Abstract

Examination of Applications for Capital Aid Loans

The article outlines the various steps in the handling of a public capital aid loan granted by the Federal Republic of Germany to a developing country and gives a survey of the methods appliedin examining projects that are to be financed. A compilation of these methods was given in the “Veröffentlichungen aus dem Arbeitsbereich der Kreditanstalt für Wiederaufbau” (KfW) [Publications on the Field of Activities of the Reconstruction Loan Corporation] and to this extent the article is simultaneously a collective review of those publications. Loan applications are subjected to an examination of the development policy aspects by the Federal Ministry for Economic Co-operation (BMZ) and a technical, bank scrutiny by the KfW. The technical examination is undertaken at several levels. A project must have a high rank in the overall economic priorities scale of the developing country. 'The necessity of additional capacities is checked with the aid of sectoral analyses. While the examination of the economic and socioeconomic effects of a project includes a cost-benefit analysis as far as possible, operational economy and liquidity aspects from the focal point of the analysis of the management side of the project. The methodological problems dealt with by the KfW publications are: cost benefit analysis, assessment problems in cost-benefit analysis, data requirements for investment studies, combination of efficiency and financial accounting, sectoral analysis of the sugar industry, and the problems of financing domestic costs.