The World Bank Report No: ISR6784 Implementation Status & Results Kenya Financial and Legal Sector Technical Assistance Project (P083250) Public Disclosure Copy Operation Name: Financial and Legal Sector Technical Assistance Project Project Stage: Implementation Seq.No: 15 Status: ARCHIVED Archive Date: 11-Jul-2012 (P083250) Country: Kenya Approval FY: 2005 Product Line: IBRD/IDA Region: AFRICA Lending Instrument: Technical Assistance Loan Implementing Agency(ies): Ministry of Finance Key Dates Board Approval Date 14-Oct-2004 Original Closing Date 31-Mar-2010 Planned Mid Term Review Date Last Archived ISR Date 03-Jan-2012 Effectiveness Date 30-Jun-2005 Revised Closing Date 31-Mar-2013 Actual Mid Term Review Date Project Development Objectives Project Development Objective (from Project Appraisal Document) The overall development objective of the project is to create a sound financial system and strengthened legal and judicial capacity that will ensure broad access to financial and related legal services. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost FINANCIAL AND JUDICIAL SECTOR STRATEGY DEVELOPMENT 0.80 RESTR. AND PRIVATIZATION OF FINANCIAL INSTITUTIONS 3.30 STRENGTHENING REGULATORS AND DPF BOARD 3.90 STRENGTHENING DEBT MANAGEMENT AND MARKETS 1.50 MODERNIZING PAYMENTS SYSTEM 3.10 Public Disclosure Copy IMPROVING THE LENDING ENVIRONMENT 2.30 LEGAL AND JUDICIARY REFORM 8.10 PROJECT MANAGEMENT 4.00 UNALLOCATED 3.00 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Page 1 of 8 The World Bank Report No: ISR6784 Previous Rating Current Rating Overall Risk Rating Public Disclosure Copy Implementation Status Overview Implementation of the project is satisfactory, enhanced by the September 30 2011 restructuring and extension of the closing date for the project until March 2013. This allows for the completion of critical procurement, including on ICT related activities, that are crucial to the project objectives and are underway. The change in the leadership of legal and judicial reform agenda led to a strategic review, which confirmed the activities under this project as priority. These activities are being implemented. The project remains well underway to achieve its development objectives, as indicated by the targets met for each of the development indicators as of May 2012, with the exception of the target for spreads that has started to decline after the effect of macroeconomic pressures, international and other factors started to subside by late 2011. Key items currently being supported at various agencies are expected to set the basis for the automation of (commercial and financial) courts and improving case management and records management including at land registry, which will reduce time and costs of legal services. Additional bills have been submitted to Parliament during this period, with some expected to be submitted shortly and others being drafted. Overall prudential (focusing on risk based supervision), regulatory and supervisory capacity as well as governance has continued to improve at all supervisory entities to help enhance the resilience of the financial sector and ultimately broaden access to financial services, including at SASRA, the newest institution that has licensed more than 122 SACCOs licensed (controlling 82% of SACCOs with Front Offices Services Activities) as at of end June 2012. Debt and capital markets continue to be developed, while the framework for public private partnership (PPP) to address long term financing for infrastructure is being further supported including an ongoing consultancy for developing a PPP pipeline and safeguards frameworks developed. In addition, key elements to further enhance broader access to financial services are being implemented, including on mobile banking and payments systems, credit bureau, and agency banking. Strategic aspects at both financial and legal sectors have also been developed, complementing comprehensive strategies being implemented. The World Bank has also supported several key topics with technical missions to provide hands on advice to help achieve project objectives. Locations No Location data has been entered Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target The rate(s) of case clearances by Milimani Text Value Agreement pending on Case clearance increases by Commercial Courts, or in respect of major approach to establish 5 percent annually types of commercial cases, improves baseline and evaluate significantly by at least 5 percent annually from progress. 