Policy-Based Loans (PBLs) provide flexible, fungible funds that are not tied to specific goods, works, or services. The resources are directly connected to the implementation of policy reforms by governments.
Modalities
Multi-tranche
Adequate for short to mid-term reforms whose policy actions are completely defined at the approval of the loan The fulfillment of all the policy actions for each tranche is required before the tranche can be disbursed. eginning.
Programmatic
Programmatic are more flexible to support mid to long term reforms that need time to mature and whose policy actions are yet to be defined at the moment of the approval of the series. That said, programmatic lines contain indicative actions to be completed by the second and subsequent operations in the series.
Examples of use: A progressive transition of a state to 0 net Greenhouse gas emissions or contribute to the water safety and environmental sustainability of a country, focused on climate resilience.
Lending rate: SOFR base rate + IDB Ordinary Capital variable lending spread:
SOFR base rate is USD SOFR daily overnight compounded rate + IDB's funding margin.
Funding margin for 1st quarter 2025 is 41 bps.
IDB’s Ordinary Capital lending spread - for 2025 is 80 bps.
Fees: Commitment fee 50 bps: applicable on undisbursed loan amount and starts to accrue 60 days after loan contract signature.
Interest and Currency conversion options are available.
For applicable loan charges and conversion option fees, please refer to www.iadb.org/rates
Deferred drawdown option (DDO)
A deferred drawdown option (DDO) can be requested for all PBL modalities. The DDO allows the deferral of the disbursement (up to 3 years, renewable for another 3 years) after the completion of the policy actions for a fee.
Flexible repayment options subject to a maximum maturity of 20 years, and maximum Weighted Average Life (WAL) of 12.75 years.
Standard Grace Period: 5.5 years.
Standard amortization schedule (semiannual, straight-line payments), bullet repayment structures, extended grace periods, uneven amortization schedules, and shorter repayment periods are available without additional cost.
All financial terms for PBLs applies to DDO except for:
Upfront fee: 50bps; Commitment fee: 38bps.
Finance results of an existing or new government program
Loan Based on Results
(LBR)
Finance investments with defined objectives and scopes
Specific Investment Loans
(ESP)
Interest Rate Risk Management
Interest Rate Conversion Option
(N/A)
Combining financial instruments ensures timely funds, spreads risk, and optimizes resources for disaster recovery and climate resilience. This approach supports immediate response and long-term investment, creating a robust and sustainable financial strategy.
The “Program to Support Social Protection Reforms I and II” aimed to help the Government of Honduras reduce extreme poverty through policy measures. It focused on financial sustainability, efficiency in social protection, and institutional coordination. The program included two operations executed in 2018 and 2019, targeting improvements in health, education, and social protection services.
The program significantly reduced extreme poverty in Honduras by allocating 15.5% of the Solidarity and Social Protection Fund to the Better Life Voucher program, surpassing the 10% target. It expanded decentralized health services to 94 of the poorest municipalities, reducing maternal mortality rates, and integrated third-cycle education services into the national budget, with 25% of schools managed by the Ministry of Education. The program covered up to 310,000 households with the Better Life Voucher program, improving targeting through updated algorithms and socioeconomic data. Health compliance for 62.65% of participants was verified via the National Vaccination System. A new poverty measurement methodology was implemented, reducing moderate poverty to 42.7% and extreme poverty to 22.9%. Additionally, data sharing among social sector entities improved with four inter-institutional agreements, enhancing the efficiency and sustainability of Honduras’s social protection system.