The overall goal of the Program is to promote social equity and the economic development of poor and/or marginalized groups. In order to contribute to this goal, the Bank will finance small projects that provide financial, business, social and/or community development services to the target population in an efficient and sustainable manner.
Field of Activity
This policy calls for the financing of small productive projects, including commerce and services, and certain community development and social projects which have a positive impact on the livelihoods of the poor and marginalized groups.
Projects eligible for financing with Program resources must have available a clear cut statement from the government of the recipient country to the effect that it has no objection to the project, and meet the following conditions:
- To directly benefit poor and/or marginalized groups of society who lack access to financial, business development, or other support services needed to strengthen their livelihoods.
- To generate new employment opportunities, strengthen existing employment and improve the incomes and well-being of poor and marginalized groups.
- The intermediary institution must be a private entity (commercial or non-profit) or a public local development institution that is seeking to promote economic improvement and well-being of poor and marginalized groups. Public local development institutions include state, provincial, departmental and municipal entities.
- The intermediary institution must be legally registered and established in the interested country and governed by provisions of law that will enable it to contract obligations with the Bank; and possess institutional conditions that ensure the sound administration of the resources.
- The intermediary institution must demonstrate its ability to produce adequate generation of revenue from project activities to ensure the repayment of the Bank's financing, if required, as well as the sustainability of any services to the final beneficiaries/clients which are intended to continue beyond the life span of the project.
Resources of the Program
Resources for financing of the Program may be drawn from the following sources: (a) the net income of the Fund for Special Operations (FSO) or other resources the Bank may decide to allocate to the Program; (b) contributions and special Trust Funds from donor countries and institutions; (c) repayments to dedicated trust funds for microenterprise and small projects; or (d) other resources the Bank may have under administration.
- The upper limit for individual loan operations is set at US$1 million.
- Financing of individual intermediary institutions may be combined into wholesale facilities that benefit multiple intermediary institutions.
- The upper limit of subloans or the value of services that the intermediary institution may grant to the final beneficiary/client will in each case be established in the loan document, taking into account the characteristics of the project.
- The IDB resources allocated by means of the Program may be used for technical assistance, investment in construction work, procurement of equipment and materials, working or operating capital, financing of marketing of products and/or start-up costs.
- Of the intermediary institution: The intermediary institution should contribute with its own resources in order to ensure greater ownership and accountability and to give the contribution of IDB funds a catalytic effect. The level of counterpart contribution will be based upon the characteristics of the project and the intermediary institution.
- Of the final beneficiary/client: It is desirable that the final beneficiaries/clients contribute with their work, personnel and savings in order to assume ownership and make each project successful. The level of counterpart contribution will be based upon the characteristics of the project and the beneficiaries.
- The Bank to the intermediary: Reimbursable financing made by the Bank to the intermediary institution should be amortized in a period of time of up to 20 years, with a grace period not to exceed 5 years. The interest rates and fees charged by the Bank and the currency of denomination of the loan will be determined by the characteristics of the project, of the intermediary institution and of the current economic conditions of the country, subject to the current financial policies of the Bank and the limitations set by the funding source. The reinvestment of loan repayments and any rents resulting from the use of project funds will be restricted to activities authorized in the project or comparable thereto.
- The intermediary to the final beneficiary/client: Terms, conditions, and fees of loans and/or services provided to the final beneficiary/client by the intermediary institution should be set according to prevailing market conditions and should reflect those employed by other organizations engaged in similar activities in the sector. This will ensure that Bank financing does not indirectly undermine the sustainability of the services provided by the intermediary institution or other private initiatives. If the economic environment is such that a reference rate cannot be determined, the contract between the Bank and the intermediary will stipulate the general terms and conditions to be applied by the intermediary.
The Bank will evaluate the need to engage in technical cooperation with the intermediary institution to support the preparation of the project, or to ensure that the institutional capabilities will be in place to manage the financing and achieve the objectives of the project. Moreover, such technical cooperation may be used for enhancing the capacity of the final beneficiaries/clients to benefit from the project. If a specific need is defined, such a component may be financed to the intermediary institution on a reimbursable or non-reimbursable basis and may be granted before or at the same time as the loan. If reimbursable, the technical cooperation will be granted on the same terms and conditions as the loan.
The Bank may finance technical cooperation that benefits multiple intermediary institutions as an integral part of a wholesale or umbrella project facility. Such technical cooperation may be utilized to strengthen intermediaries as noted above, and to support the organization and operation of the wholesale or umbrella project facility, including the identification, preparation and monitoring of individual projects funded by the facility. The Bank may also finance project preparation projects or facilities that provide resources to local organizations to develop project proposals.
The upper limit for individual technical cooperations is set at US$250,000.
___________________________________________________________ Prevailing Reference Document: GP-75-9, November 1998
* The operational policies of the Inter-American Development Bank are intended to provide operational guidance to staff in assisting the Bank's borrowing member countries. Over the course of the Bank's more than 40 years of operations, the approach to developing operational policies has taken various forms, ranging from the preparation of detailed guidelines to broad statements of principle and intent. Many policies have not been updated since they were originally issued, and a few reflect emphases and approaches of earlier years which have been superseded by specific mandates of the Bank's Governors, the most recent being the Eighth Replenishment mandates of 1994.
In accordance with the Bank's information disclosure policy, the Bank is making all of its operational policies available to the public through the Public Information Center. Users please note that the Bank's operational policies are under a process of continuous review. This review process includes preparation of best practice papers summarizing experience at the Bank and other similar institutions, and sector strategy papers.