Public Disclosure Authorized AFRICA Madagascar Finance & Markets Global Practice Recipient Executed Activities Specific Investment Loan FY 2008 Seq No: 19 ARCHIVED on 30-Jun-2017 ISR28814 Implementing Agencies: BCM/CSBF, AGEPASEF Public Disclosure Authorized Key Dates Key Project Dates Bank Approval Date:05-Jun-2008 Planned Mid Term Review Date:10-Nov-2014 Original Closing Date:31-Dec-2012 Project Development Objectives Effectiveness Date:28-Nov-2008 Actual Mid-Term Review Date:30-Nov-2014 Revised Closing Date:30-Jun-2017 Public Disclosure Authorized Public Disclosure Authorized Project Development Objective (from Project Appraisal Document) The overall project development objective (PDO) is to increase access to sustainable financial services, particularly to micro,small and medium enterprises (MSMEs), and households in Madagascar. This will be achieved by providing technical assistance,capacity building, and matching grants to financial sector actors and stakeholders to ultimately improve competition, anddiversification in the sector. The project supports implementation of the Government's financial sector strategy by addressing the obstacles to providing betteraccess to formal financial services. These obstacles are related to financial sector infrastructure, quality of financial andcredit information, and a conducive legal and regulatory environment. The project will support activities that will play a catalytic role in achieving the objective of increased access to financialservices for firms and households in Madagascar. Support will focus on areas where the World Bank has a comparative advantage, i.e.technical assistance, and where there is a track record of successful interventions. Project support will be provided for two maintechnical components and one administrative component: (i) Creating an enabling environment for a sound and inclusive financialsector; (ii) Improving access to finance and the diversity of financial products; and (iii) Project implementation and monitoring &evaluation. The proposed outcome indicators for the PDO are: - Increased credit to micro, small and medium enterprises. - Increase number of accounts at licensed financial institutions (commercial banks and microfinance institutions). Has the Project Development Objective been changed since Board Approval of the Project Objective? Yes Board Approved Revised Project Development Objective (If project is formally restructured)phrpdodel The objective of the Project is to assist the Recipient in increasing access to sustainable financial services, particularly by micro, small and medium enterprises and households in Madagascar. Components Name 1. Increasing MSME access to finance:(cost $5.80 M) 6/30/2017 Page 1 of 14
2. Improving the Capacity of Microfinance Institutions and other relevant Non-Bank Financial Institutions for Greater Outreach and Sustainability:(Cost $6.30 M) 3. Project Implementation, Monitoring and Evaluation:(Cost $2.70 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions The last Implementation Support Mission of the project (conducted from may 8-18, 2017) continued to show good progress in the implementation of the PASEF, since the last ISM. Component 1: Increasing MSME access to finance. The partial portfolio credit guarantee (PPCG) continues to register important progress. The study on the determinants of interest rates has been finalized. After three years of existence, the Partial Portfolio Credit Guarantee (PPCG) continues to show a satisfactory performance with an increase in the number of credits and outstanding volume and an increasing number of Participating Financial Institutions (PFIs). Some of the PFIs are about to reach their maximum credit attributed by the PPCG. As of May 8, 2018, 8 FPIs participated to the PPCG (SME windows) with 1364 credits from 1261 client with a total outstanding of 57 billion Ariary ($ 18 million). 26 call on guarantee has been registered so far, of which 6 were rejected (non-conformity with the convention), still an acceptable level. An increase in the capital of PPCG is necessary to allow the continuity and the sustainability of the PPCG. The multiplier has been temporarily increased to 4, 8 TA are currently operational (of which two central TA and six TA operational within FPIs). The agriculture window (financed under the CASEF project) has disbursed its first tranche of capital (1,5 millions USD) on May 31, 2017. Five PFIs have confirmed their interest in participating to the agriculture window. the manual of PPCG has been amended to include the operations of the agriculture window, so as the MoU between the UGPCASEF, SOLIDIS and AGEPASEF. A cooperation agreement during the interim period of the closing