Balancing development returns and credit risks: project appraisal in a multilateral development bank

Figures & data

Figure 1 MDBs' additionality in AfDB's ADOA framework.

Figure 2 Relationship between development outcomes and additionality. Notes: Sample size: 121 operations. Model (1): slope, 0.4; p-value, 0.003. Development outcomes are rated on a six-point scale from ‘1 – highly unsatisfactory’ to ‘6 – excellent’. Additionality is rated on a four-point scale from ‘1 – none’ to ‘4 – strongly positive’.

Table 1 Correlation between additionality and subcategories of development outcomes.

	Additionality
Additionality	–
Household benefits	0.2001
Infrastructure	0.0361
Government	0.0426
Macroresilience	0.0352
Environmental effects	0.2090
Gender and social effects	0.1511
Private sector development	0.3077

Figure 3 Relationship between development outcomes and credit risk. Notes: Sample size: 109 operations. Model (2): slope, 0.048; p-value, 0.49. Development outcomes are rated on a six-point scale from ‘1 – highly unsatisfactory’ to ‘6 – excellent’. Credit risk is assessed on a scale from 1 to 10, with 1 representing the lowest level of risk exposure.

Table 2 Correlation between credit risk and subcategories of development outcomes.

	Credit risk
Credit risk	–
Household	0.1778
Infrastructure	− 0.1681
Government revenues	− 0.0409
Macroresilience	− 0.3160
Environmental effects	0.0451
Gender and social effects	0.0854
Private sector development	0.2196

Figure 4 Relationship between additionality and credit risk. Notes: Sample size: 109 operations. Model (3): slope, 0.48; p-value, 0.29. Additionality is rated on a four-point scale from ‘1 – none’ to ‘4 – strongly positive’. Credit risk is assessed on a scale from 1 to 10, with 1 representing the lowest level of risk exposure.

Table 3 Drivers of project approval.

Constant	0.056 (0.176)
Development outcomes	0.080^*^* (0.038)
Additionality	0.086^* (0.047)
Credit risk	− 0.042^*^* (0.016)
R^2	0.207
No. of observations	109

Notes: Standard errors are reported in parenthesis. Sample size: 109 operations; Model (4): development outcomes are rated on a six-point scale from ‘1 – highly unsatisfactory’ to ‘6 – excellent’. Additionality is rated on a four-point scale from ‘1 – none’ to ‘4 – strongly positive’. Credit risk is assessed on a scale from 1 to 10, with 1 representing the lowest level of risk exposure.

^*Significance at the 90% level.

^**Significance at the 95% level.

^***Significance at the 99% level.

Table 4 Drivers of the development outcome rating.

Constant	− 0.218 (0.738)
Household benefits	0.368^*^*^* (0.108)
Infrastructure	0.190^*^*^* (0.061)
Government	0.327^*^*^* (0.104)
Macroresilience	0.108 (0.084)
Environmental effects	0.174^*^* (0.080)
Gender and social	0.323^*^*^* (0.112)
Private sector development	0.358^*^*^* (0.126)
R^2	0.517
No. of observations	88

Notes: Standard errors are reported in parenthesis. Sample size: 109 operations; Model (5): development outcomes are rated on a six-point scale from ‘1 – highly unsatisfactory’ to ‘6 – excellent’. Subcategories of development outcomes are rated on a four-point scale from ‘1 – poor’ to ‘4 – excellent’.

^*Significance at the 90% level.

^**Significance at the 95% level.

^***Significance at the 99% level.

Table 5 Drivers of the additionality rating.

Constant	0.638 (0.160)
Political risk mitigation	− 0.005 (0.055)
Financial additionality	0.716^*^*^* (0.044)
Improved development outcomes	0.152^*^*^* (0.034)
R^2	0.824
No. of observations	120

Notes: Standard errors are reported in parenthesis. Sample size: 109 operations; Model (6): additionality is rated on a four-point scale from ‘1 – none’ to ‘4 – strongly positive’. Subcategories of additionality are rated on a 4-point scale from ‘1 – none’ to ‘4 – strongly positive’.

^*Significance at the 90% level.

^**Significance at the 95% level.

^***Significance at the 99% level.

Table A1 Descriptive statistics.

	Cost of project ($m)	ADB contribution ($m)	Share of AfDB contribution	Additionality score	Political risk mitigation sub-score	Financial additionality sub-score	Improved development outcomes sub-score	Development outcome score	Credit risk
Mean	604.19	68.33	0.27	1.83	3.61	1.96	2.67	2.57	4.70
Standard error	140.39	8.21	0.03	0.06	0.06	0.07	0.08	0.07	0.13
Median	223.40	36.96	0.19	2.00	4.00	2.00	3.00	3.00	5.00
Mode	200.00	50.00	1.00	2.00	4.00	2.00	2.00	3.00	5.00
Standard deviation	1531.45	89.98	0.27	0.65	0.69	0.77	0.83	0.82	1.34
Sample variance	2,345,327	8096.27	0.07	0.43	0.48	0.59	0.69	0.68	1.81
Range	13,368	498.50	0.99	3.00	3.00	3.00	3.00	5.00	6.00
Minimum	10.00	1.50	0.01	1.00	1.00	1.00	1.00	1.00	2.00
Maximum	13,378.13	500.00	1.00	4.00	4.00	4.00	4.00	6.00	8.00
Count	119.00	120.00	119.00	121.00	120.00	120.00	120.00	121.00	109.00

Note: $m is million of dollars.

Table A2 Sector and country distribution.

	Corporate sector (%)	Financial institutions (%)	Infrastructure (%)	Total (%)
Least developed countries	14.9	14.0	14.0	43.0
Middle-income countries	5.8	5.0	3.3	14.0
Regional projects	2.5	36.4	4.1	43.0
Total	23.1	55.4	21.5	100.0

Table A3 Project approvals and refusals at board level.

	Corporate sector (%)	Financial institutions (%)	Infrastructure (%)	Total (%)
Projects accepted	15.7	53.7	19.0	88.4
Projects dropped	7.4	1.7	2.5	11.6
Total	23.1	55.4	21.5	100.0