Special  Report The effectiveness of 
blending regional 
investment facility grants 
with financial institution 
loans to support  
EU external policies EN 2014  NO 16
EUROPEAN
COURT
OF AUDITORS
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Luxembourg:  Publications  Office  of the European  Union,  2014
ISBN  978-92-9207-015-1
doi: 10.2865/85000
© European  Union,  2014
Reproduction  is authorised  provided  the source  is acknowledged.
Printed in Luxembourg
EN 2014  NO 16
Special  Report The effectiveness of 
blending regional 
investment facility grants 
with financial institution 
loans to support  
EU external policies 
(pursuant to Article 287(4), second subparagraph, TFEU )
02
 Contents
Paragraph
 Glossary and abbreviations
I–VIII  Executive summary
1–13  Introduction
1–4 The potential benefits of blending external cooperation grants with loans
5–13  EU blending mechanisms
14–15  Audit scope and approach
16–52  Observations
16–37  The regional investment facilities have been set up in an appropriate manner, but the 
Commission’s management is still affected by shortcomings
17–21  The set-up of the regional investment facilities is satisfactory and the regulatory and procedural framework 
is improving
22–31  Suitable projects are selected but the Commission’s assessment does not focus adequately on the added 
value and amount of EU grants
32–33  The Commission makes advance disbursements that are unnecessarily high
34 In the case of sub-facilities, the criteria for awarding sub-loans were vague or broad
35–37  The extent of the Commission’s monitoring of the implementation of grants varied
38–52  The intended benefits of blending grants and loans have not been fully achieved so far
39–42  The need for a grant to enable the loan to be contracted was demonstrated for only half of the projects 
examined
43–46  The potential for Commission involvement in the formulation of policies and for having an impact on the 
way projects were set up and managed was not fully exploited
47–52  Blending enhanced donor coordination but the visibility of EU funding has been limited to date
03 Contents
53–60  Conclusions and recommendations
 Annex I  — Global coverage of regional investment facilities
 Annex II  —  Amounts committed, contracted and paid by the Commission per regional 
investment facility as at 31.12.2013
 Annex III —  Number of projects approved by regional investment facility for the 2007–13 
period
 Annex IV —  Contributions to the 387 projects approved by the regional investment facility for 
the 2007–13 period
 Annex V  — Financial institution loans by regional investment facility for the 2007–13 period
 Annex VI — Sample of 15 ITF projects examined
 Annex VII — Sample of 15 NIF projects examined
 Annex VIII — Audit sample of projects for the creation of sub -facilities
 Annex IX — Projects referred to in paragraph 42
 Reply  of the Commission
04
 Glossary  
and abbreviations
AFD : Agence française de développement
AFD is a French public development finance institution that fights poverty and fosters economic growth in 
developing countries and the French Overseas Provinces. It is the main implementing agency for France’s 
development cooperation.
AIF: Asian Investment Facility
CIF: Caribbean Investment Facility
Concessional loan : A concessional loan is a loan with terms that are significantly more favourable than the terms 
of loans at market conditions. The IMF calculates the concessionality level as the difference between the loan’s 
nominal value and the sum of the discounted future debt‑service payments to be made by the borrower, expressed 
as a percentage of the loan’s nominal value.
EBRD : European Bank for Reconstruction and Development
The EBRD is a publicly owned development bank based in London that promotes transition to open, 
market‑based economies in countries from central and eastern Europe to central Asia and the southern and 
eastern Mediterranean. It provides project financing for banks, industries and businesses, both new ventures and 
investments in existing companies. It focuses on the private sector but also works with publicly owned companies.
EDF : European Development Fund
The EDFs are the main instrument for providing European Union aid for development cooperation to the African, 
Caribbean and Pacific States and overseas countries and territories. The partnership agreement signed in Cotonou 
on 23 June 2000 for a period of 20 years (‘the Cotonou Agreement’) is the current framework for the European 
Union’s relations with these countries and territories. Its focus is on reducing and eventually eradicating poverty.
EIB: European Investment Bank
The EIB is the European Union’s bank. It is owned by and represents the interests of the European Union Member 
States and works closely with other EU institutions to implement EU policy by providing finance for investment 
projects.
EU Delegation : The EU is represented through 139 EU delegations and offices around the world. The EU 
Delegations are part of the European Commission structure but serve EU interests as a whole.
EuropeAid : Directorate‑General for Development and Cooperation — EuropeAid
IFCA : Investment Facility for Central Asia
IFP: Investment Facility for the Pacific
IMF : International Monetary Fund
ITF: EU–Africa Infrastructure Trust Fund
05 Glossary and abbreviations 
KfW : Kreditanstalt für Wiederaufbau
KfW is the promotional bank of the Federal Republic of Germany and is based in Frankfurt. The development branch 
of the bank carries out German financial development cooperation on behalf of the government.
LAIF : Latin America Investment Facility
MRI : Mutual Reliance Initiative
The MRI is a formal framework set up in 2009 by AFD, EIB and KfW with the purpose of increasing effectiveness in 
co‑financing development projects. Its main features are the delegation of most tasks to the lead financier of an 
operation and the mutual recognition of procedures.
NIF: Neighbourhood Investment Facility
ROM : Results Oriented Monitoring
The ROM system is a review tool for projects and programmes, which provides recommendations for improvement.
WBIF : Western Balkans Investment Framework
06
 Executive  
summary
I
Blending mechanisms combine loans1 from financial 
institutions with grants. Blending gives grant donors 
the possibility of leveraging their external cooperation 
funds by mobilising loans from financial institutions. It 
also allows them to have an impact on the formulation 
of policies and/or on the way projects are set up and 
managed. Furthermore, blending loans and grants can 
promote cooperation between stakeholders in devel ‑
opment aid and can enhance the visibility of aid.
II
Since 2007, the Commission and the Member States 
have set up eight regional investment facilities that 
cover the Commission’s entire sphere of external 
cooperation. Over the 2007–13 period, the EU allo ‑
cated 2 106 million euro to such facilities. Develop ‑
ment‑finance institutions identify projects and apply 
for grants, which are approved by executive bodies 
comprising the Commission, Member States and other 
donors. The financial institutions contract most techni ‑
cal assistance and monitor the projects.
III
The Court’s audit covered the regional investment 
facilities from when they were set up. The Court 
specifically assessed the effectiveness of blending 
regional investment facility grants with loans from 
financial institutions. The audit focused on the set‑up 
and management of the regional investment facilities 
and on the extent to which the intended benefits of 
blending were achieved. The audit work consisted of 
an analytical review, interviews with Commission staff, 
a survey of 40 EU delegations, 22 of which replied, vis ‑
its to the four main financial institutions and an exami ‑
nation of a sample of 30 grants awarded to projects.
1 In addition to loans, to a lesser extent there are also other forms of 
non‑grant financing.IV
The Court concludes that blending the regional invest ‑
ment facility grants with loans from financial institu ‑
tions to support EU external policies has been gener ‑
ally effective. The regional investment facilities were 
well set up but the potential benefits of blending were 
not fully realised due to Commission management 
shortcomings.
V
The Member States and the Commission have ensured 
that the regional investment facilities were properly 
set up and they are now firmly established. The lend ‑
ing element of the funding was mainly provided by 
four European financial institutions, which identified 
the qualifying investments. Over the last 7 years, they 
have identified sufficient projects for committing the 
funding available.
VI
The 30 projects examined by the Court were all 
judged to be relevant for the regions and countries 
concerned. However, the approval process under ‑
taken by the Commission was not thorough, and the 
decisions to award the grants, at a particular level, 
were frequently not convincingly evidenced. Guid ‑
ance on what criteria the Commission should use in its 
decision ‑making was also lacking. Once grants were 
approved, the advance disbursements were unnec ‑
essarily high. The Commission’s monitoring did not 
ensure that the added value of grants was achieved in 
all cases.
Executive summary 07
VII
The regional investment facilities provided the devel ‑
opment partners with a platform for working closely 
together and for undertaking very large projects, 
which would have been difficult to finance otherwise. 
The justification for awarding grants for blending with 
loans was clear in certain cases, especially where con ‑
cessionality criteria had to be met. However, in other 
cases, in fact in about 50 % of the cases examined this 
was not evident. The Commission did not fully capital ‑
ise on the potential for a positive impact on the way 
projects were set up or for a wider impact on sector 
policy. The visibility of EU support has been limited so 
far although the Commission started to address the 
situation.
VIII
The Court makes a number of recommendations 
for the Commission to improve the effectiveness of 
the regional investment facilities. The recommenda ‑
tions concern project selection and grant approval, 
disbursement of funds, monitoring of the implemen ‑
tation of EU grants, and enhancing the visibility of 
EU aid.
08
 Introduction
The potential benefits of 
blending external 
cooperation grants with 
loans
01 
Blending mechanisms combine loans2 
from financial institutions with grants. 
The grants may take various forms but, 
in the case of EU cooperation with de ‑
veloping countries, the most common 
types of grants are direct‑investment 
grants, interest‑rate subsidies, tech ‑
nical assistance and loan‑guarantee 
schemes.
02 
The main aim of blending mechanisms 
is to leverage external cooperation 
funds by mobilising loans from finan ‑
cial institutions. Blending aims, in par ‑
ticular, to address sub‑optimal invest ‑
ment situations in the case of activities 
or infrastructure that could be viable 
but do not attract sufficient funding 
from market sources. The following are 
the main reasons why projects cannot 
attract financiers at normal market 
rates:
(a) they are insufficiently profitable 
but present high economic, envi ‑
ronmental and/or social benefits;(b) they have excessive risk profiles;
(c) they are located in heavily indebt ‑
ed countries that are subject to 
International Monetary fund (IMF) 
requirements for loans (see Box 1 ).
03 
In addition to mobilising loans from 
financial institutions, blending offers 
the grant donor the possibility of be ‑
ing involved in the formulation of poli ‑
cies or of having an impact on the way 
projects are set up and managed. This 
may, for instance, be by mitigating the 
negative externalities of projects, such 
as detrimental environmental or social 
effects, or by providing additional 
funding for specific objectives related 
to the project, such as administrative 
or technical capacity development.2 In addition to loans, to a lesser 
extent there are also other 
forms of non‑grant financing.
