PRODUCT NOTEIBRD Enclave Loans for IDA Countries
Overview and Objectives

Special Security Features

Low income economies (classified as International
Development Association, or IDA) can access additional
development financing from the World Bank in the form ofEnclave Financing for investment projects. International Bankfor Reconstruction and Development (IBRD) extends Enclave
financing in the form of loans for projects in IDA-only
countries. IBRD and IDA have separate balance sheets and an
Enclave loan is typically considered when the country isseeking World Bank financing above and beyond its IDA
envelope. The Enclave loan does not have any impact on theIDA envelope and it is subject to credit enhancement featuresthat adequately mitigate IBRD’s credit risk. The financial terms
are similar to those of the IBRD flexible loan (IFL).

The Enclave requires credit enhancement features to ensure
the security of the IBRD loan. The borrower, government, andIBRD work together to explore and determine these features.
The process involves: identifying suitable revenue streams
from creditworthy sources; clarifying certainty of cash flowswith projections and stress testing; ascertaining financial
viability; and, detailing the needed covenants, legal structures,and remedies. In addition, there are operational
considerations in securing the Enclave, such as thearrangements to ringfence the funding that will repay the IBRD
Enclave loan. This includes setting up debt service andoffshore escrow accounts.

The Enclave approach has the additional benefit of ensuringtransparency of the revenue flows of the underlying projects.
It also ensures that international best practices are applied forenvironmental and social safeguards. The Enclave is suitable
for a range of sectors that generate strong export revenues,
such as extractives, agricultural commodities, transport,
energy, and others. These revenues can then be secured tounderpin the Enclave loan with a sovereign counter-guarantee
to IBRD.
Enclave loans have been deployed by the World Bank for over
50 years, with the first being in 1968 with a loan to Guinea
using bauxite mining export revenue as the underlying
security. Since then, many more have financed projects
involving energy and water exports, mineral and agriculturalcommodity exports, mainly in Africa.

Eligibility
The Enclave is for IDA-only countries that have the resources
necessary to meet repayment obligations to IBRD. The Enclaveis specifically for projects that:• Are expected to generate large economic benefits withsignificant developmental impact;• Cannot be fully financed out of the country’s own
resources, IDA resources, or other concessional financingresources;• Is consistent with the Non-Concessional Borrowing Policy(NCBP) and the IMF Debt Limit Policy; and• Have foreign exchange-generating projects where therevenue flows can be ring-fenced.

IBRD Enclave Loans for IDA Countries

Currency
IBRD Enclave loans are committed and repayable in thefollowing currencies: USD, EUR, GBP, and JPY. IBRD may also
be able to provide financing in other currencies that it canefficiently intermediate.

Tenor and Repayment Terms
The IBRD Enclave loan has the same terms as the IBRD Flexible
Loan (IFL). The full details are found in the following table.
Borrowers can customize repayment terms (i.e., grace period,repayment period, and amortization profile) to meet debt
management or project needs. For example, if the objective isto reduce the overall refinancing risk of the debt portfolio, aborrower may choose repayment terms that smooth out thedebt service profile. This flexibility can also be used ininvestment operations to match repayment terms to aproject’s expected cash flows. The loan’s maximum final
maturity is 35 years including grace period. The maximum
weighted average maturity or average repayment maturity is
20 years.

Pricing
The price of the IBRD Enclave loan reflects IBRD’s AAA credit
rating and is stable and transparent. Components of thepricing include the interest rate, front-end fee andcommitment fee. The interest rate consists of a market-based
floating reference rate and a spread. The reference rate varies
by currency (SOFR for USD, TONA for JPY SONIA for GBP andEURIBOR for EUR). In certain cases, pricing of Enclave Loans
may be higher than the IFL as Enclave loans are provided forIDA-only countries that may have higher credit risks.

Updated as of December 2021

PRODUCT NOTE
LendingRate

The lending rate consists of a variable reference rate plus a spread. The lending rate is reset semi-annually on eachinterest payment date and applies to interest periods beginning on those dates. The reference rate is the value of the.

applicable market rate for a six month interest rate period (SOFR for USD, TONA for JPY, SONIA for GBP, andEURIBOR for EUR). The loan interest rate charge can be capitalized.

