Report No: RES41622 RESTRUCTURING PAPER ON A PROPOSED PROGRAM RESTRUCTURING OF NATIONAL SAFETY NET PROGRAM FOR RESULTS APPROVED ON JULY 23, 2013 TO THE REPUBLIC OF KENYA Social Protection and Jobs Global Practice Africa Region Regional Vice President: Hafez M. H. Ghanem Country Director: Carlos Felipe Jaramillo Regional Director: Amit Dar Practice Manager: Robert S. Chase Task Team Leaders: Yuliya Smolyar, Iftikhar Malik Page 1 of 16 ABBREVIATIONS AND ACRONYMS CT-OVC Cash Transfer for Orphans and Vulnerable Children COVID-19 Coronavirus Disease 2019 DLI Disbursement-Linked Indicator DLR Disbursement-Linked Result FM Financial Management GoK Government of Kenya G&CM Grievance and Case Management HSNP Hunger Safety Net Program MIS Management information system MLSP Ministry of Labor and Social Protection NDMA National Drought Management Authority NSNP National Safety Net Program OPCT Older Persons Cash Transfer program PWSD-CT Persons with Severe Disability Cash Transfer PforR Program for Results PDO Project Development Objective SR Single Registry SSN Social Safety Net Page 2 of 16 I. PROGRAM STATUS AND RATIONALE FOR RESTRUCTURING Program Status 1. The Government of Kenya has been making satisfactory progress toward achieving various results supported by the National Safety Net Program for Results (Program). The original Program was approved in July 2013 in the amount of SDR 166.9 million (US$250 million equivalent) and declared effective in October 2013. In April 2017, additional financing of SDR 38.6 million (US$50 million equivalent) along with extension of the closing date until June 30, 2020 was approved by the Board of the Executive Directors. Over the years, there has been substantial progress with most of the Disbursement Linked Indicators (DLIs) achieved (Table 1). The notable results achieved to date include the expansion in the number of safety net beneficiaries, electronic payments of benefits with two-factor authentication, an improved Management Information System (MIS) to administer the cash transfers, a fully operational single registry (SR) of beneficiaries, and consolidation of three out of the four cash transfer programs under the NSNP.1 Furthermore, under the Hunger Safety Net Program (HSNP) managed by National Drought Management Authority (NDMA), the Government has made a significant progress in establishing systems to enable a rapid scale-up of cash transfers in response to food security shock in four counties in Northern Kenya that are prone to recurrent droughts. Being a part of the NSNP, HSNP has also established a social registry which covers almost all households2 living in the counties of Turkana, Wajir, Mandera and Marsabit, and provides an objective measurement of their welfare status. These households have also been facilitated to open the bank accounts to enable timely delivery of shock responsive emergency cash transfers. TABLE 1. NSNP DLI STATUS TABLE Disbursement Linked Disbursement Linked Results US$ SDR Progress in achieving Indicator million million DLIs 1. Additional a. Expansion Plan for the NSNP, informed by 10 6.8 Achieved households are poverty and vulnerability criteria adopted enrolled in the NSNP b. 235,000 new households enrolled in the 90 60 Achieved NSNP according to agreed Expansion Plan and paid for by the Government of Kenya (GoK) in comparison with July 2013 baseline c. Remaining 40,000 CT-OVC3 beneficiary 8 5.9 Achieved households (funded by the UK Department for International Development at December 2016) financed by the Government from July 2018 d. Modified NSNP Expansion Plan, including 3 2.2 Achieved NEDI expansion, adopted e. 70,000 additional households in the NEDI 27 19.85 Partially achieved counties enrolled in the NSNP and paid for SDR 10.5 ml through the Government’s budget. outstanding 2 System for a. Establishment of baseline 5 3.34 Achieved recertification of b. Plan adopted for how all four NSNP 5 3.34 Achieved NSNP beneficiaries is programs will maintain an up-to-date registry in place of beneficiaries through recertification c. Completion of the rollout plan of the 10 6.66 Not yet achieved. recertification plan in at least 20 sub-counties 3 Single registry is fully a. Program MISs fully operational using agreed 15 10 Achieved operational with standards for internal payroll controls program MIS’s using b. Single Registry is fully operational with links 10 6.7 Achieved agreed standards for to IPRS Page 3 of 16 Disbursement Linked Disbursement Linked Results US$ SDR Progress in achieving Indicator million million DLIs internal payroll controls 4 Percent of NSNP a. 60 percent of NSNP payments made 6 4 Achieved payments made electronically using two-factor authentication electronically using b. 90 percent of NSNP payments made 9 6 Achieved two-factor