Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) ACGF - Madagascar Financial Services Project (P109607) AFRICA | Madagascar | Financial and Private Sector Development Global Practice | Recipient Executed Activities | Specific Investment Loan | FY 2008 | Seq No: 14 | ARCHIVED on 01-Feb-2015 | ISR17614 | Implementing Agencies: AGEPASEF Key Dates Key Project Dates Board Approval date:05-Jun-2008 Effectiveness Date:28-Nov-2008 Planned Mid Term Review Date:30-Nov-2012 Actual Mid-Term Review Date:30-Nov-2014 Original Closing Date:31-Dec-2012 Revised Closing Date:31-Dec-2016 Project Development Objectives 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) 2. Improving the capacity of MFIs for greater outreach and sustainability:(Cost $6.30 M) 3. Project Implementation, Monitoring and Evaluation:(Cost $2.70 M) 2/1/2015 Page 1 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Moderately Satisfactory  Moderately Satisfactory Overall Implementation Progress (IP)  Moderately Satisfactory  Moderately Satisfactory Overall Risk Rating  --  Moderate Implementation Status and Key Decisions The mid-term review of the project (conducted from November 10 to 21, 2014) confirmed the relevance of the project development objectives and the adequateness of the main project’s activities. The project activities are playing a catalytic role in achieving the development objective of increased access to financial services for firms and households in Madagascar. This is all the more relevant given the signals of instability shown by the microfinance sector in the recent months. This assessment is in line with the one conducted by an independent consultant who was invited by the Project Implementation Unit to review the project before the mid-term review mission. The mission team however is proposing a revision of the M&E framework (to be implemented through a level II restructuring of the project) in order to redefine some key indicators and associated targets in light of the recent major evolutions (including those in the microfinance sector). Project’s implementation has continued to show substantial improvement over the past 6 months, despite some delays and adjustments still need to be accounted for (as explained below). The PIU continues to perform well. Overall implementation progress remains Moderately Satisfactory and the rating for the progress to achieve the PDO also remains Moderately Satisfactory. Project's disbursements have shown a 20 percentage points increase since the previous ISM going from a level of 27% at end-June 2014 to 47,23% as of end-December, 2014, reaching a total disbursed amount of $7.1 mill(out of $15 mill). Component 1: Increasing MSME access to finance. The partial portfolio guarantee (PPG) has had a good start with a large volume of loans qualifying for the guarantee. Some adjustments have been made to eligibility criteria to improve additionality. - The partial portfolio guarantee (PPG) scheme became fully operational in September 2014, first through a manual registration process and then, as from November 2014, through a fully computerized registration process that will facilitate and expedite the entering of credits on the guarantee. - Registration of credits under the PPG surpassed expectations. Over a nine weeks period ending on November 14, there were 85 credits registered under the guarantee for an amount of 3 billion MGA (approximately 1.2 million USD) and an amount guaranteed of 1.5 billion MGA (or 600,000 USD). There is a large backlog of credits granted between June 28 2014 (date of the signature of the convention BOA SOLIDIS) and November 14. As of November 14, the volume of credit granted by BOA and eligible to be entered in the guarantee is 12.1 billion MGA or 10.8 billion MG depending on the eligibility criteria used (the old or the new ones, see below). In any case the volume has surpassed the 8 billion MGA in volume of credit BOA committed itself to enter into the PPG over a period of one year ending in June 2015. It is hoped that the backlog will be resorbed by January 2015. - There has been growing interest from banks and micro finance institutions to participate in the GPP with five commercial banks and three MFIs expressing their strong interest. It is expected that three new Participating Financial Institutions - PFIs (banks and possibly MFIs) will be selected. As the provision of technical assistance is an essential ingredient of the program, new resident technical assistants will be recruited for the new PFIs. - The concept of “additionality” is crucial in order to guarantee the developmental impact of the PPG scheme. Additionality occurs when MSMEs which did not have access to credit will be able to obtain a loan or when MSMEs will benefit from better conditions (amount of loan, collateral), thanks to the PPG. To maximize additionality the World Bank team together with BOA and SOLIDIS have agreed to limit the renewals to specific cases, such as when a renewal is accompanied by an increase in the amount of the loan or by a decrease in collateral requested by the lender. At the same time all parties agreed to raise the maximum business volume of an eligible firm from 2 billion to 3 billion MGA. The second modification will counter somewhat the negative impact on the volume of credits registered under the guarantee by BOA, from imposing restrictions on renewals. Globally, the changes in eligibility criteria will bring the PPG much closer to the development objectives