African Development Bank unveils draft policy on Multi-Tranche Financing for comment
The African Development Bank Group invites its stakeholders and the general public to provide feedback, inputs and comments on its draft Policy on Multi-Tranche Financing (MTF).
The Bank’s management has developed the concept of a Multi-Tranche Financing approach to enhance the Bank’s operational delivery modalities for greater selectivity and organizational effectiveness. This seeks to make the institution more effective, relevant, dynamic and results-driven.
The proposed MTF will allow the Bank to structure a long-term, large or complex operation to be packaged as a series of separate and smaller linked projects (tranches) over a defined time frame (maximum 10 years).
Structurally, management will prepare the overall MTF document and request the Board’s approval of the financing envelope for the entire MTF. The Board is expected to approve the first tranche project at the same time as the MTF approval. The financial commitment and legal agreements will only be signed with the client on the first tranche (not the entire MTF envelope). This implies that the overall MTF envelope will not be legally binding.
Only the first and subsequent tranches of the MTF will involve signing separate legal agreements. The preparation of subsequent tranches will be streamlined based on strictly defined criteria, without compromising the due diligence requirements of the Bank.
The bank said it is drawing from the best practices of other multilateral development banks, such as the Asian Development Bank, the Inter-American Development Bank and the World Bank, which have introduced varied forms of MTF approaches for the same reasons that the African Development Bank is following this route.
“The MTF is therefore expected to align the Bank with evolving market practices, while simultaneously enabling the Bank to leverage its balance sheets far more effectively,” the bank said.
The deadline for submitting comments is 20 November 2021.