CREDIT NUMBER 6707-KM GRANT NUMBER D676-KM Financing Agreement (Financial Inclusion Project) between THE UNION OF COMOROS and INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT NUMBER 6707-KM GRANT NUMBER D676-KM FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between THE UNION OF COMOROS ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association"). The Recipient and the Association hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement. ARTICLE II - FINANCING 2.01. The Association agrees to extend to the Recipient a grant and a credit, which are deemed as Concessional Financing for purposes of the General Conditions ( collectively, "Financing") in the following amounts: (a) an amount equivalent to seven Million four hundred thousand Special Drawing Rights (SDR 7,400,000) ("Grant"); and (b) an amount equivalent to of nine million and two hundred thousand Euros (9,200,000 Euros)) ("Credit"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section III of Schedule 2 to this Agreement. 2.03 . The Maximum Commitment Charge Rate is one-half of one percent (1 /2 of I%) per annum on the Unwithdrawn Financing Balance. 2.04. The Service Charge is the greater of: (a) the sum of three-fourths of one percent (3 /4 of 1%) per annum plus the Basis Adjustment to the Service Charge; and (b) three-fourths of one percent (3 /4 of 1%) per annum ; on the Withdrawn Credit Balance. 2.05 . The Payment Dates are 15 June and 15 December in each year. 2.06. The Payment Currency is Euro. -2- 2.07. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 3 to this Agreement. ARTICLE Ill - PROJECT 3.01. The Recipient declares its commitment to the objective of the Project. To this end, the Recipient shall carry out the Project through the Project Implementing Entity, in accordance with the provisions of Article V of the General Conditions and Schedule 2 to this Agreement and the Project Agreement. ARTICLE IV - REMEDIES OF THE ASSOCIATION 4.01. The Additional Events of Suspension consist of the following: (a) BCC's Legislation has been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of BCC to perform any of its obligations under the Project Agreement. (b) BCC has failed to comply with any of its obligations under the Subsidiary Agreement or the Project Agreement. 4.02. The Additional Events of Acceleration consist of any event specified in paragraphs (a) and (b)of Section 4.01 of this Agreement occurs and is continuing for a period of sixty (60) days after notice of the event has been given by the Association to the Recipient. ARTICLE V - EFFECTIVENESS; TERMINATION 5.01. The Additional Conditions of Effectiveness consist of the following: (a) The Project coordinator has been duly hired in accordance with terms of reference, experience, and integrity acceptable to the Association. (b) The BCC has adopted the Project Operations Manual in form and substance satisfactory to the Association. ( c) A Subsidiary Agreement has been executed on behalf of the Recipient and the Project Implementing Entity, in form and substance satisfactory to the Association, and all conditions precedent to the effectiveness of the Subsidiary Agreement, except for the effectiveness of this Financing Agreement, have been met; 5.02. The Effectiveness Deadline is the date ninety (90) days after the Signature Date. 5.03. For purposes of Section 10.05 (b) of the General Conditions, the date on which the obligations of the Recipient under this Agreement (other than those providing for payment obligations) shall terminate is twenty (20) years after the Signatme Date. -3- ARTICLE VI - REPRESENTATIVE; ADDRESSES 6.01. Except as provided in Section 2.02 of this Agreement, the Recipient ' s Representative is its minister responsible for budget and finance. 6.02. For purposes of Section 11.0 I of the General Conditions : (a) the Recipient's address is: Ministry of Finance, Budget, and the Banking Sector Place de l'lndependence B.P. 324 Moroni 6.03. For purposes of Section 11.01 of the General Conditions: (a) The Association's address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Association's Electronic Address is: Telex: Facsimile: 248423 (MCI) 1-202-477-6391 -4- AGREED as of the Signature Date. THE UNION OF COMOROS By INTERNATIONAL DEVELOPMENT ASSOCIATION By Authorized Representative e: ! DA\:\ '"2.. .. ~ ~'Jo(e..'j ; _ R;clcLLht>~~\_ Title: C..ou 0 -\-(''1 :CS\ G> t 1-o Q Date: >_J S- / OZ J dJ,') /J ,u SCHEDULE 1 Project Description The objective of the Project is to increase access to and usage of financial services for Adults. The Project consists of the following parts: Part 1. Increasing Access to and Usage of Financial Services 1.1 Automate Interbank Transactions and Develop Digital Payment Interoperability a) Improving the digitization of