OM Section D11/BP - Asian Development Bank

OPERATIONS MANUAL
BANK POLICIES (BP)
OM Section D11/BP
Issued on 29 October 2003
Page 1 of 5
These policies were prepared for use by ADB staff and are not necessarily a complete
treatment of the subject.
A. Introduction
PROCESSING LOAN PROPOSALS
1. Processing loans is similar for projects in the public sector, projects in the private
sector with government guarantee, sector loans, program loans, credit lines to
development finance institutions, and multiproject loans. 1
B. The Policy
2. ADB’s policy is to fully involve the developing member country (DMC)
government, the borrower, the executing agency, and the project beneficiaries at all
stages of the project cycle, beginning with project identification. In this, ADB assists its
DMCs in formulating and, if necessary, reformulating projects so that they are viable.
3. To ensure that ADB’s loans are designed and processed to best cater to the
development needs of the recipient DMCs, formulating and processing of ADB loan
projects are subject to scrutiny as set forth below.
C. Scope of the Policy
1. Country Strategy and Program and Country Strategy and Program
Updates
4. The country strategy program (CSP) (and its updates [CSPUs]) is central to ADB
operations, and its preparation is aligned with the DMC’s development planning cycle to
ensure more effective integration of the CSP into the government’s investment and
budget processes. 2
2. Concept Clearance
5. A project loan is not normally processed unless it forms part of the CSP or CSPU
for the DMC. In exceptional cases, a loan proposal that is not included in the CSP or
CSPU can be processed if Management’s clearance is obtained for the basic concept of
the proposed project. Such concept clearance requires sufficient information to be
provided to enable the operations vice-president (OVP) to make a prima facie judgment
whether the project is to be included in the CSP and the loan processing started.
1 Technical assistance loans, emergency assistance loans, and loans directly to the private sector without
government guarantee are processed differently. See OM Section D3 (Sector Lending), OM Section D4
(Program Lending), OM Section D5 (Sector Development Programs), OM Section D7 (Emergency
Assistance), OM Section D10 (Private Sector Operations), and OM Section D12 (Technical Assistance).
2 See OM Section A2 (Country Strategy and Program).

3. Project Classification
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Issued on 29 October 2003
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6. As an integral part of the CSP, loan projects 1 are classified by linkages to ADB’s
strategic development goals (themes) and to sectors.
4. Publicity
7. It is the policy of ADB to list all loans to be processed in the publication ADB
Business Opportunities (ADBBO) and on ADB’s web site (http://adb.org). A project or
program profile is prepared to coincide with the listing in ADBBO, and the project or
program profile and ADBBO listings are updated as processing of the project or program
progresses through to Board consideration. A more comprehensive project or program
profile is prepared after Board consideration, and it is updated annually during
implementation of the project or program. The project or program profile provides
information to the public to ensure that adequate opportunity is given to all parties
concerned to participate in debate during each stage of a project or program.
5. Scrutiny of Projects under Process
8. As a matter of policy, ADB examines different aspects of a project at distinct
stages and involves the borrower and project beneficiaries at key stages during
processing. These stages include project indentification, during project preparation, at
loan negotiations, and in Board consideration.
6. Disclosure of Loan Documents to Borrowers and the Public
9. Prior to loan negotiations and at the specific request of the DMC through ADB’s
official channel of communication in the DMC, 2 the draft loan documents including the
report and recommendation of the President (RRP) as approved by the staff review
committee (or second management review meeting), may be provided to the DMC with
prior approval of the OVP. The borrower is advised to treat the documents as
confidential, and that they are essentially for the internal use of ADB, do not commit ADB
to finance the project or program, and may be revised prior to loan negotiations.
10. It is ADB’s policy that the RRP is made available on request to the general public
after approval of the loan by the Board. The borrower is informed of this policy before
loan negotiations and, during loan negotiations, the borrower indicates information
contained in the RRP that it considers confidential. This information is circulated to the
Board in a separate memorandum together with the loan documents. In exceptional
cases, RRPs containing information of a highly sensitive nature may be fully restricted at
the request of the head of department and with the approval of the OVP.
1 In this context, “loan projects” include program loans and sector loans.
2 In this context, the term “official channel of communication” refers to the customary level of
correspondence and liaison in the DMC for the particular project.