of PASEF project and the new project on financial inclusion is being submitted for signature to the Ministry of Finance, UGPCASEF and the AGEPASEF The interest rate study for commercial banks and MFIs were all finalized and discussed in a validation workshop with all the stakeholders in May 2017. As a follow up to this study, the authorities will abrogate the ordinance 62 putting a ceiling on interest rates in Madagascar. Final rating: Given that the PPCG continues to perform well the rating for this component is maintained at Satisfactory Component 2: Strengthening the Microfinance sector. Good progress under component 2 continued since the last ISM. Several activities have been completed or have made significant progress. - Strengthening of the CSBF for a better supervision of the Microfinance sector: The offices of the territorial representations of BCM are all fully operational, all the procurement processes have been completed and the agents have received an adequate training. Cumulatively, 56 demand of licenses were registered at these offices since 2015 (out of an objective of 32). These offices will also be used to support the data transfer to feed the Centrales des Risques and feed the dynamic database from the IMF census and the BSA software. CSBF will also deal with the regulatory issue concerning AVEC (Assocation Villageoise d Epargne et de Crédit). The First-funded project that provides TA to CSBF in the strengthening of regulation and supervision of MFIs is progressing well and will be extended by an additional year. - Strengthening the capacity of MFIs: The results of the training provided in partnership with APIMF continue to be positive. All the activities planned under this activity has been accomplished. As of mars 2017, the final targets continue to be overachieved (1,646 staffs trained against an objective of 1076). 7 trainers were certified CGAP trainers, 20 MFIs and APIMF staff have benefitted from the Boulder training on microfinance. - Preparation of a legal framework for mobile banking services and for banking agents in Madagascar. The law on mobile banking and for mobile agents was adopted by the National Assembly and the Senate in December 2016 and promulgated in January 2017. The decree related to the mobile banking law are currently being drafted by the CSBF. - Modernization of the management information systems (MIS) and of the communication systems. All the materials reserved for the five out of the six 6/30/2017 Page 2 of 14
selected MFIs were all delivered. The project implementation unit has finalized the procurement and the delivery of the remaining computers for OTIV Tana, after few disruption and suspension of the previous procurement process (the previous materials were not consistent with the required technical specification), the PASEF has called up an expert advisor. The training offered by the Technical Assistants on MIS has beenfinalized, since it was extended until the end of the project to insure the sustainability of the MIS. The test phase for the MIS to selected MFIs were successful. - Support to the Centrale des Risques de la Microfinance and to the data base for financial institutions : The operationalization of CRM was realized on time in Septembers 2016 as expected and the full migration in merging the Centrale des Risques de la Microfinance (CRM) and the Centrale des Risques Bancaire (CRB), into a single and unique Centrale des Risques (CR) was effective as expected in April 2017. As planned, 23 out of the 25 IMFs and 3 Financial instiotutions now use the Unified Centrale des Risques. The consultants on J2EE et OBIEE were fully integrated in the Central bank's Human Resource plan. With respect to the management of the data base of the credit establishments, the central bank of Madagascar has opted for a supervision software (Bank Supervision Application), developed by SADC. The BSA software has been installed successfully. Extension of MFIs in remote areas: good progress has been registered and branches of two MFIs (namely OTIV Tana et VOLAMAHASOA ) were operational as planned in Betsiboka and Anosy areas. Altogether 19 branches supported by the project are operational. 6/30/2017 Page 3 of 14
Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating 6/30/2017 Page 4 of 14
Political and Governance -- Moderate Moderate Macroeconomic -- Moderate Moderate Sector Strategies and Policies -- Moderate Moderate Technical Design of Project or Program -- Moderate Moderate Institutional Capacity for Implementation and Sustainability -- Moderate Moderate Fiduciary -- Low Low Environment and Social -- Low Low Stakeholders -- Moderate Moderate Other -- -- -- Overall -- Moderate Moderate Results Project Development Objective Indicators PHINDPDOTBL Portfolio at risk - Microfinance (Percentage, Custom) Value 3.50 5.00 4.20 5.00 PHINDPDOTBL Percentage of project supported institutions that are reporting on this indicator (Percentage, Custom Breakdown) Value 0.00 100.00 100.00 100.00 PHINDPDOTBL Outstanding SME Loan Portfolio (Amount(USD), Custom) 6/30/2017 Page 5 of 14
