Sovereign cofinancing is partner financing mobilized to directly contribute to ADB project outcomes. This is cofinancing from ADB’s bilateral and multilateral partners, as well as from philanthropy and the private sector. All ADB projects and technical assistance can be cofinanced, with details varying in terms of
- how much control and responsibility ADB has for the project (i.e., full administration, partial administration, or no administration)
- what terms apply (i.e., loans or grants)
- whether it is for a specific project (project-specific cofinancing) or theme (trust fund activities)
In 2020, sovereign cofinancing amounted to $11.1 billion, more than double 2019’s level and is the highest volume to date. The devastation wreaked by COVID-19 in the Asia and Pacific region translated into higher demand for support from ADB member countries.
ADB’s response to the impact of the COVID-19 pandemic was unprecedented in both speed and volume. Moreover, ADB’s convening power galvanized development partners to consolidate their resources in support of innovative funding platforms to rapidly address the seismic impact of the pandemic across the region.
More about ADB’s sovereign cofinancing in 2020.
When cofinancing with ADB, the bilateral, multilateral, and private sector partners can choose from two modalities. They can opt for “project-specific cofinancing,” which refers to supporting individual projects, programs, or technical assistance. They can also choose to create a trust fund or contribute to one or more of ADB’s existing trust funds.
These modalities are arrangements that deepen and focus ADB’s partnerships with financing partners while offering them more entry points for cofinancing opportunities. They are instruments that seek partners’ commitment to support ADB’s program and project operations in line with agreed upon principles and procedures.
View ADB’s cofinancing modalities.
Project-specific cofinancing can either be a loan or a grant. If the cofinancing will be administered by ADB, a cofinancing agreement is signed by ADB and its partner. If not, they sign a memorandum of understanding.
ADB also accesses global funds for project-specific cofinancing. Global funds are funding initiatives managed by other multilateral banks.
View ADB’s project-specific cofinancing activities in 2020.
A trust fund is a financing arrangement established by ADB for accepting contributions from financing partners, with such contributions used to finance projects and activities that meet certain eligibility criteria. It may be financed by a single partner or supported by multiple partners.
Trust funds can either stand on their own or be a part of an umbrella facility, called Financing Partnership Facility, that supports specific ADB corporate initiatives, such as clean energy or increasing health impacts and health security across the region. These facilities have one or more trust funds that finance projects and programs contributing to the achievement of its objectives.
View ADB’s active trust funds.
Partnership Framework Arrangements
ADB also welcomes strategic and long-term partnerships for development. For partners who want to try this route, they can agree with ADB to set an indicative amount of development finance for a specific amount of time, to be distributed among specific projects or trust funds. ADB and the financing partner formalize this agreement through a partnership framework agreement (PFA).
Also expressed as framework cofinancing arrangements, memoranda of understanding, and similar terms, PFAs facilitate better strategic collaboration, cooperation, and complementarity. They involve a funding envelope to cover a broad range of planned and coordinated cofinancing activities over a period. They also serve as a tool for surfacing and resolving concerns that may arise during project negotiations.
View ADB’s active PFAs.
ADB’s work on sovereign cofinancing is also a partnership among ADB’s departments, with the regional departments leading the project design and implementation and the Strategic Partnerships Division (SPSP) of the Strategy, Policy and Partnerships Department and the Partner Funds Division (SDPF) of the Sustainable Development and Climate Change Department providing guidance and support vis-à-vis cofinancing operations.
SPSP takes the lead in partnership policy and strategy formulation as well as in the establishment of cofinancing partnerships. It spearheads the mobilization of external resources through project-specific cofinancing and broader cofinancing arrangements. Specifically, SPSP provides:
- Partner relationship management
- Support to internal clients
- Cofinancing policies and procedures
SDPF takes charge of the administration of broad-based single- and multi-donor trust funds. It assists other departments in administering existing trust funds, projects, and TA under project-specific cofinancing, and global funding initiatives after the signing of cofinancing agreements. The division also manages the single repository of bank-wide data and reports on sovereign cofinancing. SDPF takes charge of:
- Trust fund resource mobilization
- Design of new trust funds
- Cofinancing administration
- Fund manager support, guidelines, data & analytics
This partnership is active and in sync with the ADB project cycle, working on specific cofinancing actions in each of the five distinct stages of project implementation. During planning of the project cycle, SPSP helps identify mutual interests and areas of priority among partners, and then, as project preparation rolls around, it collaborates with partners, governments, and other stakeholders in the formulation of a joint terms of reference. At the project approval stage, SPSP is joined by SDPF, and together, they negotiate with donors and work on securing partner commitment.
During the project implementation stage, SDPF supports regional departments. They communicate directly with financing partners on project implementation and administration matters. When there is any change in the project that affects the cofinancing agreement, SDPF takes charge, with support from the Office of the General Counsel (OGC), of the drafting and signing of relevant amendments. When the project reaches completion, SPD and SDPF documents the cofinancing results in official reports such as the ADB Annual Report, Operations Statement, and Partnership Report.