electronically using two-factor authentication authentication 5 Percent of payments a. 75 percent of all payments disbursed to 15 10 Achieved disbursed to Payment Service Providers on time Payment Service Providers on time 6 Functional complaint a. (i) Complaints and grievance mechanism is 5 3.34 Achieved and grievance functional at national level for all four cash mechanisms transfer programs a. (ii) Complaints and grievance mechanism is 10 6.68 Not yet achieved functional at all levels for all four cash transfer programs b. (i) Beneficiary Outreach Strategy developed 3 2.01 Achieved and adopted b. (ii) Beneficiary Outreach Strategy 10 6.68 Achieved implemented in at least 20 sub-counties b. (iii) Beneficiary awareness of transfer 7 4.68 Partially achieved. amount and Grievance and Case Management SDR2.3 ml outstanding system 7 System for scaling up A system for scaling up the NSNP as part of the 20 13.35 Not yet achieved. the NSNP as part of national drought risk management system has the national drought been created with agreed levels of GoK risk management contingency financing system 8 Strategy for a. Strategy for consolidating CT-OVC, OPCT, 5 3.34 Achieved consolidating the PWSD-CT and UFS-CT4 adopted cash transfer b. Strategy for consolidating the CT-OVC, OPCT, 10 6.68 Achieved programs and PWSD-CT implemented 9 The GoK finances the GOK finances the HSNP in line with budget and 5 3.34 Achieved HSNP in line with policy commitments budget and policy commitments 10 NSNP beneficiaries’ a. Complementary Services module in SR is 2 1.5 Achieved access to ready and formal data sharing protocols are complementary available for the use of potential partners social and productive b. Agreements signed with at least two 1 0.75 Not yet achieved. services is partners providing relevant complementary Promoted services to NSNP beneficiary households 1 Throughout the document, the World Bank financed National Safety Net Program for Results is referred to as “the Program” and the overall Government-led National Safety Net Program is referred to as “the NSNP” or “the program”. 2 Some households have self-selected to not be part of the registry. 3 Cash Transfer for Orphans and Vulnerable Children. 4 OPCT - Older Persons Cash Transfer, PWSD-CT - Persons with Severe Disabilities - Cash Transfer, UFS-CT - Urban Food Subsidy Cash Transfer. Page 4 of 16 Disbursement Linked Disbursement Linked Results US$ SDR Progress in achieving Indicator million million DLIs 11 Fiduciary systems for a. Implementation of 30 percent of agreed 2.7 1.98 Achieved NSNP have been critical Financial Management actions strengthened b. Implementation of 70 percent of agreed 3.6 2.64 Achieved critical FM actions c. Implementation of 100 percent of agreed 2.7 1.98 Achieved but evidence critical FM actions is waiting for World Bank’s review and disbursement 2. Notwithstanding the above good progress, the Program has six outstanding Disbursement-Linked Results (DLRs) with a total value of about SDR40 million (US$55.2 million equivalent). The Government has made some efforts but is yet to complete activities to achieve the remaining results. These include: a) expansion of NSNP benefits coverage in the North and North-Eastern counties (DLR 1e); b) recertification of program beneficiaries in 20 sub-counties (DLR 2c); c) launch of the decentralized complaints and grievance mechanism (DLR 6 a(ii)); d) creation of the National Drought Emergency Fund as the national disaster risk financing tool (DLI7); and e) establishment of partnerships with providers of complementary services to NSNP beneficiaries (DLR 10b). Insufficient progress to attain the results by the current closing date has been the reason for recent downgrading of the development objective and implementation progress ratings to moderately satisfactory. 3. Efforts to complete the outstanding results before the current closing date of June 30, 2020 have been affected by the Coronavirus Disease 2019 (COVID-19) pandemic. In response to the COVID-19 outbreak, the Government has put in place a number of measures to contain its spread. This has included among others the introduction of domestic travel restrictions. The Government has had to suspend all field work, making it impossible to make progress on DLR 1e and DLR 2c, while social distancing measures makes it challenging to make rapid progress on other result areas. An action plan was agreed with the Government to sustain the implementation of key activities to achieve the pending results and make necessary adjustments in the context of COVID-19 pandemic. There are no outstanding audits or Interim Financial Reports for the credit. Rationale for Restructuring 4. The COVID-19 pandemics has forced the Government to focus on emergency response in various