The lending rates and fees can be found at: https://treasury.worldbank.org/en/about/unit/treasury/ibrd-financialproducts/lending-rates-and-fees. The spread is variable. It consists of IBRD's average cost margin on related funding
relative to the applicable reference rate plus IBRD’s contractual spread of 0.50% and a maturity premium for loans withaverage maturities greater than eight years. The spread is recalculated on a quarterly basis and applies to the interest
period commencing on the interest payment date falling on, or immediately following the recalculation date, but falling
prior to the next recalculation date.
Note that the pricing of Enclave Loans may be higher than the IFL as Enclave loans are provided for IDA-only countries that may
have higher credit risks.

Fees

Front-end fee of 0.25% of loan amount is due within 60 days of effectiveness date of the project, but before the firstwithdrawal from the loan, and may be financed out of loan proceeds. The commitment fee of 0.25% is charged on
undisbursed balances and starts to accrue 60 days after the signing date.

Maturity Limits
and Repayment
Schedules

Policy Limits: Final maturity is 35 years including grace period (during which only interest is paid), while maximum
weighted average maturity is 20 years.
Repayments: Borrowers have the flexibility to tailor the repayment schedule during loan preparation. Once the loan issigned, the repayment schedule cannot be changed for the life of the loan, except to accommodate for approved
conversion to local currency. Borrowers have a choice of two types of repayment schedules:• Commitment-linked Repayment Schedule: The loan repayment schedule begins at loan commitment. Principal
repayments are calculated as a share of the total loan amount disbursed and outstanding.
• Disbursement-linked Repayment Schedule: The loan repayment schedule is linked to actual disbursements. Eachsemester’s group of disbursements are similar to a tranche with its own repayment terms (i.e., grace period, final
maturity, and repayment pattern). Each semester’s group of disbursements would have the same repayment terms.

Loan Currencies•••

Currency of Commitment: Loans are offered in most major currencies like EUR, GBP, JPY and USD. Other currencies
may be available if the IBRD can fund itself efficiently in the market. Borrowers may contract loans in more than one
currency.
Currency of Disbursement: Disbursements may take place in any currency, as requested by the client. Currencies areacquired by IBRD and passed on to the client at market terms. The loan obligation, however, remains in the currencyof commitment.
Currency of Repayment: The loan principal, interest, and any other fees must be repaid in the currency ofcommitment. However, currency conversion options may be available as specified below.

CurrencyConversion•Interest
Rate Conversion

The reference rate applicable to the disbursed balance of the loan may be fixed and subsequently unfixed by using theloan conversion option. Note that the spread will not be converted.

Conversion Fees

Transaction fee(s) for currency and/or interest rate conversions may apply(see: https://treasury.worldbank.org/en/about/unit/treasury/ibrd-financial-products/lending-rates-and-fees).

Payment Dates

Debt service payment dates will be on the 1st or 15th day of a month and semi-annually thereafter, as decided by theborrower during loan negotiation.

Prepayment

Borrowers may prepay, at any time, all or part of the outstanding loan balance. Prepayment charges apply based on (i)IBRD’s redeployment cost of the prepaid loan amount and (ii) the cost of unwinding any outstanding interest or currency
conversions plus any transaction fees applicable to amounts that were previously converted.

•Undisbursed Amounts: All or part of the undisbursed balance may be converted from one major currency intoanother major currency which IBRD can efficiently intermediate (see “Currency of Commitment” above).
Disbursed Amounts: All or part of the disbursed and outstanding balance may be converted into another currency,
including the borrower’s local currency, subject to the availability of a liquid swap market for that currency. Amounts
converted to certain local currencies may be repaid in a major currency, although the borrower’s obligation will bedenominated in the local currency.

The above is not necessarily a complete treatment of the terms and conditions of these loans. Borrowers should refer to theirloan agreements and General Conditions with respect to their individual loans.

Contact: Miguel Navarro-Martin, Manager, Financial Products & Client Solutions, The World Bank Treasury
 mnavarromartin@worldbank.org  +1 (202) 458 4722
1225 Connecticut Avenue NW, Washington, D.C., 20433, U.S.A.

IBRD Enclave Loans for IDA Countries

Updated as of December 2021