Since 1977, the Bank has had a three-tier classification system that forms the basis for determining the eligibility of its developing member countries (DMCs) to borrow from the Asian Development Fund (ADF) and for applicable limits on Bank financing of project costs.
To this end, the paper proposes a systematic approach to applying the two country criteria, viz., per capita GNP and debt repayment capacity, for determining ADF eligibility. The approach is captured in a decision matrix that is arrived at through a two-stage process. The first stage, the per capita GNP operational cutoff is applied to divide borrowing DMCs into two categories, i.e., those below and those above the cutoff. In the second stage, within each income category (i.e., below and above the per capita GNP cutoff) countries are further differentiated on the basis of debt repayment capacity.