of the PASEF and will leave more room to new PFIs. - The study on the determinants of interest rates in Madagascar has started and data collection efforts are ongoing. During the MTR mission the CSBF Secretary General and the BCM governor stated their support for the execution of the study and CSBF agreed to provide missing data where needed. The APB (‘Association Professionals des Banques’) however expressed doubts about the study and its member banks communicated limited willingness to participate and share all relevant data on interest rates, margins and commissions. The WB team will reach-out bilaterally to banks (including head-offices in those cases where the same bank group had agreed to participate in a similar study conducted in other regions. E.g. BCEAO) to clarify the objective of the study and increase their willingness to collaborate as well as provide all necessary data. - Until the newly agreed changes to the PPG take effect, the rate for this component remains Moderately Satisfactory. Component 2: Strengthening the Microfinance sector. Good progress has been registered also under component 2 but delays still remain. In terms of support to the CSBF: - The stock-taking study of MFIs operating today in Madagascar was successfully finalized at the end of October 2014 and validated by CSBF. The 2/1/2015 Page 2 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) report has provided detailed information on all MFIs active today in Madagascar. - The Drafting of the legal framework for mobile and agent banking in Madagascar were also finalized and it is now up to the CSBF to guide them through the ratification process. - Two initial IT diagnostics of the existing microfinance credit bureau (‘Centrale des Risques Microfinance’ - CRM) and of financial institutions (‘Systeme de Gestion de Base de Donnée des Institutions de crédit’ - SGBD) were finalized under the project. Technical specifications for the relevant equipment and software will be developed by PASEF, CSBF and DOI. The expression of interest (EoI) will also be launched. In terms of Strengthening the capacity of microfinance institutions (MFIs): - PASEF has successfully provided training to 342 MFI staff since 2013. Of those training participants a total of 237 confirmed having changed their work practices as a result of the training. According to the training feedback questionnaires collected until today participants are very satisfied with the trainings they attended and rated them with an average grade of 4,5 out of 5. They estimate their own competencies have increased from a grade of 2/5 to 4/5, six months after having attended the training. - The diagnostic of the existing Management and Information Systems (MIS) of 6 MFIs has been finalized and selected IT enhancements will be implemented. - PASEF supports MFIs in extending their service delivery in the two target regions of Anosy and Betsiboka. One MFI supported by PASEF (Vola Mahasoa) has started operations in two locations in Betsiboka (Maevatanana and Antanimbary) since March 2014. After three months of operation, the two outlets account for a total of 13 staff, 213,000,000 Ariary (82,081 USD) of credit and 22,192,700 Ariary (8,552 USD) of savings from a total of 574 new clients. 69% of beneficiaries are women and 87% of the portfolio is made-up of group credit. The Portfolio at Risk (PAR 30) remains at 0% up to now. These results indicate the major unmet need for financial services in the region and the considerable business potential for Vola Mahasoa. Component 3: Project Execution / Monitoring and Evaluation The existing M&E framework was developed in 2008 during the early stages of the project and revised during the Level I restructuring in 2012. A new revision of the indicators and associated targets appear necessary in light of the recent major evolutions, specifically in the microfinance sector. This will be done through a level II restructuring of the project. The revised framework will allow appropriate data collection, support implementation of project activities and adequate measurement of results. 2/1/2015 Page 3 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  --  Moderate Macroeconomic  --  --  Moderate Sector Strategies and Policies  --  --  Moderate Technical Design of Project or Program  --  --  Moderate Institutional Capacity for Implementation and Sustainability  --  --  Moderate Fiduciary  --  --  Low Environment and Social  --  --  Low Stakeholders  --  --  Moderate Other  --  --  -- Overall  --  --  Moderate Results Project Development Objective Indicators PHINDPDOTBL  Outstanding SME Loan Portfolio (Amount(USD), Core) Baseline Actual (Previous) Actual (Current) End Target Value 134048300.00 -- 132620000.00 360810000.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 Comments This indicator refers to the SME loan portfolio of all financial institutions in Madagascar. As the PCG scheme started its fully automatized operations in September 2014, the current amount does not reflect its impact on the outstanding SME loan portfolio yet. PHINDPDOTBL  Percentage of project-supported institutions that are reporting on this indicator (Percentage, Custom) 2/1/2015 Page 4 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 100.00 100.