IMF requirements for loans in heavily indebted countries
The IMF requires that heavily indebted countries only contract loans with terms that are substantially more fa ‑
vourable than loans at market conditions. Such loans are referred to as concessional loans. In heavily indebted 
countries, the IMF requires the concessionality level to be at least 35 %.Box 1
09 Introduction
04 
There are also other, more general, 
potential benefits associated with the 
use of blending:
(a) It promotes cooperation between 
stakeholders in the sphere of de ‑
velopment aid. Blending mecha ‑
nisms are set up in partnership 
with European financial institu ‑
tions in particular, and thus benefit 
from their specific expertise and 
knowledge. Increased cooperation 
may also result in greater trans ‑
parency, economies of scale and 
reduced transaction costs for the 
partner country. It also enables 
the implementation of projects 
that are too large to be financed 
by a single donor or financial 
institution.
(b) It enhances the awareness by ben ‑
eficiaries and the general public 
that investments were financed 
with the support of donors. Com ‑
bining interventions by various 
donors and financial institutions 
is a means of achieving the critical 
mass required to create the visibil ‑
ity of aid.EU blending mechanisms
05 
The Commission has been granting 
interest rate subsidies for a long time. 
More recently, however, the Commis ‑
sion and Member States have set up 
dedicated mechanisms that acceler ‑
ate the use of blending. Since 2007, 
the Commission has created eight 
regional investment facilities that 
cover the Commission’s entire sphere 
of external cooperation (see Annex I ). 
They combine grants funded by the 
European Development Funds (EDFs) 
and the EU general budget with loans, 
mainly from European development ‑
finance institutions. In some cases, 
direct contributions are also made by 
EU Member States.
06 
The regional investment facilities 
have a three‑tiered structure of 
governance3:
(a) A strategic body4 that has the task 
of setting the overall strategy of 
the financing facility;
(b) An executive body5, consisting of 
the Commission, Member States 
and other donors, which is re ‑
sponsible for approving individual 
grants;
(c) A technical body6, consisting of 
financial institutions and the Com ‑
mission, which establishes a com ‑
mon project pipeline and selects 
the projects to be presented to the 
executive body.3 The Western Balkans 
Investment Framework (WBIF) 
constitutes an exception in 
that it is governed by 
a steering committee and 
a project financiers’ group.
4 Referred to as ‘strategic board ’ 
or ‘steering committee ’.
5 Referred to as ‘operational 
board ’ or ‘executive 
committee ’.
6 Referred to as ‘Project 
Financiers’ Group ’ or ‘Financial 
Institutions Group ’.
10 Introduction
07 
Following consultations with the 
respective partner country or coun ‑
tries, the financial institutions propose 
projects7. Development of the project 
pipeline is led by the financial institu ‑
tions. They identify and select projects 
on the basis of their own financial as ‑
sessment criteria and apply for a grant, 
specifying the type and amount. 
The process of project development 
involves collaboration with the Com ‑
mission, notably within the technical 
bodies and at EU delegation level. The 
lead financial institution of a project 
monitors the implementation of the 
project and reports on its progress. 
The lead financial institution is entitled 
to a fee for managing the implementa ‑
tion of projects.
08 
The EU–Africa Infrastructure Trust 
Fund (ITF) is the only regional invest ‑
ment facility that operates as a fund. 
The European Investment Bank (EIB) 
acts as treasurer for this fund. In the 
case of the other regional investment 
facilities, the Commission in most 
cases channels the grants to the final 
beneficiaries via the lead financial 
institution. The beneficiaries them ‑
selves award and manage the underly ‑
ing contracts. However, the financial 
institutions implement the technical 
assistance and monitor the implemen ‑
tation of the blended projects. Each of 
the regional investment facilities has 
a secretariat to support the executive 
bodies. The secretariats are hosted by 
the Commission8, except in the case of 
the ITF, whose secretariat is run by the 
EIB.09 
There are also other EU blending 
mechanisms. The main example is the 
Investment Facility created in 2003 by 
the Cotonou Agreement for a period 
of 20 years. Other examples of blend ‑
ing outside the scope of the regional 
investment facilities are the Facility for 
Euro–Mediterranean Investment Part ‑
nership (FEMIP) and the Global Energy 
Efficiency and Renewable Energy Fund 
(GEEREF).
10 
The amount allocated by the EU to the 
regional investment facilities for the 
2007–13 period was 2 106 million euro 
(see Annex II ). By the end of 2013, the 
Commission had already disbursed 
1 205 million euro. The executive bod ‑
ies of the regional investment facilities 
had approved 387 projects (see An-
nex III ), the grants for which totalled 
2 346 million euro (see Annex IV ). 
These were accompanied by loans 
totalling 22 152 million euro. So far, the 
loans have a zero default rate.
11 
The projects supported are mainly 
public investment projects. The sec ‑
tors covered vary from one facility to 
another, but the transport and energy 
sectors receive most funding9. The pro ‑
jects range from fairly small, starting 
at 0,3 million euro, to ones accounting 
for more than 1 000 million euro. In 
the majority of cases, more than one fi ‑
nancial institution is involved. In some 
cases, the regional investment facili ‑
ties do not allocate funding to a single 
investment project, but to a different 
facility or fund. In the case of such 
sub‑facilities, the financial institutions 
select and finance sub‑actions, which 
involve local financier partners.7 Applications for WBIF grants 
are mainly made by partner 
countries.
8 Directorate‑General for 
Development and 
Cooperation (EuropeAid), with 
the exception of the WBIF, 
whose secretariat is provided 
by the Directorate‑General for 
Enlargement.
9 About 55 %.
11 Introduction
12 
The four main financial institutions10 
involved in the regional investment fa ‑
cilities from the outset are the EIB, the 
European Bank for Reconstruction and 
Development (EBRD), the Agence Fran ‑
çaise de Développement (AFD) and the 
Kreditanstalt für Wiederaufbau (KfW). 
Annex V  provides an overview of the 
loan amounts they approved over the 
2007–13 period for the 387 projects 
that received support under these 
facilities.
13 
In December 2012, the Commission 
launched the EU Platform for Blending 
in External Cooperation in order to ex ‑
amine how to improve the quality and 
efficiency of regional investment facili ‑
ties. The process is ongoing and the 
expected output is a set of recommen ‑
dations and guidelines on the use of 
blending in external cooperation and 
on how to mobilise additional public 
and private resources to increase the 
impact of EU external cooperation and 
development policy.10 The other eligible financial 
institutions are: Agencia 
Española de Cooperación 
Internacional para el 
Desarrollo (AECID), African 
Development Bank (AfDB), 
Belgian Investment Company 
for Developing Countries 
(BIO), Caribbean Development 
Bank (CDB), Council of Europe 
Development Bank (CEB), 
Companía Española de 
Financiación al Desarrollo 
(COFIDES), Finnish Fund for 
Industrial Cooperation Ltd. 
(FINNFUND), Inter‑American 
Development Bank (IADB, 
observer in LAIF), Luxembourg 
Development Agency 
(Lux‑Dev), Nordic Investment 
Bank (NIB), Private 
Infrastructure Development 
Group (PIDG), Österreichische 
Entwicklungsbank AG (OeEB), 
Società Italiana per le Imprese 
all’Estero (SIMEST), Sociedade 
para o Financiamento do 
Desenvolvimento (SOFID).
12
 Audit scope  
and approach
14 
The Court assessed the effectiveness 
of blending the regional investment 
facility grants with loans from financial 
institutions to support EU external 
policies by focusing on the following 
two questions:
(a) Have the regional investment 
facilities been set up and managed 
well?
(b) Did the use of blending yield the 
intended benefits?
15 
This audit, which was the first by the 
Court in this particular area, was car ‑
ried out between May and December 
2013 and looked at how the regional 
investment facilities had performed 
since their creation. The Court focused 
its audit on the EU financial allocations 
and the role of the Commission. The 
audit work consisted of an analytical 
review, interviews with Commission 
staff, a survey of 40 EU delegations11, 
visits to the four main financial insti ‑
tutions and a detailed examination 
of a sample of projects. The sample12 
consisted of 15 projects that received 
grants from the ITF (see Annex VI ) and 
15 projects that had received grants 
under the Neighbourhood Investment 
Facility (NIF) (see Annex VII ). These 
two regional investment facilities 
cover both the EDF and the EU gen ‑
eral budget, and represent more than 
70 % of the grants approved by the 
regional investment facilities by the 
end of 2013. They are also the oldest 
investment facilities and thus have 
the most advanced projects. Because 
of their particular characteristics, the 
audit also included an examination of 
eight projects relating to the creation 
of sub‑facilities (see paragraph 11) for 
financing actions with the involve ‑
ment of local financial institutions (see 
Annex VIII ).11 22 EU delegations responded 
to the survey.
12 The Court selected the 
projects randomly by 
monetary unit sampling.
13
 Observations
The regional investment 
facilities have been set up 
in an appropriate manner, 
but the Commission’s 
management is still 
affected by shortcomings
16 
The Court examined whether the over ‑
all set‑up of the regional investment 
facilities and the procedural frame ‑
work were appropriate. The audit also 
focused on the procedure for assessing 
grant applications, the justification for 
the projects selected and the appro ‑
priateness of the type and amount of 
the grants. Finally, the implementation 
of the grants and monitoring of the 
projects were also examined as part of 
the audit.
The set -up of the regional 
investment facilities is sat -
isfactory and the regulatory 
and procedural framework is 
improving
17 
It is appropriate to have eight different 
regional investment facilities instead 
of one global investment facility 
because:
(a) the facilities have different struc ‑
tures for combining the funding 
from the various donors involved 
and channelling it to the projects;
(b) EU funding to the geographical 
investment facilities comes from 
different financial instruments, 
which have different legal bases;(c) the allocation of responsibilities 
within the Commission and the 
financial institutions is geographi ‑
cally based;
(d) the parties represented in the 
various governance bodies (see 
paragraph 6) vary from region to 
region.
18 
The objectives and priority sectors 
under all the regional investment 
facilities are aligned with global EU 
policy objectives. In the case of the ITF, 
only projects with a regional dimen ‑
sion were eligible, which limited the 
potential for blending.
19 
The Financial Regulation13 recently 
introduced specific rules on blending 
mechanisms14. These rules, applica ‑
ble from 2014 onwards, significantly 
improve the regulatory framework by 
defining concepts and principles, sim ‑
plifying the management modes used 
for blending, and providing the legal 
basis to use innovative financing tools. 
The Commission is currently further 
improving the framework by preparing 
guidelines for the management of the 
regional investment facilities15.
20 
While the Commission has made some 
progress in this area, projects were 
generally initiated by financial institu ‑
tions with the Commission responding 
to these proposals and the ensuing 
grant requests, rather than actively 
identifying operations.13 Regulation No 966/2012 of the 
European Parliament and of 
the Council of 25 October 2012 
on the financial rules 
applicable to the general 
budget of the Union and 
repealing Council Regulation 
(EC, Euratom) No 1605/2002 
(OJ L 298, 26.10.2012, p. 1).
