Disbursement Procedures - Islamic Development Bank

Ineligible Items For IDB Financing
4.73 The Bank does not finance customs duties and other taxes imposed by the
borrowing (or guaranteeing) member country. This policy is applied by selecting items to
be financed and setting eligible disbursement percentages so that the overall level of Bank
financing excludes taxes. In the case of imported goods bought locally, the Bank usually
disburses a percentage of the purchase price in order to avoid disbursing against duties
or taxes. Similarly, the local cost component of contracts for works is usually financed at
less than 100 percent to exclude taxes. For locally manufactured goods purchased directly
from the factory, no adjustment to the disbursement percentage is made in order to
exclude financing of customs duties or taxes on imported components entering into the
cost of a final product.
4.74 Additionally, the Bank do not finance the following :
* Items not within the project and category description defined in the
financing agreement.
* Items not procured in accordance with IDB’s Procurement Guidelines,
* Payments made or due for goods, works, and services provided after the
closing date
* Land acquisitions (although, in very rare cases, an exception may be
approved by Bank’s management)
* Late payment penalties imposed by suppliers, unless the penalties were
incurred in connection with a disputed payment which was under arbitration
* Excessive advance payments
* Self insurance
4.75 Local freight charges for imported goods are not eligible for Bank financing, unless
clearly indicated in the financing agreement.
4.76 The borrower, not the Bank, must be the beneficiary of insurance policies.
Premiums paid in foreign exchange are eligible for Bank financing. Self insurance and
premiums in local currency are not eligible unless provided for in the financing agreement.
Retroactive Financing
4.77 Under the existing IDB disbursement policies and procedures, a project has to be
approved, an Agreement between the beneficiary and the IDB has to be signed and come
into effect before any funds could be disbursed to the beneficiary. Similarly, disbursement
could be made only to meet approved expenditures which must be supported by adequate
documentation in accordance with the provisions of the Agreement. These steps are
aimed at ensuring that the financing made available by the Bank is used strictly for the
purpose for which it is provided.
4.78 However, these procedures often result in IDB not being able to undertake some of
the projects which are otherwise feasible owing to the inability of the beneficiaries to wait
for IDB financing. In some cases, the beneficiaries could have agreed to wait for the IDB
appraisal and approval process provided there was assurances that the IDB would
reimburse expenses incurred during this process.