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PROJECT INFORMATION DOCUMENT (PID) 
CONCEPT STAGE 
Report No.:  AB1108 
Project Name 
IDP ECON DEVT SUPPRT 
Region 
EUROPE AND CENTRAL ASIA 
Sector 
Micro- and SME finance (60%);Other social services (40%) 
Project ID 
P089751 
Borrower(s) 
GOVERNMENT OF AZERBAIJAN 
Implementing Agency 
Social Fund for Development of IDPs 
Environment Category 
[
]
A
[
]
B
[
]
C
[
]
FI   [ x] TBD (to be determined) 
Safeguard Classification 
[
]
S
1
[
]
S
2
[X] S
3
[
]
S
F
[
x]
TBD (to be determined)
 
Date PID Prepared 
September 10, 2004 
Estimated Date of 
Appraisal Authorization 
February 18, 2005 
Estimated Date of Board 
Approval 
May 19, 2005 
1.  Key development issues and rationale for Bank involvement 
 
The 1988-1994 conflict between Azerbaijan and Armenia over the Nagorno-Karabakh region resulted in 
Azerbaijan losing  about 20% of its territory and about 700,000 or 15% of its population becoming  IDPs. 
(An additional 200,000 ethnic Azeri refugees fled Armenia). Support from the UN, international donors 
and NGOs helped avoid a major humanitarian crisis and allowed the Azerbaijan Government to ensure 
that the minimum needs of IDPs were temporarily met. Together with UNDP and UNCHS, the World 
Bank developed in 1997-98 a USD 120.0 million program for the 
Resettlement and Reconstruction
 
of 
Liberated Territories
 [i.e. areas in Azerbaijan that had been temporarily occupied by Armenian forces].  
To finance the first phase of the program, the Bank approved a USD 20.0 million IDA credit (The Pilot 
Reconstruction Project--Cr. 31090-AZ) in August 1998. The credit was complemented by parallel 
financing from UNDP (USD 3.2 million), UNCHS (USD 12.1 million) and EU (USD 9.5 million), and 
supported by a Government contribution of USD 9.5 million.   
Rebuilding infrastructure in the war stricken regions allowed some IDPs to return to their places of origin. 
However,  many others remained confined to camps or temporary shelter, especially in the Greater Baku 
area.  To address the needs of these groups and help improve their living conditions, the Bank agreed to 
provide a USD 10.0 million Supplemental Credit in June 1999 to finance, through a social fund type 
mechanism (the ‘Social Fund for Development of IDPs (SFDI)’) micro-projects with social and economic 
objectives and to provide micro-credits to individual IDPs with a view to enhancing their economic 
opportunities.    
After overcoming some initial problems, the project has seen a consistently successful implementation. At 
this point, virtually all credit resources have been committed and all activities are expected to be fully 
completed by the time of credit closing on June 30, 2005. 
 
In the first years of the post-conflict period the Government focused primarily on meeting the urgent and 
critical humanitarian needs with the expectation that the conflict could be settled and IDPs returned to 
their places of origin.  As the prospects for a rapid settlement of the conflict started fading the 
Government became increasingly concerned that the poor economic and social conditions of IDPs could 
turn into a potential source of social unrest.  As a result the Government began to increasingly focus its 
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attention on the improving the living conditions of IDPs and promoting their social and economic 
integration in the environment of  their current places of residence.   
Supporting the economic and social integration of IDPs was the objective of the SFDI component from 
the very beginning.  Recognizing the validity of the SFDI approach the Government asked the Bank in 
November.2003 to consider the preparation of a follow up project that would continue the efforts initiated 
by the SFDI component to further the economic and social integration of IDPs in the Azeri society.               
 
2. Proposed objective(s) 
 
The proposed ‘IDP Economic Development Support Project –IDPEDS’, would, as a ‘Repeater Project’, 
replicate, and continue the activities developed under, the ‘Social Fund for Development of IDPs -SFDI’ 
component of the ongoing ‘Azerbaijan Pilot Reconstruction Project’ (Cr.  31090-AZ), beginning around 
the time of  closing of  the latter on June 30, 2005.  The objective of the SFDI component was to improve 
the living conditions and the living standards of the most vulnerable groups of IDPs through better access 
to basic social services and the creation of employment opportunities. 
 
 
 
3. Preliminary description 
 
In keeping with the current structure of the SFDI component of the ‘Azerbaijan Pilot Reconstruction 
Project’ the proposed IDPEDS would include two components:  
 
Component A. 
Micro-projects.
 The micro-projects component would finance the implementation by 
SFDI of micro-projects of the same type and size implemented under the existing project.  (repair of 
schools, dormitories, health facilities, rehabilitation of small-scale water and electricity supply systems, 
etc.).  SFDI has currently a portfolio of possible projects of about USD 8.0 million that have been 
identified but could not be financed for lack of funds. Additionally, sizeable portfolios of potential 
projects were identified by other donors, especially USAID, but remained at the state of proposals due to 
the reduction of donor involvement. 
Component B
:
Micro-Finance
.
The micro-finance component would finance the continuing extension of 
micro-credits to IDPs  though with a slightly different approach to the implementation arrangements 
adopted for the following reasons: First, the amount of new credit resources from IDPEDS is likely to be 
relatively modest because a significant portion of the needs will be covered from reflows from the 
existing project. Second, IDPEDS would only be made available to micro-finance institutions that have a 
demonstrated financial viability and management capacity, a requirement that is likely to eliminate many 
of the current partner lending institutions, especially the credit unions.    
At this point it is estimated that the total cost of the project will be about USD 16.0 with an IDA credit of 
USD 14.5 million  
The proposed IDPEDS would be implemented by SFDI, the agency responsible for the implementation of 
the SFDI component of the ‘Azerbaijan Pilot Reconstruction Project’. 
 
4.  Safeguard policies that might apply 
 
The proposed IDPEDS is expected to have a positive environmental impact, especially by rehabilitating 
sanitation and drinking water supply installations. Improvements in schools and other public facilities is 
expected to improve energy efficiency. Environmental concerns will be addressed during selection, 
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development and implementation of  micro-projects in accordance with procedures laid out in the SFDI 
Operations Manual (OM). The  proposed IDPEDS will not trigger any other Bank safeguard policy.  
 
5. Tentative financing 
Source: ($m.) 
BORROWER/RECIPIENT 1.5 
INTERNATIONAL DEVELOPMENT ASSOCIATION 
14.5 
 Total 
16.0 
 
6. Contact point 
Contact: Ellen Hamilton 
Title: Urban Planner 
Tel: (202) 473-6583 
Fax: (202) 614-0983 
Email: Ehamilton@worldbank.org