Note: OP/BP 14.20, Cofinancing, were revised on April 2013 to take into account the recommendations in “Investment Lending Reform: Modernizing and Consolidating Operational Policies and Procedures” (R2012-0204 [IDA/R2012-0248]), which were approved by the Executive Directors on October 25, 2012. As a result of these recommendations, OP/BP 10.00, Investment Project Financing, have been updated, and OP/BP 12.00, Disbursement, have been retired (among other changes). This OP has consequently been updated to reflect these changes, as well as to reflect the updated titles of the Bank’s policy on access to information and of the Procurement and Consultant Guidelines.
Questions should be addressed to the Director, Global Partnership and Trust Fund Operations.
Revised April 2013
1. The IBRD and IDA Articles of Agreement state that the Bank's1 funding is intended to supplement investment from other sources (more specifically private ones).2 Therefore, for projects that require resources additional to what the Bank and recipient can provide, the Bank expects the recipient to seek such resources from third parties. Cofinancing may derive from official or private sources, and it may be channeled as either joint or parallel cofinancing.3
2. The Bank's objectives in encouraging the provision of official cofinancing are to
(a) mobilize resources to fill a financing gap in a specific project;
(b) coordinate the financing for recipient countries' development programs and help establish common policies or investment priorities among financing sources at the project and sector level; and
(c) assist donors that wish to link their own aid programs with the Bank's capacity to support the development and implementation of projects (provided the incremental costs to the Bank are covered; see para.5).
3. The Bank's objectives in encouraging the provision of private cofinancing are to
(a) catalyze financing for individual projects and increase overall private resource transfers for development; and
(b) facilitate borrowing countries' access to international capital markets.
4. Identification, preparation, appraisal, and supervision of cofinanced projects are carried out in accordance with the Bank's standard policies and procedures.4 The Bank cooperates with cofinanciers and shares with them information on cofinanced projects.5 The Bank endeavors to develop with official cofinanciers a framework for processing cofinancing quickly and expediently, and it engages in a dialogue at the operational level to develop specific cofinancing projects and follow-up actions.
5. The Bank recovers its incremental costs for services it agrees to provide to cofinanciers.6 A uniform fee structure, based on the level of service to be provided by the Bank, is used for this purpose.7
Strategy and Planning
6. Cofinancing needs and issues are addressed, as appropriate, in the Country Assistance Strategy (CAS).8 Cofinancing needs at the project level are identified early in project preparation and are spelled out at each stage of the preparation process. The Bank conducts periodic cofinancing consultations with official cofinanciers to achieve early agreements on cofinancing.
7. The cofinancing needs of individual projects are matched with the interests of individual cofinanciers at the earliest possible stage. To obtain firm and timely commitments from cofinanciers, and to allow time to synchronize project processing, the Bank involves cofinanciers in project design as early as possible, normally at the initial Project Information Document stage. The terms and conditions of cofinanciers' participation must be consistent with the financing plan for any specific operation. Therefore, the Bank engages in a continuing and open dialogue with cofinanciers, sharing relevant country, sector, and project information.9 If the recipient country consents, cofinanciers may participate in Bank missions on cofinanced projects.
8. To reduce project complexity, simplify implementation, and avoid placing an undue burden on the recipient's administrative capabilities, the number of cofinanciers for each project is kept to the minimum consistent with the needs of the project.10 To ensure that funds provided by cofinanciers will be made available when needed, Loan Agreements include, as necessary, cross-effectiveness clauses and events of default linked to cofinancing. The choice of clauses to be included depends on the specifics of the project financing plan.
9. In joint cofinancing, procurement is carried out in accordance with the Bank's Procurement and Consultant Guidelines.11 In parallel cofinancing, the Bank and cofinanciers finance their different components according to their own rules. OP/BP 11.00, Procurement, set out the Bank's procedures applicable to procurement. The Bank encourages cofinanciers to provide untied funding. The Bank does not administer tied cofinancing funds.12
Disbursements and any processing of disbursement documentation by the Bank in relation to cofinancing are governed by the policies and procedures set out inOP/BP 10.00, Investment Project Financing. Exceptions require the approval of the Director, Loan Department.
"Bank" includes both IBRD and IDA; "loans" includes credits and grants; "projects," "operations," and "investments" include the activities or facilities financed under investment, Program-for-Results, and development policy loans; "Loan Agreements" includes Development Credit Agreements; and "recipient" refers to the recipient of cofinancing funds, which is usually also the Bank's borrower. IBRD Articles of Agreement, Article I (ii); IDA Articles of Agreement, Article V, Section 1 (c). Export credit cofinancing may derive from either official or private sources. For further discussion, see Annex A, Sources and Types of Cofinancing. See OP/BP 9.00, Program for Results Financing, OP/BP 10.00, Investment Project Financing, and BP 8.60, Development Policy Lending. Agreed adjustments may be made to these procedures when the Bank enters into special arrangements with multilateral development banks and other cofinanciers. Such services may include project preparation, appraisal, supervision, procurement, and disbursement (including maintenance of and reporting on loan disbursement accounts) for the cofinanced project or component. The fee structure is set from time to time by the Planning and Budgeting Department, in consultation with the Trust Funds Administrator, and is available in the Bank's Budget Management Manual. Any exception to the application of the fee structure requires the approval of the Vice President and Controller. Also see OP/BP 14.40, Trust Funds. See BP 2.11, Country Assistance Strategies. Some projects--for example, those that seek to integrate cofinanciers' and government policies in a specific sector--may need to involve a large number of cofinanciers. When justified by specific project circumstances and when requested to do so by the recipient, the Bank may consider administering tied trust funds to finance consultants for technical assistance activities that are not components of a Bank-financed project.