Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF TOGO-FINANCIAL SECTOR AND GOVERNANCE PROJECT GRANT H454-TG APPROVAL DATE 03/21/2009 Financial and Private Sector Development Africa Region TO THE REPUBLIC OF TOGO January 31, 2013 Report No: 74120-TG This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
ABBREVIATIONS AND ACRONYMS AfDB BPEC CAS-IMEC CNSS CRT E&S FMR FSGP IDA IMF ISR MFIs MS TF PAD PDO PIU WB African Development Bank Banque Centrale des Etats de l Afrique de I Ouest (West African States Central Bank) Banque Populaire d Epargne et de Credit (former CET, Caisse d Epargne du Togo) People Savings and Credit Bank Cellule d Appui et de Suivi des Institutions Mutualistes ou Cooperatives d Epargne et de Credit (Support and Monitoring Unit for Mutuals or Credit and Savings Cooperatives) Caisse Nationale de Securite Sociale (Pension Institution for Private Sector) Caisse de Retraite des Fonctionnaires (Pension Institution for Civil Servants) Environmental & Social Financial Monitoring Reports Financial Sector and Governance Project International Development Association International Monetary Fund Implementation Status Report Microfinance Institutions Moderately Satisfactory Trust Fund Project Appraisal Document Project Development Objective Project Implementation Unit World Bank Regional Vice President: Country Director: Sector Manager: Task Team Leader: Makhtar Diop Madani M. Tall Paul Noumba Um Adja M. Dahourou
REPUBLIC OF TOGO FINANCIAL SECTOR AND GOVERNANCE PROJECT CONTENTS A. SUMMARY... 1 B. PROJECT STATUS... 1 C. PROPOSED CHANGES... 5 ANNEX 1: RESULTS FRAMEWORK AND MONITORING... 11 ANNEX 2: DETAILED PROJECT COSTS... 17
Restructuring: Level 1 January 31,2013 1. Basic Information Project ID & Name Country Task Team Leader Sector Manager Country Director Original Board Approval Date Original Closing Date Current Closing Date EA Category EA Completion Date P111064: TG: Financial Sector and Governance Project Togo Adja Mansora Dahourou Paul Noumba Um Madani M. Tall 03/31/2009 12/31/2014 12/31/2014 C Required 2. Revised Financing Plan (US$ Million) Source Original Revised Borrower 0.40 0.40 IDA 12.00 12.00 Total 12.40 12.40 3. Borrower Organization Department Location Togo - Lome, Togo 4. Implementing Agency Organization Department Location Ministry of Economy and Finance (Ministere - Lome, Togo de l'economie et des Finances) 5. Disbursement Estimates (US$ Million) Actual amount disbursed as of 01/14/2013 7.45 Fiscal Year Annual Cumulative 2012 2.78 10.23 2013 2.00 12.23 Total 12.23
6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank Does the restructured project trigger any new safeguard policies? No No 7a. Original/Current Project Development Objectives/Outcomes The project development objective is to improve financial sector stability by supporting the Government financial sector reform program. Financial sector restructuring will lead to more efficient resource allocation towards poverty reducing and growth inducing sectors. The project will provide technical assistance to various stakeholders to support the financial sector reform program of the Government of Togo. 7b. Revised Project Development Objectives/Outcomes The objective of the Project is to improve the stability of specific segments of the Recipient s financial sector to support the Recipient s financial sector reform program.