D. Summary Procedure
OM Section D11/BP
Issued on 29 October 2003
Page 3 of 5
11. Under the summary procedure, although full loan documentation is submitted to
the Board, a loan not exceeding $100 million will not normally be discussed by the Board
unless requested by Board members.
1. Eligibility Criteria
12. To be eligible for Board consideration under the summary procedures, the loan
or equity investment proposal must meet all of the following conditions:
(i) The proposed loan amount should not exceed $100 million for a public
sector project; for a private sector operation without government
guarantee, the proposed loan/equity investment combined amount should
not exceed $10 million;
(ii) The proposed loan should be neither a program loan nor a sector
development program loan nor for a project with a major policy reform
component;
(iii) The project should not involve an important new approach for ADB in the
sector in the DMC (for example, new initiatives in subregional or
crossborder cooperation, major use of information and communications
technology, social protection, private sector development, and privatepublic
sector partnerships);
(iv) In the case of a public sector project, the proposed loan should be listed
as part of the pipeline in the latest applicable CSP or CSPU as formally
considered by the Board. If the proposed loan amount is higher than that
listed in the CSP/CSPU, it should not be more than 15% or $10 million
above, whichever is more limiting. In the case of a private sector
operation, it must explicitly meet a sector or thematic priority stated in the
CSP/CSPU for private sector interventions in the DMC;
(v) The project should not have the potential for significant adverse impact on
the environment;
(vi) The project should not have the potential for significant adverse economic
and social impact, particularly on vulnerable groups that may be unable to
absorb the impact;
(vii) The project should not incorporate a major and significant new approach
to gender and development on which full Board discussion would be
merited;
(viii) The project proposal should not involve use of an ADB guarantee (partial
credit or political risk) or the complementary financing scheme, or a novel
and replicable financing arrangement that the Board should fully discuss
at a meeting;

OM Section D11/BP
Issued on 29 October 2003
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(ix) The project proposal should not involve any exception to an existing ADB
policy; and
(x) The loan should not be an emergency loan.
2. Process
13. The process remains as specified under the policy to date, which is:
(i) The recommendation to submit a specific loan proposal to the Board
through the summary procedure is initiated by the responsible department
and endorsed by the regional director general to the OVP for the latter’s
endorsement and transmittal to the President. The President makes the
final decision on the procedure to be adopted for Board consideration of
the proposal when the Board paper is submitted to him for approval to
submit to the Board.
(ii) Board approval on a no-objection basis is assumed by a specified
deadline date in the absence of a request for discussion of the items and
in the absence of a sufficient number of abstentions or objections. A
“Summary Procedure item” appears on the agenda of a subsequent
Board meeting only to record approval.
(iii) Board members may make a formal request for a full Board discussion of
a loan proposal submitted under the summary procedure. If a discussion
is requested, the Board meeting for such discussion is scheduled as soon
as possible after the deadline for no objection, with sufficient time allowed
for the concerned Board members and staff to prepare for the Board
meeting.

Basis: This OM section is based on:
OM Section D11/BP
Issued on 29 October 2003
Page 5 of 5
ADB. 2002. Business Processes for the Reorganized ADB, 1 January.
Manila.
ADB. 2001. Doc. R110-01, Streamlining the Approval Process of the
Board of Directors Through More Efficient Use of the Summary
Procedure for Loan Proposals, 26 July. Manila.
ADB. 1992. Doc. R212-92, Streamlining of Board Documents on
Project-Loan and Technical Assistance, 22 December. Manila.
ADB. 1988. Doc. R169-88, Streamlining of Technical Assistance Loan
Proposals, 18 November.
ADB. 1984. Doc. R107-84, Streamlining of Loan and Technical
Assistance Operations, September. Manila.
This OM section is to be read with OM Section D11/OP.
Compliance: This OM section is subject to compliance review.
For inquiries: Questions may be directed to the Director, Management Support
Division, Strategy and Policy Department.
29 October 2003
This supersedes OM Section No. 34/BP
issued on 13 January1997.
Prepared and issued by the Strategy and
Policy Department with the approval
of the President.

