• an equity provided by HMG/N
• a credit from the International Development Association (IDA) / The World Bank
• a grant from the German Agency for Technical Cooperation (GTZ) / udle project

From the so obtained funds, TDF provided loans and soft loans for social infrastructure and income-generating projects, soft loans for small income-generating projects in low-income municipalities and grants for projects in among others the sectors of sanitation, environment and education, besides for designs and studies as well as supervision of construction.

In December 1995, the German Development Bank "Kreditanstalt für Wiederaufbau" (KfW) committed a grant amount of DM 10 million to TDF to provide grants, loans and soft loans for social infrastructure and income-generating projects, including the pertaining consultancy services, in 36 municipalities in Nepal and to be used over a period of 5 years, i.e. till December 2000. Numerous projects have been implemented, while some are still under implementation, the entire grant amount is allocated and TDF expects the last disbursements to be effected in the 2nd half of the year 2001.

Based on the satisfactory implementation of this Town Development Program and subsequent to consultations and negotiations in late 1999 and early 2000, the Government of the Federal Republic of Germany and His Majesty's Government of Nepal agreed to continuation under a Town Development Program, Phase II. For the purpose, the KfW -- on the one side -- and HMG/N and TDF -- on the other side -- entered into new agreements on November 30, 2000, in which the KfW committed a further grant amount of DM 14,002,431.52 to TDF. The new agreements consider enhanced matching funds and disbursement in a proportioning of 75% loan to 25% grant till June 30, 2005, for social infrastructure and income-generating projects in 58 municipalities, constituted in Nepal till 1999. The following chapters detail the procedures and conditions for the municipalities in seeking loan, soft loan and/or grant assistance from TDF under the new KfW funding.
In the present context, it is to be mentioned that, with effect from 1 January 2001, TDF will also channel loan funds obtained by HMG/N from the Asian Development Bank (ADB) to emerging towns in Nepal in the scope of the "Small Towns Water Supply and Sanitation Project". Seeking assistance from TDF under this project title is however subject to different procedures and conditions; the concerned policy documents are available in the Project Monitoring Office (PMO) of the Department for Water Supply and Sewerage (DWSS), the project implementing agency.

Under Phase II of the Town Development Program, technical support from GTZ/udle to TDF will continue. The support includes the strengthening of TDF's organisational and fund management, besides advice to TDF in assisting municipalities in the implementation, operation and maintenance of TDF-funded projects. Thereto, the GTZ/udle team comprises an External Consultant and a senior coordinator to TDF. KfW has authorised TDF to decide on appraisals and contract awards, etc. for projects up to total costs of NRs. 8,500,000.-, provided certification by the External Consultant. For projects with total costs above this limit, the formal non-objection of KfW is required. Other support activities from udle to municipalities to strengthen their capabilities in the fields of administration, finance and planning, etc. will be coordinated with the TDF activities, as and when necessary.