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Loan effectiveness

The loan takes effect once certain conditions agreed to be precedent to first disbursement are met. This is also known as loan effectiveness. In addition to "other conditions" which may be fulfilled later, the following are some of the standard conditions said to be precedent to first disbursements: a) designate authorized signatories for the loan resources; b) present a legal opinion; c) submit the investment schedule; d) present a list of goods and services to be procured; e) open and maintain a special project account; f) establish a project implementation unit; g) any other condition agreed during negotiation as necessary to precede first disbursement.

Generally, these conditions are limited to the legal requirements as mentioned above, as well as cross-effectiveness of co-financing, and execution of subsidiary loan agreements. The requirements and deadlines for loan effectiveness are stipulated in the loan agreement.

ADB's Legal Counsel and Project Coordinating Officer review if the conditions are met, after which the loan is formally declared effective. Normally, loan documents allow 90 days for the loan agreement to become effective.