OPERATIONS MANUAL
OPERATIONAL PROCEDURES (OP)
OM Section D11/OP
Issued on 29 October 2003
Page 1 of 6
These procedures were prepared for use by ADB staff and are not necessarily a
complete treatment of the subject.
A. Introduction
PROCESSING LOAN PROPOSALS
1. The processes, scrutinizes, and instruments applicable to ADB loans are set
forth below.
B. Application of the Policy
1. Country Strategy and Program
2. The country strategy and program (CSP) is anchored in thorough assessments
of growth and poverty, and in thematic and sector work in a developing member country
(DMC). These establish the socioeconomic basis, strategic focus, and priority areas for
ADB interventions in the country. Thematic and sector plans are, in general,
prerequisites for each major thematic area and sector that is within ADB’s strategic focus
in a DMC. These “roadmaps” describe medium-term targets and plans for each thematic
area or sector, including planned policy reform, institutional development, and
investment initiatives. Inclusion of proposals in the “sector roadmaps” is, in general,
needed before any lending and/or nonlending services and products are provided to the
country. The assistance program evolves from the “sector roadmaps” to the CSP, which
is submitted for approval by the President and endorsement by the Board.
2. Concept Clearance
3. The initial requirement for processing a loan proposal not included in the CSP is
that sufficient information is available to establish its linkages with the development
priorities of the DMC and with ADB’s strategic focus for the country. The concept
clearance paper, incorporating a summary project description, is submitted by the
regional director general (RDG) to the operations vice-president (OVP) for consideration.
If the loan proposal originates in ADB, concept clearance is requested from the OVP
only after government concurrence has been obtained for the proposal being included in
the CSP.
3. Project Classification
4. Project proposals 1 are classified by linkages to ADB's strategic development
goals and to sectors. Classification may be tentative at the project identification stage
and changed during processing.
1
In this context, “project proposals” include program loans, sector projects, and sector development
projects.

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5. The regional departments are responsible for classifying current year and
pipeline projects and for recording the classification in the Project Processing
Information System (PPIS). 2 The Environment and Social Safeguard Division (RSES) is
responsible for advising the regional departments on classification with respect to
environmental and social concerns at the project preparation technical assistance
(PPTA)/small-scale technical assistance (SSTA)/project preparatory note (PPN),
management review meeting (MRM), and staff review committee (SRC)/second MRM
stages of processing.
4. Project Framework
6. The project framework is a design tool that logically links the goal or rationale of
a project, its objectives, inputs and activities, expected outputs, key indicators, key risks
and assumptions, the analysis that needs to be undertaken, the manner in which data is
collected, the expected beneficiaries, and the stakeholders. Conceptualization of the
framework starts at the project identification stage and is refined as project processing
proceeds. Its final version enables monitoring of project implementation to be
undertaken, and indicates where and when any necessary remedial interventions need
to be carried out.
7. Development of the project framework is an integral and mandatory part of the
terms of reference of a feasibility study, PPTA, or SSTA. The project framework is the
fundamental working document during the inception phase of the PPTA. When the PPN
or SSTA approaches to project processing are employed, the requirements for the
preparation of the project framework are the same as for the PPTA approach. The
framework is discussed in detail among the executing agency, implementing agency,
consultants, ADB project team, prospective beneficiaries, and interested nongovernment
organizations (NGOs) to ensure there is a common understanding of the project by all
parties.
5. Project Design
8. Project design is an evolving process from the time of conceptualization at the
CSP stage through design stage to Board approval of the project. The design process
involves the project team, borrower, beneficiaries, NGOs, other aid agencies,
consultants, and other stakeholders.
9. The design process involves several steps starting with fact-finding for the
PPTA/SSTA/PPN, through selection of consultants, fielding of consultants, inception
review, midterm review, other reviews as necessary, final tripartite review, optional factfinding
for the project, MRM, optional appraisal of the project, SRC or second MRM, loan
negotiations, and Board consideration.
10. From inception of the PPTA/SSTA/PPN until the final tripartite meeting, all
aspects of the project design are reviewed in detail by the project team, the borrower,
the consultants, and other stakeholders. Such aspects include technical, financial,
2 The PPIS is the only basis for monitoring and reporting on the classification system. The PPIS enables the
categories of project mix to be analyzed by number, total project costs, loan amount, DMC, sector, and
source of financing.