14 A new Title VIII, Financial 
Instruments, was introduced.
15 Practical guidelines that have 
helped partner countries to 
understand the requirements 
connected with WBIF project 
applications and submissions 
have existed since 2012.
14 Observations
21 
The secretariat of the ITF is operated 
by the EIB (see paragraph 8). In view of 
the fact that the EIB is a project finan ‑
cier and irrespective of the fact that 
the secretariat is ring‑fenced from the 
EIB’s banking activities, this is an issue 
that needs to be addressed.
Suitable projects are selected 
but the Commission’s 
assessment does not focus 
adequately on the added 
value and amount of EU 
grants
Selection of projects for grants 
assistance
22 
The process for identifying and select ‑
ing projects enabled sufficient grant 
applications to be made in order for 
the funding allocated to be commit ‑
ted within the planned timeframe. The 
projects approved were relevant to the 
development needs of the regions and 
countries concerned.23 
To request a grant from a regional 
investment facility, financial institu ‑
tions need to submit a grant applica ‑
tion form16. Although they became 
longer and more detailed over time, 
the information provided by the 
financial institutions before grant ap ‑
proval was too general for appropriate 
decision‑making by the executive bod ‑
ies of the regional investment facilities. 
Quantified data were lacking on loan 
conditions, concessionality (see Box 1 ) 
and viability (see Box 2  for an exam ‑
ple). Furthermore, the expected added 
value of providing a grant was not well 
formulated, structured or quantified.16 The ‘Standard Project 
Submission Form ’ in the case 
of the geographical 
investment facilities managed 
by EuropeAid, the ‘Project 
Grant Application Form ’ for 
the WBIF and the ‘Cover Sheet ’ 
for the ITF.
ITF project — Power rehabilitation in Benin and Togo
The project concerned the construction and refurbishing of electricity transmission lines and substations for 
a total of 85,7 million euro. It aimed to improve the reliability and efficiency of the electricity supply in Benin 
and Togo. The ITF granted an interest rate subsidy of 12,25 million euro which enabled the concessionality 
level of 35 % to be met, as required by the IMF (see Box 1 ).
Insufficient information provided by the financial institution
The grant application form provided by the financial institutions does not include figures on the financial and 
economic viability of the project, concessionality and the alignment of the project with the countries’ needs 
even though it was all available in the financial institution’s files. Furthermore, the form was unclear about the 
expected added value of the ITF grant. Without this information, the Commission could not carry out an ap ‑
propriate assessment of the grant request.Box 2
15 Observations
17 The information necessary to 
calculate this was not available 
for the other regional 
investment facilities.
18 Although the possibility exists 
for financial institutions to 
request a so‑called ‘Cleared in 
principle’ from the Executive 
Committee.24 
An underlying reason why the informa ‑
tion provided by the financial institu ‑
tions was limited was that projects 
were often still at the preliminary 
stage when the grant applications 
were made. The financial institutions 
decide on their loans at a later stage, 
i.e. after the feasibility study. Their 
decisions were therefore based on bet ‑
ter, more detailed information than the 
Commission had when it assessed the 
grant applications.
25 
Although there is no particular guid ‑
ance for this, the Commission has 
improved its reviews of grant applica ‑
tions over time. However, the reviews 
remain largely based on the informa ‑
tion presented in the grant application 
form and are therefore limited by it. 
For the projects examined, the reviews 
paid little attention to concessionality, 
debt sustainability, the grant amount 
or economic viability. The Commission 
has not established criteria for the eco ‑
nomic viability. In fact, it has no clear 
rules or guidance as to which type of 
development investments should be 
financed by either grants, loans or 
a blend of the two.
26 
The Commission’s reviews progressive ‑
ly involved the relevant EU delegations 
by consulting them when assessing 
grant applications. The Court’s exami ‑
nation of projects and interviews with 
delegation staff indicated that this in ‑
volvement was still insufficient, in par ‑
ticular during the identification phase. 
Only 59 % of the 22 EU delegations 
that responded to the Court’s survey 
said they were involved in the identi ‑
fication process of blended projects. 
This limited the extent of ownership of 
projects by the delegations. However, 
once financial institutions applied for 
a grant, the Commission asked most 
of the delegations to provide their views on the projects selected for their 
respective countries.
27 
The average number of days from 
introduction in the pipeline to final 
board approval is 215 for the ITF, 257 
for the LAIF and 290 for the NIF17. In the 
LAIF and the NIF, each project needed 
provisional and final approval at both 
technical and board level, which was 
time‑consuming. This procedure was 
somewhat lighter for the ITF, which did 
not require provisional approvals18.
Selection of grant type and 
amount
28 
The grant types chosen (see para ‑
graph 1) were appropriate for the 
added value they intended to achieve. 
Only the ITF provided interest rate 
subsidies; the other regional invest ‑
ment facilities did not, even though 
this was permitted by their regulatory 
and contractual framework.
16 Observations
19 As already observed by the 
Court in paragraph 3.2 of 
Special Report No 3/99 on the 
management and control of 
interest rate subsidies by the 
Commission (OJ C 217, 
29.7.1999, p. 1).29 
Eleven of the 30 grants examined by 
the Court aimed to ensure that the 
loan met the minimum concessionality 
level of 35 % required by the IMF (see 
Box 1 ). For seven of these 11 grants, 
the Court could not obtain evidence 
from the Commission or the financial 
institutions showing that the conces ‑
sionality level was not higher than 
needed to meet the IMF requirement. 
In one case, the concessionality level 
exceeded the minimum of 35 % with ‑
out the Commission being informed 
of it.
30 
There were no established criteria for 
setting the amounts of grants where 
the main objective was other than 
compliance with IMF requirements. In 
the cases examined, it was often un ‑
clear how amounts had been decided 
upon. Furthermore, the Commission 
did not consider it necessary to carry 
out a rigorous verification of the way 
the grant amounts requested by finan ‑
cial institutions have been calculated.
31 
In theory, financial institutions could 
set an interest rate that is higher than 
normal and have it accepted by the 
beneficiary by including a grant in the 
financial package. Consequently, there 
is a risk that the benefit of grants is 
not fully transferred to the beneficiary. 
Although the public development 
financial institutions are responsible 
for providing the most appropriate 
financing conditions, neither the Com ‑
mission nor the Court can exclude that 
this risk may materialise as they don’t 
have the means to examine this due 
to the confidentiality of how interest 
rates are set19.The Commission makes 
advance disbursements  
that are unnecessarily high
32 
Once grants have been approved 
and agreements signed, consider ‑
able advance disbursements were 
made. The Commission had the funds 
available and transferred these before 
they were needed. The beneficiary 
used these funds slowly because it 
took time to set up the project and 
contract the necessary services and 
works and because of the duration 
of implementation. The funds trans ‑
ferred remained therefore unused for 
long periods of time, contrary to the 
principles of sound financial manage ‑
ment (see Box 3  for an example). As 
a consequence, the budgetary outturn 
does not reflect the actual underlying 
activity of the facilities.
33 
For the ITF, the Commission makes 
transfers to the fund and then the 
EIB, as manager of the fund, trans ‑
fers grants from the fund to the lead 
financial institution. The ITF’s execu ‑
tive board approves grants for a total 
that does not exceed the cash balance 
available in the fund. With this prudent 
approach, the ITF ensures that it will 
be able to meet its commitments. As it 
takes time before project implementa ‑
tion actually starts, the beneficiary will 
disburse the respective amounts only 
some years later. As a result, a large 
amount of money lies dormant in the 
fund’s bank account for years (see the 
Figure ).
17 Observations FigureITF Cash flow movements
Source:  ITF Secretariat.NIF project — Second phase of the Tunis fast railway network
This 550 million euro project finances the construction of priority sections of two new lines of the high ‑speed 
urban railway network of Tunis. The NIF grant of 28 million euro provides technical assistance to the contract ‑
ing authority and the supervisor.
Unnecessarily high advance disbursement of the NIF grant
In 2010, the Commission transferred the entire grant to the beneficiary. The financial institutions disbursed 
their loans only when the beneficiary needed the funds. As the project experienced significant implementa ‑
tion delays, the first loan disbursement took place only in 2013. Due to the delays, 24,5 million euro of the NIF 
grant was left unused for more than 3 years.Box 3
0100200300400500600700
2007 2008 2009 2010 2011 2012 2013Cash in handmillion eu ro
Cumulative cash inﬂow
Cumulative cash outﬂow
18 Observations
In the case of sub -facilities, 
the criteria for awarding 
sub -loans were vague or 
broad
34 
For the eight sub‑facilities (see para ‑
graph 11) examined by the Court (see 
Annex VIII ), there was no provision 
that the activities to be financed by 
the sub‑facility should be individually 
approved ex ante  by the Commission and in only one case were they ap ‑
proved by the financial institution. At 
the same time, the criteria for selecting 
activities eligible for sub‑loans were 
vague or very broad in the majority 
of the cases20, with no mention of the 
sectors and priorities concerned. The 
Commission could not therefore be 
certain that the expenditure focused 
on EU priorities (see Box 4  for an 
example).20 With the exception of the 
Geothermal Risk Mitigation 
Facility.
NIF project — SME Finance Facility
The SME Finance Facility, which had a total of 150 million euro to allocate consisted of two products. The first 
provided technical assistance to the local partner financial institutions and a loss risk sharing facility to loan 
portfolios. The second provided technical assistance and interest‑free loans in order to reduce interest rates 
and provide a loss/risk‑sharing cushion. The NIF grant for this project was 15 million euro.
Broad criteria for selecting activities to be financed by the sub -facility
The grant application form provided by the financial institutions did not clearly indicate at which level the 
sub‑loans needed to be approved. It also failed to specify the responsibility of the lead financier in the ap ‑
praisal and selection process. There was no provision for the selection process to take account of the EU 
priorities as the eligibility criteria accepted investments in all sectors. Furthermore, reporting requirements for 
project follow‑up were not clearly specified.Box 4
The extent of the 
Commission’s monitoring of 
the implementation of grants 
varied
35 
The secretariats of the regional invest ‑
ment facilities are responsible for 
overall financial monitoring of the 
facilities. The financial institutions 
monitor the implementation of the 
projects themselves. At Commission level, responsibility for following up 
grants lies with the EU delegations. 
The extent of their follow‑up varied 
due to the absence of clear internal 
guidelines (see paragraph 19) and the 
different levels of involvement by the 
delegations in the identification of 
projects (see paragraph 26). In addi ‑
tion, contractual arrangements with 
the financial institutions to provide 
information were unclear and insuffi ‑
ciently demanding.
