All NORSAD’s projects pass through a project cycle that, with some variations, is common for them all: i) Direct Financing Identification Most project promoters approach NORSAD directly, whilst others are referred to NORSAD by institutions with similar objectives.
Preparation To process a loan application, NORSAD needs a business plan from the project promoters. The business plan must include: - Purpose and justification
- Details of project promoters
- Market aspects
- Technical aspects
- Project cost
- Financing plan
- Financial projections
- Development impact
- Environmental impact
- Risks and other issues
Appraisal If the project meets NORSAD’s general project criteria, the Agency conducts a comprehensive appraisal of the project. Approval The Agency Board of Directors approves the projects at its quarterly board meetings. A project may however, be presented to the Board of Directors between board meetings by circulation.
Loan offer/disbursement NORSAD prepares a loan offer that must be accepted within 30 days and disbursement can commence when the loan agreement has been signed, securities registered and the project company has obtained all necessary operating and loan servicing approvals from local authorities. The whole process from application to disbursement normally takes 2-5 months depending on the completeness of information and security registration procedures in a country. Implementation Implementation of a project is the responsibility of the promoters, but NORSAD monitors it closely. The Agency requires to be kept informed about the project by receiving regular reports as well as audited reports by the end of the financial year. Evaluation When a loan has been repaid, NORSAD evaluates the outcome of the project. The Agency compares actual results with original objectives. Lessons learnt from both successes and failures are used to improve future financing operations. Thus, the cycle has been completed. ii) Indirect Financing (Lines of Credit) Applications for lines of credit pass through a similar cycle as above but with slight differences in the following areas: Preparation The business plan must include details on; - Purpose and justification
- Details of promoters
- Operating Environment
- Financial market analysis
- Interest rate policy
- Credit appraisal/monitoring policies and procedures
- Treasury management
- Organisation and management
- Financial and economic analysis
Appraisal After reviewing the business plan, an on site due diligence is conducted to assess the track record the financial intermediary has with SMEs, to review its procedures and its pipeline of projects and to verify that it complies with prudential and regulatory standards and requirements.
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