2011 Date 28-Jun-2012 31-Mar-2013 Public Disclosure Copy Comments No baseline was established It has been recommended at appraisal that the PMU consider using information contained in a Oct07 consultant report on pending cases to establish baseline ("Preliminary Survey on Synchronized Survey of Pending Cases in Kenya Courts"). Page 2 of 8 The World Bank Report No: ISR6784 At least 15 new or upgraded Commercial/ Text Value Legislation not drafted. a) 5 laws gazetted, Financial and related laws and subsidiary b) 4 laws under Parliament legislation developed, approved by Cabinet review, and and published by the State Law Office c) 2 laws passed by Public Disclosure Copy (Attorney General’s Office) Parliament and pending Presidential ascent. Date 31-May-2012 31-Mar-2013 Comments Source: PMU, May 2012 Complete stages of pending bills, regulations gazetted. 1-2 additional bills published (i.e. PPP bill 2011). Non-Performing Loans (NPLs) drop to 8 Percentage Value 19.30 3.50 8.00 percent of Total Loans (net of interest in Date 30-Jun-2005 30-Mar-2012 31-Mar-2013 suspense) by end of project. Comments Source: CBK, March 2012 As this is a sector-wide indicator the achievement of which is subject to many macro- and micro-economic factors beyond the scope of this Project, the PMU has been advised to better document the attribution of project interventions to this target. Interest rate spread between Average Deposit Percentage Value 8.60 12.89 8.00 Rates and Lending Rates falls below 8 percent Date 31-Dec-2005 30-Mar-2012 31-Mar-2013 by end of project Comments Source: CBK, March 2012 This indicator is also a sector- wide target subject to many macroeconomic conditions (e. Public Disclosure Copy g. inflation, exchange rate pressure). Kenya experienced an accelerating inflationary environment which has just been stabilized. Credit extended to the private sector as a Percentage Value 25.80 46.10 37.00 percentage of GDP increases to at least 37 Date 31-Dec-2005 30-Dec-2011 31-Mar-2013 percent by end of project. Comments Source: PMU, December 2011 Page 3 of 8 The World Bank Report No: ISR6784 The PMU has been advised to better document the attribution of project Public Disclosure Copy interventions to this sector- wide target, the achievement of which is subject to many macro- and micro-economic factors. Percentage of population with access to formal Percentage Value 23.40 40.00 rural financial services increases to at least 40 Date 31-Mar-2006 28-Jun-2012 percent by end of project. Comments No survey results are available for this ISR period. This is another sector-wide target. Percentage of population with access to formal Percentage Value 26.40 50.00 financial services increases to 50 percent by Date 31-Mar-2006 28-Jun-2012 31-Mar-2013 end of project. Comments No survey results are available for this ISR period. This is also a sector-wide target. Number of accounts in the financial sector Number Value 2204000.00 15000000.00 increases to 15 million accounts by project end. Date 30-Jun-2005 28-Jun-2012 31-Mar-2012 Comments No survey results available for this ISR period. This is a sector-wide target. Intermediate Results Indicators Public Disclosure Copy Indicator Name Core Unit of Measure Baseline Current End Target CBK’s compliance (Compliant or Largely Text Value CBK compliant /largely at least 18 Compliant) with Basel Core Principles (BCP) compliant with 16 BCPs rises to at least 18 principles. (FSAP 2004). Date 31-Dec-2005 28-Jun-2012 31-Mar-2013 Comments No BCP compliance assessment was carried out for this ISR period. Page 4 of 8 The World Bank Report No: ISR6784 Laws of Kenya revised and online access Text Value Real time information on the Procurement of a consulting All Laws of Kenya Revised, provided/enhanced with Judges Help Desk laws of Kenya not available firm for the purpose at final and available in Hardcopy, established and operational. Judges Help- online. stage CD-ROM, Online (in Desk. acceptable formats. Public Disclosure Copy Date 31-Dec-2005 28-Jun-2012 31-Mar-2013 Comments Source: PMU, June 2012 Civil Procedure Rules reviewed and published. Text Value Existing Civil procedure rules Civil Procedure Rules 2010 Civil procedure rules being outdated. gazetted. implemented Date 30-May-2012 31-Mar-2013 Comments Source: PMU, May 2012 Time taken to register companies’ declines 8 Number Value 60.00 8.00 days by project end. Date 28-Jun-2012 31-Mar-2013 Comments 60 days (DB2004) 47 days No updated information is (DB2005) available for this ISR period. Private credit registries operational and sharing Text Value 0 2 CBR licensed Preparation for or drafting of data. regulations for Positive credit reporting and Drafting of Code of Conduct commences. Avg Number of credit reports accessed: 180,000 Date 30-Mar-2012 31-Mar-2013 Comments a) 1st CBR licensed in Q1Y11, and B) 2nd CBR licensed in Mar11. Source: PMU, March 2012 Percentage of clearing house transactions Percentage Value 0.00 95.00 being processed through Real Time Gross Date 28-Jun-2012 31-Mar-2013 