interbank transactions through, among others: (i) acquiring hardware and software to establish an automated transfer system (ATS+); and (ii) providing technical assistance and capacity building to the Central Bank of the Comoros' ("BCC") staff in establishing the ATS+ system. b) Improving the interoperability of digital payment through, among others: (i) acquiring hardware and software to establish a national retail payment switch; (ii) supporting the operational cost of the national retail payment switch platfonn during its first year of operation; (iii) providing technical assistance capacity building to support switch procurement and implementation (iv) subscribing to the fiber optic network to run the A TS+ and switch; (v) rehabilitating BCC's data center emergency room and establishing a backup site outside BCC premise; and (vi) acquiring core banking system for BCC to effectively run the ATS+ and switch; 1.2 Facilitate Access and Usage of Digital Financial Services a) Designing and launching a financial and digital literacy program to increase awareness on account ownership (including account ownership parity of women with men), financial goals, and financial products' terms and conditions. b) Increasing the reach of financial institutions to consumers through among others: (i) supporting Fis in providing BTAs to consumers; and (ii) providing technical assistance to BCC to to support and monitor financial institutions' efforts to provide access to BTAs. c) Improving and expanding agent/merchant networks through, among others: (i) providing support to Fis to establish agent and merchant networks; (ii) acquiring of hardware and software necessary to build the above- mentioned networks; (iii) equipping merchants with low cost and secure digital payment acceptance devices. d) Providing support to the digitalization of Non-Bank Financial Institutions (NBFis) through, among others: (i) acquiring hardware and software to enhance their core banking systems, and to adopt innovative delivery channels -2- and services such as digital wallets, and prepaid cards, as well as digital credit services ; and (ii) providing technical assistance to NBFis on digital financial services. e) Providing suppo1i to government and institutions with large reoccurring transaction flows, including agriculture and remittances, to support digital payments through: (i) acquiring hardware and software to facilitate digitization of payments; (ii) supporting the digitization of the Comoros Pension Fund (CRC)'s payments through acquiring optimal software and IT systems ; and (iii) developing a mapping of payments including inter a/ia government payments. f) Providing technical assistance to BCC to develop financial sector regulatory and oversight frameworks . 1.3 Enhance Financial Stability and Integrity to Facilitate Usage of Financial Services a) Improving the Department of Banking Regulation and Supervision (DSBR)'s supervision capacity and assessing the soundness of all financial institutions through : (i) the acquisition of a Bank Supervision Application ("BSA"); (ii) technical assistance and capacity building through a resident advisor to conduct on-site and off-site banking supervision; and (iii) implementing a diagnostic of the Public Risk Registry (CD RIP) and supporting its upgrades or replacement if necessary. b) Improving the Recipient's capacity to address the risks and threats pertaining to AML/CFT through: (i) providing technical assistance to implement the National Risk Assessment's recommendations (NRA); and (ii) capacity building for the reinforcement of the financial analysis of suspicious transactions by banks and the FIU. Part 2. Project and Payment Systems Management a) Providing support for the implementation of Project actlv1tles, through maintaining and strengthening of the Project Implementation Unit (PIU) capacity with respect to: (i) management; (ii) technical capacity; (iii) fiduciary capacity (i .e. financial and procurement management, auditing); (iv) environmental and social Safeguards management; (v) preparation of Project reports and manuals; (vi) monitoring and evaluation; and (vii) hardware and software (for accounting and management) . b) Facilitating payment systems policy development through (i) establishing the National Payment Council (NPC) ; and (ii) building the capacity of NPC and BCC's staff on digital financial services. -3- SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements. 