Special Evaluation Study: Real-Time Evaluation Study of the Multitranche Financing Facility (Complete Report)

Abstract

Introduced at the Asian Development Bank (ADB) in mid-2005, the modality of the multitranche financing facility (MFF) was intended to facilitate the programming of a set of individual loan tranches in a sector and country in an efficient and sequential way, and without the need for the processing of each such tranche for ADB Board approval after the facility itself would be approved. After approval of an MFF, the utilization period could extend up to 10 years or longer. This presented the advantage to clients that they would be assured of a stable financing source, with a need to pay commitment fees only on the approved loan tranches or guarantees, not the entire MFF financing envelope from the day of its approval. The advantage would also be that only tranches approved would burden the clients‘ balance sheet and its cofinancing abilities, not the entire amount of the MFF approved. The MFF modality aimed to strengthen ADB‘s capacity to mobilize development finance by enhancing the flexibility and client orientation of its financial products, making ADB more in tune with existing and evolving market practices, and helping ADB to work better with other development partners. The incentive structure of the MFF, relying on government agencies to submit tranche proposals only if and as soon as new tranche projects would be ready, also provided ADB with a way to expand its lending without the need for commensurate increase in staff resources for processing.