TOGO - FINANCIAL SECTOR AND GOVERNANCE PROJECT RESTRUCTURING PAPER A. SUMMARY 1. This Project Paper, in line with Bank policy for Level I restructuring, seeks the approval of the Executive Directors to introduce the following changes in the Togo Financial Sector and Governance Project (Grant Number H454-TG, P111064). 2. The proposed changes will: (i) address inconsistencies in the PDO formulation in the Project Appraisal Document (PAD), the Financing Agreement (FA) and the results framework and harmonize the project development objective in all documents; (ii) refocus activities in two components and enhance response to the current needs of the country s financial sector and governance reforms strategy; (iii) reallocate funds to components where further support is needed to complete activities and achieve the PDO; (iv) and revise the results framework. 3. The restructuring will allow the authorities to undertake a faster realization of the project development objective and improve financial sector stability and governance in the country. On behalf of the Government of Togo, The Minister of Economy and Finance officially requested the project restructuring and reallocation of funds in a letter dated July 17, 2012. The original financing agreement will be amended to reflect these changes. B. PROJECT STATUS 4. The Financial Sector and Governance Project was approved on March 31, 2009 for a total amount of SDR 8 million (US$12 million equivalent) and became effective on August 11, 2009. As such, the project has been in implementation for approximately three years. The project has the following components: (i) Component One: Restructuring of the banking sector (US$4.40 million); (ii) Component Two: Strengthening of the microfinance sector (US$3.20 million); (iii) Component Three: Pension Sector reforms (US$1.00 million): Component Four: Support to the implementation of reforms in the financial and private sectors (US$1.00 million). The project mid-term review took place from May 29 June 8, 2012. 5. The financial management system set up is functioning satisfactorily. There is a sound control environment (qualified fiduciary staff and adequate manual of procedures supported by a computerized accounting system) and the project complies with financial management requirements such as timely submission of quarterly Interim Unaudited Financial Reports and annual audit. The latest external audit opinion was unqualified and there are currently no open accountability issues. While financial implementation and disbursement of the project were deemed generally satisfactory, implementation of the different components was heterogeneous, with a project disbursement rate of 54.72% at midterm. 6. Overall implementation progress was downgraded from satisfactory to moderately satisfactory (MS) after the mid-term review due to the relatively slow pace in implementation in component one (banking sector restructuring) and the low disbursement and unsatisfactory 1
implementation rate in component 2 (microfinance sector strengthening). Implementation of component three (pension sector reform) and component four (support to the implementation of reforms in the financial and private sectors) are rated satisfactory. Project resources have been utilized at more than 90% in these two components. The performance of the management unit is rated moderately satisfactory because of the project institutional design (hybrid team integrated within the Ministry officials and contractors) which did not allow large flexibility in some cases due to hierarchical relations between the project unit and ministry officials. 7. Component 1: As stated above, Component one (Restructuring of the banking sector) execution rate is moderately satisfactory due to the slow implementation pace in banks privatization. The component s objective is to support the Government s banking restructuring strategy by providing technical assistance to ensure that the financial and institutional restructuring of three public banks (BTCI, BIA and UTB) as well as governance improvement of BPEC (a bank that was restructured and privatized prior to the project) is completed. In addition, assistance is provided to attract strategic banking investors (sale of majority shares) for the three Togolese state owned banks: BTCI, BIA, UTB as well as a fourth one (BTD), the restructuring of which had already been completed by authorities before the project preparation started. The Togolese banking sector restructuring strategy was initiated in October 2008 with a signed agreement to replace the non-performing loans originated by state-owned enterprises in public and private banks with Government securities, as well to complete the recapitalization of one public bank (this operation represented around US$176 million financed by the state budget before project preparation). 8. Implementation of component one (the process to attract strategic investors) was delayed until mid-2011 reflecting delays in completing preliminary actions such as the recruitment of the privatization advisers for the four banks, the adoption of a Privatization Law by the Parliament and the setting up of the Privatization Committee. The process is however moving forward, as a provisional adjudicator has been identified for one bank and the remaining transactions are expected to be finalized by Q1-2013. The loan recovery society (mechanism to recover the nonperforming loans bought back by the Government of Togo through the securitization operation) was created by decree in September 2012 and needs to be operationalized. 