An Evaluation of the Bank's Non-Sovereign Operations with Sub-National Entities: 2007-2010

Dec 2011
This evaluation examines the IDB's non-sovereign operations with sub-national entities during the 2007-2010 period. The delivery of loans to sub-national borrowers in this period was modest, not even near breaching the one-third ceiling. Attention to the sub-national sector is important in Latin America, because effective public service delivery is critical for poverty reduction, low gross capital formation is hindering development in the region, and decentralization has increasingly placed investment decisions for infrastructure services at the sub-national level. This presents an opportunity for the IDB, as, compared to peer multilaterals, it has a limited share in this sector. Therefore, OVE advises to: (i) further understand the potential market for sub-national lending, analyzing and mapping eligible and currently excluded sub-national entities in client countries, using alternative policy scenarios for both sovereign guaranteed and non-sovereign guaranteed operations; (ii) review the guidelines and practices of peer multilaterals to determine the desirability and feasibility of emulating them; and (iii) propose changes to existing policy and guidelines such that the IDB can better serve currently excluded sub-national enterprises through non-sovereign guaranteed lending.