In most developing countries a shortage of long-term, local-currency financing for small-scale infrastructure projects impedes local economic development. Inadequate fiscal transfers, little own source revenue and low creditworthiness make it difficult for local governments to fully fund projects on their own. This paper proposes the use of project finance as a means to attract financing from domestic banks and institutional investors. Donors can play a catalytic role by providing technical assistance to develop projects and credit enhancement to attract commercial financing. Small-scale infrastructure financing needs in developing countries -- Potential sources of financing for small scale infrastructure -- A proposal for a pooled financing facility to tap domestic capital -- Overcoming technical and capacity challenges to financing small-scale infrastructure projects in developing countries -- Conclusion -- Appendix Field-Tested Local Infrastructure Financing Approaches.