Real-Time Evaluation Study of the Multitranche Financing Facility | Asian Development Bank

Real-Time Evaluation Study of the Multitranche Financing Facility

Evaluation Document | 27 December 2012

This evaluation examines the costs and benefits associated with the multitranche financing facility modality, by considering efficiency gains or cost reductions as well as gains in development effectiveness. 

Against the backdrop of the need for more innovative and efficient financing instruments to meet the large and growing financing gaps in many countries, the Asian Development Bank (ADB) piloted the multi-tranche financing facility (MFF) from mid-2005, and mainstreamed it in mid-2008. The instrument is special in providing the comfort of long term programmatic support to a country without the commitment fee cost associated with subsequent segments in a financing envelope. The modality also has considerable in-built flexibility in its use. Both features have contributed to the attractiveness of the instrument to countries and to ADB.

Yet, the rapidly growing acceptance of the MFF modality warrants more guidance and due diligence on practices regarding its preparation, processing and implementation. This has a bearing on the modality's contribution to development effectiveness. The most significant change that needs attention is the impact of the devolution of decision-making from Board to Management on the needed adherence to a programmatic approach. Management has assured that the process of such devolution, and the putting in place of checks and balances - to ensure development effectiveness - are evolving. This process evaluation, as requested by the Board, is an opportunity to examine how things are going and what needs to be done.

In evaluations such as this, it is vital to look at instruments within a framework that accounts for both the cost savings delivered by the approach and the development benefits it brings about. It would be a mistake, as is the case sometimes, to consider just the cost side of an operation, say the cost of having due diligence or sound safeguards, but not the benefits to development outcomes - or vice versa. Despite data and timing limitations, this evaluation tried to comment on both the costs and benefits.

Management has incrementally introduced procedures to direct the implementation of the MFFs in the spirit with which ADB normally extends support, and conform to technical, financial, economic, environmental, social and fiduciary perspectives. However, this evaluation finds that some guidance and directives that were aimed at streamlining the business processes, have been interpreted so liberally that their application potentially compromises the development goals and outcomes in varying degrees. The evaluation examines outstanding issues that need to be addressed, so as to improve the modality's efficiency and effectiveness without diluting ADB's prudence in financial planning and exposure to reputational risk.

Hardly any MFF has been completed as yet. MFF documentation is incomplete. Yet, through field visits, interviews with staff and the triangulation of different types of information, the study has come up with sufficiently robust findings and lessons. In essence, they reflect the need for much better upfront screening and project selection, for the enforcement of rigorous checks and balances during implementation, as well as for tougher decision making with respect to exercising the option of discontinuing an ongoing but poorly performing MFF investment program.

The study supports the continuation of the modality as one instrument in ADB's tool kit, on the basis of its attractiveness to clients as well as its potential impact on development effectiveness when implemented well. Within such a forward looking framework, the review stresses recommendations for strong action to direct the instrument towards enhancing the development impact of the operations.


  • Acknowledgements
  • Foreword
  • Executive Summary
  • Chapter 1: Evaluation Focus
  • Chapter 2: The Portfolio
  • Chapter 3: Expected Benefits
  • Chapter 4: The Working of the Modality
  • Chapter 5: Quality Assessment and Review
  • Chapter 6: Implications for Operations
  • Chapter 7: Key Findings, Lessons, and Recommendations 64
  • Appendixes