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Financial Management and Analysis of Projects :
2. User Instructions
2.2. ADB Lending and Technical Assistance
2.2.1.
ADB makes loans from its Ordinary Capital
Resources (OCR) and from the Asian Development Fund (ADF). The ADF
is designed to provide loans on concessional terms to Developing
Member Countries (DMCs) with low per capita gross national product
(GNP) and limited debt repayment capacity. The small size and location
of countries may also constitute a criterion for ADF eligibility.
The ADF is maintained by regular member contributions. ADB also
provides technical assistance from its own resources and from special
funds. These include the Technical Assistance Special Fund (TASF)
and the Japan Special Fund (JSF).
2.2.2. ADB's Charter permits it to make,
participate in, or guarantee loans to its DMCs, or their governments,
to any of their agencies or political subdivisions, and to public
or private enterprises operating within such countries, as well
as to international or regional entities with economic development
concerns in the region. Loans are made only for projects or programs
of high developmental priority.
2.2.3. ADB has four primary types
of lending:
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Project Loans.
Among other things, project lending is aimed at developing energy,
agriculture, transport and communications, and other basic infrastructure
as well as health, education, and finance.
- Sector
Loans. OM D3 (Sector Lending) sets out ADB policies
in relation to sector lending. Sector lending is a form of ADB
assistance to a DMC for project-related investments based on considerations
relating to a sector or subsector as a whole in the DMC. The purpose
of a sector loan is to assist in the development of a specific
sector (or subsector) by financing part of an investment in the
sector, planned by the DMC. A sector loan is expected to improve
sector policies and strengthen institutional capabilities.
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Sector lending is particularly appropriate when a large number of subprojects in the sector (or subsector) are to be financed. |
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Technical assistance may be given for project preparation, sectoral studies, and/or institution building, prior to, or together with, the provision of the sector loan. Sector loans are ordinarily given to well-established institutions with experience in project implementation. |
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Sector loan proceeds will be utilized primarily to meet the foreign exchange costs of subprojects making up the loan. Recurring costs (e.g., fuel and essential supplies) and local currency expenditures or subprojects may also be financed under sector loans in accordance with relevant ADB policies (see OM H3). |
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ADB lending terms are the same for sector and project loans. |
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Program Loans. OM D4 (Program Lending) sets out
ADB policies in relation to program lending. Program loans are
given by ADB to assist a DMC in developing a sector (or subsector)
as a whole and improving a sector's performance through appropriate
policy and institutional improvements over the medium to long
term. Program loans are given only to DMC governments. Advisory
technical assistance may be attached to a program loan to further
study unresolved policy issues or to strengthen the capacity of
key sector institutions. Although program lending differs from
project lending in objectives, the procedural and administrative
steps in processing a program loan are generally the same as those
for projects.
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Private Sector Loans, Equity, and Guarantees. OM D10 (Private
Sector Operations) sets out ADB policies in relation to private
sector lending. ADB assistance to the private sector in DMCs is
designed to help in resource mobilization and more efficient use
of investment funds for economic development. ADB support for
the private sector in DMCs aims to: (i) create a favorable environment
for the private sector in DMCs; (ii) strengthen financial institutions
and capital markets; (iii) assist in privatizing public sector
enterprises; (iv) catalyze external and domestic resource flows
to infrastructure projects utilizing build-own-operate (BOO)/build-own-transfer
(BOT) modalities; (v) invest in selected, productive private enterprise
in accordance with sound banking principles; and (vi) assist economically
attractive and financially sound private sector projects that
require ADB financial support to complete the financing plan or
to provide comfort to other lenders and investors. ADB assistance
may be provided in one or more of the following forms: (i) loans
to financial institutions to finance small- and medium-scale private
enterprises, (ii) direct loans to medium- and large-scale private
enterprises, (iii) equity investments in private enterprises including
private financial institutions, (iv) underwriting of issues of
equity or debt instruments on national or international securities
markets, (v) assistance to infrastructure projects; (vi) equity
investments; and (vii) guarantees of the debt-service obligations
of private enterprises with or without counterguarantee by a DMC
government.
2.2.4.
ADB's Technical Assistance (TA) is classified
into four development activities: (i) project preparatory technical
assistance (PPTA) for assisting in the preparation of one or more
projects, a program loan, or a sector loan, for financing by ADB
and other external sources; (ii) project implementation technical
assistance for assisting in the implementation, operation, and management
of an ADB-financed project; (iii) advisory technical assistance
for financing institution-building, plan-formulation, and sector-,
policy-, and issues-oriented studies; and (iv) regional technical
assistance (RETA), covering more than one DMC. OM D12 (Technical
Assistance) sets out ADB policies in relation to technical assistance.
2.2.5. ADB encourages cofinancing. The cofinancing
strategy comprises: (i) maximizing the amount of cofinancing from
other official funding agencies, and (ii) increasing the flow of
private capital through cofinancing to DMCs. The purpose of this
strategy is to maximize the impact of ADB's assistance in the development
of its DMCs and to mobilize additional resources for such development.
Cofinancing funds come from (i) official funding agencies, (ii)
export credit agencies, and (iii) commercial finance institutions.
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