9. In addition to the restructuring and privatization of the state-owned banks, the project provides technical assistance on a cost sharing-basis to build capacity in commercial banks. A training program for interested private and public commercial banks has been developed and is being implemented to strengthen banks staff capacity in areas such as risk management, customer relationship management, operations, and credit history assessment. 10. Component 2: Implementation progress of component two (microfinance sector strengthening) is unsatisfactory due to the low disbursement and implementation rate. The objective of this component is to strengthen the stability of the microfinance sector through improved external and strengthened internal controls within microfinance institutions (with a focus on increasing the capacity of network institutions to supervise their member s institutions). 2
11. The microfinance sector in Togo is currently fragile: three large microfinance institutions (MFIs) are on the edge of bankruptcy, many others need to be closely monitored given an uncertain health, and several MFIs (about sixty) operate without a license. During the midterm review mission, it was agreed that the main priority is to return the sector to good health and increase the to a level commensurate with the size of the sector. The Microfinance Supervision Cell within the Ministry of Economy and Finance (Cellule d'appui et de Suivi des Institutions Mutualistes ou Coopératives D Epargne et de Crédit, CAS-IMEC), despite the technical assistance provided by the project remains weak and has not demonstrated its ability to adequately regulate the sector in terms of strategic decisions and staffing, nor to monitor the level of compliance in implementing the recommendations of missions by MFIs. 12. Component 3: With regards to component three (pension sector reforms), implementation progress is satisfactory. The objective of this component is to reform the pension arm of the two social security institutions CRT and CNSS (respectively Caisse de Retraite des Fonctionnaires and Caisse Nationale de Securite Sociale), to restore governance and make them compliant with the norms and standards of the regional pension institutions. 13. Several important studies have been financed, such as financial and organizational audits, actuarial studies and assistance to draft a new law taking into account the new financing parameters recommended in the studies. The studies showed that comprehensive reforms should be undertaken for the two institutions to be sustainable. In particular, the social security institution for public servants, CRT, faces a deep financial deficit which requires important annual Government subsidies (around US$16 million) to ensure timely payment of pensions. The pension branch of CNSS, the private sector social security institution, will also face deficits in the coming years if reforms are not implemented. New financing parameters have to be applied for both institutions. To achieve this, there is a need to engage in a broad dialog between all stakeholders of each institution (Government, public servants, and labor unions), reach agreements on the reforms that should be undertaken, and translate these reforms into new laws and regulatory frameworks. 14. Component 4: Implementation of component four (Support to the implementation of reforms in the financial and private sectors) is also satisfactory to-date. The original objective of this component was to support the implementation of reforms in the financial and private sectors by providing technical assistance to the Permanent Reform Secretariat (an entity created in 2009 within the Ministry of Economy and Finance by the Togolese authorities, with the mandate to steer reforms in the financial and private sectors) and the Economy Directorate within the Ministry of Economy and Finance, to strengthen their capacity to formulate policies in the financial and private sectors. The component also aimed at improving public private sector dialogue. 15. In this component, the project has funded activities related to the finalization of the new investment Code as well as consultancy services to assist the Ministry of Industry in drafting new free zone legislation and undertaking partial environmental studies for the free zone. These activities were carried out when there was no IDA-funded private sector project in Togo and no operational framework to build public-private dialogue. After the IDA Private Sector Development Support project was declared effective in December 2011, it has taken over these 3
