Official cofinancing is an arrangement under which ADB and one or more donor governments finance a project or program in partnership with a developing member country (DMC).
ADB partners with official funding agencies—bilateral as well as multilateral—in financing ADB-assisted projects and programs, either for technical assistance activities or components of investment projects. Assistance may be in the form of a grant, loan, or guarantee. Funding from official sources include official development assistance provided by donor governments from their budget appropriations, usually in the form of grants and loans (concessional or nonconcessional), or funds obtained from nonbudgetary official sources and/or capital markets that are provided on semi-commercial terms.
These official funding agencies may provide funds on a parallel or joint basis.
Most official cofinancing is arranged on a parallel basis. ADB and the cofinancier funds separate components of the project, with the cofinancier following its own procurement procedures.
Under joint cofinancing, ADB and the cofinancier together finance common goods and services for the project on a pro rata basis. This type of cofinancing works well when a cofinancier does not tie its assistance to procurement from its own country and agrees to follow ADB's procurement guidelines.
$3.5 billion was generated in 2011 in official cofinancing from the development assistance windows of external partners, such as government agencies and international organizations, to cofinance 170 ADB projects. This total official cofinancing comprised $3.3 billion for 37 projects and $0.2 billion for 133 technical assistance activities. This amount increased by 13.2% from $3.1 billion in 2010 and marked a record year for grant cofinancing.
Benefits for DMCs, funding agencies
For developing member countries (DMCs), ADB's official cofinancing operations
- maximize the impact of development assistance through coordination of projects with complementary or synergistic benefits;
- avoid duplication of efforts and promote a consistent approach to development assistance by funding institutions; and
- expand availability of concessional and nonconcessional development assistance, particularly for DMCs that have yet to gain direct access to commercial financing.
For official funding agencies, ADB's official cofinancing operations
- maximize the impact of each dollar of development assistance, since ADB coordinates its projects with those of cofinanciers that offer complementary or synergistic benefits;
- avoid duplication of efforts and promote a consistent approach to development assistance;
- share the results of ADB's project feasibility studies with cofinanciers; and
- share project information with cofinanciers during implementation to help realize the expected benefits of cofinancing; and
- for untied cofinancing, provide cofinanciers with ADB administration and supervision services (for both loans and grants).
Preparatory steps for arranging cofinancing
ADB's role in arranging official loan cofinancing for a project depends on the mode of cofinancing for the project, the wishes of the borrowing DMC, and the policies and capacity of official cofinanciers. ADB may actively solicit cofinancing, provide information on the feasibility and viability of a project, hold consultations with cofinanciers in the field and at headquarters from the early stages of the project processing cycle, and provide administrative services in respect of procurement, disbursement, and other matters as required by cofinanciers if their funds are untied.
How we arrange official cofinancing
ADB’s Office of Cofinancing Operations coordinates with official funding agencies during the formulation of the Country Strategy and Program in the DMC, which is the basis for identifying and formulating the projects to be financed by ADB in the DMC during the next three years. This coordination continues during the project processing cycle, and ADB makes every effort to accommodate cofinanciers' processing schedules and procedures.
ADB encourages cofinanciers to identify cofinancing opportunities and to contact ADB early in the project processing cycle. In this way, cofinanciers can participate in project formulation and appraisal activities.