19 Observations
36 
Performance monitoring has been 
limited and unstructured so far. 
Within the EU Platform for Blending in 
External Cooperation, a results‑based 
monitoring system is being designed 
to include a set of standard indicators 
for monitoring purposes.
37 
As with other development projects 
financed by the EU, the Commission 
randomly selected blended projects 
for Results Oriented Monitoring (ROM). 
This exercise consisted of short, fo ‑
cused, on‑site assessments by external 
experts following a consistent meth ‑
odology. The ROM assessments looked 
at many aspects of project imple ‑
mentation on the basis of five criteria: 
relevance, efficiency, effectiveness, 
potential impact and likely sustainabil ‑
ity. However, the assessments did not 
focus specifically on the added value 
of the grants. Regarding the results of 
the ROMs, it was not clear whether the 
financial institution or the EU delega ‑
tion was expected to take action on 
the conclusions and recommenda ‑
tions. Projects supported by the ITF, 
however, were not subject to ROM.The intended benefits of 
blending grants and loans 
have not been fully 
achieved so far
38 
The Court assessed the extent to 
which the intended benefits of blend ‑
ing have been achieved. These include 
mobilising additional non‑grant fi ‑
nancing, being involved in the formu ‑
lation of policies, having an impact 
on the way projects are set up and 
managed, improving donor coordina ‑
tion and enhancing the visibility of 
European development cooperation 
aid (see paragraph 4).
The need for a grant 
to enable the loan to 
be contracted was 
demonstrated for only half  
of the projects examined
39 
Projects that received support from 
the regional investment facilities also 
attracted significant funding from 
non‑European financial institutions 
as well as from beneficiaries. For the 
sample of projects examined by the 
Court, the European financial institu ‑
tions together provided 45 % of the 
total investment costs, some 20 % was 
raised by non‑European financial insti ‑
tutions and 25 % from own contribu ‑
tions from beneficiaries. The latter is 
good practice in order to ensure that 
the beneficiaries take responsibility 
for the investments. Funding was thus 
provided, in the main, by institutional 
development banks and private sector 
lending has been low to date.
20 Observations
21 This corresponds to 18 % of ITF 
committed amounts, 10 % of 
NIF committed amounts and 
35 % of WBIF committed 
amounts.
ITF project — Maputo Airport
The ITF financed consultancy services during the preparation phase of works at the international airport in 
Maputo (Mozambique). The planned investment concerns the rehabilitation and improvement of the runways, 
taxiways and airfield ground lighting. The consultancy services cost 0,6 million euro and consisted of a feasi ‑
bility study for the design of the project and the preparation of the tender process.
Good practice of technical assistance during the pre -investments phase leveraging the financing for an 
investment
The technical assistance successfully prepared the project. The investment cost of 52 million euro is financed 
by loans provided by European financial institutions. Construction work will start in the second half of 2014.Box 540 
The ITF provided interest rate subsidies 
with the aim of making the financial 
institution loan concessional according 
to IMF criteria (see paragraph 29). The 
grant therefore enabled the invest ‑
ment to take place. At the end of 2013, 
14 of the 71 projects for which ITF sup ‑
port was committed had this objec ‑
tive. They represented 217 million euro 
out of a total of 494 million euro com ‑
mitted by the ITF.41 
The regional investment facilities also 
funded a significant number of activi ‑
ties during the pre‑investment phase. 
These were mostly studies, such as 
feasibility studies, necessary for set ‑
ting up an investment project and for 
which financial institutions in general 
had only limited financial resources 
available. These projects accounted 
for 46 % of the ITF projects examined, 
20 % of the NIF projects examined and 
70 % of all WBIF projects21. The vast 
majority of these studies led or will 
most likely lead to actual investment 
projects and can therefore, at least to 
some extent, be said to have facilitated 
the investment financed by a loan (see 
Box 5  for an example).
42 
For 15 of the 30 projects examined 
by the Court, there was no convinc ‑
ing analysis to show that a grant was 
necessary in order for the loan to be 
contracted (see Annex IX ). Depend ‑
ing on the case concerned, there were 
indications that the investments would 
also have been made without the 
grant:(a) In one case, the purpose of the 
grant was to render the loan con ‑
cessional but the beneficiary coun ‑
try was no longer bound by the 
IMF rules on concessional lending;
21 Observations
(b) In two cases, a significant propor ‑
tion of the investment was di ‑
rectly financed by the EDF. A grant 
was therefore not necessary to 
render the financing package 
concessional;
(c) In four cases, the grant was mar ‑
ginal compared to the total invest ‑
ment cost and did not significantly 
increase the overall financial prof ‑
itability of the project;
(d) In one case, the project was fi ‑
nancially viable even without the 
grant;
(e) In one case, the government was 
very committed to making a high 
profile investment with environ ‑
mental benefits even though the 
financial profitability was very low. 
Awarding a grant was not neces ‑
sary in order for the government 
to commit to covering possible 
future losses;
(f) In five cases, the grant served 
mainly to help the financial in ‑
stitutions to propose a financial 
package that was likely to be ac ‑
cepted by the governments of the 
beneficiary countries, for instance 
by matching the other financiers’ 
offers for the projects concerned;
(g) One case involved the creation 
of a sub‑facility for providing 
credit‑enhancement support. The 
sub‑facility consisted of two identi ‑
cal products one of which was able 
to operate successfully without 
any grant funding.The potential for Commission 
involvement in the 
formulation of policies and 
for having an impact on the 
way projects were set up 
and managed was not fully 
exploited
43 
Grants from regional investment facili ‑
ties often have a positive impact on 
the way projects are set up and man ‑
aged (see paragraph 3). For the 30 pro ‑
jects examined by the Court, this was 
achieved in various ways depending 
on the project:
(a) In 11 cases, the grant made it pos ‑
sible to introduce project compo ‑
nents that would most probably 
not have been financed otherwise. 
Examples of such components 
included useful technical assis ‑
tance and introducing a pro‑poor 
emphasis for the project (see Box 6  
for an example);
(b) In three cases, the Commission 
was directly involved in setting up 
the project because it made the 
project proposal, financed the fea ‑
sibility study and/or co‑financed 
the project through a direct 
contribution;
(c) In two cases, the grant financed 
feasibility studies, which were an 
important element for deciding 
on the nature and scope of invest ‑
ment projects;
(d) In one case, the grant enabled 
the project to have a significantly 
wider scope.
22 Observations
44 
In the 13 other projects examined 
by the Court, however, there was no 
evidence that the contributions from 
the regional investment facilities had 
any influence on the way projects were 
set up.
45 
Of the projects examined by the Court, 
there were 10 cases where the grant 
has also had a positive impact on the 
policy of the beneficiary country in 
the sector concerned. In most of these 
cases, the grant reinforced an already 
existing policy dialogue with the Com ‑
mission in the sector in which the pro ‑
jects were implemented. The potential 
of policy dialogue was greater when 
the grant actually mobilised additional 
financing (see paragraph 42).46 
In the 20 other projects, there was 
no evidence that grants had a wider 
impact on policy in the sector in which 
support was provided. When the fi ‑
nancial institution attached conditions 
to its loans, in most cases they were 
directly related to the implementation 
of the project. The Commission was 
not involved in monitoring and assess ‑
ing compliance and in most cases did 
not require the regional investment 
facilities to attach conditions to the 
grants that related to the policies of 
the sectors concerned.ITF project — Lake Victoria Water and Sanitation  — Kampala Water
The project concerned the enhancement of the financial and operational capacity of the National Water and 
Sewerage Corporation in Kampala (Uganda). It aimed at increasing the reliability of and access to water supply 
services for the population of Kampala and the surrounding areas. The total project cost was 212 million euro. 
The ITF financed technical assistance worth 8 million euro for project preparation, as well as an interest rate 
subsidy of 14 million euro, which ensured a concessionality level of 35 % as required by the IMF.
Good practice on impact on the set-up of the project
The grant brought about social benefits through the pro‑poor focus of the project. In particular, the project 
improved the supply of drinking water and basic sanitation in the poorer areas around Kampala. The grant 
benefits were transferred to the final beneficiaries by providing water to the poorest households at reduced 
rates. Without the grant funding, the project would have focused solely on richer areas.Box 6
23 Observations
Blending enhanced donor 
coordination but the 
visibility of EU funding has 
been limited to date
Donor coordination
47 
The regional investment facilities 
encourage coordination between 
development partners by providing 
a framework for the financial institu ‑
tions to meet and discuss their invest ‑
ment plans and to coordinate their 
efforts in a way which goes beyond 
the projects themselves. This is good 
development practice, in line with the 
Paris Declaration principles22.
48 
Of the 38 ITF and 73 NIF investment 
projects23 for which the executive 
boards committed grants by the end 
of 2013, 26 and 52 projects received 
loans from more than one source.
49 
Blending enabled the funding of 
large projects by combining different 
sources of funding within individual 
projects. At the end of 2013, the ITF 
and the NIF committed support to, 
respectively, 22 and 26 investment 
projects that received loans of a total 
value of more than 100 million euro. 
Such projects would have been dif ‑
ficult to finance by a single financial 
institution.50 
The Mutual Reliance Initiative (MRI) es ‑
tablished by three European financial 
institutions further enhanced coop ‑
eration and coordination. The MRI is 
a formal framework set up in 2009 by 
AFD, EIB and KfW with the purpose of 
increasing effectiveness in co‑financ ‑
ing development projects. Its main 
features are the delegation of most 
tasks to the lead financier of an opera ‑
tion and the mutual recognition of 
procedures. This reduces transaction 
costs for the beneficiary, which is in 
line with aid effectiveness principles. 
However, decisions and contracting 
remain with each financial institution.
Visibility of EU funding
51 
The regulatory framework of the 
regional investment facilities stipulates 
general visibility rules24. The main prin ‑
ciple is that the lead financier ensures 
EU visibility which is at least equiva ‑
lent to its own visibility. Contractual 
arrangements relating to individual 
projects generally also stipulate the 
need for adequate visibility25 although 
they fail to provide concrete rules or 
instructions. The Court’s examination 
of individual projects and the survey of 
EU delegations showed that the finan ‑
cial institutions have so far provided 
only limited visibility of EU grants in 
blended projects. There are a number 
of underlying reasons for this:
(a) The contractual framework does 
not contain clear and concrete 
rules or instructions for finan ‑
cial institutions with regard to 
visibility;22 The Paris Declaration (2005) 
outlines the following 
principles for making aid more 
effective: ownership, 
alignment, harmonisation, 
results and mutual 
accountability.
