(ii) Engineering Service Loans
Engineering service loans make available funding for specialists to engineering services associated with the review of feasibility study reports, preparation of project tender documentation, and project design.
(iii) Project Type Sector Loans (PTSL)
These loans are used to provide funds (primarily in local currency) to purchase the materials, equipment, and services required for the implementation of numerous small-scale projects that support a development plan for a specific sector.
(iv) Commodity Loans
Commodity loans are provided to help countries improve their balance of payments situation and achieve domestic economic stability. The loans are used to pay for the import of commodities (e.g., industrial capital goods, industrial raw materials, fertilizers and agricultural chemicals, farm implements, and other types of machinery) specified in advance by agreement between the governments of the lending and recipient countries.
Generally, borrowing countries draw up allocation plans for commodity loans in different sectors depending on their priorities, and disburse the loan funds accordingly. Given their nature, commodity loans tend to be consumed fairly rapidly, usually within two years of the signing of the loan agreement. By contrast, project loans are normally disbursed over five years.
(v) Structural Adjustment Loans (SAL)
Structural adjustment loans are intended to support efforts for institutional reform and improvement of overall economic policy in the debtor country. The loan funds are normally used to buy imported commodities of a general nature, and where necessary, are accompanied by consultancy services for implementing Structural Adjustment Programs.
As a rule, the lending government reviews the Structural Adjustment Program drawn up by the borrowing government and sets out conditions, known collectively as conditionality. The total loan may be subdivided into several tranches of funds, each tranche being delivered in accordance with progress made in the implementation of the Structural Adjustment Program. Since it is often difficult to establish conditionality in the case of bilateral aid programs, such loans are normally jointly financed with the World Bank.
Japan extended its first structural adjustment loan in fiscal 1986 to support countries in sub-Saharan Africa, in a special joint financing (SJF) arrangement with the World Bank's Special Africa Fund.
(vi) Sector Adjustment Loans
While structural adjustment loans are aimed at assisting overall institutional reform and policy improvement for the economy in developing countries, sector adjustment loans seek to provide support for overall policy improvement and institutional reform in specific sectors. Funds disbursed under these loans are generally applied to the importation of certain goods and services needed for development in the designated sector. As is the case with structural adjustment loans, consultancy services are made available if required. Two other points of similarity to the structural adjustment loan program are that conditionality is established after reviewing the Sector Adjustment Program prepared by the borrowing country, and that funds may be disbursed in tranches.
(vii) Sector Program Loans (SPL)
A sector program loan involves the lending country providing a commodity loan to support a developing country's balance of payments problem, and the counterpart funds thereby generated being invested in a priority sector identified in the country's development policy.
(viii) Development Finance Loans (Two-step Loans)
Delivered via a financial institution in the target country, a two-step loan is designed to support development in specific sectors in a developing country. In addition to being able to target numerous beneficiaries, for example, the fostering of small- and medium-sized enterprises or supporting individual farmers, the two-step loan also plays a role in fostering the development of the financial institution itself. This type of loan takes its name from the fact that the funds are first provided to the local financial institution, after which they are then disbursed to multiple end beneficiaries.
Types of ODA Loans