Public Disclosure Authorized AFRICA Ethiopia Finance & Markets Global Practice IBRD/IDA Investment Project Financing FY 2016 Seq No: 3 ARCHIVED on 25-May-2017 ISR27984 Implementing Agencies: National Bank of Ethiopia, Development Bank of Ethiopia, Ministry of Industry, MOFEC Public Disclosure Authorized Key Dates Key Project Dates Bank Approval Date:17-May-2016 Planned Mid Term Review Date:30-Oct-2018 Original Closing Date:31-Aug-2022 Project Development Objectives Effectiveness Date:01-Sep-2016 Actual Mid-Term Review Date:-- Revised Closing Date:31-Aug-2022 Public Disclosure Authorized Project Development Objective (from Project Appraisal Document) The project development objective is to increase access to finance for Eligible Small and Medium Enterprises in the Recipient's territory. Has the Project Development Objective been changed since Board Approval of the Project Objective? No PHRPDODEL Components Name Financial Services to SMEs:(Cost $193.00 M) Enabling Environment for SME Finance:(Cost $0.80 M) Public Disclosure Authorized Business Development Services for SMEs:(Cost $2.50 M) Project Management, Communication and Impact Evaluation:(Cost $3.70 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Moderately Satisfactory Overall Risk Rating Substantial Substantial 5/25/2017 Page 1 of 7
Implementation Status and Key Decisions A World Bank mission visited Addis Ababa, Ethiopia from April 3rd to 7th, 2017. The mission liaised with the Ministry of Finance and Economic Cooperation (MoFEC), Ministry of Industry (MoI), National Bank of Ethiopia (NBE), Development Bank of Ethiopia (DBE), Federal Small and Medium Manufacturing Industries Development Agency (FeSMMIDA), development partners, and other relevant stakeholders to advance project implementation. The main objective of the mission was to work with the Project Implementation Unit in the Ministry of Industry and the Project Management Team in the Development Bank of Ethiopia to advance the project s implementation on all the relevant components. In particular the team worked to: (i) initiate project restructuring in order to transferr the project implementation unit from MoI to FeSMMIDA; (ii) work with the DFID-funded Enterprise Partners to implement the technical assistance for the credit facility; (iii) define specific roadmaps to start disbursement to participating financial institutions; (iv) discuss with NBE and DBE on how to address the issue of single borrower exposure limit of leasing companies; and (v) define specific roadmaps to advance with implementation on all other project components. The project team observed moderate progress on each project component. An update on each component is as follows: Component 1, Financial Services to SMEs. The objective of Component 1 is to establish a credit facility providing access to finance for working capital and leasing finance for participating financial institutions (PFIs) for onlending to eligible SMEs. This liquidity support will be complemented with prior mandatory technical assistance (TA) aimed at supporting financial institutions in designing, piloting and rolling out financial products utilizing novel lending methodologies (e.g. cash flow-based lending) to successfully expand their outreach to the target SMEs. Successful graduation from the technical assistance program is a prerequisite for accessing the credit line. The technical assistance support is funded externally through DFID funded Enterprise Partners (EP) and the IFC. Following administrative delays, Enterprise Partners commenced delivery of required activities at the end of April 2017, with a goal of completing initial TA over the course of approximately 6 months. The TA began with a detailed needs assessment for each institution, which will be followed by a technical cooperation agreement between the respective financial institutions, DBE and EP. The TA is expected to be delivered in two phases leading to expected certification of a first round of client financial institutions (4 MFIs and 4 Banks) by September 2017, and certification of additional financial institutions as well as more in-depth TA with certified institutions to follow. This process will enable the first round TA recipients to become certified and thereby access the line of credit as soon as possible. The IFC leasing team is working jointly with Enterprise Partners (EP) to outline training needs of the Development Bank of Ethiopia (DBE) and all five regional leasing companies. The IFC leasing team and EP will work together to coordinate TA for DBE and the 5 regional leasing companies, commencing by June 1, 2017 with the initial mandatory module required for certification delivered within 6 months. All parties agreed that TA should be given even while the regional leasing companies were technically non-compliant to enable them to effect change, as long as there was a commitment to the core leasing mandate, they stand a chance to meet the eligibility criteria and to qualify as participating financial institutions. Component 2 Enabling Environment for SME Finance The objective of Component 2 is to improve the enabling environment for facilitating SME finance in Ethiopia. This would require the following: (i) creation of a collateral registry that would support both the lending and the leasing business; and (ii) a diagnostic of the insolvency and creditor/debtor regime to address key bottlenecks to SME lending. The Bank team is Providing TA to a Legal Drafting Committee created under the leadership of NBE s Vice Governor, consisting of senior legal experts from NBE and financial institutions who are taking the