Settlement rises to at least 95 percent. Public Disclosure Copy Comments No updated information is RTGS Backup site set up available for this ISR period. handle s At least 95 percent of CH transactions. Proportion of financial institutions in Percentage Value 93.00 96.00 compliance with capital adequacy ratios rises Date 31-Dec-2005 28-Jun-2012 31-Mar-2013 Comments Number, percent compliance No updated information is 96 percent compliant with available for this ISR period. CBK Capital Adequacy Ratios (CAR) Page 5 of 8 The World Bank Report No: ISR6784 Financial Sector Regulators adopt Risk-Based Text Value Regulators at various stages Resident RBS advisers in RBA, CMA, IRA implementing Supervision. in implementing RBS. place to support adoption of RBS CBK-BSD partially RBS implemented RBS preparing Public Disclosure Copy risk management guidelines for FIs Date 31-Dec-2005 28-Jun-2012 31-Mar-2013 Comments Source: PMU, June 2012 Autonomy of Financial Sector Regulators (IRA, Text Value CMA, RBA partially No updated information CMA, RBA, IRA, CBK –BSD CMA, RBA, Saccos Regulatory Authority and autonomous; Commissioner available for this ISR period remain autonomous. SASRA CBK-BSD) established. of Insurance is a dept. of more autonomous. MoF; DPFB operated CBK though it has separate Board June 2005. Date 31-Dec-2005 28-Jun-2012 31-Mar-2013 Comments Improved ICT/workflows at all institutions. Judicial sector strategic plan adopted and Text Value Judicial sector strategy A Judiciary Transformation JSP under implementation. being implemented by the judiciary. Framework 2012-2016 developed Date 30-Dec-2005 28-Jun-2012 31-Mar-2013 Comments Source: PMU, June 2012 Comprehensive Financial Sector Reform and Text Value Background studies for Development of the strategy CFSRD approved by Development (CFSRF) strategies adopted by strategies completed. ongoing Cabinet, adopted for the Cabinet. implementation Date 31-Dec-2005 28-Jun-2012 31-Mar-2013 Comments Source: PMU, June 2012 Automation of recording and transcription Text Value No automation of court Uses of upgraded computers Automation of recording and services in at least the commercial and civil processes and case helped reduce backlog in transcription services divisions of the High Court completed. management. typing of rulings and completed in both divisions. judgements in the newly Public Disclosure Copy established Milimani Law courts Date 19-Jun-2012 31-Mar-2013 Comments Source: PMU, June 2012 Number of courses offered at the University of Text Value 16 courses for the 2004/05 No updated information UON (20 Courses) Nairobi School of Law and the Kenya School of academic year available for this ISR period KSL (10 Courses) Law on commercial and financial law rises. None for KSL. Date 31-Dec-2005 28-Jun-2012 31-Mar-2013 Comments Page 6 of 8 The World Bank Report No: ISR6784 Submission to Parliament of the transaction to Text Value NBK 22 percent by GoK; 48 Plans for the privatization of dispose of State-influenced shares of National percent by NSSF; CB 100 GoK stakes in NBK and CB Bank of Kenya &Consolidated Bank. percent by GoK and State approved by Cabinet and Corporations. submitted to Parliament. Public Disclosure Copy Date 31-Dec-2005 28-Jun-2012 31-Mar-2013 Comments The PMU has indicated that Target shouldnt be no support is likely to be transaction completed as it needed (June 2012). depends on Parliament plus not to affect sale process. Integrated debt management system is in place Text Value Government debt Comprehensive debt management is divided management strategy between the MoF and CBK, with little coordination or Annual debt management consolidation of functions. reports issued. No comprehensive debt management strategy developed. Date 31-Oct-2005 19-Jun-2012 31-Mar-2013 Comments The PMU has indicated that There may be changes no support is likely to be expected from public financial needed (June 2012) management bill being assessed. Data on Financial Performance (as of 13-Jun-2012) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P083250 IDA-39920 Effective 14-Oct-2004 16-Nov-2004 30-Jun-2005 31-Mar-2010 31-Mar-2013 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed Public Disclosure Copy P083250 IDA-39920 Effective USD 18.00 18.00 0.00 7.52 11.05 42.00 Disbursement Graph Page 7 of 8 The World Bank Report No: ISR6784 Public Disclosure Copy Key Decisions Regarding Implementation The implementation of the project following restructuring is broadly on track, with crucial procurement of ICT well advanced and other lingering activities moving at a faster pace (notably on legal and judicial sector). Restructuring History Level two Approved on 06-Oct-2011 Related Projects There are no related projects. Public Disclosure Copy Page 8 of 8