Formulating bankable Aid for Trade projects in Africa
This document introduces broad guidelines on how to develop bankable Aid for Trade (AfT) projects and programmes and successfully position these within the AfT initiative, taking into account current perspectives and requirements of key AfT development partners.
The guide is not meant to be a blueprint, nor is it meant to be exhaustive. It aims to enable the systematic analysis of the constraints to trade for countries or regions, the identification of needs, and the formulation of project and programme proposals that are “bankable” and ready to be presented to development partners for funding under the broad umbrella of AfT.
Why are these guidelines needed?
There are very large disparities in AfT per capita in Africa and a low level of correlation between potential demand and supply. Karingi and Fabbroni (2009) find that countries most in need are those showing the worst values across a selection of trade-related performance indicators.
In financial terms, a bankable project would usually refer to a project that lenders are willing to finance since there will be a financial return on the investment. However, in the aid context, a bankable AfT project is one which development partners are willing to fund since they are confident of a positive and sufficient effect on the capacity of the beneficiary (e.g. greater regional integration, increased trade capacity, growth, poverty reduction, etc.). A bankable project could be described as a “good quality project [expected to deliver the desired results] addressing relevant needs and falling inside the development partner priorities at the right time”. However, this does not translate into higher levels of AfT supply. In fact, there is an extremely weak relationship between need or demand and supply of AfT in per capita terms.
Many developing countries face substantial difficulties in developing bankable projects and programmes based on their identified needs. According to the results of the 2011 Organization for Economic Cooperation and Development (OECD)/World Trade Organization (WTO) AfT questionnaire, 65 per cent of respondents stated difficulties in designing bankable projects as one of the “most important” or “important” challenges in accessing trade-related funding. Recent survey results confirm this remains the case and show that both African countries and regional economic communities face difficulties in developing bankable project proposals and clearly identifying needs and associated priorities. These challenges are ranked as “the most critical in hampering an adequate resource mobilization through AfT”.
Preparing the case for funding
As with any finite resource, there is competition for AfT resources. Priorities need to be established and choices made. Securing support requires a carefully considered and well argued “business case” or “pitch” that appeals to the funder. As discussed by the World Bank (2011), the case needs to demonstrate that allocating resources to any particular programme, project or activity is an investment rather than merely a cost, not just to the funder but also the wider constituency. Naturally, the more complex the programme the greater the effort required to prepare the business case. Economic analysis is useful in setting the context and calculating costs and benefits of new investments. It is important to contextualize the evidence and demonstrate relevance to a particular country or region.
In summary, the best proposals are comprehensive yet concise, tailored to a specific funder (in terms of priorities, formats and approach), evidence-based, demonstrate credibility and track record, and are realistic in terms of what can be achieved.
This guideline document is a key output of an assignment to provide technical support for enhancing the formulation of bankable AfT projects in Africa, which is part of a larger project to provide technical support for the successful implementation of the UN Development Account project on “Facilitating the effective integration of developing countries in the global economy through Aid for Trade schemes” led by ECA.