lead in drafting a proclamation to provide for Movable Property Security Rights Registration. The draft proclamation is being finalized and is expected to be ready for stakeholders consultation by the end of June. The team is also preparing TORs for the insolvency diagnostic. Component 3 Business Development Services to SMEs The objective of Component 3 is to support SMEs through the provision of tailored Business Development Services (BDS) to address constraints on the demand side, and to make SMEs more bankable. The completion of a BDS needs assessment and the recruitment of private BDS providers to deliver services to SMEs are important priorities. The two procurements for a BDS needs assessment and BDS delivery will proceed in quick succession of on another, in order to enable BDS activities to launch on schedule. The general parameters of the terms of reference for BDS providers (number of SMEs, timeline) are already known and the more detailed scope of work (methodology, locations, target sub-groups) will be informed by the needs assessment and incorporated into the final contracts with the providers. In order to respond to capacity needs of public sector BDS institutions, the project will explore how it can incorporate support to pubic BDS providers, in addition to working with private BDS providers. The recruitment of private BDS providers will proceed as scheduled. At the same time, the Project Implementation Unit in coordination with Ministry of Industry will submit a proposal for the Project Implementation Committee outlining how SMEFP could support and involve public sector institutions providing BDS, such as the TVET Centers of Excellence. The strategy will be to purse a two-track approach of contracting private providers for BDS services to SMEs, while also exploring supporting the capacity of public institutions. 5/25/2017 Page 2 of 7
Component 4 Project Management, Communication, and Impact Evaluation The objective of Component 4 is to support overall coordination of project activities, and to rigorously measure the impact of the project on the growth of participating SMEs. The Project PMT has been established in DBE with the direct responsibility of managing the credit facility under Component 1. The PIU has been established under the MoI with the mandate of overall project s coordination and direct responsibility of Components 2, 3 and 4. A key priority is now to finalize staffing in the PIU by completing recruitment of the PIU Coordinator and to finalize transition of the PIU from the Ministry of Industry to the Federal Small and Medium Manufacturing Industries Development Agency (FSMMIDA). The European Union Delegation (EU) and Department for International Development (DFID) are providing funding for the impact evaluation component of the project. The impact evaluation activities are being carried out by the Ethiopian Development Research Institute (EDRI) and the World Bank. EDRI has begun planning for development of the client registration and database system for the project. Developing a database of all clients registered for the project will enable EDRI to monitor project participants and administer more in-depth surveys with participants over the life of the project. EDRI will develop the database in an online format so that it can be easily accessible to the Project Implementation Unit (PIU) and the Project Management Team (PMT). Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Moderate Substantial Substantial Macroeconomic Moderate Moderate Moderate Sector Strategies and Policies Low Low Low Technical Design of Project or Program Substantial Substantial Substantial Institutional Capacity for Implementation and Sustainability Moderate Moderate Moderate Fiduciary Substantial Substantial Substantial Environment and Social Low Moderate Moderate Stakeholders Moderate Moderate Moderate Other -- -- -- Overall Substantial Substantial Substantial Results Project Development Objective Indicators PHINDPDOTBL Volume of Financial Support to SMEs under the credit facility (Amount(USD), Custom) Value 0.00 0.00 0.00 269,000,000.00 5/25/2017 Page 3 of 7
PHINDIRITBL Comments USD 269 Million includes USD 193 Million IDA, and USD 76 Million European Investment Bank (EIB) co-financing PHINDPDOTBL Number of SMEs Reached with Financial Services under the credit facility (Number, Custom) Value 0.00 0.00 0.00 2,152.00 PHINDPDOTBL Portfolio Quality under the credit facility (Percentage, Custom) Value 0.00 0.00 0.00 5.00 Overall Comments Intermediate Results Indicators Number of Loans/ Leases disbursed to SMEs under the credit facility (Number, Custom) Value 0.00 0.00 0.00 3,873.00 5/25/2017 Page 4 of 7
PHINDIRITBL PHINDIRITBL PHINDIRITBL PHINDIRITBL Collateral Registry Established (Yes/No, Custom) Value N N N Y Insolvency Diagnostic Completed (Yes/No, Custom) Value N N N Y Number of SMEs that received training through a BDS Program under the project (Number, Custom) Value 0.00 0.00 0.00 912.00 Date 01-Feb-2016 02-Nov-2016 05-May-2017 31-Aug-2022 Report drafted on citizen engagement survey (Yes/No, Custom) Value N N N Y Date 20-Apr-2016 02-Nov-2016 05-May-2017 31-Aug-2022 Overall Comments 5/25/2017 Page 5 of 7
Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P148447 IDA-57930 Effective XDR 144.80 144.80 0.00 0.37 144.43 0% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P148447 IDA-57930 Effective 17-May-2016 15-Jun-2016 01-Sep-2016 31-Aug-2022 31-Aug-2022 Cumulative Disbursements Restructuring History There has been no restructuring to date. Related Project(s) 5/25/2017 Page 6 of 7
There are no related projects. 5/25/2017 Page 7 of 7