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Annual Report 2003

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Funding

The main instruments for providing help to ADB’s DMCs are policy dialogue, loans, technical assistance, grants, guarantees, and equity investments (see page 7). ADB offers a range of modalities and terms for loans aimed at improving performance.

About 70% of cumulative lending comes from ordinary capital resources (OCR) from three distinct sources: private placements and capital markets in the form of borrowing, paid-in capital provided by shareholders, and accumulated retained income (reserves) that provides a buffer for risks.

Loans are also provided from Special Funds. The Asian Development Fund (ADF) offers loans on concessional terms to members with low per capita gross national products and weak debt-repayment capacities. The ADF is financed by periodic, voluntary contributions from donors. A major constraint in 003 was the level of available resources for concessional lending and technical assistance, a situation that might potentially jeopardize the institution’s ability to deliver its program. Discussions were held with donors concerning the replenishment of ADF resources. Significant milestones included the ADF VIII Midterm Review followed by the ADF IX donors’ meetings in Copenhagen and Tokyo. As part of these meetings, ADB has agreed with donors to undertake a wide range of initiatives and reforms aimed at improving its efficiency and effectiveness in providing development assistance to DMCs. Other Special Funds are the Technical Assistance Special Fund, the Japan Special Fund, and the ADB Institute Special Fund.

ADB also manages and administers additional funds: the Japan Scholarship Program, the Japan Fund for Poverty Reduction, and the Japan Fund for Information and Communication Technology. It also channels grants provided by bilateral donors to support technical assistance and soft components of loans. In recent years, thematic trust funds focusing on gender and development, governance, poverty reduction, water, energy, and the environment were established to support technical assistance operations and selected components of loan projects.

Technical assistance funded through grants or loans helps maximize ADB’s development impact. Most technical assistance grants are used for preparing projects and supporting advisory activities in areas such as law and policy reform, strengthening fiscal policies and procedures, good governance, capacity building, and natural resource management.

ADB has a triple-A credit rating² and actively mobilizes financial resources through its cofinancing operations tapping official, commercial, and export credit sources. Assistance to its DMCs creates an enabling environment for private sector development. ADB also directly finances private sector projects to assist commercial investors and lenders. (For more on ADB financial management, see http://www.adb.org/About/fnncemgt.asp.)

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