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6. DISBURSEMENT PROCEDURES

Four Major Types

6.1 Procedures for withdrawal of loan proceeds are standardized to facilitate disbursements under most loans. There are four major types of disbursement procedure, described briefly as follows:

• direct payment procedure, where the Asian Development Bank (ADB), at the borrower's[1] request, pays a designated beneficiary directly (Chapter 7);

• commitment procedure, where ADB, at the borrower's request, provides an irrevocable undertaking to reimburse a commercial bank for payments made or to be made to a supplier against a letter of credit (LC) financed from the loan account (Chapter 8);

• reimbursement procedure, where ADB pays from the loan account to the borrower's account for eligible expenditures which have been incurred and paid for by the project out of its budget allocation or its own resources (Chapter 9); and

• imprest fund procedure, where ADB makes an advance disbursement from the loan account for deposit to an imprest account to be used exclusively for ADB's share of eligible expenditures (Chapter 10).

Simplified Documentation under the Reimbursement Procedure

6.2 While normally ADB requires submission of full supporting documentation, there are special cases where it accepts simplified documentation procedures:

• the statement of expenditures (SOE) procedure involves the borrower submitting a SOE to support an application (Sections 9.9- 9.24), and

• the force account works procedure involves the borrower submitting periodic certification of the progress or completion of civil works in support of its application for reimbursement (Sections 9.25-9.29).

Disbursement Procedures and Suggested Types of Payment

6.3 The four procedures are normally used for the following kinds of payment:

Disbursement Procedures

Suggested Types of Payment

Direct payment

Mainly large civil works, progress payments, consultants' fees, procurement of goods

Commitment

Importation costs

Reimbursement

Local currency costs, petty purchases, and small civil works

Imprest fund

Contractors' bills and suppliers' invoices in local currency, numerous items of operating expenses, other relatively small eligible expenditures

Modes of Loan Disbursement

6.4 The following table presents the interrelationship of the different types of loan disbursement procedures.

Approval Authority for the Procedures

Disbursement Procedures

Full or Simplified Documentation

Key Supporting Documents

Direct payment (Chapter 7)

Invoice

No need for

Commitment (Chapter 8)

Full supporting documents

Contract, copy of letter of credit

prior ADB approval

Reimbursement, with full supporting documents (Chapter 9)

Invoice, proof of payment such as receipt

Reimbursement, without full supporting documents (Chapter 9)

Force account

Financial progress

certificate

SOE

SOE

Need prior ADB approval (description in project administration manual)

Imprest Fund

Force account

Physical progress certificate, financial progress certificate

Estimate of

expenditure

(for initial and

additional

advance),

imprest account

reconciliation

(Chapter 10)

SOE

SOE

Full supporting documents

Invoice or claim, proof of payment such as receipt

statement, bank statement (for liquidation and/or replenishment)

ADB = Asian Development Bank, SOE = statement of expenditures. a Refer to relevant chapters for more detailed requirements.

  • [1] "Borrower(s)" in this handbook refers to borrowers, recipients (of grants), and/or their executing agencies unless the context requires otherwise.
 
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