One of the most hidden corruption risks in defence procurement arises in the financing package. In many cases the main defence contract has a high level of scrutiny, but the same is very rarely true of the financing package.

Governments do not pay for arms with cash up front. Along with procurement contracts, there is usually a relatively complex, multi-year financing package, which gives details on how exactly the arms will be paid for. This may include interest rates, commercial loans or export credit agreements, and companies may add certain things to ‘sweeten the deal’, such as a fixed price for equipment maintenance fees by the company.

The financing package outlines the length of time a country has to pay for the equipment, and any penalties for late payment; in some cases, companies can trigger penalties and demand payment from countries if these deadlines are not met.

Corruption Example: Kenya

In 2006, John Githongo investigated a grand scale corruption scandal in Kenya. His groundbreaking report raised issues of misusing agents, false companies, single sourcing, subcontracting, and more. One way in which the Kenyan government lost money in the exceedingly corrupt procurement process was through conditions in the financing package. Githongo's report states: '...in most of the contracts the Government started debt repayments before substantive implementation of the projects had begun. The implication of this was that the bogus financing companies used the Government’s money to implement the projects and then proceeded to charge interest on what are in truth fictitious loans by the Government to itself.'

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