The World Bank supports development initiatives through project, policy, and program financing. The key elements of the Financial Management (FM) approach with these different types of operations is detailed below.
Investment Project Financing (IPF)
The Bank Policy: Investment Project Financing defines the FM arrangements in IPF projects as the planning and budgeting, accounting, internal control, funds flow, financial reporting, and auditing arrangements of the borrower and entity responsible for project implementation. The FM arrangements rely on the borrower’s existing institutions and systems, with due consideration to the capacity of those institutions.
During the preparation stage, FM staff assess the financial management risks to achieving the project’s development objectives and determine the adequacy of the FM arrangements proposed at the implementing agency levels, together with any measures needed to mitigate the impact of the likelihood of risks materializing.
Throughout the project’s life, FM specialists in task teams work with the country borrower to ensure sound management of funds and accountability for project resources in achieving the desired development results. The FM specialists also work with borrowers to strengthen the systems and institutions for fiduciary assurance.
Development Policy Financing (DPF)
Financial management in DPFs centers around two major areas: gaining reasonable assurance that the borrower’s public financial management (PFM) system appropriately manages budget resources, and that funds flow arrangements are in place to ensure that the loan proceeds reach the designated accounts, and are accounted for in the country’s budget management system.
The funds are disbursed against satisfactory implementation of a program of policy and institutional actions that promote growth, including maintenance of a satisfactory macroeconomic policy framework and compliance with tranche release conditions. The borrower commits to using development policy lending funds for eligible expenditures only. The Bank normally disburses the loan proceeds into an account that forms part of the country’s official foreign exchange reserves (normally held by the central bank), and an amount equivalent to the loan proceeds is credited to an account of the government to finance budgeted expenditures.
Program for Results (PforR)
PforR relies upon country systems and disburses against results as measured by pre-determined indicators.
At the identification stage, the Bank works with the borrowing country to determine a clear definition and scope of the government program and the part of the program or sub-program to be financed by the Bank. Once agreed, the Bank identifies key results in terms of outputs and outcomes, as well as the related disbursement linked indicators (DLIs) to be used to determine the timing and amount of each disbursement.
FM, Procurement, and Governance specialists conduct a joint Fiduciary Systems Assessment (FSA) of program fiduciary systems and program arrangements. The FSA considers whether program systems provide reasonable assurance that the financing proceeds will be used for intended purposes, with due attention to the principles of economy, efficiency, transparency, and accountability.
Last Updated: May 01, 2018