2. Adaptable Tools: Investment & Development Policy Lending

3. Modernization of Investment Lending

4. 3 IL Simplification—Why?  Respond to Borrowers’ demands for simpler, faster, more responsive IL  Make life easier for Borrower & Bank staff  Cut costs and time  Restore IL as an important product line

5. 4 Faster project processing and better documentation Issue: IL processing too slow; reviews and documents not strategic Actions:  February 2003: Faster processes for simple and repeater projects  July 2003: New Project Concept Note, streamlined Project Appraisal Document, and associated new procedures (QER)  October 2003: Guidance on streamlined procedures for fiduciary and safeguard reviews and clearances  December 2004: PCN/PAD Review to assess how it works

6. 5 More effective, adaptable, and results-oriented project supervision Issue: Lack of agility to adapt to changed circumstances; insufficient focus on outcomes in implementation Actions:  FY04/05: Reform of project supervision report (ISR)  FY05: Package of initiatives for easier project restructuring and rework  FY05: New policy on additional financing to allow for faster scaling up  FY05: OED Harmonization ISR-ICR-OED exit

7. 6 Ability to finance wider range of expenditures Issue: Disconnect between expenditures that borrowers need to incur and those eligible for Bank financing Action: FY04: New policies and procedures approved for expanded eligibility of expenditures and country/sector treatment of cost sharing Fiduciary and Safeguard policies applied with capacity-building focus Issue: Application of Bank’s fiduciary and safeguard policies doesn’t build sufficient Borrower capacity Action: FY05/07: Pilot operations to use and strengthen borrowers’ fiduciary and safeguard systems

8. 7 Efficient, user-friendly policy framework for IL Issue: Policy framework for IL is outdated, overly complex,fragmented, and too rigid Actions:  FY05: Revise policy on emergency lending to better align with borrowers’ emergency needs and facilitate more efficient implementation  FY05/07: Create a consolidated IL policy framework and procedures for IL that would be:  limited to core policy principles and requirements for project appraisal and supervision  eliminate redundant and outdated requirements and prescriptive details

9. 8 Modernized investment lending instrument Issue: Current array of IL instruments is confusing, rigid, and not well adapted to today’s needs Actions:  Nov. 2002: Fiduciary guidelines for pooled funding  FY05: Proposal for consolidated IL instrument

10. 9 Closing Remarks: To help investment lending further, three parallel tracks of reform need to be followed during the FY05-FY07 period:  Completion of IL Simplification Agenda  Serious reduction in Bank-internal “churning” during preparation and supervision of IL operations  Overcoming lack of investment lending incentives and slots in country/regions’ programs