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economic, institutional, social, environmental, resettlement, sector policy, and legal. The
project team also examines the project design in the context of the CSP and in
coordination with other funding agencies. The macroeconomic setting, including
budgetary and balance of payments positions, is examined if it has a bearing on the loan
proposal. Attention is paid to institutional capacity, cost estimates, cofinancing,
implementation arrangements (including procurement, consulting services, project
management, disbursements, accounting, and auditing), and conditions or covenants
likely to be attached to the loan.
11. If any issues or analysis are unresolved at completion of the final tripartite
meeting, loan fact-finding is conducted by the project team, and, if still unresolved after
loan fact-finding, the borrower and the project team detail the issues and analysis
requiring guidance from the OVP at MRM. If the project is in environmental category A or
B, having a substantial environmental impact, the summary environmental impact
assessment (SEIA) is posted on the ADB web site.
6. Management Review Meeting
12. The MRM is the first stage at which the OVP encounters details of a project. The
MRM draft must, therefore, address all concerns raised during interdepartmental review
of the draft report and recommendation of the President (RRP). The MRM determines or
endorses the readiness of the project design and analysis, advance procurement under
the loan, retroactive financing in principle, and the need for project appraisal if this is
required to address any pending issues or analysis. If project-appraisal is needed, the
draft RRP is updated and an SRC or second MRM is held to review the resolutions
reached among the project team, the borrower, and stakeholders concerning pending
issues or analysis.
7. Loan Negotiations
13. Authority for loan negotiations to commence is sought from the OVP by the
project team through the RDG. After approval of the OVP has been given, the draft loan
documents are forwarded to the borrower with an invitation for loan negotiations. This
invitation includes the requirement that the borrower’s negotiating team is to indicate any
information or data in the loan documents that is to be treated as confidential. Prior to
loan negotiations, a notice of loan negotiations is issued to the Board by the Office of the
Secretary (OSEC). The project team leader (PTL) leads the negotiations, and, when
these have been completed, the project counsel prepares minutes for signature by both
parties.
8. Board Consideration
14. When loan negotiations have been completed, the RRP is edited by OSEC. If
major changes to the RRP are not expected as a result of loan negotiations, the RRP
may be edited before loan negotiations start. The loan agreement and RRP are cleared
by the Office of the General Counsel (OGC) and OSEC for circulation to the Board.
Usually, not less than 3 weeks is allowed between circulation of the loan documents to
the Board and Board consideration. Notwithstanding the foregoing, for projects requiring
an environmental impact assessment, Board consideration cannot be given until more
than 120 days after posting the SEIA on ADB’s web site.

9. Disclosure of Loan Documents
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15. The draft loan documents forwarded to the borrower prior to loan negotiations
are confidential, and the borrower is requested to restrict circulation, as the draft
documents are for ADB’s internal use, their content may be changed, and they do not
commit ADB to finance the project or program.
16. After approval by the Board, the RRP is declassified and made available to the
public on request. In exceptional cases, RRPs containing confidential information may
be fully restricted. In such cases, the Board covering memo circulating the RRP states
that the RRP is classified and is not to be released to the public.
17. Draft or approved loan documents for ADB’s private sector operations are not
released to the public without the prior agreement of the parties to the transaction.
18. When cofinancing for a project is being sought, the Office of Cofinancing
Operations (OCO) assists in
(i) Structuring the cofinancing component;
(ii) Preparing and distributing project profiles or other agreed documentation
to potential cofinanciers; and
(iii) Assisting the borrower in the solicitation and evaluation of cofinancing
proposals.
19. The distribution of detailed project information to prospective cofinanciers is
always carefully coordinated with the borrower, whether a public sector entity or a
private sector entity. Such information typically describes ADB’s direct participation in
the project (such as a direct loan or equity investment) and any ADB credit enhancement
support (such as an ADB guarantee).
(i) In the case of a public sector project, OCO may, on request, forward the
draft loan documents and/or other pertinent information to potential
cofinanciers.
(ii) In the case of a private sector project, the MRM may authorize distribution
of the draft loan documents, or a suitably abridged version of such draft
documents, to potential cofinanciers, subject to their prior agreement to
confidentiality requirements.
10. Cofinanced Loan Proposals
20. Cofinanced loan proposals may be circulated to the Board for consideration
before cofinancing arrangements have been finalized.
11. Loans Financed by Other Sources

