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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.
In 2012, total official cofinancing amounted to $2.17 billion for 178 projects. This includes loan cofinancing of $1.74 billion for 20 projects, grant cofinancing for investment projects of $283.3 million for 36 projects and grant cofinancing for technical assistance of $146.8 million for 129 projects. Loan cofinancing remains the largest component of official cofinancing.
Benefits of cofinancing with ADB
Cofinancing with ADB has many benefits to development partners and developing member countries (DMCs), including those listed below.
Benefits to financing partners:
- ADB's in-depth knowledge of DMCs.
- ADB’s presence in field through resident missions.
- ADB as catalyst for development issues where donors can cooperate with ADB on a common agenda.
- ADB’s long-standing experience in working with DMCs on project processing and implementation.
- ADB’s due diligence in project processing.
- ADB’s clear and transparent procurement process.
- Avoidance of duplication of efforts.
Benefits to DMCs:
- Access to additional resources
- Ability to undertake large-scale projects
- Coordination of external assistance
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.