areas. This includes an emergency cash transfer intervention for the affected households who have lost income due to COVID-19 containment measures. The World Bank has received the Government’s request to extend the closing date of the Program by six months and repurpose the outstanding credit balance to support this emergency cash transfer intervention. The World Bank team has been working with government counterparts to explore the potential support areas; however, more time is required to complete the discussions, undertake the required analysis of the design parameters by using the due diligence protocols, and agree on the way forward. It is for this reason that the team is requesting management’s approval of extension in the closing date of the Program from June 30, 2020 to December 31, 2020. The proposed restructuring is needed to sustain the implementation of key activities to achieve the pending results and make necessary adjustments in the context of COVID-19 pandemic. Kenya confirmed its first case of coronavirus infection on March 13, 2020 and immediately announced and enforced various measures to contain the spread of the virus. As of June 21, 2020, the total number of confirmed cases are 4,738, which has caused 123 deaths. While these measures will have a critical affect in reducing and slowing down the spread of COVID-19, they are also compounding the economic impact of the virus. Firms and individual are facing a significant demand shock on their goods and services. Rural households with livelihoods centred around subsistence agriculture will be less directly affected by measures to reduce Page 5 of 16 transmission of COVID-19. Mobility restrictions are unlikely to affect their economic activity, and as demand for food is expected to remain high (sustaining or increasing current food price levels). But rural households (who make up the majority of the current Social Safety Net beneficiaries) are being affected by the severe desert locust infestation, threatening crops, livestock production and income and thereby compounding their vulnerability and threatening food security. II. DESCRIPTION OF PROPOSED CHANGES 5. The proposed restructuring will extend the closing date of the Program until December 31, 2020. This will give time for the Government to advance critical activities toward achieving the outstanding results. Furthermore, this will allow completing the assessment and discussion on reprogramming by defining new DLIs, which can support the Government`s COVID-19 response while remaining aligned with the development objectives of the Program. The disbursement and implementation schedule as well as the end target date for the results indicators are revised in line with the proposed new closing date. There are no other requested changes. Since the extension of the closing date exceeds two years from the original closing date, approval from the Regional Vice President is required. III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Change in Disbursement Estimates ✔ Change in Implementation Schedule ✔ Change in Implementing Agency ✔ Change in Program's Development Objectives ✔ Change in Program Scope ✔ Change in Cancellations Proposed ✔ Reallocation between and/or Change in DLI ✔ Change in Disbursements Arrangements ✔ Change in Systematic Operations Risk-Rating Tool ✔ (SORT) Change in Safeguard Policies Triggered ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Page 6 of 16 Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/TF Status Closing Date Closing(s) Date Closing Date for Withdrawal Applications IDA-52870 Effective 31-Mar-2018 30-Jun-2020 31-Dec-2020 30-Apr-2021 IDA-59810 Effective 30-Jun-2020 31-Dec-2020 30-Apr-2021 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Year Current Proposed 2014 9,860,250.00 8,970,532.00 2015 24,095,250.00 30,233,229.25 2016 36,659,500.00 105,802,547.14 2017 40,463,250.00 43,234,986.48 2018 54,892,500.00 10,390,501.32 2019 70,873,250.00 11,405,728.62 2020 63,155,000.00 24,389,163.03 2021 0.00 65,573,312.16 OPS_DETAILEDCHANGES_EA_TABLE . Page 7 of 16 The World Bank National Safety Net Program for Results (P131305) ANNEX 1: RESULTS FRAMEWORK . . Results framework Program Development Objectives(s) To support the Republic of Kenya's efforts to establish an effective national safety net program for poor and vulnerable. Program Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target To support the Republic of Kenya's efforts to establish effective NSNP for poor and vulnerable HHs Net change in beneficiary household monthly per adult 0.00 150.00 equivalent consumption expenditure (Number) Number of NSNP beneficiaries, by sex (Number) 1,650,000.00 4,280,000.00 Action: This indicator has been Revised Completion of the rollout of the recertification plan in