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Project Assessment Criteria

An important principle for Finnpartnership is the commercial, social and environmental criteria when analysing a project's eligibility to receive the support. The basis of the project assessment is commercial viability and sustainability of a project.


Business Partnership Support Facility is a tool for developing commercially viable business partnerships into feasible projects. The aim with these business partnerships is to achieve positive developmental effects in the target developing countries.

The basis of the project assessment is commercial viability and sustainability of a project. Also social and environmental sustainability are important criteria.

The applicant should have an adequate commercial track record corresponding to the operations and the sector of the project in question. In addition, the applicant should have sufficient financial and human resources to implement the project.

Support is available for activities with realistic potential to develop into a commercially viable project and which:

  • foster development in the target country
  • are in line with legislation and requirements of the target country, and
  • comply with international environmental and social standards.

Commercial viability and sustainability

The feasibility of a project plan is assessed on the basis of commercial viability and bankability of a project. Business Partnership Support can be applied for in the early phases of a project, such as the identification phase of potential business partner and feasibility studies, when detailed financial estimates of a project are not yet available. In this case, the assessment is based on the track record of the applicant and the resources available to implement the project. When external investors are needed for financing the project, the business idea can also be assessed from a financiers' perspective.

Project plans that are further developed and include financial projections are assessed on the basis of presented projections. When the grant is applied for the development of existing business operations, special attention is paid to the possibility of these business operations supporting the implementation or continuity of the partnership.


Developmental effects

The purpose of the Business Partnership Support Facility is to encourage commercial cooperation between Finnish companies and companies in developing countries. The aim is to achieve positive developmental effects in the target developing countries. To define a project's eligibility to receive the facility, its developmental effects are also assessed.

The principles of developmental effects are used in the assessment. In addition, the environmental effects of the projects are assessed according to separate social and environmental performance standards.

Potential direct or indirect developmental effects of a project can be defined according to the following contributions to the economy and society of the target country:

  • contribution to national income (wages, interest, rents and profits)
  • employment effects
  • market and structural effects (diversification of the production structures)
  • contribution to government revenues (tax, royalties, customs duties)
  • technology and know-how transfer
  • training effects
  • social effects/social benefits (compliance with ILO regulations; work safety; wage level etc.)
  • environmental sustainability (positive environmental effects, such as renewable energy etc.)
  • gender effects
  • improvements in the physical and social infrastructure benefiting the population in the vicinity of the project, and
  • net currency effects.

The character of project activities and the project type (such as importing from a developing country, technology transfer or investing in a developing country) affect considerably whether individual developmental effects can be assessed. In the early stages of a project, such as the identification phase or pre-feasibility phase, it is also possible that only qualitative effects can be estimated.

In the application form the applicant should briefly describe the potential developmental effects of the project. Finnpartnership’s experts will, if needed, contact the applicant for further information in order to assess developmental effects.

Social and environmental impacts

The main principle in projects supported by Business Partnership Support is their compliance with internationally accepted social and environmental standards as well as local legislation related to environment, employee rights etc. Social and environmental assessment criteria are based on International Financial Corporation’s (IFC) Performance Standards on Social & Environmental Sustainability (also see EHS Guidelines). Adjusting to higher standards can be an asset for the project.

It is vitally important for the overall feasibility of a project to take social and environmental sustainability into account at the very beginning of project planning, especially if external financing is required. Support can be granted for social and environmental assessments already at the pre-feasibility study stage. Applicants can also seek advice from Finnfund’s Environmental Advisor in applying the above standards to individual projects (please contact Finnpartnership).

Projects are classified according to their potential social and environmental impacts. The project classification as well as its type and stage determine the amount of information available for the assessment, but also the scope of the assessment process.

The basic rule is that projects should have as few negative impacts as possible on health, society, legislation and/or environment.

Environmental categories
Environmental category A: Projects with potentially significant adverse environmental impacts that may affect an area broader than the project site itself. In practice, this includes, for example, new production facilities and significant extensions of existing facilities in critical sectors, and projects located in sensitive areas or in their immediate vicinity.
Environmental category B: Projects with moderate environmental impacts that are less adverse than those in category A, and that are easier to manage than category A projects.
Environmental category C:

Projects with minimal or no adverse environmental impacts.

 


Social impact category

Projects are classified based on their potential social risks. Projects having the following characteristics are subject to closer scrutiny:

  • projects or business activities in the primary sector, such as agriculture or mineral, oil and gas exploitation, which typically involve large amounts of unskilled or temporary/migrant labour
  • labour-intensive industries (especially those situated in export processing zones)
  • industries with hazardous working conditions
  • projects that need to dispossess and resettle people, or intensified exposure of indigenous communities to mainstream society or erosion of the natural resource base of local communities; and
  • projects in which privatisation due to price increase may have possible adverse impacts on access to basic social services or to other services with a high developmental effect.

Projects in which the Business Partnership Support has been used for drawing up project documents (such as feasibility studies, business plans or social and environmental impact assessments), and which may have notable, negative effects, are obliged to adhere to certain quality standards. An important principle for Finnpartnership in assessing projects is to strengthen their feasibility, which also includes advising applicants to take social and environmental aspects into consideration already in a project’s planning phase. Finnpartnership’s advisers will provide assistance in defining which social and environmental performance standards should be applied in each project.

If necessary, Finnpartnership can provide more detailed information on the Social and Environmental Impact Assessment Criteria.