aspects of public private dialogue and investment climate reforms. Therefore, even though the Permanent Reform Secretariat remains involved in helping business environment reforms and public private dialogue capacity building, it is doing so through the private sector project. 16. The following table shows the amounts spent by component as of July 2012. Table 1: Amount spent by component as of July 2012 (expressed in USD) Components/Activities Original Amount amount spent 1: Restructuring of the banking sector 4 400 000 2 000 000 2: Strengthening of the microfinance sector 3 200 000 1 100 000 3: Reform of the pension industry 1 000 000 940 000 4: Support to the implementation of reforms in the financial and private 1 000 000 860 000 sectors Advance for project preparation 950 000 103 000 Project management 850 000 811 000 Amount unallocated 600 000 0 TOTAL 12 000 000 5 814 000 17. The major project outcomes to date have been: (i) (ii) (iii) Significant progress with regards to the banking sector restructuring, especially with the privatization process of the four public banks which started in 2010 but accelerated from July 2011 and is now near completion. An adjudicator has been selected for one bank and as of January, the transaction was completed, following the new investor s license approval by monetary authorities; for one bank, there was no interest. Final technical and financial proposals were received in end- December 2012 for the two other banks (three offers for one bank and a single offer for the last one). It is expected that all transactions will be completed by June 2013. pension sector reforms are underway thanks to the completion of studies to reform the civil servants and private pension funds and the adoption by parliament of a new law establishing revised financing parameters for the private sector pension institution. the Permanent Reform Secretariat (Secrétariat Permanent pour le suivi des politiques de réformes et des programmes financiers), is now fully operational. The project has provided assistance to strengthen its capacity to formulate policies in the financial and private sectors and to carry out its mandate. The dynamism of the Permanent Reform Secretariat has been translated into its leadership in program discussions and negotiations with development partners (WB, IMF, AfDB), in monitoring the annual reforms matrix in the public sector in Togo and the elaboration of the Financial Sector Development Strategy (FSDS). The FSDS has been adopted in November 2012 by the Cabinet and the Permanent Secretariat 4
will be in charge of the action plan implementation as well as the monitoring and evaluation. C. PROPOSED CHANGES 1. Project s Development Objectives 18. Original Project Development Objective (PDO). There is a need to refine the PDO, in order to bring clarity in its formulation. In the financing agreement and the results framework, the PDO reads as follows: The project development objective is to improve financial sector stability by supporting the Government financial sector reform program. 19. The explanatory sentences in the PAD's project description (pg. 10; par. 42 1 ), however, are quite broad, and give the impression that project activities will address poverty reduction and support real sectors inducing economic growth in the country. The explanatory sentences are as follows: The project development objective is to improve financial sector stability by supporting the Government financial sector reform program. Financial sector restructuring will lead to more efficient resource allocation towards poverty reducing and growth inducing sectors. The project will provide technical assistance to various stakeholders to support the financial sector reform program of the Government of Togo. Hence, the references to poverty reduction and growth inducing sectors are misleading and do not correspond with the project s components, since most of the activities in the project are designed to improve stability issues and bring better governance in the banking, microfinance and pension sectors. 20. In light of the broad level objectives identified in the wording of the project development objective, the PDO statement has been refined and harmonized in all documents to enhance clarity and remove aspects that are not directly related to the project activities and which results will prove difficult to achieve. 21. Proposed PDO. The new PDO formulation is to improve the stability of specific segments of the Recipient s financial sector to support the Recipient s financial sector reform program. 2. Results/indicators 22. Although the project development objective has been refined, the PDO level indicators remain relevant. An additional indicator on the pension reform has been added to the PDO level indicators to show all components contribution to the revised PDO. 23. The results framework has been slightly revised as presented in Annex 1 to better measure achievements under the project objectives and reflect the activities undertaken under the different components. Changes in the results framework include refining the formulation of some intermediate outcomes to enhance measurability of project outcomes, and by removing indicators whose measurement proved difficult within the project timeframe. 1 Project Appraisal Report (IDA/R2009-0045/1, dated March 12, 2009). 5