1. The Recipient shall: (a) carry out the Project through BCC, and shall cause BCC to maintain throughout Project implementation, a PIU to be responsible for the management, coordination, supervision, and monitoring of Project activities; (b) cause the PIU to maintain, throughout Project implementation key staff i.e. ,: (i) a Project coordinator, (ii) a financial management specialist, (iii) an accountant, and (iv) a procurement specialist, and thereafter maintain, until completion of the Project, a structure, responsibilities, and such key staff with functions, experience, responsibilities, qualifications and integrity acceptable to the Association and described in the Project Operations Manual (POM); and (c) cause the PTU to appoint and hire, no later than one ( 1) month after the effectiveness date, an environmental and social specialist with functions, experience, responsibilities, qualifications and integrity acceptable to the Association and described in the Project Operations Manual (POM). 2. The Recipient shall establish a Project Steering Committee by ministerial arrete, no later than two (2) months after the effectiveness date, with a composition, functions, and resources satisfactory to the Association, chaired by the BCC's Governor or his representative and include inter alia, General Secretary from selected ministries or their representative, General Directors of financial institutions, public institutions and departments or their representative, representative from telecommunication companies, and representatives from relevant financial institutions, and shall meet twice a year to: (i) review and approve the Project's annual work plan and budget; (ii) review and approve the Project's evaluation reports; (iii) review and approve the Project activities' report and periodic financial report; and (iv) provide overall guidance to the PIU for project implementation. 3. No later than six (6) month prior to the establishment of the national retail payment switch under Part 1.1 (b) , the BCC shall establish and maintain a Switch Implementation Group (SIG) to serve as the body for national switch- related dialogue, coordination, and management in form and substance and with resources and functions satisfactory to the Association, including staff all -4- with qualifications, integrity, experience and terms ofreference satisfactory to the Association. 4. Implementation Agreement has been executed on behalf of the Recipient through the PIU and the CRC is in full force and effect to carry out Part 1.2. (e) (ii). B. Project Operations Manual l. The BCC shall : (a) can-y out the Project, in accordance with the Project Operations Manual (POM), containing detailed arrangements and procedures for: (i) institutional coordination and day-to-day execution of the Project; (ii) monitoring, evaluation, reporting and communication; (iii) administration, financial management and accounting; and (iv) such other administrative, technical and organizational a1Tangements, and procedures as shall be required for purposes of implementation of the Project. (b) For the purposes of implementing Part 1.1.b (iv) of the Project, the POM shall adopt criteria and a selection process for the selection of the BCC 's backup data site in fonn and substance acceptable to the Association. (c) except as the Association shall otherwise agree in writing, not amend or waive, or pennit to be amended or waived any provision of the POM. 2. In case of conflict between the provisions of the POM and this Agreement or the Project Agreement, the provisions of this Agreement and the Project Agreement shall prevail. C. Subsidiary Agreement. To facilitate the carrying out the Project by the Project Implementing Entity, the Recipient shall make the proceeds of the Financing available to the Project Implementing Entity under a subsidiary agreement between the Recipient and the Project Implementing Entity ("Subsidiary Agreement"), under terms and conditions approved by the Association, which shall include the following: (i) the principal amount of the financing made available under the Subsidiary Agreement; (ii) the financing terms of the credit made available under the Subsidiary Agreement; (iii) the right of the Recipient to suspend or terminate the right of any of the Project Implementing Entity to use said proceeds of the financing, or to obtain a refund of all or any part of the amount of the financing then withdrawn, upon any of the Implementing Entity failure to perform any of the obligations under the applicable Subsidiary Agreement. -5- 1. The Subsidiary Agreement shall furth er include the obligation of the Project Implementing Entity to: (a) implement the Proj ect with due diligence and effici ency and in conformity with appropriate administrative, technical, financial , economic, environmental and social standards and practices, including the provisions of the Anti-Corruption Guidelines applicable to recipients of loan proceeds, other than the Recipient, Safeguards Instruments, and in accordance with the provisions of this Agreement; (b) (i) procure all