ADB’s Multitranche Financing Facility, 2005–2018: Performance and Results Delivered

Evaluation Document | 14 November 2019

The multitranche financing facility (MFF) was introduced by the Asian Development Bank (ADB) in 2005 in the aftermath of the 1997 Asian financial crisis when ADB lending had stagnated because of both supply constraints and weak demand. At the time, member countries were concerned about the high costs of ADB lending, limited choice of instruments, and the perception that there was a deteriorating quality of service associated with ADB financing. The MFF was seen as a key financing innovation that would make ADB more responsive, efficient, and able to deliver results on the ground over an extended period of time. By the end of 2018, ADB had provided over $52 billion through 105 MFF programs to 16 member countries, almost one third of ADB’s total sovereign financing during the period.

This evaluation is intended to shed light on the modality’s performance and results delivered to date as an  input  for  ADB  Board  and  Management  discussions  to  further  improve  its  design,  operation,  and development results going forward.

The evaluation finds that the MFF modality has partially met the objectives of its creation. As expected, MFF operations have provided predictable and large financing over extended periods, helping member countries address critical development financial gaps. Clients have been satisfied with the MFF. On the other  hand,  the  expected  value  addition  in  the  areas  of  efficiency,  portfolio  performance,  and development results was not clearly evident. The development contribution was found to be generally comparable with those of stand-alone investment projects, which suggests an under-utilization of the MFF potential to deliver transformational changes commensurate with the larger scale and longer term of engagement promoted by the modality.

At the same time, the evaluation finds that the delegation of MFF tranche approval authority to ADB Management,  combined  with  periodic  monitoring  and  advance  reporting,  did  not, in general, compromise  the  quality  of  MFF  operations.  However,  changes  in  the  operational context  and  the introduction of additional regulatory requirements for MFFs over time have gradually reduced some of the  modality’s  initial  advantages,  and  the  demand  for  MFF financing  has  declined  from  the  rapid expansion following mainstreaming of the modality. Several countries that have used MFFs in the past are now taking a more balanced approach when choosing from the available ADB financing instruments.

The evaluation notes that, provided some changes are made, the MFF can be a powerful instrument for ADB to serve its client countries and promote transformational development in the region. The evaluation recommends that ADB should review the use of MFF modality and update the policy as necessary to ensure  it  is  aligned  with  the  corporate  Strategy  2030  to  deliver  integrated solutions  and  realize  its transformational development potential. It also recommends that ADB should introduce measures to ensure that all operations envisaged under the MFF program are completed; that learning from prior tranches is captured and applied in subsequent tranches; and that transaction costs of MFF operations are reduced to restore the modality’s attractiveness to ADB operations and client countries.