Application preparation checklist

This checklist is designed to serve as a guide for the preparation of an application to the Private Sector Department for a loan or equity investment. It may not be fully applicable to all projects and merely indicates the type of issues, which should be addressed. Before a project appraisal can take place, it will be necessary to submit a detailed feasibility study and a business plan.

General Information

• Describe the proposed or existing enterprise, its history, the capital structure and main sponsors, the nature of ongoing activities, if any, management, references and, where applicable, the audited financial results for the last five years;
• Description of the proposed project, whether new or as an extension, its objectives and rationale. The total investment required. Timing of key events;
• Give details of preparatory studies and investigations carried out so far, when and by whom.

The Sector

• Review and describe the financial sector in the country concerned. List the main types of financial institutions and describe their role in the sector. Under what laws and by which regulatory bodies are they approved and allowed to operate. In an annex list all the institutions by type.
• Describe the interest rate environment. How are rates determined and managed? What are the current rates for each type of transaction?
• Describe the money and capital markets. What are the different instruments, their terms and conditions, etc. Estimate the total market value of each type;
• Describe the foreign exchange regime. Which institutions are authorized to deal in foreign exchange rates during the last five years?
• Is credit allocated or directed by the government or regulatory authorities to particular market segments? Are any subsidized credit schemes in operation?
• Describe how the project fits within government's development objectives and policies for the sector.

Market

• Describe the market for the product(s) and services. Provide historical data and forecasts;
• List the main competitors, both domestic and foreign. Give indications of their volumes and market shares. Are any of them planning expansions?
  What will be the likely reaction of competitors to this project?
• Review the marketing strategy selected and its justification. Describe preparations for market research, product planning, pricing strategies, distribution, promotional programs, advertising, selling and so forth.

Organization

• Describe the structure of the Board and management, including organization charts and CVs for key managerial personnel;
• Describe planned human resources management for the project, including availability of personnel. Also describe relevant laws, regulations and practices. Indicate the cost of staff at all levels;
• Describe proposed training programs.

Technical Aspects

• Describe the plans for obtaining adequate and appropriate premises and fixed assets, including equipment;
• Describe the main features of planned operating procedures and methods, including computer systems, and the rational for the choices made.

Government Role, Taxation, Regulations, Insurance

• Does government have any direct or indirect role in the project? Which government approvals are required and current status of each. Provide copies of approvals already obtained;
• Describe government and/or central bank regulations related to the operation of financial institutions;
• Describe applicable taxes, provisions concerning repatriation of capital, dividends, royalties, etc.
• Provide details of all insurance policies related to the project, the management and the Board.

Project Investment Costs and Financing Plan

• Provide detailed plans for raising the required capital. Provide assumptions and details of pre-operating expenses and how they will be funded and accounted for;
• Provide projected balance sheet, profit and loss account and cash flow projections for the first five years of operation, stating detailed assumptions, especially rate and spread assumptions, as well as anticipated market penetration;
• Compute various measures of performance ratios as appropriate, such as risk assets to capital, operating ratios, return on assets and return on equity;
• Demonstrate sustainable compliance with local and international capital adequacy requirements;
• Compute sensitivity analyses at various levels of business relative to the base assumption.

Proposed Bank Involvement

• Provide details of the financial participation requested from the African Development Bank, explain why the financing is required, for what purpose the proceeds will be used and what else is expected from the ADB (for instance, technical assistance, etc.)

Proposed Security and Safeguards

• Discuss realistically the risks involved in carrying out the project, including market, government regulations, management, labor, competition, system failures etc. Then review and explain how these risks can be mitigated and what kind of security and safeguards would be available.

Appendices 

• Provide copies of relevant audited financial statements for the last five years (if available), copies of legal documents (e.g. memorandum of incorporation and articles of association), lists of affiliated companies, information on individual shareholders, products and services descriptions, market statistics and other relevant material as the case may be.