Improving Governance in Africa

What is the AfDB's loan approval process? The Bank has clear core operational priorities and cross cutting themes as part of its Ten-Year Strategy in deciding in which areas to intervene. All projects follow the same internal approval process. 1. Preparation of a Project Concept Note The Project Concept Note (PCN) is a document which is prepared to present, in a concise and analytical way, the main features of the project to be financed. The main objective is to allow Management to take an informed decision whether to go ahead with appraisal and due diligence of the related project or not. The first review level of the PCN is done by peer reviewers and members of the Project Appraisal Team (PAT), which constitutes experts drawn from a wide range of relevant Bank departments. The PCN is finally reviewed and discussed by the Country Team who determines if the transaction is well conceived and that both structure and orientation are compliant with the Bank's strategy and development priorities. It will also establish if the project is technically sound and commercially viable. The PCN is cleared by the Country Team (chaired by the Regional Director) which will recommend the project to the Operations Committee (which is chaired by the Bank's Vice-President/Chief Operating Officer) for final clearance. However, PCNS of some projects responding to certain circumstances including but not limited to having an amount higher than UA 100 million, reputational risk, exceptionally innovative features in their design, will require prior review by the Credit Risk Committee (chaired by the Bank Group Chief Risk Officer) who will make recommendations, as applicable to credit risk governance, credit assessment, rating change approval to the Operations Committee prior to its final clearance. The Operations Committee will then make a comprehensive review of the Project Concept Note with focus on finer technical details of operation. At this stage, particular attention is given to its rating. If the project is cleared at this level, the PAT will go on a project appraisal mission to do an appraisal and due diligence, assessing the Project on the ground. Simultaneously, the Bank's Risk Management Department undertakes an independent credit evaluation of the project and prepares a Summary Credit Note. 2. Project Appraisal Stage On completion of the due diligence mission, a Project Appraisal Report (PAR) is prepared. This is then discussed by the Project Appraisal Team at Country Team level. The discussion of the PAR at the Country Team is subsequent to the CRC reviewing the project for further credit assessment recommendations. Once cleared at the Country Team level, the project is sent to the Operations Committee before being submitted for approval to the Board. 3. Board Approval Final approval rests with the Board of Directors. The Board will make a decision based on the Project Appraisal Report and on the independent Board Credit Memorandum report prepared by the Risk Management Department. Following approval (and disbursement), all projects continue to be periodically assessed and evaluated by the Bank's Risk Management Department, and their internal risk rating is regularly updated. 74

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