23 Not taking account of the 33 
ITF and 18 NIF pre‑investment 
projects (see paragraph  41).
24 For instance, in Article 10 of 
the agreement laying down 
the implementation rules of 
the ITF and paragraph 13 of 
the NIF framework agreement 
between the financial 
institutions and the 
Commission.
25 In the case of NIF‑type 
facilities, all contribution 
agreements include a clause 
that requires the financial 
institution explicitly to 
mention the support of the 
European Union through the 
NIF.
24 Observations
(b) With the exception of the Com ‑
munication and Visibility Manual 
for EU External Actions, which 
was drawn up for projects imple ‑
mented by the Commission, there 
are currently no particular rules or 
guidelines adapted to the specific 
characteristics of blending;
(c) With the exception of a few cases, 
there are no budgets allocated to 
visibility;
(d) Reporting on efforts to provide EU 
visibility is not required.
52 
The Commission is currently stepping 
up its efforts to improve EU visibility 
of blended projects. In the latest ver ‑
sion of the grant application form, the 
planned communication and visibility 
activities need to be described. Fur ‑
thermore, in some cases the Commis ‑
sion required financial institutions to 
draw up a communication plan, which 
is good practice. Although clear guide ‑
lines are lacking, some EU delegations 
have taken the initiative to help publi ‑
cise the grants of the regional invest ‑
ment facilities.
25
 Conclusions  and  
recommendations
Conclusions
53 
The Court concludes that blending 
the regional investment facility grants 
with loans from financial institutions 
to support EU external policies has 
been generally effective. The regional 
investment facilities were well set up 
but the potential benefits of blending 
were not fully realised due to Commis ‑
sion management shortcomings.
54 
Together with the Member States, the 
Commission successfully launched the 
regional investment facilities and their 
overall set‑up is appropriate. A number 
of European financial institutions were 
attracted that identified sufficient 
projects for the funding available. The 
audited projects were relevant to the 
development needs of the regions 
and countries concerned. Although 
the grant types were appropriate, the 
Commission’s review of grant applica ‑
tions was based on incomplete infor ‑
mation and has not focused enough 
on the added value of grants. Once 
grants were approved, the advance 
disbursements were unnecessarily 
high and the Commission’s monitoring 
did not ensure that the added value of 
grants was achieved in all cases.55 
The regional investment facilities facili ‑
tated coordination between develop ‑
ment partners at various levels, which 
has made it possible to fund projects 
that would be too large for financing 
by a single donor or financial institu ‑
tion. However, the other potential ben ‑
efits of blending grants and loans have 
not yet been fully achieved. In half of 
the cases, blending has enabled loans 
to be contracted for instance by mak ‑
ing them concessional, in line with IMF 
requirements. In the other half of the 
cases, however, there was no convinc ‑
ing analysis to show that a grant was 
necessary for the financial institutions 
to contract the loans. Furthermore, 
the Commission did not fully capitalise 
on the potential for a positive impact 
on the way projects were set up or for 
a wider impact on sector policy. The 
visibility of EU support has been lim ‑
ited so far, although the Commission 
has started to address the situation.
Recommendations
56 
After 7 years experience with the 
regional investment facilities, the Com ‑
mission is seeking to improve their 
set‑up and operation, for instance by 
preparing guidelines and participat ‑
ing in the EU Platform for Blending in 
External Cooperation. In this pro ‑
cess, the Court invites the Commis ‑
sion to take account of the following 
recommendations.
26 Conclusions and recommendations
57 
The Commission should ensure that 
the allocation of EU grants is based 
on a documented assessment of the 
added value resulting from the grants 
in terms of achieving EU development, 
neighbourhood and enlargement ob ‑
jectives. In doing so, the Commission 
should:
(a) ensure that adequate guidelines 
are adopted and implemented in 
order to steer the Commission’s 
involvement at all stages of the ap ‑
proval and follow‑up process;
(b) take a more proactive role, in 
particular at EU delegation level, in 
identifying and selecting projects;
(c) ensure that grant applications 
submitted to executive boards for 
final approval concern only mature 
projects and contain complete 
information. More specifically, the 
grant applications should detail 
the need for and added value of 
the grants and clarify how the 
amounts have been established;
(d) shorten the average duration of 
the approval process by reviewing 
the systematic need for provisional 
approvals.58 
The Commission should disburse fund ‑
ing only when the funds are actually 
needed by the beneficiary.
59 
The Commission should improve its 
monitoring of the EU grant implemen ‑
tation. In doing so, the Commission 
should:
(a) implement a results‑measurement 
framework that includes indicators 
for following up the impact of EU 
grants;
(b) provide clear instructions to EU 
delegations regarding their role in 
monitoring EU support for blend ‑
ed projects;
(c) include the ITF in the ROM process 
and adapt ROM methodology 
to the specific characteristics of 
blending.
60 
The Commission should increase its 
efforts to ensure that appropriate 
visibility is afforded to EU funding by 
defining clear visibility requirements 
for financial institutions and requiring 
the EU delegations to be involved in 
visibility actions.
This report was adopted by Chamber III, headed by Mr Karel PINXTEN, Member of 
the Court of Auditors, in Luxembourg at its meeting of 8 July 2014.
 For the Court of Auditors
 Vítor  Manuel  da SILVA  CALDEIRA
 President

27
 Annexes
Global coverage of regional investment facilities
Source:  Databases held by the secretariats of the regional investment facilities.Annex  I
Investment Facility for
Central Asia (IFCA) - 2010
Total grants: 64 million euroTotal loans: 317 million euro
Asian InvestmentFacility (AIF) - 2012
Total grants: 36 million euroTotal loans: 358 million euro
Latin America InvestmentFacility (LAIF) - 2010
Total grants: 190 million euroTotal loans: 4 515 million euroCaribbean Investment Facility (CIF) - 2012
Total grants: 35 million euroTotal loans: 67 million euroNeighbourhoodInvestment Facility(NIF) - 2008
Total grants: 953 million euroTotal loans: 9 626 million euro
Investment Facility forthe Paciﬁc (IFP) - 2012
Total grants: N/ATotal loans: N/A
EU-Africa InfrastructureTrust fund (ITF) - 2007
Total grants: 762 million euroTotal loans: 4 549 million euroWestern Balkan InvestmentFramework (WBIF) - 2009
Total grants: 302 million euroTotal loans: 2 720 million euro
28 Annexes Annex  II Amounts committed, contracted and paid by the Commission per regional 
investment facility as at 31.12.2013
(million euro)
Committed Contracted Paid
ITF 638 638 459
WBIF 274 260 214
NIF1789 477 422
LAIF1179 160 78
IFCA 86 66 22
AIF 60 34 9
CIF 70 2 1
IFP 10 - -
Totals 2 106 1 637 1 205
1 This does not include an additional 17 million euro committed in 2011 for Climate Change Facility to be shared between NIF and LAIF.
Source:  European Commission.
29 Annexes Annex  IIINumber of projects approved by regional investment facility for the 2007–13 period
2007 2008 2009 2010 2011 2012 2013 Totals
ITF 4 4 9 13 13 11 15 69
WBIF - 18 47 16 42 31 24 178
NIF - 14 13 15 15 18 17 92
LAIF - - - 5 3 12 5 25
IFCA - - - 1 3 3 4 11
AIF - - - - - 3 5 8
CIF - - - - - - 4 4
Totals 4 36 69 50 76 78 74 387
Source:  Databases held by the secretariats of the regional investment facilities.
30 Annexes Annex  IVContributions to the 387 projects approved by the regional investment facility for 
the 2007–13 period
(million euro)
ITF1WBIF NIF LAIF IFCA AIF CIF Totals
GRANTS
Investment 
facilityCommission 383 226 696 190 64 36 35 1 630
Other donors 114 - - - - - - 114
National/regional indicative 
programmes80 - 200 - - - - 280
Other donors 185 76 57 - - - - 318
Total grants 762 302 953 190 64 36 35 2 342
LOANS
EUMultilateral 1 237 2 360 7 095 209 312 110 - 11 323
Bilateral 1 127 360 2 531 1 992 5 248 37 6 300
Non-EURegional 1 174 - - 2 314 - - 30 3 518
Multilateral 826 - - - - - - 826
Bilateral 185 - - - - - - 185
Total loans 4 549 2 720 9 626 4 515 317 358 67 22 152
1 ITF Commission and other donors’ contributions calculated as pro rata of the payments made to the Fund.
Source:  Databases held by the secretariats of the regional investment facilities.
31 Annexes Annex VFinancial institution loans by regional investment facility for the 2007–13 period
(million euro)
EIB EBRD AFD KfWOther financial 
institutionsTotal
ITF 1 237 - 881 246 - 2 364
WBIF 1 760 600 200 160 - 2 720
NIF 4 498 2 588 1 100 1 429 11 9 626
LAIF 209 - 823 772 397 2 201
IFCA 170 142 - 4 1 317
AIF 110 - 203 45 - 358
CIF - - 37 - - 37
Total 7 984 3 330 3 244 2 656 409 17 623
Source:  Databases held by the secretariats of the regional investment facilities.
32 Annexes Annex  VISample of 15 ITF projects examined
 Source:  Databases held by the secretariats of the regional investment facilities.
MALI-MAURITANIA-SENEGAL
Hydropower plant Félou
Total cost: 112 million euroITF contribution: 9 million euro
COTE D’IVOIRE-SIERRA LEONE-LIBERIA-GUINEAPower Interconnector
Total cost: 387 million euroITF contribution: 13 million euro
ZAMBIA-NAMIBIA-SOUTHAFRICACaprivi Interconnector
Total cost: 321 million euroITF contribution: 15 million euroBENIN-TOGOPower rehabilitation
Total cost: 86 million euroITF contribution: 12 million euro
CAMEROON-CHAD-CENTRALAFRICAN REPUBLICAccess to Douala
Total cost: 66 million euroITF contribution: 6 million euro
ZAMBIAItezhi Tezhi
Total cost: 286 million euroITF contribution: 18 million euroMOZAMBIQUE-SOUTHAFRICAMaputo Airport
Total cost: 58 million euro
ITF contribution: 2 million euroMOZAMBIQUE-ZIMBABWE-
ZAMBIA-MALAWIBeira Corridor
Total cost: 230 million euroITF contribution: 29 million euroZAMBIA-MALAWI-MOZAMBIQUEGreat East Road Rehabilitation
Total cost: 285 million euroITF contribution: 40 million euroTANZANIABackbone Interconnector
Total cost: 388 million euroITF contribution: 14 million euroTANZANIALake Victoria Water & Sanitation Mwanza
Total cost: 122 million euroITF contribution: 18 million euroTANZANIA-KENYA-UGANDA-RWANDA-BURUNDI-DEMOCRATIC REPUBLIC OF CONGOEastern Africa Transport Corridor
Total cost: 146 million euroITF contribution: 17 million euro
BURUNDI-RWANDA-DEMOCRATICREPUBLIC OF CONGORehabilitation of Ruzizi I and II
Total cost: not yet determinedITF contribution: 3 million euro
UGANDA-KENYA-TANZANIAKampala Water - Lake Victoria Watsan
Total cost: 234 million euroITF contribution: 22 million euro
RWANDA-ETHIOPIA-KENYA-UGANDA-TANZANIA-BURUNDIGeothermal Risk Mitigation Facility for Eastern Africa
Total cost: not yet determinedITF contribution: 30 million euro
33 Annexes Annex  VII Sample of 15 NIF projects examined
 Source:  Databases held by the secretariats of the regional investment facilities.
