Asian Development Fund: FAQs

What is the Asian Development Fund?

Established in 1973, the Asian Development Fund (ADF) is the oldest and largest of ADB's existing special funds. It is a multilateral source of concessional assistance dedicated exclusively to the needs of the region. ADF is designed to provide loans on concessional terms and grants to ADB's developing member countries (DMCs) that have low incomes per capita and limited or low creditworthiness. Activities supported by the ADF promote poverty reduction and improvements in the quality of life in the poorer countries of the Asia and the Pacific.

How is ADF funded?

ADF resources come mainly from contributions of ADB's member countries, which are mobilized under periodic replenishments, and reflows from ADF loan repayments. Initial contributions to ADF were pledged in 1973 and designated as ADF I. Since then, ADF has been replenished ten times. The replenishment process for ADF XI, which will cover the period 2013-2016, was concluded in April 2012.

As of 31 July 2014, total contributions amounted to $35.9 billion equivalent at 31 July 2014 exchange rates. Thirty-four members of ADB have provided direct contributions to ADF. The largest contributors are, in descending order, Japan, the United States, Australia, Canada, Germany, the United Kingdom, and France. The breakdown of contributions from non-regional and regional members is about 51%:49% of total pledged contributions.

Who is eligible for ADF assistance?

Borrowers' eligibility for ADF is based on two criteria: (1) per capita gross national income (GNI) and (2) creditworthiness for ordinary capital or market-based resources. ADB uses World Bank's per capita GNI estimates based on the Atlas method and the International Development Association's operational cutoff for eligibility.

Currently, there are 29 borrowers that have access to ADF resources. These DMCS fall under two groups: (1) "ADF-only" countries and (2) “blend" countries, which have access to both the ADF and ordinary capital resources (OCR).

Group A (ADF Only): Afghanistan, Bhutan, Cambodia, Kiribati, Kyrgyz Republic, Lao People’s Democratic Republic, Maldives, Marshall Islands, Myanmar, Nauru, Nepal, Samoa, Solomon Islands, Tajikistan, Tonga,Tuvalu, and Vanuatu.

Group B (Blend, ADF and OCR): Armenia, Bangladesh, Georgia, the Federated States of Micronesia, Mongolia, Pakistan, Palau, Papua New Guinea, Sri Lanka, Timor-Leste, Uzbekistan, and Viet Nam.

What are the terms and conditions of ADF assistance?

  Maturity Grace Period Interest Other Features
Group A (ADF-only): Project Loans 32 yrs 8 yrs 1% during the grace period
1.5% during the amortization period
Equal amortization; No commitment fee
Group A (ADF-only): Program Loans 24 yrs 8 yrs 1% during the grace period
1.5% during the amortization period
Equal amortization; No commitment fee
Group B (Blend) 25 yrs 5 yrs 2% interest per year Equal amortization; No commitment fee
Emergency Assistance Loans 40 yrs 10 yrs 1% interest per year Principal repayment at 2% per year for the first 10 years after the grace period and 4% per year thereafter; No commitment fee
Hard Term Facility same as above same as above 150 basis points below the weighted average of the 10-year fixed SDR swap rates plus OCR lending spread, or the applicable ADF interest rates, whichever is higher; Reset every January and applied to all hard-term loans approved during that year Equal amortization; No commitment fee; Fixed interest rate for the life of the loan

How are ADF resources allocated?

The main instrument for distributing ADF resources is the performance-based allocation (PBA) system. Based on a formula that includes a number of key development variables, the policy is designed to fairly allocate ADF support among the many competing needs, and to direct the funds to where they will be used most effectively.

ADF grant financing was introduced in ADF IX, and the framework was subsequently revised. Under the current framework, the proportion of assistance provided as grant financing is contingent on the country's risk of debt distress. This is determined by the outcome of a forward-looking Debt Sustainability Analysis when available, or by a comparison of the country's latest available external debt indicators. High-risk countries will receive 100% of ADF funding as grants and moderate-risk countries, 50%, while low-risk countries will receive only loans. To avoid rewarding poor performance, a 20% volume discount will be applied to the grant portion of a country's performance-based allocation.

How are ADF resources utilized?

ADF-financed operations serve many of the economic, strategic, and humanitarian interests of contributing members in a cost-effective manner. No other multilateral fund is as directly and broadly involved in the economic and social development of poor and less creditworthy countries in Asia and the Pacific.

Share of ADB Support by Sector*
Infrastructure 58%
   Energy 24%
   Transport 21%
   Water 11%
   Other infrastructure 2%
Finance 4%
Education 8%
Agriculture 11%
Health 1%
Others (includes public sector management, and industry and trade) 18%

* 2013-2014 approvals
Note: Infrastructure, finance and education are among ADB's core operational areas.

ADB member countries see ADF financing as important for achieving ADB's vision of a region free from poverty. In support of this overarching objective, ADF financing is used to support development projects and programs that include:

  • infrastructure;
  • policy support and policy reform;
  • production capacity, human development, and environmentally sustainable investments;
  • good governance and capacity building for development management; and
  • regional cooperation.

How is ADF performance evaluated?

During negotiations for ADF, donors collectively set out detailed activities and/or milestones for implementation. A donors' report, which outlines in detail the major initiatives to be undertaken over the course of the replenishment period, is produced and disseminated at the end of the negotiation process.

Also built into the ADF replenishment process is a midterm review. A meeting is generally convened halfway into the 4-year ADF period and provides the opportunity for donors to take stock of progress made and challenges facing ADB and ADF.

ADB has adopted a results management approach to improve the planning, monitoring, and evaluation of all its operations in an effort to achieve and sustain intended development results. Using its Strategy 2020 Results Framework, ADB also launched its Development Effectiveness Review series, which assesses the progress of implementing Strategy 2020 and covers all operations financed by ADF and ADB’s ordinary capital resources (OCR). Within this approach, ADB management regularly reports to the Board of Directors about the operational progress of planned and actual use of ADF resources, as well as evaluations of ADF-financed projects and programs. Lessons learned are then integrated into future operational planning for ADF borrowers. See also the Development Effectiveness Country Brief series for country-specific overviews of ADB's operational effectiveness.