1. International Banks
for Development Financing

2. CONTENTS AND PURPOSE The World Bank Group
Regional Banks for Development Financing
Chosen European Development Banks
International Banks’ Development Financing Projects as a Business Opportunity
purpose:
present those IBDF that are important because of the size of their funds
present business opportunities

3. 1. The World Bank Group
the oldest and the only international bank for development financing with truly global membership
group of five independent international development institutions:
International Bank for Reconstruction and Development - IBRD (1944)
International Development Association – IDA (1956)
International Financial Corporation – IFC (1960)
Multilateral Investment Guarantee Agency – MIGA (1988)
International Center for the Settlement of Investment Disputes – ICSID (1966):
non-financial institution

4. International Bank for Reconstruction and Development (IBRD)
Establishment, objectives and membership:
establishment: Bretton Woods, 1944
objectives: long-term financing of after-war reconstruction and long-term financing of development of less developed member countries (developing countries and countries in transition)
membership: IBDF with global membership
Evolution of activities and changing priorities from establishment until now:
second half of the 1940s and first half of the 1950s: financing economic reconstruction of countries that were affected most during World War II
second half of the 1950s: long-term financing of economic development

5. International Bank for Reconstruction and Development (IBRD)
1960s: financing big industrial and infrastructure objects
1970s:
socio-economic development goals: growth, poverty reduction, securing basic needs of the population
financing integral programs of countryside development, heakth and education projects, securing clean water access, sanitary services, apartment building and urban area development
1980s:
project and balance-of-payments financing
ecological aspects of economic development
1990s: Washington Consensus
poverty reduction programs, institutional capabilities strengthening and anticorruption programs, programs oriented towards cooperation with the private sector as well as non-government organizations

6. International Bank for Reconstruction and Development (IBRD)
Capital and voting method:
capital: 188,6 mia $ (in the middle of 2000), of which less than 1/10 of paid-in-capital
voting method:
voting power of a country depends on its share in the capital of the bank
basis: quotas in the IMF
Organization:
Board of Governors
Board of Executive Directors
Development Committee
President

7. International Bank for Reconstruction and Development (IBRD)
Sources of funds:
basic financial source is capital
borrowing in international capital markets
reserves and debt repayments for loans approved in previous years
Loans as a prevailing form of the allocation of funds:
terms of the loans: favorable commercial loans, payment term between 12 and 20 years (3-5 years of principal payment deferral), variable interest rate, unconditional insurance with the borrowing country guarantee
preferred creditor

8. International Bank for Reconstruction and Development (IBRD)
loan types:
project loans
sectoral loans
structural adjustment loans
technical assistance loans
loans for reconstruction
size and structure of approved loans:
the biggest IBDF that approves loans to developing countries and to countries in transition

10. International Bank for Reconstruction and Development (IBRD)
Structural Adjustment Loans (SAL):
multitude of economic reforms that are supposed to reach macroeconomic equilibrium in a country through supply side measures
reasons for the introduction of SAL loans
concepts and basic elements of the SAL loan/program:
SAL loan– balance-of-payments loan
SAL program– structural reform program
criteria for accompanying success of implementing SAL programs: drawing in more tranches
complementarity of/competitiveness between SAL programs and economic stabilization programs

11. International Development Association (IDA)
securing financial assistance and/or concessional loans
Founding, objectives, membership and organization:
establishment: in 1960, as a response to dissatisfaction of politically independent developing countries with the size and the quality of IBRD funds
objectives and membership:
concessional lending to the least developed developing countries (criterion: per capita GNP )
two groups of countries (differences in the method of initial obligatory subscription)
organization: same as IBRD

12. International Development Association (IDA)
Sources of funds:
member countries donations, part of the IBRD regular activities income and payments of loans, approved in previous years
IDA replenishment: regular replenishment of IDA funds

13. International Development Association (IDA)
Allocation of funds:
funds exclusively in the form of loans, for which a debtor country guarantee is needed
basic criterion – per capita GNP; depends also on whether the country has access to funds from other sources or not
mainly poverty reduction projects
repayment period between 35 and 40 years, grace period for principal repayment is 10 years, only payment of certain administrative costs

