Asian Development Bank (ADB)
The Asian Development Bank (ADB) assists its members, and partners, by providing loans, technical assistance, grants, and equity investments to promote social and economic development in the Asia Pacific region. ADB maximizes the development impact of its assistance by facilitating policy dialogues, providing advisory services, and mobilizing financial resources through cofinancing operations that tap official, commercial, and export credit sources.
Responding to the evolving needs of developing member countries (DMCs) and the Asia and Pacific region as a whole, ADB offers a range of public sector loans and grants that differ in purpose, focus, financing and disbursements, and implementation arrangements. Investment lending pays for goods, works and services related to specific projects, and project loans are the most ADB's commonly used modality.
Most of ADB's lending comes from its ordinary capital resources (OCR), offered at near-market terms to lower- to middle-income countries—and beginning in 2017—at very low interest rates to lower income countries. The Asian Development Fund (ADF) offers grants that help reduce poverty in ADB's poorest borrowing countries. ADB also partners with the private sector by investing in smaller, riskier projects that are innovative, complex, and in challenging markets and sectors through financing programs such as the Trade and Supply Chain Finance Program.
ADB is working across Asia and the Pacific to support sustainable forest management and conservation efforts, as well as agricultural land use improvements, to promote carbon conservation. ADB’s approach to land and forest management helps support local livelihoods, strengthens resilience to climate change, maintains clean water, and protects biodiversity.
ADB offers loans, grants, and technical assistance from Special Funds, Trust Funds, and other sources to help reduce poverty in Asia’s poorest countries.
The Climate Change Fund (CCF) was established in May 2008 to facilitate greater investments in DMCs to effectively address the causes and consequences of climate change, by strengthening support to low-carbon and climate-resilient development in DMCs. The fund provides financing through: grant component of investments, technical assistance (stand-alone and piggy-back or linked to loan), and direct charge. It has three components: (i) adaptation, (ii) clean energy development, and (iii) reduced emissions from deforestation and forest degradation, and improved land use management (REDD+ and land use).
Financing Instrument: Loans, Technical Assistance, Grants, Equity
Loans for forestry related projects have included a US$40 million and US$200 million project. Grants for technical assistance to forest-related projects have ranged from US$250,000 to US$800,000.
CCF allocations for forest-related projects have ranged from US$800,000 to US$1,250,000.
Applicable geographical regions/country groups: Asia and the Pacific
For sovereign loans, ADB uses a classification system to determine the eligibility of developing member countries (DMCs) to borrow based on two main criteria, (i) per capita income and (ii) creditworthiness. DMCs are classified into:
- Group A (Concessional assistance-only): those in need of greatest concessionality and eligible for Asian Development Fund (ADF) grants
- Group B (OCR blend): those that need some concessionality, and
- Group C (Regular OCR only): those in need of least concessionality.
DMCs within these groups are further differentiated to determine the mix of funds and lending terms they can access, based on ADB’s (i) concessional assistance policy and (ii) policy on diversified financing terms (effective 2021).
To be eligible for ADB non-sovereign financing, the proposed recipient must be:
- (i) an entity wholly owned or controlled by one or more private entities
- (ii) an entity, wholly owned or controlled by a sovereign, undertaking commercial activities (sub-sovereign and other public sector entities)
- (iii) an entity, partially owned or controlled by one or more private entities and a sovereign, undertaking commercial activities
- (iv) a local government or other sub-sovereign entity (including municipalities and other forms of local government) that can contract and obtain financing independently from the sovereign
All DMCs are eligible to receive CCF resources. The following types of activities may qualify for the fund's support:
- Preparation of relevant strategies or action plans for DMCs
- Investment in climate change mitigation or adaptation measures
- Development of knowledge products and services related to climate change
- Facilitating knowledge management activities, including regional conferences and workshops
- Funding to off-set ADB’s corporate carbon footprint
The various stages that a public sector project goes through, from country programming, project design, to project completion, and evaluation are known collectively as the ADB project cycle.
- Country Partnership Strategy: ADB works with each developing member country to define a medium-term development strategy and operational program called a country partnership strategy (CPS). The CPS is aligned with the country's development plan and poverty reduction goals, and its preparation with the DMC's development planning cycle. ADB conducts thematic and sector analyses and assessment studies in preparation for a new CPS. These will be posted on ADB's web site as available. A CPS is developed in close consultation with the government and other country stakeholders including civil society, nongovernment organizations, private sector, as well as the country's other development partners. The CPS is posted on ADB's web site at the same time they are circulated to ADB's Board of Directors for endorsement, subject to the country's consent.
- Project Identification/Preparation: ADB often provides grants called project/program preparatory technical assistance (PPTA) to help the government identify and prepare feasible projects. During the early stage of the PPTA, a flagging exercise—called an initial poverty and social analysis—is conducted to identify those people who may be beneficially or adversely affected. A technical assistance report is prepared as a recommendation for ADB to finance a technical assistance project.
- Approval: The draft loan agreement and draft project proposal is submitted to all parties involved including the Government for review. Feedback is collected, and the Government is then called for negotiation with ADB.
- Implementation: ADB-assisted projects are implemented by the executing agency according to the agreed schedule and procedures. A project administration manual sets out the project's implementation agreements and details.
- Completion and Evaluation: After the project facilities and technical assistance activities are completed, ADB prepares a completion report to document the implementation experience. These reports are prepared within 12-24 months of the completion of the project.
For private sector financing, there is no standard form of application for ADB assistance. However, ADB would need some basic information to evaluate a project, including an executive summary, project description, feasibility study, background on sponsors, project ownership structure, projects' implementation arrangements, projects operations, the market, environmental and social aspects, cost estimates, financing plan, financial model, risk analysis, and permits and licenses. The credit approval process involves a preliminary review, concept review, transaction review, final review, management or board approval, then closing.
For private sector (non-sovereign) finance, there is no standard form of application for ADB assistance. However, ADB would need some basic information to evaluate a project.
A list of information requirements for new infrastructure projects that require ADB assistance can be found here https://www.adb.org/what-we-do/private-sector-financing/applying-assistance. These requirements may be amended according to the nature of the project for which ADB assistance is being sought.
Climate Change Fund procedure: Project proposals are submitted by ADB user departments to the Climate Change Steering Committee through the fund secretariat. Project proposals are reviewed by the working groups (i.e., Adaptation and Land Use Working Group and Clean Energy Working Group) who provide the recommendations on the applications for the fund allocation to the CCSC. The CCSC approves the fund allocations to projects. In general, applications are reviewed in six batches and are due on 31 January, 31 March, 31 May, 31 July, 30 September, and 30 November. Direct charge applications are reviewed on ongoing basis. For more information on the CCF, visit https://www.adb.org/what-we-do/funds/climate-change-fund
Last updated: 7 September 2023