24. In order to measure all aspects of the PDO, new indicators were introduced and redundant indicators related to the private sector have been dropped. The new indicators that were added are the following: (i) core sector indicators relevant to microfinance and the percentage of the project s female beneficiaries, (ii) an indicator to measure improvement in microfinance institutions ; (iii) an indicator to reflect pension sector reform; and, (iv) an indicator to allow the monitoring of the reforms undertaken by the Reform Secretariat in a way that facilitates data collection. 3. Components Component One: Restructuring of the banking sector 25. This component s objective and activities will not be affected; the Project will finalize the support to the banks privatization process. It will continue to provide technical assistance for capacity building in commercial banks active in Togo, which have showed an interest in upgrading staff skills in banking practices. 26. Funds from this component will be reallocated to other components (three and four) in order to achieve desirable outcomes. Remaining resources in this component are still high and committed amounts will be sufficient to finalize the projected activities and achieve the desired objective. Component Two: Strengthening of the microfinance sector 27. In order to reduce the sector s fragility and promote transparency, the content of this component will be refocused with a particular emphasis on restructuring the supervisory authority and its ability to regulate the sector, while strengthening microfinance institutions. This includes inter alia: (i) providing technical assistance to restructuring and strengthening the supervisory authority by setting up a Surveillance Committee within the Ministry of Economy and Finance which supersedes the microfinance supervisory cell (the Committee will operate as an oversight commission and will help enforce recommendations by MFI missions ; (ii) improving the microfinance authority s capacity to undertake field by providing technical assistance to monitor implementation of missions recommendations and deal with failing and illegal MFIs; (iii) providing technical assistance to disseminate and undertake training of the new microfinance law elaborated by the,which was ratified by Togo in 2011; (iv) developing and updating the database for off-site. 28. In addition, the project will develop and implement a training plan for inspectors and fund inspection missions on a declining basis; continue to strengthen internal controls in MFIs by providing technical assistance and training activities such as the dissemination of internal control and inspection manuals, providing training to internal and external auditors, and providing technical assistance to large and medium MFIs to improve their internal procedures. It should be noted that this technical assistance will be provided to microfinance institutions which will be selected in accordance to criteria that will be detailed in the revised project implementation manual. Among those criteria, a focus will be given to proven record of reliable management, 6
high promise of financial sustainability, conformity with the main prudential norms for MFIs, etc. The project will also continue to provide support to the sector rationalization by encouraging independent savings and credit cooperatives or those retrenching from failing networks to join viable networks, continue to fund partial external MFIs audits; and will promote transparency and consumer protection by co-financing ratings and workshops on financial literacy and consumer protection. 29. Given the proposed changes above, and noting the fact that the component had been over-budgeted in the PAD, the proposed activities have been reevaluated and resources have been projected to adequately fund the restructured component. Remaining resources will be reallocated to components three and four respectively, as well as to cover project operating costs to insure adequate coordination and monitoring. Component Three: Pension Sector Reform 30. Additional resources will be dedicated to assist the Government to complete the necessary reforms in the sector. This assistance will help strengthen further the financial sustainability of social security institutions in Togo. The Project will continue to support the CRT and the CNSS and the following adjustments will be made: (i) (ii) reallocation of resources towards this component to undertake activities such as technical assistance and workshops to implement the social security parametric reforms recommended by the studies financed by the project to date regarding both institutions; harmonize and upgrade CRT accounting systems in order for the institution to be compliant with the regional supervisory body; improve information systems by developing a master plan and purchasing management information applications for CRT; analyze the possibility of adding a supplementary fully funded scheme to CNSS. Provision of technical assistance to develop and partially finance human resources training plan to improve staff capacity in both institutions. Component Four: Support to the implementation of reforms in the financial and private sectors 31. Changes are related to the component s objective, activities and indicators. The component s objective will slightly change, and will be focused on supporting the implementation of financial sector and governance reforms by providing technical assistance to the Permanent Secretariat and the Economy Directorate within the Ministry of Economy and Finance, instead of reforms in the financial and private sectors and improving public private sector dialogue. 32. The scope of activities related to private sector will be reduced and governance aspects will be taken into account. The project will (i) develop and implement training plans to strengthen the capacity of key staff to formulate and monitor policies in the financial sector; (ii) provide technical assistance to the Permanent Secretariat to disseminate the Financial Sector Development Strategy, which is being finalized under its leadership as well as co-finance with 7