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 Comments There is only one bank currently participating in the PCG fund. Although this bank has been reporting data on its outstanding SME loan portfolio, the impact of the PCG is not yet visible as the Fund started its full automated activities in September 2014. PHINDPDOTBL  Outstanding Microfinance Loan Portfolio (Amount(USD), Core) Baseline Actual (Previous) Actual (Current) End Target Value 84897000.00 -- 110608000.00 212685000.00 Date 31-Dec-2012 -- 30-Sep-2014 30-Dec-2016 PHINDPDOTBL  Percentage of project-supported institutions that are reporting on this indicator (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 100.00 100.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 PHINDPDOTBL  % active loans to women - Microfinance (Percentage, Core) Baseline Actual (Previous) Actual (Current) End Target Value 42.00 -- 42.00 52.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 Overall Comments Intermediate Results Indicators 2/1/2015 Page 5 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) PHINDIRITBL  Outstanding loans to MSME by participating financial institutions (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value -- -- -- -- Date -- -- 30-Sep-2014 31-Dec-2016 Comments As there is only one financial institution currently participating in the PCG scheme, we are not allowed to provide information on individual MSME portfolio for confidentiality reasons. PHINDIRITBL  Portfolio at risk - MSME - of participating financial institutions (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value -- -- -- -- Date -- -- 30-Sep-2014 31-Dec-2016 Comments As there is only one financial institution currently participating in the PCG scheme, we are not allowed to provide information on individual MSME portfolio at risk for confidentiality reasons. PHINDIRITBL  Dedicated MSME lending department established in each of the participating financial institutions (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value NO -- YES YES Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 PHINDIRITBL  Number of loan introduced in the PPGG fund by partner financial institutions (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 141.00 400.00 Date 31-Dec-2012 -- 21-Jan-2015 31-Dec-2016 2/1/2015 Page 6 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) PHINDIRITBL  Participating Financial Institutions meet main prudential norms and regularly provide audited financial statements (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value NO -- YES YES Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 PHINDIRITBL  Internal audit, risk management of the Fund Manager improved (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value NA -- YES YES Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 PHINDIRITBL  Fund Manager profitable (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value NA -- YES YES Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 PHINDIRITBL  Claims on guaranteed portfolio less than 3% (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value NA -- YES YES Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 2/1/2015 Page 7 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) PHINDIRITBL  Study on interest rate completed (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value NO -- NO YES Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 PHINDIRITBL  Average time it takes to issue an MFI license (Months, Custom) Baseline Actual (Previous) Actual (Current) End Target Value -- -- 8.00 6.00 Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 PHINDIRITBL  Number inquiries issued through signle application window in regional branches of CSBF (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value -- -- 12.00 24.00 Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 PHINDIRITBL  Number of MFIs inspected (on-site) by CSBF at minimum every two years per MFI (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 6.00 -- 4.00 18.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 2/1/2015 Page 8 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) PHINDIRITBL  Number of inquiries from MFIs to Centrale des Risques increases (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 7.00 -- 23.00 33.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 PHINDIRITBL  A mobile banking framework is issued (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No -- No Yes Date 31-Dec-2012 -- 31-Dec-2014 31-Dec-2016 PHINDIRITBL  Portfolio at Risk - Microfinance (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3.50 -- 5.10 4.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 PHINDIRITBL  Number of employees who change their method of work following training (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 332.00 1076.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 2/1/2015 Page 9 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) PHINDIRITBL  Number of MFIs supported by the project using an automated MIS (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 0.00 7.00 Date 31-Dec-2012 -- 30-Sep-2014 31-Dec-2016 Overall Comments Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P109607 TF-92098 Effective USD 15.00 15.00 0.00 7.08 7.92 47% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P109607 TF-92098 Effective 15-Jul-2008 15-Jul-2008 28-Nov-2008 31-Dec-2012 31-Dec-2016 Cumulative Disbursements 2/1/2015 Page 10 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report ACGF - Madagascar Financial Services Project (P109607) Restructuring History Level Approved on 05-Feb-2013 ,Level 2 Approved on 16-Jun-2014 Related Project(s) There are no related projects. 2/1/2015 Page 11 of 11 Public Disclosure Copy