14. International Development Association (IDA)
Size and structure of approved loans:

15. International Financial Corporation (IFC)
Establishment, objectives, membership and organization:
establishment and objectives:
accelerate economic development of developing countries exclusively by financing private sector projects in these countries
organization: similar to IBRD and IDA
Capital and voting method:
capital: fundamental capital – paid-in capital
voting method: voting power depends on the paid-in capital share

16. International Financial Corporation (IFC)
Sources and allocation of funds:
sources of funds: identical to IBRD sources
allocation of funds:
commercial loans approved exclusively without a country’s guarantee
IFC can finance projects in the form of equity stakes (not more than 35%)
Size and basic characteristics of activities:
financial placements need to be commercially interesting, projects need to have a clear development component
usually not more than 25 per cent of the value of the project

17. 2. Regional Banks for Development Financing Fundamental Common Characteristics and Differences Among Regional Banks for Development Financing
IADB (1959), AfDB (1964), AsDB (1966), EBRD (1990)
common characteristics:
organizational and financial structure similar to IBRD and IDA
membership open to developing countries in the region (the only ones eligible to funds) as well as to countries outside the region
regular financial sources are used for commercial loans
special operations funds are very similar to IDA

18. European Bank for Reconstruction and Development (EBRD) – Regional Bank for Development of Countries in Transition
Establishment, objectives and membership:
establishment: Paris, 1990
objectives:
supporting the transition process from command to market economy and strengthening the private sector in Central and Eastern Europe
Key differences between EBRD and other three regional development banks:
the only IBDF whose members are other international institutions and banks, in addition to independent countries
the only IBDF whose political orientation is included in its statute
much more detailed statute

19. European Bank for Reconstruction and Development (EBRD) – Regional Bank for Development of Countries in Transition
Capital and voting method:
capital: share of paid-in capital is between per cent
voting method: number of votes depends on the share of the country in bank’s capital
Organization:
Board of Governors
Board of Directors
President

20. European Bank for Reconstruction and Development (EBRD) – Regional Bank for Development of Countries in Transition
Sources of funds and their allocation:
sources of funds:
financial basis for activities is the bank’s capital; borrowing on international capital markets, reserves, repayments of loans, dividends and capital gains on equity shares
allocation of funds:
exclusively to countries in transition
state-guaranteed loans: public sector projects
loans without state guarantee: private sector projects
share investments

21. European Bank for Reconstruction and Development (EBRD) – Regional Bank for Development of Countries in Transition
Evolution of EBRD activities and key priority changes:
principal activity: financing projects whose goal is to contribute to efficient process of transition from planned to market economy :
financing projects of privatization of state companies, building and reconstructing infrastructure objects and financing of projects for restructuring the military industry production into production in the absence of wars and war-tensions

22. European Bank for Reconstruction and Development (EBRD) – Regional Bank for Development of Countries in Transition
from 1995 onwards:
a more balanced combination of loans and equity financing
efficient financial system, especially the banking sector, is essential for the success of the overall process of transition
new strategy of activities (1999) is trying to secure a balanced realization of given objectives, by countries and sectors as well as by types of instruments

23. European Bank for Reconstruction and Development (EBRD) – Regional Bank for Development of Countries in Transition
Size and structure of activities:

24. 3. Chosen European Development Banks European Investment Bank (EIB)
significantly bigger than IBRD
reasons for particular treatment:
EIB enables allocation of funds into all member countries
EIB shareholders are exclusively industrialized countries from one region
membership is limited to member countries of the EU, its activities are under strong influence of the EU

25. European Investment Bank (EIB)
Establishment, objectives, membership and capital:
Set up under the Treaty of Rome in 1957
autonomous institution and independent legal entity
objectives:
strengthening the economic integration of the EU countries
securing economically and socially balanced development of the EU countries
capital: 6 per cent share of paid-in capital
Organization:
Board of Governors
Board of Directors
Management Committee and its President
Auditing Committee
Personnel

26. European Investment Bank (EIB)
Sources of funds and their allocation:
sources of funds:
most funds from borrowing in the international financial markets, bank’s capital is the basis for activities; repayments of loans and reserves
allocation of funds:
Internal allocations – exclusively in the form of commercial loans, repayment term up to 20 years, grace period on principal repayment up to 5 years (financing of infrastructure objects)
External allocations – mostly in the form of loans with /without state guarantee