EGYPT
Improved Water and Wastewater
Services Programme
Total cost: 295 million euroNIF contribution: 5 million euro
TUNISIA
2nd phase fast railway network of Tunis
Total cost: 550 million euroNIF contribution: 28 million euroGEORGIA
East-West Highway
Total cost: 592 million euroNIF contribution: 20 million euro
MOLDOVA
Water Utilities DevelopmentProgramme
Total cost: 32 million euro
NIF contribution: 10 million euro
SME Finance Facility
Armenia, Azerbaijan, Georgia, 
Moldova, Ukraine, BelarusTotal cost: 150 million euroNIF contribution: 15 million euro
SME Guarantee Facility
Jordan, Lebanon, Egypt, Tunisia, MoroccoTotal cost: 320 million euroNIF contribution: 24 million euroARMENIA
Small Municipalities Water Project
Total cost: 21 million euroNIF contribution: 8 million euroUKRAINE
TA Support for Municipalities
Total cost: 135 million euroNIF contribution: 5 million euro
MOROCCO
Tramway de Rabat
Total cost: 346 million euroNIF contribution: 5 million euro
MOROCCO
Ourzazate Solar Plant
Total cost: 807 million euroNIF contribution: 30 million euro
MOROCCO
Drinking Water Eﬃciency Programme
Total cost: 101 million euroNIF contribution: 7 million euro
EGYPT
Integrated and Sustainable Housing and Community Development Programme
Total cost: 175 million euroNIF contribution: 30 million euroEGYPT
Power Transmission
Total cost: 762 million euroNIF contribution: 20 million euro
EGYPT
Cairo Metro Line 3 phase III
Total cost: 2 075 million euroNIF contribution: 40 million euro
GEORGIA
Water InfrastructureModernization phase II
Total cost: 80 million euroNIF contribution: 8 million euro

34 Annexes Annex  VIIIAudit sample of projects for the creation of sub-facilities
Facility Title ToolGrant 
amount  
(million euro)Country/regionLead finance 
institutionOther sources of 
external financing
ITFAfrica Energy Guarantee 
FundTechnical Assistance 1 Regional EIB -
ITFAfrican Sustainable Energy 
FacilityTechnical 
Assistance/Grant8 Regional EIB -
ITFGeothermal Risk Mitigation 
FacilityGrant 30 Rwanda, Ethiopia, 
Kenya, Uganda, 
Tanzania, BurundiKfW -
NIF SME Guarantee Facility Grant 24 Jordan, Lebanon, 
Egypt, Tunisia, 
MoroccoEIB AFD, WB, OFID
NIF SME Finance FacilityTechnical 
Assistance/Grant15 Armenia, Azer -
baijan, Georgia, 
Moldova, Ukraine, 
BelarusEBRD EIB, KfW
NIFMENA fund for Micro, Small 
and Medium EnterprisesTechnical 
Assistance/Grant10 Regional KfW -
IFCAKyrgyzstan sustainable 
energy efficiency financing 
facilityTechnical 
Assistance/Grant7 Kyrgyzstan EBRD -
IFCASME Finance Facility for 
Central AsiaTechnical 
Assistance/Grant11 Regional EBRD -
35 Annexes
Projects referred to in paragraph 42
Facility Project title ToolGrant 
amount  
(million euro)Country/regionLead finance 
institution
ITF Power interconnector Interest rate subsidy 13Cote d’Ivoire, Sierra 
Leone, Liberia, GuineaEIB
ITF Caprivi interconnector Interest rate subsidy 15Zambia, Namibia, South 
AfricaEIB
ITF Great east road rehabilitation Interest rate subsidy 25Zambia, Malawi,  
MozambiqueEIB
ITF Eastern Africa transport corridor Interest rate subsidy 17Tanzania, Kenya, 
Uganda, Rwanda, 
Burundi, Democratic 
Republic of CongoEIB
ITF Itezhi Tezhi Interest rate subsidy 18 Zambia EIB
NIFImproved water and wastewater 
services programmeGrant 5 Egypt KfW
NIF Tramway de Rabat Technical assistance 5 Morocco AFD
NIF2nd phase fast railway network of 
TunisGrant 28 Tunisia AFD
NIF Water infrastructure modernisation II Technical assistance/Grant 8 Georgia EIB
NIF SME Finance Facility Technical Assistance/Grant 15Armenia, Azerbaijan, 
Georgia, Moldova, 
Ukraine, BelarusEBRD
NIF Power transmission Technical assistance/Grant 16 Egypt EIB
NIF East–West highway Grant 20 Georgia EIB
NIF Ouarzazate solar plant Grant 30 Morocco EIB
NIF Drinking water efficiency programme Technical assistance/Grant 7 Morocco KfW
NIF Cairo Metro Line 3, phase III Technical assistance/Grant 40 Egypt AFDAnnex  IX
36
The Commission has devised this set ‑up taking 
full account of the potential benefits of the facili ‑
ties and considers that its management has been 
adequate.
The Commission considers that the realisation of 
the potential benefits should take into account the 
nature of the grants (e.g. technical assistance) and 
the results of the implementation of the projects.
VI
The Commission considers that the approval pro ‑
cess was thorough: all relevant stakeholders are 
adequately involved and the Commission adapts 
the consultation process to the specificities of the 
projects. Sufficient and complete information is 
available during the decision ‑making process.
Added value is assured in all cases: Projects are 
submitted to the competent Operational Board only 
when all the project components have been clari ‑
fied and its added value is apparent.
The arrangements for advance disbursements are 
being reviewed in the new contract templates for 
financial instruments.
VII
The Commission considers that justification for 
the financing was clear in all cases. These cases are 
described in paragraph 42 of this report and have 
been duly contested and justified by the Com ‑
mission. Please see Commission’s reply to para ‑
graph 42, (a) to (g).
In all cases, the priorities of the facilities have 
been aligned to EU sector policies for each of the 
regions (clearly stated in their respective Strategic 
Orientations).
Nevertheless, the Commission will look into ways 
for the achievement of a wider impact on sec ‑
tor policy as well as for enhancing visibility of EU 
support.Executive summary
I
The Commission welcomes this special report as 
well as the draft recommendations that will further 
enhance the management of the blending facilities, 
an innovative approach to development coopera ‑
tion financing.
Investment needs in EU partner countries are sub ‑
stantial. Government and donor funds are far from 
sufficient to cover these needs. Countries need 
to attract additional public and private financing 
to drive economic growth as a basis for poverty 
reduction.
The Agenda for Change emphasises the support of 
inclusive growth and job creation as a key priority 
of EU external cooperation. In this context, blending 
is recognised as an important vehicle for leveraging 
additional resources and increasing the impact of 
EU aid.
By bridging financing gaps in investment projects, 
the EU grant often enables projects as a whole and 
can therefore mobilise more additional financing 
than loans from financial institutions. In addition, 
the public financial institutions directly participat ‑
ing in blending also provide financing beyond loans 
such as equity or subordinated debt, for example.
IV
The Commission is responsible for the set ‑up of 
the facilities, assessed positively in the report. 
The management of the projects is carried out in 
partnership. The Commission administers the facili ‑
ties while the development finance institutions are 
responsible for the daily management of the pro ‑
jects. They implement the budget tasks that have 
been entrusted to them, in compliance with the 
rules of the indirect management mode laid down 
in the Financial Regulation.Reply  of the  
Commission
Reply of the Commission 37
The Commission is responsible for the set ‑up of 
the facilities, assessed positively in the report. 
The management of the projects is carried out in 
partnership. The Commission administers the facili ‑
ties while the development finance institutions are 
responsible for the daily management of the pro ‑
jects. They implement the budget tasks that have 
been entrusted to them, in compliance with the 
rules of the indirect management mode laid down 
in the Financial Regulation.
The Commission has devised this set ‑up taking full 
account of the potential benefits of the facilities.
18
The Commission is addressing the governance 
of ITF and the limitation identified by the Court 
such as the restrictions to regional programmes 
(e.g. opening to national programmes, different 
sectors ‑same voting rights, management by the 
Commission).
20
The identification of projects is a result of interac ‑
tions and discussions between different stakehold ‑
ers, including the partner countries or relevant 
regional organisations, the Commission and EU 
delegations, other donors, the financial institutions 
and in some cases, private sector as well as civil 
society representatives.
The identification of projects builds on the pro ‑
gramming process and on the approved policy pri ‑
orities by the Commission, EEAS and partner coun ‑
tries. The identification of projects further builds on 
the strategic discussions held within each blending 
facility in the context of the strategic board/steer ‑
ing committee and on the discussions held on the 
analysis of the portfolio of approved projects and 
on the pipeline of projects. VIII
The Commission notes that the recommendations 
made by the Court are totally aligned with the 
reform of the facilities that the Commission has 
started at the end of 2013 and which is now enter ‑
ing the approval phase.
Introduction
Box 1 
The IMF no longer sets loan ‑by‑loan concessional ‑
ity requirements, instead it sets an overall average 
weighted concessionality rate for all borrowings. 
Hence this mechanistic approach will not automati ‑
cally apply in the future.
08
The Commission is now considering modifying the 
ITF in order for it to be managed like the other six 
regional facilities having the same rules for all and 
therefore increasing transparency and predictability 
of the process for all partners and ensuring equal 
rights to all Member States in operational boards. 
Furthermore the special funds allocated by the 
Member States to blending can be still managed by 
the EIB if they so desire.
12
The Commission is actively promoting the involve ‑
ment of more Member States agencies in the imple ‑
mentation of the facilities to ensure equal opportu ‑
nities and increased exchange of best practices.
Observations
16
The Commission considers that the management 
of the regional investment facilities has been 
adequate.
