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Efforts to Increase Development Effectiveness of Projects

Types of ODA Loans

1. Project-Type Loans

1) Project Loans
Project loans, which account for the largest portion of ODA Loans, finance projects such as roads, power plants, irrigation, water supply and sewerage facilities. The loans are used for the procurement of facilities, equipment and services, or for conducting civil and other related works.

2) Engineering Service (E/S) Loans
Engineering Service (E/S) loans are for engineering services which are necessary at the survey and planning stages of projects. These services include reviews of feasibility studies, surveys on detailed data on project sites, detailed designs and the preparation of bidding documents. In the same manner as Project Loans, completion of feasibility studies or their equivalent and confirmation of the project's overall necessity and relevance are prerequisite for this type of loan.

3) Financial Intermediary Loans (Two-Step Loans)
Financial intermediary loans are implemented through the financial institutions of the recipient country based on the policy-oriented financial system of the partner country. These loans provide funds necessary for the implementation of designated policies, such as the promotion of small and medium-scale enterprises in manufacturing, agriculture and other specified industries and the construction of facilities to improve the living standards of the poor. These loans are known as "two-step loans (TSL)" because under the process, funds pass through two or more financial institutions before the end-beneficiaries receive the funds.

Under this type of loan, funds can be provided to a large number of end-beneficiaries in the private sector. Since these loans are implemented through local financial institutions, strengthening of the operational capabilities of these institutions and the development of the financial sector of recipient countries are also expected as the result of these loans.

4) Sector Loans
Sector loans are for materials and equipment, services and consulting required for the implementation of development plans in a specific sector consisting of multiple sub-projects. This type of loan also leads to improved policies and systems in the sector.

2. Program Loans

Program loans assist recipient countries seeking to improve policies and implement general system reforms. Loan agreements are signed and funds are provided based on confirmation that reform items have been achieved by the partner country's government. In recent years, the most common type of these loans is one in which proceeds are incorporated into the target partner country budget. There are many instances in which these types of loans take the form of co-financing with the World Bank and other multilateral development banks (MDBs).


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