goods, works and services required under the Project and to be financed out of the proceeds of the Financing in accordance with the requirements set forth or referred to in the Procurement Regulations and the provisions; and (ii) ensure that all such goods, works and services are used exclusively for the purposes of the Project; (c) ensure that all facilities to the Project shall at all times be properly operated and maintained and that all necessary repairs and renewals of such facilities shall be made promptly as needed; (d) with respect to monitoring and evaluation: (i) mai ntain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators acceptable to the Recipient and the Association, the progress of the Project and the achievement of its objective; (ii) prepare periodic reports, in fonn and substance satisfactory to the Recipient and the Association, integrating the results of such monitoring and evaluation activities and setting out measures recommended to ensure the continued efficient and effective execution of the Project and to achieve its objective, each such report to cover a calendar quarter; (iii) furnish each such report to the Recipient and the Association within forty-five (45) days after the end of such period; and (iv) prepare, and furnish to the Recipient a final report, of such scope and in such detail as the Recipient and the Association shall reasonably request, on the execution of the Project, and furnish the same to the Recipient and the Association not later than six (6) months after the end of the Project; ( e) with respect to financial management: (i) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Recipient and the Association, both in a manner adequate to reflect its operations and financial condition, including the operations, resources and expenditures related to the Project; (ii) avail the records pertaining to the project to external and internal auditors; (iii) prepare as part of the Project Report, interim unaudited financial reports covering each qua11er, and furnish them to the Recipient and the Association not later than forty-five (45) days after the end of the period covered by such reports, and provide such other information concerning such unaudited financial statements as the Recipient or the Association may from time -6- to time reasonably request; and (iv) have its financial statements audited by independent auditors and applying standards both acceptable to the Association at least once in each fiscal year; and (f) enable the Recipient and the Association to inspect the Project, their operations and any relevant records and documents . 2. The Recipient shall exercise its rights under the Subsidiary Agreement in such manner as to protect the interests of the Recipient and the Association and to accomplish the purposes of the Financing. Except as the Association shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive the Subsidiary Agreement or any of its provisions. D. Anti-Corruption The Recipient shall ensure that the Project is carried out in accordance with the provisions of the Anti -Corruption Guidelines . E. Environmental and Social Standards I. The Recipient shall, and shall cause the Project Implementing Entity to, ensure that the Project is carried out in accordance with the Environmental and Social Standards, in a manner acceptable to the Association. 2. Without limitation upon paragraph 1 above, the Recipient shall , and shall cause the Project Implementing Entity to ensure that the Project is implemented in accordance with the Environmental and Social Commitment Plan ("ESCP"), in a manner acceptable to the Association. To this end, the Recipient shall, and shall cause the Project Implementing Entity to, ensure that: (a) the measures and actions specified in the ESCP are implemented with due diligence and efficiency, and provided in the ESCP; (b) sufficient funds are available to cover the costs of implementing the ESCP; (c) policies and procedures are maintained, and qualified and experienced staff in adequate numbers are retained to implement the ESCP, as provided in the ESCP; and ( d) the ESCP, or any provision thereof, is not amended, repealed, suspended or waived, except as the Association shall otherwise agree in writing, as specified in the ESCP, and ensure that the revised ESCP is disclosed promptly thereafter. 3. In case of any inconsistencies between the ESCP and the provisions of this Agreement, the provisions of this Agreement shall prevail. 