FINANCIAL ANALYSIS:

Procedural aspects of project financing in banks as well as NBFCs

Development operations financed by follow a procedure cycle, which is almostidentical for all kinds of
projects whose technical, economic, and financial feasibility has been established. These projects must
have a reasonable economic rate of return
and should be intended to promote development in the beneficiary country. The procedure consists of
the following:
1) Identification of the project:
The projects idea is introduced to providers by various sources: a request from thegovernment
concerned or financials identification missions may identify a proposalfrom other financiers, or it.
Applications for financing are then sorted out and classified: projects to be financed are selected from
amongst projects which have top priority inthe development plans of the beneficiary countries and
which meet the requirementsestablished by the rules for financing set out by the providers and agreed
upon by thegovernment concerned. In all cases, an official request from the government should
besubmitted to financials before it decides to participate in the financing.
2) Desk review and determination of the projects scope:
Experts, each in his field of specialization, study all the documents available on
the project and examine its components, its estimated local and foreign costs, the preliminary financing
plan, the position of the other sources of financing, the
currenteconomic situation and the development policy of the beneficiary country and,generally, review
all elements which may help in making the project a success.
3) Preliminary approval:
The findings of the projects review are set out in a report prepared by financialsexperts and submitted
to Board of Directors for preliminary approval for undertakingfurther studies on the said project with
the intention of considering the possibility of organizations participation in its financing.
4) Project appraisal and submission to the Board:
After the project has been granted preliminary approval, organizations usuallydispatches an appraisal
mission to the projects site. The appraisal stage is considered
to be one of the key stages of the procedure in this stage the projects objectives,components, cost,
financing plan, justification and all its economic, technical and
legalaspects are determined. The projects implementation schedule, the methods of procurement of g
oods and services, the economic and financial analysis and theimplementing and operating agencies are
also examined at this stage. Based on theresults of the appraisal mission, an appraisal report is
prepared, as well as a Director Generals report which is submitted to the Board of Directors for
final approval.
5) Consultations with other co financiers:
Consultations are considered to be one of the important stages in the procedure. It isduring this stage
that agreement is reached regarding the financing plan, the type of financing, and distribution of the
components of the project so as to ensure the smoothflow of disbursements during execution of the
various components of the project. Thiscoordination should continue throughout the project
implementation period to ensurethe fulfillment of its objectives.
6) Negotiations and signature of the loan agreement:
After the beneficiary government is informed of the Board of Directors decision toextend the loan
according to the terms agreed upon during the appraisal of the
project,the loan agreement is prepared and negotiated, and eventually signed with thegovernment
concerned.
7) Declaration of effectiveness of the loan agreement:
A loan agreement is declared effective after continuous contacts with the governmentconcerned
and the other co-financiers and after fulfillment of all conditions precedentto effectiveness stipulated in
the loan agreement.
8) Project implementation and disbursement from the loan:
After the declaration of effectiveness of the loan agreement, the projectsimplementation and, consequ
ently, the disbursements from the loan funds startaccording to the plan agreed upon during the
appraisal process and in line with the
rulesand provisions of the loan agreement signed between the two parties.
9) Supervision and follow-up:
Financials undertakes the follow-up of the projects implementation through its fieldmissions sent to the
projects site or through the periodic reports which it requires the beneficiary country to provide on a
quarterly basis. These reports enable them to
advisethe government concerned on the best ways to implement the project.
10) Current status reports:
Whenever necessary, experts prepare status reports which include the most
recentinformation and developments on the projects implementation. These reports aresubmitted to
the Board of Directors for information and approval of any possibleamendments, which may be required
for implementation. This is done in
coordinationand agreement with the government concerned and the other co-financiers.
11) Project completion report:
This report is prepared at the projects site and in the office as well, after completion of the project. This
report enables organizations to make use of the experience gainedfrom the completed project, when
implementing similar projects in future. In addition,it may help in identifying a new project in the same
sector.