Note: OP 8.45 reflects the policies set out in Development Grant Facility (DGF): A Proposal (R97-185; M97-52), July 29, 1997;The Development Grant Facility: FY98 DGF Annual Review and Proposed FY99 DGF Budget (R98-258), October 28, 1998; and The Development Grant Facility: FY99 DGF Annual Review and Proposed FY00 DGF Budget R99-150), July 26, 1999. Questions may be directed to the DGF Secretariat, RMC.
1. Grants are an integral part of the Bank's1 development work and an important complement to its lending and advisory services.2 The Bank's main objectives in extending grants are to encourage innovation, catalyze partnerships, and broaden the scope of Bank services. Grants enable the Bank to leverage its financial resources, people, and skills, and to combine forces with other partners in pursuit of shared objectives. Grants can complement, expand, and enhance Bank programs, but they do not substitute for Bank financing of regularly budgeted activities.
2. The Bank provides grants from the following main sources: (a) the IBRD administrative budget through the Development Grant Facility, (b) IBRD net income, and (c) IDA resources. This OP sets out Bank policy governing grants from these sources. The Bank also administers and in some cases executes grants from donor-supported trust funds.3 Trust fund policies and procedures are set out in OP/BP 14.40, Trust Funds.
Grants from the IBRD Administrative Budget: Development Grant Facility
3. Because grants are an integral part of the Bank's work, they are generally made from the IBRD administrative budget. Such grants are normally channeled through the Development Grant Facility (DGF) to enable the Bank to prioritize allocations.4 DGF grants are used only to support activities that meet the Bank's overall grant-making objectives (see para. 1) and that are consistent with the Bank's institutional and sector priorities.5 DGF grants must also substantially meet eight eligibility criteria (see Annex A).
4. Grants under the DGF are made from an annual budget endorsed by a Bankwide DGF Council, recommended by Management, and approved by the Bank's Board of Executive Directors. The Executive Directors have delegated to Management the authority to approve grants of up to $1 million per individual program for programs that meet the eligibility criteria and the Bank's strategic priorities, from amounts derived through reallocations within the DGF budget approved by the Board, up to an aggregate of no more than 10 percent of that budget.
Policies Under Individual DGF Programs
5. Some grant programs included in the DGF, while broadly consistent with overall DGF policies and procedures, have their own governance structures, subgrant eligibility criteria, and subgrant allocation procedures.6
Grants from IBRD Net Income
6. On the recommendation of Management and the Executive Directors, the Governors of the Bank allocate funds from IBRD's net income in the interests of the IBRD's members as a whole and in support of the Bank's development priorities.7 In making these allocations, they take into account the IBRD's overall financial position, risk, and outlook: allocation of grants from the IBRD's net income is considered only if there are funds available beyond the amounts necessary to maintain adequate reserves.
7. Grants from IBRD net income are generally used in three ways: (a) to support IDA countries, as transfers made either directly to IDA or to related instruments; (b) for special country-specific situations for which use of the Bank's normal lending instruments is not feasible; and (c) in special circumstances, to support associated multilateral institutions or other priority activities.
8. Under certain circumstances, IDA can provide a limited amount of grant funding in lieu of IDA credits, subject to normal IDA Board approval procedures and policies. Use of IDA grants is limited to (a) funding in the context of debt relief provided under the Highly Indebted Poor Country (HIPC) debt initiative; and (b) for exceptional support to post-conflict countries, as a last resort, where other resources are inadequate or inappropriate and as part of a concerted international effort.
"Bank" includes IBRD and IDA.
At the country level, grants can complement loans to achieve poverty reduction where potential returns are high but less immediate, such as in the case of technical assistance or capacity building. They can also be useful where the recipient is financially weak and lending is either unavailable or inappropriate, such as in post-conflict situations. At the global and regional levels, grants can complement loans where potential returns are high, such as in health research or global rule-making, but take a longer time to develop and are not captured in a single country or through market mechanisms.
In special cases, other parts of the administrative budget extend grants, primarily within the Bank. For example, two programs support innovation within the Bank-the Innovation Marketplace ($3 million in FY98) and the PSD Exchange ($1 million in FY99)-and one program supports research within the Bank-the Research Support Budget (about $5 million in FY98).
Institutional priorities are identified in a variety of forums, including the Strategic Compact, Strategic Forums, the Strategic Directions paper, and other Bank documents and discussions. Sector Boards are responsible for establishing sector strategies.
These grant programs include, for example, the Institutional Development Fund, the Small Grants Program, and the Consultative Group for International Agricultural Research; further information is available at the DGF website.
In certain cases (e.g., IDA), indicative allocations have been included in multidonor agreements. However, in all such cases, allocations are contingent on fund availability and approval by the Board of Governors. Individual grants from net income allocations (for example, individual HIPC grants or grants under the IDA Debt Reduction Facility) are approved by the Executive Directors.
Operational policies related to IDA are contained in the IDA12 and earlier replenishment agreements approved by the Board of Governors. For further reference, see Additions to IDA Resources: Twelfth Replenishment-A Partnership for Poverty Reduction (IDA/R98-105), December 23, 1998.