4. The Recipient shall, and shall cause the Project Implementing Entity to, ensure that: -7- (a) all measures necessary are taken to collect, compile, and furnish to the Association through regular reports, with the frequency specified in the ESCP, and promptly in a separate report or reports, if so requested by the Association, information on the status of compliance with the ESCP and the environmental and social instruments referred to therein, all such reports in form and substance acceptable to the Association, setting out, inter alia: (i) the status of implementation of the ESCP; (ii) conditions, if any, which interfere or threaten to interfere with the implementation of the ESCP; and (iii) corrective and preventive measures taken or required to be taken to address such conditions; and (b) the Association is promptly notified of any incident or accident related to or having an impact on the Project which has, or is likely to have, a significant adverse effect on the environment, the affected communities, the public or workers in accordance with the ESCP, the environmental and social instruments referenced therein and the Environmental and Social Standards. 5. The Recipient shall, and shall cause the Project Implementing Entity to, establish, publicize, maintain and operate an accessible grievance mechani sm, to receive and facil itate resolution of concerns and grievances of Project- affected people, and take all measures necessary and appropriate to resolve, or facilitate the resolution of, such concerns and grievances, in a manner acceptable to the Association. 6. The Recipient shall, and shall cause the Project Implementing Entity to, ensure that all bidding documents and contracts for civil works under the Project include the obligation of contractors to: (a) comply with the relevant aspects of ESCP and the environmental and social instruments referred to therein; and (b) adopt and enforce codes of conduct that should be provided to and signed by all workers, detailing measures to address environmental, social, health and safety risks, and the risks of sexual exploitation and abuse, sexual harassment and violence against children, all as applicable to such civil works commissioned or carried out pursuant to said contracts. Section II. Project Monitoring, Reporting and Evaluation The Recipient shall furnish to the Association each Project Report not later than forty-five (45) days after the end of each calendar semester, covering the calendar semester. Section III. Withdrawal of the Proceeds of the Financing A. General Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Recipient may withdraw the proceeds of the Financing to: (a) finance Eligible Expenditures; and (b) repay the Preparation Advance; in the amount -8- allocated and, if applicable, up to the percentage set forth against each Category of the following table: Category Amount of the Amount of Percentage of Credit Allocated Grant Allocated Expenditures to be (expressed in (expressed in Financed Euros) SOR) (inclusive of Taxes) (1) Goods, 8,280,000 7,400,000 works, non- consulting services, consulting services, and Training and Operating Costs, for the Project (2) Refund of 920,000 0 Amount payable Preparation pursuant to Section Advance 2. 07 (a) of the General Conditions TOTAL 9,200,000 7,400,000 AMOUNT B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A above, no withdrawal shall be made: (a) for payments made prior to the Signature Date. 2. The Closing Date is June 30, 2025 . -9- SCHEDULE 3 Date Payment Due Principal Amount of the Credit repayable (expressed as a percenta2:e)* On each 15 June and 15 December: commencing 15 December 2030 to and 1% including 15 June 2040 : commencing I 5 December 2040 to and 2% including 15 June 2060 : * The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3 .05 (b) of the General Conditions. -10- APPENDIX Definitions 1. "Adults" means an individual who attained the age of maturity as defined by the laws of the Union of Comoros. 2. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 3. "AML/CFT" means Anti-Money Laundering/ Countering the Financing of Terrori sm. 4. "BCC" means the Banque Centra/e des Comores, the Recipient's Central Bank established by Decree 75-443 dated June 1, 1975, or any successor thereto . 5. "BCC's Legislation" means "means the Decree Number 75-443 dated June 1, 1975. 6. "BSA" means Bank Supervision Application . 7. "BTA" means a basic transaction account, established through lower Know Your Customer. 8. "Category" means a category set forth in the table in Section III.A of Schedule 2 to this Agreement. 9. "CDRIP" means the Recipient's Public Risk Registry established within the DSBR by BCC's decision No 13/2015/BCC dated January 28 , 2015, or any successor hereto. 10. "CRC" means Caisse des Retraites des Comores the Recipient's pension fund established by arrete number 132/F3 on February 21, 1963, or any successor hereto. 11. "DSBR" means the BBC's Department of Banking Regulation and Supervision established, or any successor hereto. 