at System for recertification of NSNP beneficiaries is in place (Text) No least 20 subcounties Action: This indicator has been Revised % of all payments are made on time to Payment Service 12.00 90.00 Providers for transfer to Program Beneficiaries (Percentage) Page 8 of 16 The World Bank National Safety Net Program for Results (P131305) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Action: This indicator has been Revised Beneficiaries of social safety net programs (CRI, Number) 1,650,000.00 4,280,000.00 Action: This indicator has been Revised Beneficiaries of social safety net programs - Female (CRI, 825,000.00 2,140,000.00 Number) Action: This indicator has been Revised PDO Table SPACE Intermediate Results Indicators by Result Areas RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Expanding cash transfer programs to promote more comprehensive and equitable coverage Number of households paid for by the Government (Number) 114,384.00 792,000.00 Action: This indicator has been Revised Strengthening program systems to ensure good governance % of beneficiaries who know correct program transfer amount 56.30 70.00 for the program in which they are enrolled (Percentage) % of beneficiaries for whom payments are made electronically 40.00 90.00 using Two-Factor Authentication (Percentage) Grievance and Case Management mechanisms for the Cash Beneficiary Outreach Strategy implemented in at least 20 Not in place Transfer Programs are functional (Text) counties Action: This indicator has been Revised Page 9 of 16 The World Bank National Safety Net Program for Results (P131305) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target % of Program Beneficiaries who can name two means of making 8.80 40.00 complaint (Percentage) Single Registry is operational and progam MISs use the Standards Yes Yes for Internal Payroll Controls (Yes/No) Haromonizing cash transfer programs to increase the coherence of the safety net sector % of NSNP funding financed by the Government (Percentage) 41.00 96.00 Number of households per year paid through the NSNP out of No targets as this indicator will only be measured when the n/a NDEF (Text) early warning system triggers a response agreements signed with at least two partners providing NSNP beneficiaries' access to complementary social and n/a relevant complementary services to NSNP beneficiary productive services is promoted (Text) households Action: This indicator has been Revised Fiduciary systems for NSNP has been strengthened (Percentage) 0.00 100.00 IO Table SPACE Disbursement Linked Indicators Matrix DLI IN00858175 ACTION DLI 1 Additional households are enrolled in the NSNP Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome Yes Number 135,000,000.00 85.41 Period Value Allocated Amount (USD) Formula Baseline 0.00 Page 10 of 16 The World Bank National Safety Net Program for Results (P131305) July 2017 445,000.00 103,000,000.00 December 2017 275,000.00 5,000,000.00 December 2018 305,000.00 11,570,000.00 December 2019 345,000.00 15,430,000.00 DLI IN00858178 ACTION DLI 2 System for recertification of NSNP beneficiaries is in place Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome Yes Yes/No 15,000,000.00 33.33 Period Value Allocated Amount (USD) Formula Baseline No July 2017 No 0.00 December 2017 No 0.00 December 2018 Yes 5,000,000.00 December 2019 Yes 10,000,000.00 DLI IN00858181 ACTION DLI 3 Single Registry is fully operational with program MISs using agreed standards for internal payroll controls Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome No Yes/No 25,000,000.00 100.00 Period Value Allocated Amount (USD) Formula Page 11 of 16 The World Bank National Safety Net Program for Results (P131305) Baseline Yes July 2017 Yes 25,000,000.00 December 2017 Yes 0.00 December 2018 Yes 0.00 December 2019 Yes 0.00 DLI IN00858184 ACTION DLI 4 Percent of NSNP payments made electroincally using two-factor authentication Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome Yes Percentage 15,000,000.00 100.00 Period Value Allocated Amount (USD) Formula Baseline 40.00 July 2017 90.00 15,000,000.00 December 2017 90.00 0.00 December 2018 90.00 0.00 December 2019 90.00 0.00 Page 12 of 16 The World Bank National Safety Net Program for Results (P131305) DLI IN00858189 ACTION DLI 5 Percent of all payments are made on time to Payment Service Providers for transfer of Program Beneficiaries Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome Yes Percentage 15,000,000.00 100.00 Period Value Allocated Amount (USD) Formula Baseline 12.00 July 2017 0.00 December 2017 0.00 December 2018 75.00 15,000,000.00 December 2019 0.00 DLI IN00858191 ACTION DLI 6 Grievance and Case Management mechanisms for the Cash Transfer Programs are functional Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome Yes Text 35,000,000.00 61.43 Period Value Allocated Amount (USD) Formula Baseline Not in place July 2017 G&CM functional at all levels 15,000,000.00 Beneficiary Outreach Strategy developed and December 2017 3,000,000.00 adopted Beneficiary Outreach Strategy implemented in at December 2018 10,000,000.00 least 20 sub-counties Page 13 of 16 The World Bank National Safety Net Program for Results (P131305) Beneficiary awareness of transfer amount and December 2019 7,000,000.00 G&CM system DLI IN00858192 ACTION DLI 7 System for scaling up the NSNP has been adopted Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome No Yes/No 20,000,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline No July 2017 Yes 20,000,000.00 December 2017 Yes 0.00 December 2018 Yes 0.00 December 2019 Yes 0.00 DLI IN00858193 ACTION DLI 8 Government has adopted the consolidation strategy Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome No Yes/No 15,000,000.00 100.00 Period Value Allocated Amount (USD) Formula Baseline No July 2017 Yes 15,000,000.00 December 2017 Yes 0.00 Page 14 of 16 The World Bank National Safety Net Program for Results (P131305) December 2018 Yes 0.00 December 2019 Yes 0.00 DLI IN00858194 ACTION DLI 9 HSNP is financed Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome No Yes/No 5,000,000.00 100.00 Period Value Allocated Amount (USD) Formula Baseline No July 2017 Yes 5,000,000.00 December 2017 Yes 0.00 December 2018 Yes 0.00 December 2019 Yes 0.00 DLI IN00858195 ACTION DLI 10 NSNP beneficiaries' access to complementary social and productive services is promoted Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome No Text 3,000,000.00 67.93 Period Value Allocated Amount (USD) Formula Baseline Not in place July 2017 N/A 0.00 Page 15 of 16 The World Bank National Safety Net Program for Results (P131305) Complementary Services module in SR is ready and December 2017 formal data sharing protocols are available for the 2,000,000.00 use of potential partners Agreements signed with at least two partners December 2018 providing relevant complementary services to NSNP 1,000,000.00 beneficiary households December 2019 0.00 DLI IN00858196 ACTION DLI 11 Fiduciary systems for NSNP have been strengthened Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome Yes Percentage 9,000,000.00 41.00 Period Value Allocated Amount (USD) Formula Baseline 0.00 July 2017 0.00 0.00 December 2017 30.00 2,700,000.00 December 2018 70.00 3,600,000.00 December 2019 100.00 2,700,000.00 Page 16 of 16 The World Bank National Safety Net Program for Results (P131305) ANNEX 2: PROGRAM ACTION PLAN . . PAP_NOT_CHANGE_TBL Action Description Source DLI# Responsibility Timing Completion Measurement Revise OMs to respond to findings of the addendum to the Technical, and Integrated Fiduciary Assessments and Update of the Operations Manual the original ESSA Technical Client Recurrent Yearly if/as needed. Improve delivery of payments to beneficiaries: (i) reach agreement with Treasury on timeliness and flow of funds, (ii) regularly monitoring transfer steps against schedule, (iii) strengthening internal controls, (iv) developing long term PSP Regular payments to strategy Fiduciary Systems Client Recurrent Continuous beneficiaries. Implement IFAR recommendations with respect to procurement Fiduciary Systems Client Recurrent Continuous Timely procurements. Development and implementation of a time-bound FM action plan to comprehensively strengthen the fiduciary controls Implementation of 100 percent of in the NSNP Fiduciary Systems Client Recurrent Yearly the agreed priority FM actions. Finalize the EFC framework and action plan to prevent, detect, and deter EFC and ensure alignment Implementation of 100 percent of with the FM action Technical Client Due Date 30-Apr-2020 the agreed critical FM actions. Page 17 of 16 The World Bank National Safety Net Program for Results (P131305) plan Finalization of a harmonized targeting tool and update of the PMT, as and when new KIHBS data Updated HTM using new KIHBS become available Technical Client Due Date 01-Apr-2020 data Ensure financial allocations to the NSNP according to the program MTEF are included in the Adequate funding for sectoral MTEF and implementation and achievement annual budgets Other Client Recurrent Yearly of results for FY19/20. Ensure collaboration with the NRB to enable issuance of ID cards to eligible beneficiaries who do not have ID cards Other Client Recurrent Continuous Discussions held with NRB. Ensure adequate implementation capacity nationwide and more specifically in the NEDI counties by (i) developing an implementation plan and (ii) implementation of Implementation plan completed the same Technical Client Due Date 01-Apr-2020 and expansion in NEDI concluded. . Page 18 of 16