Independent Review of the Bank’s Non-Sovereign Portfolio: Preliminary Findings on

Private Sector Policy

African Development Bankwww.afdb.org/opev

Rakesh NangiaMohamed Manai

OPEV

©2011 Deloitte Global Services Limited2

Overview – Strategic Priorities

2

Infrastructure,Industry & Service Sectors

LIC’sFragile States

Equity

Risk SharingInstruments

DFIPartnerships

StrongGrowth

CautiousGrowth

PortfolioQuality

Household

Government

Environment

Social

FinancialIntermediary

SupportMSME’s

ExposureLimits

Risk RatingTargets

MemberSupport

OperationalEfficiency

PoliticalRisk

©2011 Deloitte Global Services Limited

To What Extent is the PSO Portfolio Aligned to the Strategy’s Five Objectives?

1. Improving the Investment Climate

3

• Objective fits with “one bank” concept of integrated operations

©2011 Deloitte Global Services Limited

To What Extent is the PSO Portfolio Aligned to the Strategy’s Five Objectives?

2. Supporting Private Enterprises

4

• Need to define SME’s and require DO monitoring

• Interventions through intermediaries and DFI’s have tradeoffs:‒ Positives: financial additionality, reduced risk exposure‒ Concerns: loss of control over funds usage, limited ability to

monitor and impact DO, different priorities between PSOand client financial institutions

• Increasing equity fund investments reach SME’s, create high additionality‒ Strong concerns: far greater risk exposure, need for additional monitoring and

management, lack of defined exit strategies, overall coordination

©2011 Deloitte Global Services Limited5

To What Extent is the PSO Portfolio Aligned to the Strategy’s Five Objectives?

3. Building Competitive Infrastructure

• Very high catalytic effect• 43% achieved in LIC’s, a strategic priority• Higher risk ratings than overall portfolio

• Limited use of TA on infrastructure project

• Portfolio strongly aligns to core objective and multiple priorities• Targeted TA utilizing WB Group model can reduce risk exposure, improve outcomes

©2011 Deloitte Global Services Limited

Criteria AfDB IFC EBRD AFD IDC DBSA

Approval duration

11 months(5 year avg.) 6 months 6 months 4 – 6 months 6 months 3 - 6 months

Exploratory review

Divisional Management

Combined with concept review

Combined with concept review

Combined with concept review

Combined with concept review

Combined with concept review

Concept Review / Preliminary analysis

Departments Review

Senior Management Opscom Screening

CommitteeHead of Business Unit Opscom equivalent

Country Team

Credit Comm.

OIVP

Opscom

• Gating stages during the approval process

Approval Stages (1 of 4)

6

• Approval process stages are similar to benchmarked MDBs, but AfDB’s internal steps are more cumbersome

• AfDB has twice as many approval gates as other MDBs

©2011 Deloitte Global Services Limited

Criteria AfDB IFC EBRD AFD IDC DBSA

Final Review/Project appraisal

Department Review

Departmental Management Opscom Project Committee Head of Business

Unit

Opscom equivalent Country Team

Credit Comm.

OIVP

Credit committeeSecretariat

Opscom

Final Approval

COO

Board Notification for smaller projects

Board Notification for projects under €10 million

Investment Committee/ Board

Credit Committee/ Executive team/ Board

BoardPresident

Board

Approval Stages (2 of 4)

7

• Gating stages during the approval process

• Repeating approval steps between Concept Review and Final Review is more detailed than other IFI’s, adds time and administrative requirements

• Other IFIs utilize Board notification on smaller projects and finish approval steps within division management/OPSCOMM reviews

o Finalize Technical Draft Reports by End Of November

o Discuss Draft Consolidated Report by Mid-December

o Submit Consolidated Report and Final Technical Reports for Management Response by End of December

o Submit Consolidated Report and Final Technical Reports to CODE for Consideration by End of January 2013