interested development partners the Strategy s action plan; and (iii) provide technical assistance to the Permanent Secretariat to undertake corporate governance policy diagnosis in selected state-owned enterprises (excluding phosphates, cotton and energy which are already covered by other projects); develop a corporate governance policy and action plan, support dissemination and implementation of the policy and action plan to improve SOE corporate governance in Togo. 33. The indicator related to public private dialogue has been dropped as the project will no longer finance the public private sector dialogue itself. Operational costs 34. Allocations for operational costs have been increased to meet the needs related to increased administrative implementation support, and the price escalation of goods and services. The details of the proposed reallocations are provided in section 5 (project costs by component) and in section 7 (expenditure allocations by category of expenditure). 4. Safeguards 35. There are no environmental or social outstanding issues and the proposed changes will not trigger new safeguard policies, nor involve any exceptions to Bank policies. 5. Financing 36. The focus of the restructured project will be to accelerate the restructuring of the banking sector, strengthen microfinance industry and the pension sector. After a thorough review of the resources available for the two first components (banking restructuring and microfinance sector) and taking into account ongoing and projected activities, there is no need for additional resources in those components to achieve the PDO. Further, the actual costs evaluated are below those planned during project preparation. In contrast, more resources are needed to fully achieve the PDO in components three (pension sector reforms) and component four (support to the implementation of reforms in financial and private sectors), as well as the project implementation unit. 37. The table below illustrates the proposed changes in components. Table 2: Project Costs (expressed in USD) Components/Activities Current Proposed 1: Restructuring of the banking sector 4 400 000 3 900 000 2: Strengthening of the microfinance sector 3 200 000 2 690 000 3: Reform of the pension industry 1 000 000 1 761 000 4: Support to the implementation of reforms in the financial and private sectors 1 000 000 1 095 000 Advance for project preparation 950 000 975 000 Project management 850 000 1 384 000 Amount unallocated 600 000 195 000 TOTAL 12 000 000 12 000 000 8
6. Reallocations 38. Reallocation of proceeds will be used to adequately finance components where resources and further support are needed to complete activities and achieve the PDO. Component three (pension sector reforms), component four (support to the implementation of reforms in financial and private sectors), as well as the project implementation unit will be the recipients of additional resources resulting from the reallocation of funds within the project. The changes between components will however impact only category two (consulting and training) and category five (unallocated amount) of the table of eligible expenditures. 39. The new table of eligible expenditures, taking into account reallocation needs, is as follows: Table 3: Table of Eligible Expenditures Category of Expenditure Allocation (in SDR) % of Financing Current Revised Current Revised* Current Revised 1 - Goods and Works 1 - Goods and Works 660 000 660 000 100 100 100 100 2 - Consulting and Training 2 - Consulting and Training 5 400 000 5 700 000 3 - Operating Costs 3 - Operating Costs 860 000 860 000 100 100 4 - Refund of PPA 4 - Refund of PPA 650 000 650 000 100 100 5 - Unallocated 5 - Unallocated 430 000 130 000 100 100 8 000 000 8 000 000 100 100 7. Implementation schedule 40. The project is on track to be completed by the current closing date and hence no extension is envisaged as part of this restructuring. Changes in implementation schedule are related to adapting human resources to implement the microfinance component and to specifying the eligibility criteria for microfinance. The project implementation manual will be revised to reflect these changes. 41. Modifications in the scope of the microfinance component entail a revised implementation schedule by strengthening project implementation capacity and adapting operational human resources. An experienced internationally recruited technical assistant will be hired to assist the microfinance authority to: (i) implement properly the component; (ii) assist with the setting up of the microfinance Surveillance Committee; (iii) support the restructuring of the supervisory entity (especially with regard to s follow-ups) and support governance strengthening in microfinance institutions. The international technical assistant will work directly with the supervisory authority and will report to both the project coordinator and the supervisory entity chief. In addition, a major part of the current microfinance specialist s responsibilities (hired externally to support the PIU) would fall on the technical 9