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21. When a loan proposal is to be financed exclusively by other sources but is
processed and administered by ADB under approved general cooperation arrangements
with ADB, Board approval of the loan is not required. The Board, however, is to be
informed in advance of the nature of the loan proposal and of the services ADB is to
undertake on behalf of the funding source. The Board information paper is to contain a
general outline of individual proposals included in the cooperation program together with
the documents prepared by ADB to perform those services.
12. Roles and Responsibilities
22. The project team is the entity tasked with project design, preparation, and
approval. The RDG is responsible for appointing the project team and PTL. The PTL
prepares terms of reference (TOR) for each project team member. The project team
processes the PPTA/SSTA/PPN paper for review by the SRC and by sector/thematic
committees. If an SRC is required it is chaired by the RDG. The PPTA paper is finalized
by the project team, edited by OSEC, and cleared through OGC and OSEC to the OVP
for endorsement to the President for approval or agreement to circulate it to the Board. If
the SSTA/PPN method is used, the SSTA memo or PPN is endorsed by the RDG and
approved by the OVP in accordance with technical assistance approval authority.
23. After consultants have been selected, the project team issues them with a notice
to proceed after confirming with the borrower that counterpart staffs are available. The
project team undertakes an inception mission early in the conduct of the
PPTA/SSTA/PPN and forwards its back-to-office report (BTOR), highlighting key issues
and proposed actions, to the sector director for endorsement. The project team may
carry out a midterm review of the study in the field based on the consultants reports and
after these have been reviewed by sector/thematic committees and RSES. The midterm
review BTOR is submitted to the sector director for endorsement. Further reviews may
be necessary before the draft final report (DFR) is received from the consultants or the
SSTA/PPN document is drafted. In each case, the reviews are undertaken by members
of the project team, and their BTORs are forwarded to the sector director for
endorsement.
24. The DFR is assessed by the project team. This assessment, together with the
DFR, is forwarded to the Central Operations Services Office (COSO), Controller’s
Department (CTL), OGC, sector/thematic committees, and RSES for review and
comment. The issues raised at this stage are discussed during the final tripartite review
mission. The BTOR of this mission highlights the manner in which these issues have
been addressed, and the sector director decides whether MRM is warranted or loan factfinding
is needed first. In either case, the next step is for the project team to prepare the
draft RRP.
25. The draft RRP and the SEIA are reviewed by COSO, CTL, OCO, the Operations
Evaluation Department (OED), OGC, the Regional and Sustainable Development
Department (RSDD), and Strategy and Policy Department (SPD). The Chief Compliance
Officer, RSDD issues a compliance memorandum, and the PTL forwards a matrix of
comments received and the proposed actions, together with the draft RRP, to the OVP
for MRM. The project team is responsible for appraisal if required by the MRM, in which
case an SRC or second MRM is held.

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26. The RRP is edited by OSEC; the edited RRP and the loan agreement are
cleared by OGC and OSEC; and the loan documents are circulated to the Board by
OSEC. After Board approval of the loan documents, the operations coordination
division/unit of the regional department is responsible for prompt signing of the loan
agreement by the borrower’s representative to sign the loan agreement. The sector
director is responsible for ensuring that any loan conditions have been met by the
borrower, and OGC is responsible for declaring the acceptance of a legal opinion
satisfactory to ADB.
Basis: This OM section is based on OM Section D11/BP and the documents
cited therein.
Compliance: This OM section is subject to compliance review.
For inquiries: Questions may be directed to the Director, Management Support
Division, Strategy and Policy Department.
29 October 2003
This supersedes OM Section No. 34/OP
issued on 13 January1997.
Prepared and issued by the Strategy and
Policy Department with the approval
of the President.