iii. the allocation of aid funds on condition that the on-lending of any
sums in excess of £400,000, or perhaps a lower figure, should be subject
to normal QDA project appraisal, this condition also to be reviewed after
a time;
iv. the provision of technical assistance to the bank in the fields of
economic, financial and technical appraisal and administration
time as i. ii. or iii. above.
Terms of On-lending
-
at the same
12. Guidance relating to the on-lending of aid funds is contained in paragraphs 86
to 90 of OP(71)1. The relevant passage so far as development banks are concerned
is paragraph 89, which reads:
"Where aid is channelled through local development banks or
other local development institutions, there are usually three stages
to the lending process: from the UK to the recipient government, from
the recipient government to the local development institution, and from
the local development institution to its clients, who will frequently be
private sector firms. In this case it is important that the loans made
by the local development institution to its clients should bear a
reasonable relation to the terms on which the money could be borrowed
in the market. If the original aid loan is passed on to the local
development institution by the recipient government on the concessionary
terms on which it is made available by the UK, then the local development
institution will be able to generate additional income to the extent of
the difference between its own borrowing and lending rates.
Alternatively,
if the recipient government on-lends to the local development institution at an intermediate rate, the product of on-lending (ie the margin between
the lending rate of the local development institution and the terms of the
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