12. "Environmental and Social Commitment Plan" or "ESCP" means the environmental and social commitment plan for the Project, dated May 20, 2020, as the same may be amended from time to time in accordance with the provisions thereof, which sets out the material measures and actions that the Recipient shall carry out or cause to be carried out to address the potential environmental and social risks and impacts of the Project, including the timeframes of the actions and measures, institutional, staffing, training, monitoring and repo1iing arrangements, and any environmental and social instruments to be prepared thereunder. -11- 13. "Environmental and Social Standards" or "ESSs" means, collectively: (i) "Environmental and Social Standard 1: Assessment and Management of Environmental and Social Risks and Impacts"; (ii) "Environmental and Social Standard 2: Labor and Working Conditions" ; (iii) "Environmental and Social Standard 3: Resource Efficiency and Pollution Prevention and Management"; (iv) "Environmental and Social Standard 4: Community Health and Safety"; (v) "Environmental and Social Standard 5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement"; (vi) "Environmental and Social Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources"; (vii) "Environmental and Social Standard 7: Indigenous Peoples/Sub-Saharan Historically Underserved Traditional Local Communities"; (viii) "Environmental and Social Standard 8: Cultural Heritage"; (ix) "Environmental and Social Standard 9: Financial lntennediaries"; (x) "Environmental and Social Standard 10: Stakeholder Engagement and Information Disclosure"; effective on October I, 2018, as published by the Association . 14. "General Conditions" means the "International Development Association General Conditions for TOA Financing, Investment Project Financing", dated December 14, 2018 . 15. "NBFI" means Non-Bank Financial Institution. 16. "NPC" means the Recipient's National Payment Council referred to m Schedule 1, Part 2 (b) to this Agreement. 17. "Operating Costs" means reasonable cost of goods and non-consulting services required for the day-to-day implementation of the Project, incurred by the Recipient (which expenditures would not have been incurred absent the Project), including consumable materials and supplies, communications services (postage, telephone and internet), media and printing services, translation and interpretation services, office space rental and utilities, leasing and/or routine repair and maintenance of vehicles, equipment, facilities and office premises, fuel costs, bank and insurance charges required for the Project, administrative support staff, and Project staff travel, lodging and per diems, but excluding salaries (including bonuses, fees and honoraria or equivalent payments) of officials of the Recipient's civil service. 18. "Preparation Advance" means the advance referred to in Section 2.05 (a) of the General Conditions, granted by the Association to the Recipient pursuant to the letter agreement signed on behalf of the Association on September 03, 2019 and on behalf of the Recipient on September 03, 2019. 19. "Procurement Regulations" means, for purposes of paragraph 87 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017 and August 2018. -12- 20. "Project Implementing Entity" means BCC. 21. "POM" means "Project Operations Manual" to be adopted by the Recipient, and referred to in Section LB of Schedule 2 to this Agreement, satisfactory to the Association, describing and setting forth procedures for implementation of the Project and institutional arrangements, consistent with the provisions of this Agreement and the Project Agreement and including, among other things, the fiduciary, technical and operational aspects and procedures for implementation of the Project, including the financial management procedures (budgeting, accounting and internal control, disbursement and flow of funds, financial reporting, annual reports, internal and external audit arrangements procedures and including the Project specific chart of accounts), procurement procedures, monitoring and evaluation arrangements, other fiduciary and administrative arrangements, and may be amended from time to time with the prior written agreement of the Association. 22. "Signature Date" means the later of the two dates on which the Recipient and the Association signed this Agreement and such definition applies to all references to "the date of the Financing Agreement" in the General Conditions . 23. "SIG" means the Switch Implementation Group referred to in Section J.A.2 of Schedule 2 to this Agreement. 24. "Subsidiary Agreement" means the agreement referred to in Section I.C of Schedule 2 to this Agreement pursuant to which the Recipient shall make the proceeds of the financing available to BCC.