INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Public Disclosure Copy Report No.: ISDSC1966 Date ISDS Prepared/Updated: 26-Feb-2013 Date ISDS Approved/Disclosed: 01-Mar-2013 I. BASIC INFORMATION A. Basic Project Data Country: Turkey Project ID: P130864 Project Name: Third Access to Finance for SMEs (SME III) (P130864) Task Team Ilias Skamnelos Leader: Estimated 25-Mar-2013 Estimated 27-Jun-2013 Appraisal Date: Board Date: Managing Unit: ECSPF Lending Financial Intermediary Loan Instrument: Sector(s): SME Finance (100%) Theme(s): Micro, Small and Medium Enterprise support (100%) Financing (In USD Million) Total Project Cost: 300.00 Total Bank Financing: 300.00 Total Cofinancing: Financing Gap: 0.00 Public Disclosure Copy Financing Source Amount Borrower 0.00 International Bank for Reconstruction and Development 300.00 Total 300.00 Environmental F - Financial Intermediary Assessment Category: Is this a Yes Repeater project? B. Project Objectives The main Project Development Objective (PDO) is to enhance access to medium and long term finance for SMEs. C. Project Description The proposed lending instrument is a US$300 million Financial Intermediary Loan (FIL), using IBRD funds, with one Borrower - Ziraat Bank. The wholesale credit line, guaranteed by the Turkish government (for a gurantee fee), will be intermediated by ZiraatBank, which in turn will intermediate funds through Participating Financial Intermediaries (PFIs) which can be commercial banks, leasing companies or/and factoring companies. The proposed credit line will complement existing credit facilities provided by other IFIs, including current SME credit lines financed by the WB. The PFIs Public Disclosure Copy will be selected by Ziraat Bank based on agreed eligibility criteria in cooperation with the WB. The selected PFIs will in turn make sub-loans with maturities of three plus years to private SMEs, the final beneficiaries of the credit line. For the purpose of this project, in line with Government policy, SMEs will be defined as firms employing fewer than 250 people and having annual turnover of less than TL 40 million. The PFIs will assume the credit risk of the sub-borrowers who will be selected based on agreed selection criteria. In accordance with the requirements of OP 8.30 (currently being updated), credit would be extended on market terms to avoid any distortion. With a view to broaden the impact of the IBRD financing, the team is in discussions with the authorities to incorporate in the project design the following features, which are not included in existing lines of credit: (a) Leverage Bank resources by instituting minimum project co-financing requirements. This will increase the amount of funding available to SME clients during the lifetime of the project; (b) Require the use of project reflows to be channeled for similar purposes under similar conditions for an additional cycle under the wholesale model. Under this practices, Ziraat would re-intermediate the reflows under the project through PFIs to SMEs for one more cycle. Ziraat Bank was selected as a wholesaler for its geographic coverage and experience with SMEs and the WB. Ziraat Bank, a public sector bank with a lending portfolio of about US$40billion, has extensive experience in offering credit to SMEs in all regions of Turkey thanks to a strong branch presence and focus on the SME sector. Additional criteria for selecting Ziraat Bank included the bank’s financial soundness, performance of its credit portfolio, and its good performance as one of the Borrowers in the ongoing SME II credit line project financed by the WB. The proposed project will be implemented through a Project Implementation Unit (PIU) at Ziraat Bank (the Borrower). Its responsibilities will include: (i) selection of and on-lending to PFIs; (ii) monitoringof PFIs to ensure compliance with project criteria; (iii) responsibility for adherence to all Public Disclosure Copy fiduciary and safeguard requirements of the World Bank for final borrowers; and (iv) monitoring and evaluation based on key project development indicators. The eligibility criteria for PFIs’ creditworthiness and internal operating practices and procedures would be determined by the World Bank in close collaboration with Ziraat Bank. D. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The project will be implemented by Ziraat Bank as the FI bank through the PFIs. The sub-project (SME beneficiary) locations are not defined at this stage and are expected to be all over Turkey. E. Borrowers Institutional Capacity for Safeguard Policies Ziraat Bank is working with WB projects as a FI bank for several years and has developed a good capacity regarding safeguards. However, it should be noted that Ziraat Bank had an organization restructuring last year and they may have lost some of their staff who were trained for WB safeguard related OPs. Therefore, the new environmental team will work closely with WB experts for improving their knowledge on OP 4.01 and its practical implementation. It is important to build a good capacity in Ziraat Bank's PIU since relevant PIU staff will be expected to share their