assistant, hence reducing the need to keep the microfinance specialist position within the project implementation unit. 42. In order to make efficient use of public resources and avoid financing bankrupted institutions (which require a full fledge recapitalization and on which the project s technical assistance will not ultimately impact the financial situation), the eligibility criteria for the microfinance institutions to benefit from project technical assistance will be specified in the project implementation manual. The focus will be on criteria such as a proven record of reliable management, high promise of financial sustainability, conformity with the main prudential norms for MFIs etc. 43. An agreement was reached between the Recipient and IDA to ensure that all activities will be undertaken within the restructured project and the remaining timeframe before the current closing date. During the midterm review mission, the project Steering Committee expressed its commitment to closely monitor the project; all project beneficiaries committed to improve collaboration between the project implementation unit, themselves and other stakeholders. 10
ANNEX 1: Results Framework and Monitoring TOGO: Financial Sector and Governance Project Project Development Objective (PDO): The project development objective is to improve financial sector stability by supporting the Government s financial sector reform program. Financial sector restructuring will lead to more efficient resource allocation towards poverty reducing and growth inducing sectors. The project will therefore provide technical assistance to various stakeholders to support the financial sector reform program of the Government of Togo Revised Project Development Objective: To improve the stability of specific segments of the Recipient s financial sector to support the Recipient s financial sector reform program. PDO Level Results Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline Cumulative Target Values** 2010 2011 2012 2013 2014 Frequency Data Source/ Methodology Responsibility for Data Collection Indicator One: Number of MFIs (with outstanding loans over 1 billion CFAF) that meet key prudential ratios (standard of liquidity and coverage of employment in the medium and long term by stable resources) by end of project Indicator Two: BTCI, UTB and BIA meet key prudential norms (solvency) from 2009 and every year until the end of the project Indicator Three: After the recapitalization of Togolese commercial banks (BTCI, UTB and BIA), the Government will no longer contribute to the absorption of losses, recapitalization and liquidity of commercial banks R Number 0/4 (No prudential ratio yet defined by ) 0/4 1/4 2/4 3/4 4/4 Annually R Yes/No No No Yes Yes Yes Yes Semi-Annually R True/False True/False True True True True True Annually Ministry of Economy and Finance, Directorate of Economy PCU PCU PCU 11
PDO Level Results Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline Cumulative Target Values** 2010 2011 2012 2013 2014 Frequency Data Source/ Methodology Responsibility for Data Collection Indicator Four: Project Direct beneficiaries, Of which female (beneficiaries) Indicator Five: The two social security institutions are financially viable by end of project N Number 0 250 500 1000 1500 2000 Annually N Percentage 0 10% 15% 20% 30% 30% Annually N Number 0/2 0/2 0/2 1/2 2/2 2/2 Annually Project Project Project PCU PCU Ministry of Economy and Finance, Directorate of Economy in partnership with CRT and CNSS INTERMEDIATE RESULTS s Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline Cumulative Target Values** 2010 2011 2012 2013 2014 Frequency Data Source/ Methodology Responsibility for Data Collection (Component One): Restructuring of the banking sector Revised (Component One): indicator One: BTCI, UTB and BIA have new gross NPLs below 5 percent of total loans each year (starting in 2009) indicator Two: BTCI, UTB and BIA meet liquidity norm by 2009 and every year until the end of the project C Percentage >5% <5% <5% <5% <5%. <5% Semi-Annually N Text Met Met Met Met Met Met Semi-annual Ministry of Economy and Finance, Directorate of Economy PCU 12
s Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline Cumulative Target Values** 2010 2011 2012 2013 2014 Frequency Data Source/ Methodology Responsibility for Data Collection indicator Three: Two out of the Four targeted banks (BTCI, UTB, BTD, and BIA) have entered into partnerships with strategic banking investors by end 2014 indicator Four: The agency in charge of loan recovery and of creating a secondary market for government securities is created by end 2009 and operational from 2013 R Number 0/4 0/4 0/4 2/4 24 2/4 Semi-Annually C Text Created created (Component Two): Strengthening of the microfinance sector Created and not Operatio nal Created and not Operational Op. Op. Semi-Annually Bank Board minutes Progress from structure/ mechanism Revised (Component Two): indicator One: Percentage of MFIs transmitting statistical data in compliance with the new accounting plan indicator Two: At least seventy five percent of MFIs with outstanding loans over 1 billion CFAF have gross a Portfolio at Risk over 90 days (PAR>90) below 5 percent by the end of the project N Percentage 0% 10% 25% 50% 65% 75% Annually R Percentage 67% 67% 70% 70% 75% 75% Annually CAS-IMEC and CAS-IMEC and 13
s Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline Cumulative Target Values** 2010 2011 2012 2013 2014 Frequency Data Source/ Methodology Responsibility for Data Collection indicator Three: Hundred percent of MFIs with outstanding loans over 1billion CFAF) have their financial statements audited and certified yearly by registered auditors (starting when the new microfinance law has been ratified by Togo) indicator Four: At least seventy five percent of MFIs have undergone at least one transparency exercise (visibility of profile, publication of data on products/clients or financial data or rating), between 2009 and 2014 indicator Five: Hundred percent of MFIs with outstanding loans over 1 billion CFAF report their financial information on the Mix Market at least once (www.mixmarket.org) starting in 2009 indicator Six: Fragile MFIs are closely monitored: the number of fragile MFIs decreases by the end of the project by R R R N Percentage Percentag e Percentag e Percentag e yet audited and certified 3 out of 6 (50%) 5 out of 6 (83%) 100% 80% 80% 90% 100% 100% Annually 50% 50% 60% 70% 75% Annually 90% 95% 100% 100% Annually 83% 100% 100% 100% 80% 50% Annually CAS-IMEC and www.mixmarket. org CAS-IMEC and www.mixmarket. org CAS-IMEC and 14
s Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline Cumulative Target Values** 2010 2011 2012 2013 2014 Frequency Data Source/ Methodology Responsibility for Data Collection 50% indicator Seven: Volume of Bank Funding: Institutional Development Microfinance (amount 000 US$) N Volume 0 (Component Three): Pension sector reform 100 200 500 1000 2500 Annually CAS-IMEC and Revised (Component Three): indicator One: The legal frameworks for CRT is modified according to established best practices by 2011 (in particular, parameters for contribution and payments are established through decrees) indicator Two: The legal frameworks for CNSS is modified according to established best practices by 2011 (in particular, parameters for contribution and payments are established through decrees) indicator Three: The parameters for CRT have been adjusted through decrees according to the findings of the actuarial studies by 2013 R R R Text Text Text modified modified Adjusted modified modified adjusted Modified Modified Adjusted Modified Modified Modified Annually Official Gazette Modified Modified Modified Annually Official Gazette Adjusted Adjusted Adjusted Annually Relevant Decrees Ministry of Economy and Finance, Directorate of Economy in partnership with CRT and CNSS 15
s Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline Cumulative Target Values** 2010 2011 2012 2013 2014 Frequency Data Source/ Methodology Responsibility for Data Collection indicator Four: The parameters for CNSS have been adjusted through decrees according to the findings of the actuarial studies by 2013 R Text Adjusted adjusted Adjusted (Component Four): Support to the implementation of reforms in the financial and private sectors Revised (Component Four): Adjusted Adjusted Adjusted Annually Relevant Decrees Reform Secretariat is operational and demonstrates the ability to identify and steer key reforms in the financial sector R Text Secretariat established, yet fully Secretari at establish ed, yet fully Op & active Op & active Op & active Op & active Semi-Annually Activity from Permanent Secretariat Ministry of Economy and Finance, Directorate of Economy in partnership with Permanent Secretariat The public private sector dialogue platform is active and contributes effectively to the shaping of policies on the private and financial sectors At least one of the recommendations of the diagnostic study on improving governance is implemented within 6 months, following the validation workshop of the study D N Number 0 0 0 0 1 2 Semi-Annually Activity from Permanent Secretariat Ministry of Economy and Finance, Directorate of Economy in partnership with Permanent Secretariat 16
ANNEX 2: DETAILED PROJECT COSTS TOGO: Financial Sector and Governance Project No. Components/Sub-Components/Activities Total 1 Component 1: Banking sector restructuring 1.1.1 Support to state owned banks for the identification of strategic partners 2.0 1.2 Support to BPEC 0.3 1.3 Training on a cost sharing basis for commercial banks staff 0.7 1.4 Support to loan recovery society 0.9 Total Component 1 3.9 2 Component 2: Strengthening of the microfinance sector 2.1 Supervision restructuring and strengthening 1.0 2.2 MFIs internal controls strengthening 1.4 2.3 Financial transparency promotion 0.3 Total Component 2 2.7 3 Component 3: Pension sector reform 3.1 Pension institution for civil servants (Caisse de Retraites du Togo-CRT ) 1.0 3.2 Pension institution for private sector (Caisse Nationale de Sécurité Sociale-CNSS) 0.5 Development of a joint training program for CRT and CNSS 0.3 Total Component 3 1.8 4 Component 4: Support to the implementation of reforms in the financial and private sectors 4.1 Support to Permanent Reform Secretariat 0.3 Technical assistance for governance and financial sector reforms 0.6 4.2 Support to Economy Directorate 0.2 Total Component 4 1.1 Advance for project preparation 0.9 5 Component 5: Project Management Total Component 5 1.4 Unallocated 0.2 TOTAL 12.0 17