In making an investment decision, CDB will take into account the economic circumstances of the country concerned and the policies of its member governments as they affect private enterprise development. In its evaluation of projects, CDB gives consideration to the following factors:
- the anticipated contribution to the general economic activity in the country concerned,
- the extent to which they would assist in overcoming obstacles to national development
- their ability to reduce imports or earn foreign exchange
- the introduction of new industries and techniques to raise productivity
- the expansion of employment activities
- compliance with environmental legislation and guidelines
- positive contribution of the project to economic cooperation and integration in the member countries.
Investments are usually made in foreign currency for acquisition of fixed assets and initial working capital. CDB funds may also be used for restructuring debt where it is likely to improve the viability of the enterprise.
CDB does not provide resources to finance speculation in shares.
CDB’s private sector operations offer the following investment products:
- Long term loans
- Equity and quasi-equity investments,
- Guarantees, and
- Technical Assistance
The nature, terms and conditions of the Bank’s investment in a particular venture are commercially-based and priced on the risks (country, foreign exchange and credit) and expected returns of the venture, as well as the characteristics of the corporate entity receiving the investment.
CDB requires its loan commitments to be adequately secured. The nature and the extent of the security requirements are determined on a case-by-case basis. Where project financing requirements exceed CDB’s limits, the Bank is also prepared to consider syndications and co-financing arrangements as appropriate. CDB may also make equity investments in projects consistent with its developmental objectives, to the extent that resources are available for this purpose. Special attention is given to investment opportunities in the BMCs where there is a shortage of risk capital. CDB will not take a majority shareholding position in an enterprise in which it invests and will normally limit its equity investment to not more than 33.3% of the invested company’s total issued share capital.
In instances where projects that have been assessed by CDB are found to be sound and developmental and which satisfy CDB’s lending criteria, but which experience difficulties in obtaining financing because prospective financiers perceive risks at levels higher than they consider tolerable, CDB may assist in the mitigation of appropriate risks by providing guarantee support, on terms and condition determined by CDB.
The following are investments that have been recently approved by the Caribbean Development Bank:
- Norman Namley
- AIC Equity Fund
Prospective clients are required to submit a business proposal to CDB including full details of the proposed project, including but not limited to:
- Feasibility studies and information on development incentives and other concessions from government,
- A brief history and financial capacity of the sponsor,
- Market surveys and marketing arrangements,
- Implementation arrangements,
- Proposed structure of ownership and management of the project,
- Historical financial data and expected operational and financial performance, and
- An anlysis of risks, including social an environmental risks and impascts, in implementing and operating the project with the accompanying mitigation measures showing which party will bear the risk and/or pay for the mitigating measures.
CDB provides Technical Assistance resources where in the opinion of CDB, the benefits that may result will acrue to the benefits of the sector or industry in the BMC. Priority for technical assistance is given to activities which will:
- improve the enabling environment and investment climate for private entrepreneurs and foreign investors,
- improve human capital,
- foster regional integration, and
- strengthen the capabilities of SMEs
Assistance is provided to both institutions and individual firms.
When making an application for technical assistance financing, prospective clients are required to submit an adequate programme description, approved in advance, setting out the rationale for the programme and the deficiencies to be resolved, the advisory and training services required, a comprehensive scope of work, estimated duration and costs. CDB also partners on TA projects and programmes with several national, regional and international agencies and institutions including:
- UWI, and
CDB’s technical assistance programme for supporting the small scale private sector is primarily through the Caribbean Technological Consultancy Services (CTCS) network. Recent interventions include:
- Barbados-Modernisation of the Financial Sector
- East Caribbean Enterprise Fund-Feasibility Study