Reply of the Commission 38
It is the responsibility of the financiers to carry out 
the necessary calculations according to interna ‑
tional standards, the principle of due diligence and 
agreed methods in a context of partnership and 
efficient division of labour.
In‑depth project appraisal is made by specialised 
teams of the FIs in accordance with the principles of 
due diligence.
The underlying studies are primarily carried out 
by the lead European Financier and are available 
whenever there are concerns regarding the suitabil ‑
ity of the projects or whenever additional informa ‑
tion is requested over and above the information 
contained in the application.
The Commission does not consider it necessary for 
financiers to provide the studies in a systematic way 
as this will only increase the administrative burden 
without real added value in most of the cases.
24
The Commission underlines that EU contributions 
have been approved only when the necessary 
information underlying compliance with the main 
requirements set out in the Strategic Orientations 
has been obtained.
All the information needed for taking a decision has 
been produced and factored in the decision ‑making 
process. In accordance with the Financial Regula ‑
tion and in the context of indirect management, the 
Commission can rely on the work already done by 
the entrusted entity, in line with the principles of 
due diligence and division of labour at the core of 
our partnership with the financial institutions.
Only sufficiently mature projects are considered 
for approval. Subsequent feasibility studies aimed 
at further strengthening project set ‑up in line with 
beneficiaries’ needs can still be done, thereby 
enhancing the quality of the project.Being systematically  ‘at the initiative’ is not an 
operational objective in itself for the Commission. 
The Commission rather strives to maximise effi ‑
ciency and division of labour in the identification 
process and build on all stakeholders operationals 
strengths. This will be further streamlined by the 
reform of the blending in its approval phase.
21
The Commission envisages reviewing the set ‑up of 
the facilities for the Africa region. Please see Com ‑
mission’s reply to paragraph 18.
Common reply to paragraphs 22 to 31
22
Due to the flexible nature and extensive sector cov ‑
erage of the facilities, the process for establishing 
a common indicator for value added for all the pro ‑
jects is necessarily complex and almost impossible.
Added value of the grant is always assessed and this 
assessment has been strengthened over time, in 
particular, in the context of the work undertaken by 
the EU Platform.
23
The Commission considers that relevant data 
required at different stages of approval (provisional 
and final) were at the disposal of the Commission. 
Financial data at a provisional approval stage is 
likely to change. However, at a final approval stage 
this information is assessed.
Additionally, certain loan conditions might change 
between the request and the final approval due 
to economic fluctuations. Therefore, the FIs can 
finalise negotiations regarding the exact conditions 
of their loan (interest rate, tenor years, etc.) after the 
Facility Board’s approval.
Reply of the Commission 39
Concessionality, debt sustainability, grant amount 
and economic viability are all elements at the core 
of the analysis undertaken by the financial institu ‑
tions and the Commission.
26
The Commission involves the Union delegations in 
the review of the suitability of the grant and their 
advice is sought whenever relevant for the selection 
process.
96 % of the responding delegations stated that they 
are involved in the selection process. The lower 
figure (59%) corresponds to the early identification 
stage as part of the overall selection process.
The Commission endeavours to further engage 
Union delegations in the preparation and follow ‑up 
of blending operations. This is essential to assure 
coherence of EU activities, increase EU visibility and 
strengthen the EU’s weight in policy dialogue.
27
The start date for the calculation should not be the 
entry in the pipeline. The pipeline is only a prelimi ‑
nary indication of potential projects with a very dif ‑
ferent level of development and different degrees 
of maturity.
The Commission is of the view that the most suit ‑
able indicator is the time elapsed between the 
approval by the Technical Board and the adoption 
by the Operational Board at the time of the final 
approval.
This leads to a result of around 4 months for LAIF 
projects, 3 months for CIF, 6 ½ months for NIF, 5 ½ 
months for AIF and around 4 months for IFCA. This 
timeframe appears to be reasonable considering 
the technical complexity of blending projects and 
the potential number of partners involved.Box 2
As recorded in the minutes of the 9th ITF Executive 
Committee meeting, additional information on this 
project was provided to its members upon prior 
request.
This project was approved in 2009. Since then, the 
grant application form has considerably improved 
in order to complement the information provided 
by the financial institutions.
25
All projects financed under the facilities are ana ‑
lysed both from an economic and debt sustainabil ‑
ity perspective. One of the main objectives of the 
Commission and of the financiers is to preserve the 
envisaged investment and its long term sustainabil ‑
ity and development impact.
Still, uniform criteria, such as minimum thresholds, 
cannot be established for assessing economic 
viability. The Working Group on the additionality 
of grants in the framework of blending mecha ‑
nisms concluded in 2009 that the very nature of 
the blending operations calls for a case by case 
approach in terms of assessment of the amount, 
form and nature of support needed. This approach 
has been confirmed in the context of the more 
recent work of the EU Platform for Blending in 
External Cooperation (EUBEC).
The EIRR (Economic Internal Rate of Return) for 
projects is always assessed as part of due diligence. 
Grant allocation decisions are made based on the 
economic and financial analysis of the projects, as 
well as the expected social benefits (affordability, 
impact on health, social situation).
This review is based on the information provided 
in the grant application form, as well as additional 
information stemming from exchanges between 
different Commission services and its delegations, 
the FI and any relevant stakeholder, before, during 
and after the technical meetings.
Reply of the Commission 40
Whilst the assessment was challenging in the 
absence of comparisons between similar projects in 
the early years of the blending facilities, the Com ‑
mission builds on experience acquired over the 
years to refine the assessment process.
Indeed, with the reform of blending discussed and 
agreed recently, the grant amount provided as 
financing will be further subject to comparability 
and increased value for money.
31
There is no evidence to suggest that it has materi ‑
alised so far. The Commission’s partners are devel ‑
opment banks, not commercial banks; their main 
objective is to contribute to development funding. 
Nevertheless, the confidentiality around pricing 
models and decisions has indeed hindered wide ‑
spread use of the interest rate subsidy instrument.
Where interest rate subsidies are used, the Commis ‑
sion relies, in particular, on its own supervision of 
the multilateral institutions (e.g. through the pillars 
assessment) and on national oversight and regula ‑
tion governing the bilateral institutions as elements 
mitigating this risk.
The calculation of interest rates made by the banks 
will be subject to scrutiny and benchmarking.
32
In indirect centralised or joint management the 
advance disbursements were indeed high at the 
moment of the creation of the first facilities. This 
was motivated by the need to launch a new aid 
modality and encourage the financial institutions to 
take over the management of complex projects.
The arrangements for advance disbursements have 
been reviewed in the new contract templates for 
financial instruments and result in a decreased level 
of prefinancing.The proof that the length of the procedure is 
appropriate and reasonable is that there has been 
no evidence so far that any relevant project was not 
implemented due to delays in the approval pro ‑
cedure. On the contrary, the approval process has 
sufficient flexibility to take into account the need 
of partners allowing speeding up the process, if 
necessary.
29
The Commission would like to clarify that achiev ‑
ing IMF concessionality levels may be necessary, 
but not sufficient, in the light of project ‑specific 
issues. Meeting the 35 % threshold can be consid ‑
ered a first, necessary precondition for the financ ‑
ing package to be accepted by a beneficiary under 
IMF restrictions. However, it is not automatically 
sufficient condition in itself. Certain projects might 
require a higher grant element of the financing 
package than 35 % without putting into doubt the 
significant development impact they provide.
30
The justification for grant amounts requested can 
vary considerably according to the specific market 
barrier being addressed, target group affordability, 
project maturity, local market conditions, availabil ‑
ity of funds from other financiers and the capac ‑
ity and risk appetite of the project implementers, 
among other conditions. This variance, coupled 
with the dearth of reliable market information in 
partner countries, makes it challenging to establish 
criteria for setting the amounts of grants cover ‑
ing every possible intervention in every possible 
dynamic market context. Ultimately the Commis ‑
sion has to rely to some extent on the ability of 
partner finance institutions to negotiate the best 
deal, i.e. the minimum grant amount, to catalyse 
a specific project. There are no viable alternatives to 
this ‘pricing’ process for some projects. For exam ‑
ple, the size of a first loss guarantee for lending 
to SMEs is not generally determined by historical 
experience (if there is any) but rather by the lenders’ 
perceived risk — a subjective parameter that can 
only be determined through skilled negotiation.
Reply of the Commission 41
35
Following the project approval, the Union del ‑
egations and/or the Commission Headquarters 
(depending on the scope of the project) secure 
adequate follow ‑up.
Commission services are in regular contact with the 
Bank’s national offices in the relevant countries, 
meetings take place with the delegation and the 
local project coordinators of the lead financial insti ‑
tutions. The lead financial institutions have the con ‑
tractual obligation to submit reports annually to the 
delegation. Furthermore, as foreseen in contracts 
signed within delegated cooperation, the Commis ‑
sion is involved, informed and invited to monitoring 
missions carried out by the lead financial Institution 
on the ground.
The contractual arrangements are sufficiently clear 
for adequate monitoring.
By increasing the earlier involvement of delega ‑
tion in the process, follow up and monitoring will 
also increase. Instructions to delegations will be 
updated to this effect.
36
The Commission acknowledges the reference to 
the ongoing work on results ‑based indicators to 
be used by the finance institutions for monitoring 
and reporting purposes and stresses that perfor ‑
mance monitoring is carried out by the lead finance 
institution.
37
All the projects are submitted to monitoring and 
evaluation(s). Some mid ‑term evaluations have 
been finalised, like in the case of NIF, or will be 
launched shortly, like in the case of LAIF.Box 3
The Commission proceeded in full compliance with 
the applicable rules and regulations.
The disbursement arrangement explained in Box  3 
was done in 2010. For the NIF, the Commission has 
changed this disbursement policy in 2012. (cf. para ‑
graph 32).
In addition, the assessment of this NIF project shall 
dully take into account the exceptional situation 
and events that took place in the partner country 
from January 2011 and that have had an impact on 
the implementaion of the project.
33
It is envisaged to review the system of advance pay ‑
ments for the ITF.
34
Projects under these facilities are approved and 
selected directly by the European financial institu ‑
tions in full compliance with the objectives, activi ‑
ties and criteria established for the project. The 
selection of the sub ‑loans and guarantees is deter ‑
mined by the project ‑related parameters (detailed 
in the fiche), in particular those spelling out the 
goals pursued by the project. Due diligence stand ‑
ards of the financial institutions are applied during 
the approval and selection procedures. These pro ‑
cedures follow an agreed and cost ‑efficient division 
of labour among partners which include arrange ‑
ments for the selection of the subordinated actions. 
The eligible financial institutions report in detail on 
the projects included in the facility on a regular as 
well as on ad hoc basis or when requested by the 
Commission.
