Improving Governance in Africa

What are the eligibility criteria for loans? Public sector: The Bank uses the same credit policy as the World Bank for determining the eligible countries to which it can lend on the sovereign side. The eligibility is based on two pillars: 1- Gross National Income per capita and 2- Credit Worthiness. As of January 2016, there are 20 countries eligible for sovereign lending, namely, Algeria, Angola, Botswana, Cameroon, Cape Verde, Congo, Egypt, Equatorial Guinea, Gabon, Kenya, Libya, Mauritius, Morocco, Namibia, Nigeria, Seychelles, South Africa, Swaziland, Tunisia, and Zambia. The list of eligible countries is reviewed periodically to determine the status of the countries and a decision to add or to remove countries from the list is taken by the Board. Moreover, the Bank conducts an annual internal rating exercise of all its African member countries based on sovereign rating models validated by leading international rating agencies. Sovereign ratings are subject to continued surveillance throughout the year and rating changes may occur in case of change in the country's fundamentals and these actions are approved by the Credit Risk Committee of the Bank. Private sector: The Bank lends only to commercially viable private sector operations in any of its 54 regional member countries. Commercial viability and risks are estimated based on internal rating models (reviewed and recalibrated periodically with the support of major international rating agencies). The ratings are reviewed at least annually and subject to continued surveillance in order to ensure proactiveness in taking any corrective measures. The Bank does not lend to projects rated below an internal rating of "5" which is equivalent to "B-" international rating and all the projects rated (numerically) above "5" are subject to: 1) exceptional Board approval and 2) a limit of 10% of the Bank's capital. The Bank also has a set of limits that governs single name exposure (6% of total risk capital) and sector exposure (25- 35% of the risk capital allocated to private sector operations). The Bank has in place a framework for the ex-ante additionality and development outcome assessment (ADOA) of its private sector operations. The baseline development outcome indicators established will facilitate tracking, monitoring and ex-post evaluations. 73

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