The proposal has been drafted to contain all preliminary information required by the IFC as listed in the last publication. The proposal has been submitted to the appropriate IFCs department or regional office, one of which is in Lagos Nigeria (Refer to the publication on 8 May, 2020).
The stages of the cycle that comes next is as follows;
1. Business Development: IFC Investment Officers (IOs) and business development officers decide suitable projects and businesses. This is done through a conversation with the business owner to understand the business needs and determine if there is a role for the IFC to play in the business.
2. Early Review: This is carried out by the Investment Officers, they prepare a description of the project, define what IFC’s role would be, the anticipated contribution to the development of the project, the benefit it will bring to stakeholders, and any potential deal-breakers.
Lessons from previous projects are also considered here, and depending on the nature of the project, a pre-appraisal visit is conducted to identify issues in advance.
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This early review is presented to the IFC senior management who then decides whether to authorize the project appraisal.
3. Appraisal: The appraisal is carried out by an investment team, who assesses the full business potential, risks, and opportunities associated with the investment through discussions with client and visits to the project site.
The following question are asked by the team: Is the investment financially and economically sound? Can it comply with IFC’s social and environmental Performance Standards? Have lessons from prior investments been taken into account? Have the necessary disclosure and consultation requirements been met? How can the IFC help the client further improve the sustainability of the project or enterprise?
4. Investment Review: At the conclusion of the appraisal, the project team will make a recommendation to the IFC departmental management, who will decide whether to approve the project. The submission of the recommendation to the IFC departmental management is a key stage in the investment cycle.
5. Negotiations: Having gotten an approval for the project in the last stage, the project team starts to negotiate the terms and conditions of IFC participation with the client. The negotiation will cover the following; conditions of disbursement and covenants, performance and monitoring requirements, agreement of action plans and resolution of any outstanding issues.
6. Public Notification: Before submitting the proposed investment to the Board for review, a Summary of Proposed Investment (SPI) for the project and the environmental and social review, where applicable , are posted on IFC’s Website. The length of the disclosure period is determined by the category of the project.
7. Board Review and Approval: The project is submitted to IFC’s Board of Directors for consideration and approval through regular or streamlined procedures. “Streamlined” means that the members of the Board review the documents but don’t meet to discuss the project.
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The streamlined option is available to low-risk projects of a small enough size. Certain small projects can be approved by IFC management under delegated authority. The due diligence process and public disclosure remain the same in all cases.
For any project to pass through the Board, the investment must have economic, financial, and development value and reflects IFC’s commitment to sustainability.
8. Commitment: If the Board approves the project, the IFC and the company sign the legal agreement for the investment. The agreement includes the client’s agreement to comply with the applicable Performance Standards, to immediately report any serious accident or fatality, and to provide regular monitoring reports. includes the client’s agreement to comply with the applicable Performance Standards, to immediately report any serious accident or fatality, and to provide regular monitoring reports. The legal agreement will also covenant the client’s Action Plan.
9. Disbursement of Funds: The funds are often paid out in stages or on condition of certain steps being completed as agreed in the legal agreement between the IFC and the client.
10. Project Supervision and Development Outcome Tracking: The IFC monitors its investments to ensure compliance with the conditions in the loan agreement. The company will submit regular reports on financial as well as social and environmental performance, and information on factors that might materially affect the enterprise.
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The dialogue during supervision allows IFC to support clients, both in terms of solving issues and identifying new opportunities. The IFC will also track the project’s contribution to development against key indicators identified at the start of the investment cycle.
11. Evaluation: The project will be evaluated on a regular basis by the IFC. This helps in making improvements in operational performance. An annual evaluation is conducted based on a stratified random sample of projects that have reached early operating maturity.
12. Closing: When the business has repaid the investment made by the IFC in full or the IFC exit the business by selling its equity stake, the books on the project will be closed. In specific cases the IFC may decide to write off the debt owed by the business. The goal of the IFC is to help the client reach a high level of sustainability that will continue long after its involvement has ended.
In the commitment stage, it was stated that in signing the legal agreement for the investment, the client will agree to comply with applicable performance standards.
What are these performance standards?
Written by;
Nnamdi M.