experience on WB safeguard policies with the PFIs, and Ziraat Bank will be responsible for providing training to these PFIs, and supervising them during implementation. It is also important that Ziraat Bank should be selective while choosing the PFIs and experience in environmental assessment and due-diligence should be one of the selection criteria. In order to achieve this, it is planned that institutional capacity assessment will be conducted for PFIs in order to evaluate their understanding of WB operational policies and relevant national regulations on environment and social aspects. It is planned that the Public Disclosure Copy first PFI capacity assessment gets conducted jointly by Ziraat Bank and WB, while Ziraat Bank conducts the next PFI capacity assessments and reports back to WB for review and approval. F. Environmental and Social Safeguards Specialists on the Team Zeynep Durnev Darendeliler (ECSSO) Esra Arikan (ECSEN) II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ Yes The Environmental Category of the project is BP 4.01 FI, as all the investments under the project will not be identified until project implementation. Environmental issues of sub-borrowers and their sub-projects will be addressed through the sub- loan environmental eligibility assessments. Environmental assessments will be carried out in accordance with both Government of Turkey Environmental Assessment (Regulation on Environmental Impact Assessment, from the Ministry of Environment and Urbanization- MoEU) and World Bank EA (OP 4.01) requirements. Due to the nature of the project, working capital or investment loan applications are expected that will include machinery purchase/replacement or small scale Public Disclosure Copy construction works. Therefore, it is expected that there will be no large scale significant and/ or irreversible impacts. Sub-projects in environmental Category A will not be eligible for funding. Moreover, since the policy on international waterways is not triggered, there will be a positive list of watersheds in Turkey in the framework which will guide the FI and the PFIs for the eligible locations of the actions. The environmental assessment (including environmental due diligence) procedures will be conducted according to the environmental review framework which will be prepared by Ziraat Bank and approved by WB. The environmental review framework will also include evaluation forms for assessing the environmental due-diligence of the existing facilities (SMEs) which will be applying for working capital or investment loans. The framework will provide guidance for additional requirements if the investment loan includes activities which will then lead to a classification Public Disclosure Copy of 'Category B' of the sub-projects. The framework will also include a methodology for 'implementation support missions'. It is expected to have a prior review for an initial set of projects whereby WB will review all safeguard documentation, and then it is planned to have a sampling system where WB's environmental and social safeguard specialists will conduct site visits and safeguard documentation assessment for randomly selected sub-projects. Natural Habitats OP/BP 4.04 No Forests OP/BP 4.36 No Pest Management OP 4.09 No Physical Cultural Resources OP/ No BP 4.11 Indigenous Peoples OP/BP 4.10 No Involuntary Resettlement OP/BP No Land acquisition is not eligible under the 4.12 proposed project so OP 4.12 is not triggered. Still, the social safeguard specialist will be included in the project team and she will be expected to provide guidance to Ziraat Bank (and to PFIs if necessary) regarding the Bank's Public Disclosure Copy land acquisition policy, in order to eliminate any incompliance with land acquisition aspects. The specialist will also attend the 'implementation support missions' to assess the sampled sub- project's scope and documentation proving there was no land acquisition conducted. Safety of Dams OP/BP 4.37 No Projects on International No Waterways OP/BP 7.50 Projects in Disputed Areas OP/BP No 7.60 III. SAFEGUARD PREPARATION PLAN A. Tentative target date for preparing the PAD Stage ISDS: 25-Apr-2013 B. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing1 should be specified in the PAD-stage ISDS: 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons. Ziraat Bank will prepare an Operational Manual that will include the environmental review procedures and implementation arrangements under this project. The Environmental Review section will be shared with the WB and, after consent, the plan will be translated to Turkish and Public Disclosure Copy will be disclosed in Ziraat Bank's web site and, if possible, the public will be informed via other sources. Environmental review will also be included in the sub-loan agreements with Ziraat Bank with selected PFIs and PFIs will be asked to disclose these procedures in their websites. IV. APPROVALS Task Team Leader: Name: Ilias Skamnelos Approved By: Regional Safeguards Name: Agnes I. Kiss (RSA) Date: 01-Mar-2013 Coordinator: Sector Manager: Name: Aurora Ferrari (SM) Date: 26-Feb-2013 Public Disclosure Copy