The Bank identified significant scope for
improvement in the execution of projects it
financed. IsDB considerably lagged comparable
multilateral development banks (MDBs) on
commonly tracked project execution metrics,
namely: quality of entry (i.e. date of project
approval to date of first disbursement) and
quality of implementation (i.e. delays during
the disbursement phase). Such delays have
significant implicit financial costs for IsDB
that do not appear on the Bank’s financial
statement. Hence, we assessed the opportunity
costs associated with project delays.
As part of the President’s Programme (PP),
IsDB plans to undertake multiple initiatives
to improve project execution. One of them
is to adopt a decentralised operating model
by enhancing local presence in member
countries through the establishment of 11
regional offices. It is envisaged that local
presence will enable IsDB to improve the
project execution through rigorous appraisal
and closer supervision of the projects.
The experience of peer MDBs suggests that
the operating costs of adopting a decentralised
model will drive up IsDB’s operational costs.
However, it is expected that the potential
financial benefits from improvement in project
execution resulting from decentralisation
will exceed the incremental operating costs
associated with it. Within this context, the
primary objective of this business case is to
assess and compare the financial benefits
accruing from expediting the project lifecycle
with the associated costs of decentralisation.
Compared to peer MDBs and planned
timelines, IsDB’s current project lifecycle
reflects significant delays. Bringing the project
lifecycle in line with international standards is
expected to accrue an annual financial benefit
of US$57 million. In addition, it also enables
IsDB to finance additional developmental
projects resulting from the faster asset
turnover. These financial benefits far exceed
the projected incremental costs from
decentralisation, namely, one-time set-up costs
of US$8.6 million and annual incremental
operating costs of US$13.8 million.
It must be noted here that decentralisation
alone will not be sufficient to improve the
project lifecycle to international standards.
It is imperative for IsDB to undertake other
supporting initiatives outlined in the PP such
as conducting rigorous project appraisal,
streamlining operational processes, and
enhancing project supervision and staff
competencies to realise the financial benefits
of the expedited project lifecycle.
Under the PP, IsDB undertook the following
- Implement the planned decentralisation of
- Implement supporting measures outlined
in the delivery track of the PP that are
aimed at improving the delivery model.
Some of the initiatives such as setting up a
project preparation facility, enhancing staff
competencies etc. may require additional
- Streamline end-to-end processes, including
addressing the procurement bottlenecks.
- Closely monitor the key performance
metrics, i.e. the quality of entry and
quality of implementation at the senior
management and Board levels.