Box 4
The Commission considers that all necessary ele ‑
ments were apparent in the grant application form 
of the NIF project of the SME Finance Facility.
Reply of the Commission 42
42 (a)
The possible financing without ITF contribution 
under the IMF programme had indeed a ceiling 
for non ‑concessional lending (see Table 1 of the 
IMF Country Reports for 2009 and 2010), therefore 
any additional lending had to be concessional. The 
decision of any given project being considered for 
concessional or not lending is a sovereign decision 
of Zambia, after discussion with the international 
community depending on the economics of each 
project.
42 (b)
The EDF grant alone had proven insufficient to 
close the financing of the projects. The additional 
funding, necessary to close the funding gap, was 
made possible only by the mobilisation of financial 
institutions resources through the ITF contribution.
42 (c)
Grants may have high added value even if small in 
size, for example in completing a financing gap, in 
improving the project quality, etc. In three of these 
cases the grant helped soften the overall financial 
conditions, as the financing package proposed by 
the co ‑financiers was not considered fully accepta ‑
ble by the borrower. For the other project, the grant 
allowed the increase of the potential impact of the 
projects including the financial benefits.
42 (d)
The Commission does not share the Court’s con ‑
clusion. The final beneficiary could have chosen 
another alternative that would have been more 
profitable but would have brought negative envi ‑
ronmental impacts. The ITF grant helped facilitate 
the investment into the environmentally preferred 
option and compensating for the higher investment 
costs.Furthermore, the Commission would like to stress 
that:
(i) ROM procedures for the DEVCO ‑managed re ‑
gional investment facilities are the same as for 
the other DEVCO projects; and
(ii) DEVCO takes the necessary actions to address 
ROM results: for projects which have undergone 
the ROM process the results are sent to the EU 
delegation/units in Headquarters involved in the 
project management. A reply is expected from 
the delegation and is usually submitted to the 
lead finance institution. If necessary a contradic ‑
tory meeting is organised aiming at clarifying the 
findings of the ROM. Additionally the Commis ‑
sion’s representatives are meeting with the con ‑
sultants who carried out the ROM visits for regular 
debriefing sessions in order to be informed about 
the situation on the ground.
It is envisaged to review the management of ITF 
projects in the future in order to possibly align it 
with the other facilities.
Common reply to paragraphs 39–42
39
The Commission does not share the analysis of 
the Court on the demonstration of the need for 
grant support to enable the loan. The grant appli ‑
cation form provides the basis for assessment, 
which is a considered judgement based on inputs 
from thematic and geographic units, as well as 
EU delegations and the secretariat, often supple ‑
mented by additional queries. The assessment of 
the Commission supported by technical meetings 
with financial institutions and operational Boards 
with the presence of the Member States is solid 
and well grounded. The Commission considers that 
the selection process of the grants gives sufficient 
assurance and proof of its need.
42
The Commission does not share this analysis for the 
following reasons:
Reply of the Commission 43
46
The Commission is of the view that the facilities 
generally leverage considerable policy gains.
The policy environment is an integral part of the 
project appraisal. Each project has its own specific 
objectives and expected impacts, which differ 
according to the nature of the project. A single 
project is not expected to impact on all objectives 
(furthermore, it is not advised to do so).
In the case of ITF, when the project coincides with 
the delegation’s focal sector, there is indeed scope 
to commonly influence the sector policy. This is dif ‑
ferent in cases where a project does not fall in the 
delegation’s focal sector while, nevertheless bear ‑
ing a regional reach.
51
For political and strategic reasons, the Commis ‑
sion (even though considering that EU visibility 
guidelines were respected) will step up visibility 
arrangements and further involve delegations in 
the process.
51 (a)
There are specific articles in all the contracts (both 
in the general conditions and in annex provid ‑
ing the description of the action) for the projects 
financed under the regional blending facilities. 
These articles stipulate that the lead finance institu ‑
tion shall ensure appropriate visibility of the grant.
In addition, in the new Indirect Management Del ‑
egation Agreement which will be used as from 2014 
for all the projects contracted under the Regional 
Blending Facilities there is an annex particularly 
foreseen for a Communication and Visibility Plan 
which will be established for each individual 
project.42 (e)
The Commission does not share the Court’s conclu ‑
sion for which there is insufficient evidence.
The NIF grant was necessary to unlock the overall 
investment package of the project and was com ‑
pletely in line with policy objectives of the EU and 
of the partner country.
42 (f)
The Commission does not share the assessment. It 
implies that the grant was required for the related 
loans to be accepted by the beneficiary, and that 
the blended package was comparable with other 
financial offers and was not overly subsidised.
42 (g)
This observation does not take into account that the 
‘unsubsidised’ product operated on the assumption 
that the subsidy would come. The NIF contribution 
in such a scheme is certainly needed for the EFIs to 
be able to provide loans at a rate that incentivise 
banks to on ‑lend to SMEs. The fact that the NIF con ‑
tribution is not (or partly) spent is rather a sign of 
success. It paves the way for a follow ‑up facility with 
a lower level of NIF contribution (without implying 
that the NIF grant should be lower in the case of 
another first operation in a country).
44
The Commission is proactively influencing the set ‑
up of the projects. The type of influence will very 
much depend on the type of project since projects 
have different objectives and different expected 
impacts. Blending projects are set up in a context 
of partnership and of sharing of responsibilities 
among donors. The Commission has a key role in 
this partnership, exercising a wide influence in all 
relevant aspects of the projects.
Reply of the Commission 44
54
The Commission considers that the approval pro ‑
cess was thorough: all relevant stakeholders are 
adequately involved and the Commission adapts 
the consultation process to the specificities of the 
projects. Sufficient and complete information is 
available during the decision ‑making process.
Added value is assured in all cases: Projects are 
submitted to the competent Operational Board only 
when all the project components have been clari ‑
fied and its added value is apparent.
The arrangements for advance disbursements are 
being reviewed in the new contract templates for 
financial instruments.
55
The Commission considers that justification for 
the financing was clear in all cases. These cases are 
described in paragraph 42 of this report and have 
been duly contested and justified by the Com ‑
mission. Please see Commission’s reply to para ‑
graph 42, (a) to (g).
In all cases, the priorities of the facilities have been 
aligned to EU sectoral policies for each of the 
regions (clearly stated in their respective Strategic 
Orientations).
Nevertheless, the Commission will look into ways 
for the achievement of a wider impact on sec ‑
tor policy as well as for enhancing visibility of EU 
support.
57
The Commission accepts the recommendation. The 
new application form clearly indicates the different 
forms of the added value the grant can provide.As for what refers to WBIF, DG Enlargement has 
ensured via its technical assistance contracts (IPF 
and IFICO) that all communication and promotional 
tools (website, reports, guidelines fact sheets, 
seminars, workshops, etc.) indicate the EU’s role in 
the mechanism. Furthermore, greater cooperation 
with the communication units of the IFIs is being 
developed and increased references to the EU and 
WBIF are now evident. Greater visibility and consist ‑
ency should be further improved as all WBIF com ‑
munications activities will be centralised in the new 
expanded IFICO contract.
52
The Commission stresses that the Communication 
and Visibility Manual for EU external actions is valid 
and applicable to all projects in the external actions 
area.
Conclusions and recommendations 
53
The Commission is responsible for the set ‑up of 
the facilities, assessed positively in the report. 
The management of the projects is carried out in 
partnership. The Commission administers the facili ‑
ties while the development finance institutions are 
responsible for the daily management of the pro ‑
jects. They implement the budget tasks that have 
been entrusted to them, in compliance with the 
rules of the indirect management mode laid down 
in the Financial Regulation.
The Commission has devised this set ‑up taking 
full account of the potential benefits of the facili ‑
ties and considers that its management has been 
adequate.
The Commission considers that the realisation of 
the potential benefits should take into account the 
nature of the grants (e.g. technical assistance) and 
the results of the implementation of the projects.
Reply of the Commission 45
59 (a)
A results measurement framework has already 
been included in the application form, with the 
accompanying guidelines clarifying the informa ‑
tion requested. The impact of the specific EU grant 
can often not be separated from the overall project. 
However, regarding the EU grant the added value 
has to be clearly pointed out (see above).
59 (b)
Instructions have been sent to all EU delegations, 
and guidelines are under elaboration.
59 (c)
The Commission partially accepts the recommenda ‑
tion. The Commission will consider the opportunity 
to adapt the ROM methodology to the specific 
characteristic of blending.
60
The Commission accepts the recommendation.
A new Indirect Management Delegation Agreement 
for all the projects contracted under the Regional 
Blending Facilities is under preparation. This 
contract template will include an annex particu ‑
larly foreseen for a Communication and Visibility 
Plan which will be established for each individual 
project.57 (a)
The Commission accepts the recommendation. 
Guidelines on revised governance to steer Com ‑
mission’s involvement at all stages of the approval 
process as well as on project follow ‑up are under 
way in the context of the EU Platform.
57 (b)
The Commission accepts the recommendation. This 
is an ongoing process, with likely completion at the 
end of 2014.
57 (c)
The Commission accepts the recommendation. In 
the revised set up of the governance of the blend ‑
ing facilities it has been proposed that projects will 
be only submitted for final approval (no provisional 
approval anymore). The application form includes 
detailed descriptions of the need and added value 
of the grant, as well as how the amount has been 
determined/calculated.
The process must involve preliminary analysis and 
discussions of the projects included in the pipeline 
to be clarified before submission for final approval 
so as to ensure maturity of the projects, impact and 
value for money.
57 (d)
The Commission accepts the recommendation.
58
The Commission accepts the recommendation. In 
the future, cash needs will be factored in before 
disbursing. A new contract template for financial 
instruments is currently under preparation. The 
measure will be likely in place by the end of 2014.
59
The Commission accepts the recommendation.

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QJ‑AB‑14‑016‑EN‑C ISSN  1831 ‑0834 The Commission and the Member States have 
set up eight regional investment facilities to 
support EU external policies. These investment 
facilities aim at pooling together (blending) 
grants provided by the European Commission 
with loans from financial institutions. They 
contribute to finance key infrastructure projects 
that require considerable financial resources.
The Court examined the effectiveness of 
blending EU grants with loans from financial 
institutions. The Court concludes that this 
blending has been generally effective. The 
regional investment facilities were well set up 
but the potential benefits of blending were not 
fully realised. The Court makes a number of 
recommendations for the Commission that 
concern project selection and grant approval, 
disbursement of funds, monitoring of the 
implementation of EU grants, and enhancing the 
visibility of EU aid.
EUROPEAN
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