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This study investigates the role of project finance as a driver of a country’s economic growth. We hypothesize that project finance is beneficial as it allows the inflow of international capital and thus compensates for any lack of domestic financial development. In addition, the contractual structure unique to project finance should lead to better investment management and governance. Investigating 90 countries from 1991 to 2005, we find support for our hypothesis. Project finance does indeed foster economic growth and this effect is strongest in low-income countries where financial development and governance is weak