Financing and mobilization of resources
General Operational Policies
The Bank is authorized to assist in the financing of development projects in its regional developing member countries by means of the following types of operations:
- Technical cooperation;
- Assistance in obtaining additional external financing to meet project needs;
- Guarantees extended by the IDB for loans from other sources.
The Bank will not finance a project in a member country if the government of the country objects to same.
Using its own resources and funds that it administers, the Bank participates in the financing of lending operations in the developing member countries as described below:
- Loans for Specific Projects are designed to finance one or more specific projects or subprojects that are wholly defined at the time the Bank's loan is approved.
- Loans for Multiple Works Programs are designed to finance groups of similar works which are physically independent of each other and whose feasibility does not depend on the execution of any given number of the works projects.
- Global Credit Loans are granted to intermediary financial institutions (IFIs) or similar agencies in the borrowing countries to enable them to onlend to end-borrowers (subborrowers) for the financing of multisector projects.
- Sector Adjustment Loans provide flexible support for institutional and policy changes on the sector or subsector level, through fast-disbursing funds. At the request of the borrower, a sector adjustment loan may include an investment component, in which case it becomes a Hybrid Loan.
- Time Slice Operations are investment loans in which the investment program for a sector or subsector is adjusted from time to time within the general criteria and global objectives agreed upon with the Bank for a project.
- The Project Preparation Facility provides funding for supplementary activities necessary to prepare a project. The basic objective is to strengthen the project preparation stage and shorten the time required, thus facilitating Bank approval of the loan and execution of the project.
- Small Projects Financing is intended to make credit available to individuals and groups that generally do not have access to commercial or development loans on regular market terms. In these cases, the Bank finances operations through intermediary institutions which then channel the funds to the final beneficiaries.
- Direct Lending to the Private Sector , without sovereign guarantees, in each instance with the concurrence of the government of the member country. At the outset, this financing would be targeted exclusively towards infrastructure and public utility projects providing services usually performed by the public sector.
- The Emergency Reconstruction Facility has the objective to make available resources to the country stricken by catastrophic disaster to cover the immediate expenses of restoring basic services to the population, It is important to understand that what drives the utilization of this facility is the urgency of having resources of the ground in the first few hours after the disaster take place.
The Bank finances technical cooperation activities to transfer technical know-how and expertise for the purpose of supplementing and strengthening the technical capacity of entities in the developing member countries. The financing is determined largely on the basis of the field of activity into which a project falls and the relative development status of the region, country, or countries involved. It may take one of the following forms:
- Technical cooperation with Non-Reimbursable Funding, which is a subsidy granted by the Bank to a developing member country to finance technical cooperation activities. This cooperation is particularly targeted to the least-developed countries of the region and/or those which have insufficient markets.
- Technical cooperation with Contingent-Recovery Resources, whereby the Bank finances technical cooperation activities where there exists a reasonable possibility of a loan either from the Bank or another lending institution. If the beneficiary should obtain a loan from any source for the project for which the technical cooperation was provided, the borrower is obligated to reimburse the funding received from the Bank.
- Technical cooperation with Reimbursable Resources, which is a loan financed by the Bank to carry out technical cooperation activities.
ASSISTANCE FOR THE MOBILIZATION OF OTHER FINANCIAL RESOURCES
The Bank considers that as a complement to the financing it provides out of its own resources and the funds it administers, it is called upon to act as a Catalyst in the mobilization of additional funds from external sources for financing specific projects in its regional developing member countries. To this end the Bank encourages and cooperates with the borrowers in securing additional external financing from different sources. The principal forms of mobilizing additional resources are:
- Export Credit. At the request of borrowing institutions, the Bank furnishes advisory assistance and cooperates with them in arranging for credits from specialized agencies in the advanced industrialized countries to finance the procurement of goods and services required for projects for which the Bank has made loans.
- Parallel Credit from Other Public Financial Institutions, in which the Bank coordinates its activities with national and international public financial institutions with an interest in offering financing for projects or programs in the regional developing member countries. To facilitate COFINANCING for such projects, the Bank is prepared to perform studies and undertake missions in conjunction with other organizations for project identification and evaluation and to enter into agreements with those organizations to administer financing granted by them on their behalf.
- Other Parallel Credits, in which at the request of borrowers, the Bank cooperates with them in obtaining parallel loans from banks or institutional investors of other countries.
According to the Agreement Establishing the Bank, and to promote the investment in the borrowing countries, the Bank can guarantee loans made by private financial sources to public and private sectors.
The Bank can provide guarantees with or without counter-guarantees of the borrowing country's government. Guarantees to private sector lenders without government counter-guarantee of the borrowing country, in whose territory the project is to be carried out, will not exceed 25% of the total cost of the project or $75 million, whichever is less.
The guarantees could be used for any kind of investment project, although the initial emphasis in guarantee operations will be on infrastructure projects.
- Export Financing, in which the Bank grants national agencies in the borrowing countries a revolving line of credit to finance intra-regional exports of nontraditional goods.
- The Bank may carry out other forms of financing with Funds Under Administration that it manages on behalf of third parties, in accordance with the terms of the contracts they have signed for the administration of said funds, for example, loans for the purchase of shares and direct equity investments.
Prevailing Reference Documents:
GP85, July 1979
GP88, August 1979
AB1378, May 1989
AT8615, September 1991
AB1704, August 1994
GN-1860-1, GN-1860-2, GN-1860-3, May, June, October 1995 respectively
GN-1860-6, October 1997
GN-1858-2, July 1995
GN-2038-2, December 1998
GP-92-15, December 1998