27. European Investment Bank (EIB)
Activities of the bank, size and structure:

28. European Investment Bank (EIB)
“internal” allocation:
classical sectoral classification: financing infrastructure objects in member countries
classification according to priorities:
financing of trans-European transportation and energy networks
financing small and medium enterprises (SMEs)
financing environment sustainability projects
EIF – tripartite institution that issues insurance to agents willing to finance trans-European network and SMEs

29. European Investment Bank (EIB)
“external” allocation:
loans can be used only for technically and economically competent projects that can be financed according to commercial conditions
the biggest share is intended for loans to countries in the process of accessing the EU and have an Access Agreement with the EU

30. European Investment Bank (EIB)

31. Council of Europe Development Bank (CEDB)
Establishment, objectives and membership:
establishment: IBDF set up by members of the Council of Europe in 1957
objectives: financing of social projects and projects needed for solving extraordinary circumstances in member countries
Organization:
Governing Board and Administrative Council
Executive Committee
Governor
Auditing Committee

32. Council of Europe Development Bank (CEDB)
Sources of funds and their allocation:
sources of funds:
bank’s capital (about 10 per cent of paid-in capital), borrowing in international financial markets, repayments of loans, approved in previous years, and reserves
allocation of funds:
commercial forms of lending: state-guaranteed loans (long repayment term and grace period on principal repayment)
Size and structure of approved loans:
statutory priorities
new priorities
other fields of action

33. Council of Europe Development Bank (CEDB)

34. reasons for the interest of obtaining projects:
4. International Banks’ Development Financing Projects as a Business Opportunity
only business subjects from member countries of given IBDF can collaborate in the preparation and realization of the projects financed by given IBDF
every contract needs to be made on the grounds of special rules, usually in the form of an international competitive bidding
reasons for the interest of obtaining projects:
priority projects – non-payment risk reduction
projects co-financed by IBDF – no non-payment risk
projects that are usually fully analyzed and in which IBDF often collaborated in the past

35. Project Cycle project identification: project preparation:
IBDF obtains preliminary information about the project, usually from general and/or sectoral studies about a country
it ends when the projects obtains the priority project status for the country and IBDF includes it in its enlistment of projects
project preparation:
IBDF and the country harmonize basic goals of the project
detailed analysis of all key aspects of the project, including technical-technological parameters, economic-financial characteristics as well as social, environmental and institutional characteristics

36. Project Cycle project analysis: negotiations and project approval:
project analysis by IBDF
precise identification of all types of goods, equipment and services that will be needed for project realization, as well as definition of procedures according to which these purchases will be made
financial plan of the projects and all funds required to close the financial construction
negotiations and project approval:
negotiations about the appraisal report
finalized version of the appraisal report along with all required accompanying documents goes to the Board of Executive Directors for approval

37. Project Cycle project realization and supervision: project assessment:
borrower is fully responsible for the realization of this phase
project assessment:
IBDF usually assesses the achieved results of the project
primary goal is to compare actual costs and benefits of the project with the ones anticipated in the appraisal report, and to take into account the experience from the past when preparing and realizing new projects

38. Sources of Information about Projects
primary sources of information – obtained with the help of personal contacts and written sources in the country in which the project is supposed to be realized
secondary sources of information about IBDF projects:
sources in banks themselves
contacts with project team members who are responsible for the project

39. Rules and Regulations of IBDF about the Procurement of Suppliers of Goods and Equipment, Works and the Procurement of Consultants
responsibility of the borrower and not IBDF
Procedures for procurements of goods, services and work:
international competitive bidding
limited international bidding
local competitive bidding
international and local shopping
direct purchase

40. Rules and Regulations of IBDF about the Procurement of Suppliers of Goods and Equipment, Works and the Procurement of Consultants
forms of co-financing:
parallel financing – common when the project is co-financed by IBDF and national export agency of a country
joint financing – every party takes over the financing of an agreed share
Procedures for procurement of consultants:
main criterion – ability of the consultant to do the assignment well
full competence of the kreditojemalca
rosters of consulting companies