Value 300,000.00 485,882.00 496,528.00 462,445.00 PHINDPDOTBL Percentage of project-supported institutions that are reporting on this indicator (Percentage, Custom Supplement) Value 0.00 100.00 100.00 100.00 PHINDPDOTBL Outstanding Microfinance Loan Portfolio (Amount(USD), Custom) Value 190,000.00 304,938.00 269,002.00 450,000.00 Comments The number of IMF that reported here has declined from 30 (from the time the objective was originally designed), to 25. PHINDPDOTBL Percentage of project-supported institutions that are reporting on this indicator (Percentage, Custom Supplement) Value 0.00 100.00 100.00 100.00 Overall Comments 6/30/2017 Page 6 of 14
Intermediate Results Indicators Outstanding loans (PPCG scheme) (Amount(USD), Custom) Value 0.00 51,900.00 58,824.00 34,000.00 Portfolio at risk - (PPCG Scheme) (Percentage, Custom) Value 0.00 0.17 1.63 4.00 Dedicated MSME lending department established in each of the participating financial institutions in the PPCG (Text, Custom) Value NO YES YES YES Number of loan introduced in the PPGG fund by partner financial institutions (Number, Custom) Value 0.00 1,426.00 1,928.00 400.00 Date 31-Dec-2012 02-Nov-2016 31-Mar-2017 30-Jun-2017 6/30/2017 Page 7 of 14
Internal audit, risk management of the Fund Manager improved (Text, Custom) Value NA YES YES YES Claims on guaranteed portfolio less than 3% (Text, Custom) Value NA YES YES YES Study on interest rate completed (Text, Custom) Value NO YES YES YES Participating Financial Institutions meet main prudential norms (Percentage, Custom) Value 0.00 100.00 100.00 100.00 6/30/2017 Page 8 of 14
Average time it takes to issue an MFI license (Months, Custom) Value 0.00 6.00 6.00 6.00 Participating financial institutions regularly provide audited financial statements (Percentage, Custom) Value 0.00 100.00 100.00 100.00 Number of inquiries made through single application window in regional branches of CSBF (Number, Custom) Value 0.00 9.00 8.00 8.00 Number of MFIs inspected (on-site) by CSBF at minimum every two years (Number, Custom) Value 6.00 2.00 1.00 10.00 Date 31-Dec-2012 31-Oct-2016 31-Mar-2017 30-Jun-2017 Comments the CSBF has decided to focus its (limited) resources on the site inspections of the largest banks as per the FSAP recommendations 6/30/2017 Page 9 of 14
Number of MFIs submitting inquiries to Centrale des Risques (Number, Custom) Value 7.00 23.00 23.00 26.00 A mobile banking legal framework is issued (Text, Custom) Value No No Yes Yes Census Study of MFIs operating in Madagascar finalized (Text, Custom) Value NO YES YES YES Number of loans extended by participating MFIs in targeted regions (Number, Custom) Value 0.00 6,844.00 9,707.00 5,200.00 6/30/2017 Page 10 of 14
in Anosy region (Number, Custom Breakdown) Value 0.00 900.00 1,726.00 1,200.00 in Betsiboka region (Number, Custom Breakdown) Value 0.00 5,904.00 7,981.00 4,000.00 % active loans to women - Microfinance (Percentage, Custom) Value 0.00 54.00 54.00 55.00 Date 31-Dec-2013 30-Sep-2016 31-Mar-2017 30-Jun-2017 Percentage of project-supported institutions that are reporting on this indicator (Percentage, Custom Supplement) Value 0.00 100.00 100.00 100.00 6/30/2017 Page 11 of 14
in Betsiboka region (Percentage, Custom Breakdown) Value 0.00 56.00 56.00 58.60 Date 31-Dec-2013 30-Sep-2016 31-Mar-2017 30-Jun-2017 in Anosy region (Percentage, Custom Breakdown) Value 0.00 51.00 52.00 45.00 Date 31-Dec-2013 30-Apr-2016 31-Mar-2017 30-Jun-2017 Portfolio at Risk - Microfinance (Percentage, Custom) Value 3.50 3.80 4.70 5.00 Number of employees of MFIs who change their method of work following training (Number, Custom) Value 0.00 1,411.00 1,646.00 1,076.00 Date 31-Dec-2012 31-Oct-2016 31-Mar-2017 30-Jun-2017 6/30/2017 Page 12 of 14
Number of MFIs supported by the project using an automated MIS (Number, Custom) Value 0.00 0.00 6.00 5.00 Overall Comments Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P109607 TF-92098 -- USD 15.00 15.00 0.00 14.91 0.09 99% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P109607 TF-92098 -- 15-Jul-2008 15-Jul-2008 28-Nov-2008 31-Dec-2012 30-Jun-2017 Cumulative Disbursements 6/30/2017 Page 13 of 14
Restructuring History Level Approved on 05-Feb-2013,Level 2 Approved on 16-Jun-2014,Level 2 Approved on 18-Aug-2015,Level 2 Approved on 15-Aug-2016 Related Project(s) There are no related projects. 6/30/2017 Page 14 of 14