A request for ADB financing will be processed in six stages as follows:
1. Concept clearance
ADB will carry out preliminary fact finding on the project and the sponsors using the information provided by the sponsors. We will also assess the likely development impact of the project and what value ADB’s participation will have on the project, the sector or the country.
If the project meets our criteria, a concept review paper (CRP) is prepared and submitted to the Investment Committee (IC) for approval. Thereafter, a mandate letter will be signed between ADB and the project sponsors.
It is likely that ADB will charge a processing (or appraisal) fee and the applicant must agree to pay ADB out-of-pocket expenses for processing the project. The concept review takes into consideration if the proposed project:
- Is prima facie technically, economically, socially, and financially viable;
- Needs ADB to play a catalytic role in developing and financing the project; and
- Supports ADB’s strategy in the country, sector or region in which the project will operate.
If so desired, ADB will sign a non-disclosure agreement with the sponsors before detailed information is shared.
2. Due diligence
After the CRP is cleared by the IC, a project team from ADB will conduct due diligence on the project, including a visit to the project site, offices of the sponsors, relevant government agencies and any proposed co-financiers. During this stage, the project team will review the following
- Overall economic, financial and commercial viability of the project business plan, costs, financing and implementation plans
- Legal and regulatory framework
- Feasibility and environmental and social assessment studies and environmental and social management plans, including resettlement plans and Indigenous Peoples plans, to address impacts on people and the environment.
For large and complex projects and transactions, the project team will coordinate with the sponsors and other senior lenders in appointing an independent legal counsel, as well as independent engineers, and environmental and social experts to collectively represent the lenders. In addition to external environmental and social experts, ADB’s environment and social staff will conduct its own due diligence, including site visits. For smaller projects and transactions, lower-level external assistance will be required. In all cases, the sponsors or clients will be required to pay for these services.
Sponsors are required to bear the costs of third party legal, technical, and other experts required to complete ADB’s due diligence. Costs and advisors can be shared with other co-lenders. The project team will confer with sponsors and other senior lenders prior to the appointment of external legal counsel and other advisers.
3. Term sheet
During due diligence, the ADB project team will discuss and negotiate the terms and conditions of ADB assistance. The project team will finalize and negotiate the term sheet, which should be agreed by the borrower prior to seeking Management’s final approval.
4. Final review
The project team will prepare the appraisal report (i.e. RRP) and other internal documentation. These will be presented to the IC for the Final Review. Draft loan, guarantee or equity documentation usually is prepared concurrently during the final steps of ADB’s process.
5. Board consideration
Once the Investment Committee has endorsed the project, the proposed ADB assistance will be presented to the ADB Board of Directors. There is a 21 day mandatory circulation period for this review.
6. Financial close
After Board approval, the documentation for project can be finalized and signed.
Once all conditions precedent have been met (including receiving a no objection letter from the host country), then the ADB loan, guarantee and/or equity investment can be disbursed per the agreed terms.