OFFICIAL DOCUMENTS GRANT NUMBER TF016588 MIDDLE EAST AND NORTH AFRICA TRANSITION FUND Grant Agreement ENHANCING GOVERNANCE AND STRENGTHENING THE REGULATORY AND INSTITUTIONAL FRAMEWORK FOR MICRO, SMALL AND MEDIUM ENTERPRISE DEVELOPMENT PROJECT between THE HASHEMITE KINGDOM OF JORDAN and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL DEVELOPMENT ASSOCIATION acting as Implementation Support Agency for the Transition Fund Dated u2014 GRANT NUMBER TF016588 TRANSITION FUND GRANT AGREEMENT AGREEMENT dated !9 fe,\ r u.L ,2014, entered into between: THE HASHEMITE KINGDOM OF JORDAN ("Recipient"); and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL DEVELOPMENT ASSOCIATION ("World Bank"), acting as Implementation Support Agency (ISA) for the Trust Fund (TF07202 1) for the Transition Fund (the "Trust Fund"). The World Bank and the Recipient hereby agree as follows: Article I Standard Conditions; Definitions 1.01. The Standard Conditions (as defined in Appendix I to this Agreement), with the modification set forth in Appendix 2 to this Agreement, constitute an integral 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 Standard Conditions or in this Agreement, or in Appendix 1 to this Agreement. Article II The Project 2.01. The Recipient declares its commitment to the objectives of the project described in Schedule I to this Agreement ("Project"). To this end, the Recipient shall cause the Project to be carried out by the Project Implementing Entity in accordance with the provisions of Article II of the Standard Conditions. 2.02. Without limitation upon the provisions of Section 2.01 of this Agreement, and except as the Recipient and the World Bank shall otherwise agree, the Recipient shall ensure that the Project is carried out in accordance with the provisions of Schedule 2 to this Agreement. -2- Article III The Grant 3.01. The World Bank agrees to extend to the Recipient, on the terms and conditions set forth or referred to in this Agreement, a grant in an amount equal to three million Dollars (US$3,000,000) ("Grant") to assist in financing the Project. 3.02. The Recipient may withdraw the proceeds of the Grant in accordance with Section IV of Schedule 2 to this Agreement. 3.03. The Grant is funded out of the Trust Fund for which the World Bank receives periodic contributions from the Trustee of the Trust Fund, in accordance with the Financial Procedures Arrangement (FPA) between the International Bank for Reconstruction and Development and International Development Association, acting jointly as Implementation Support Agency (ISA), and the International Bank for Reconstruction and Development, as Trustee, dated November 21, 2012, concerning the Trust Fund. In accordance with Section 3.02 of the Standard Conditions, the World Bank's payment obligations in connection with this Agreement are limited to the amount of funds made available to it by the Trustee under the abovementioned Trust Fund, in accordance with the FPA, and the Recipient's right to withdraw the Grant proceeds is subject to the availability of such funds. Article IV Effectiveness; Termination 4.01. This Agreement shall not become effective until evidence satisfactory to the World Bank has been furnished to the World Bank that the conditions specified below have been satisfied: (a) The execution and delivery of this Agreement on behalf of the Recipient have been duly authorized or ratified by all necessary government action. (b) The Subsidiary Agreement referred to in Section I.B of Schedule 2 of this Agreement has been executed on behalf of the Recipient and the Project Implementing Entity. 4.02. As part of the evidence to be furnished pursuant to Section 4.01 (a), there shall be furnished to the World Bank an opinion or opinions satisfactory to the World Bank of counsel acceptable to the World Bank or, if the World Bank so requests, a certificate satisfactory to the World Bank of a competent official of the Member Country, showing the following matters: -3- (a) on behalf of the Recipient, that this Agreement has been duly authorized or ratified by, and executed and delivered on its behalf and is legally binding upon it in accordance with its terms; and (b) the Subsidiary Agreement referred to in Section I.B of Schedule 2 to this Agreement has been duly authorized or ratified by the Recipient and the Project Implementing Entity and is legally binding upon each such party in accordance with its terms. 4.03 Except as the Recipient and the World Bank shall otherwise agree, this Agreement shall enter into effect on the date upon which the World Bank dispatches to the Recipient notice of its acceptance of the evidence required pursuant to Section 4.01 of this Agreement ("Effective Date"). If, before the Effective Date, any event has occurred which would have entitled the World Bank to suspend the right of the Recipient to make withdrawals from the Grant Account if this Agreement had been effective, the World Bank may postpone the dispatch of the notice referred to in this Section until such event (or events) has (or have) ceased to exist. 4.04. This Agreement and all obligations of the parties under it shall terminate if it has not entered into effect by the date ninety (90) days after the date of this Agreement, unless the World Bank, after consideration of the reasons for the delay, establishes a later date for the purpose of this Section. The World Bank shall promptly notify the Recipient of such later date. Article V Recipient's Representative; Addresses 5.01. The Recipient's Representative referred to in Section 7.02 of the Standard Conditions is its Minister of Planning and International Cooperation. 5.02. The Recipient's Address referred to in Section 7.01 of the Standard Conditions is: Ministry of Planning and International Cooperation Post office Box 555 Amman, 11118 The Hashemite Kingdom of Jordan Facsimile: 962-6-464 9341 -4- 5.03. The World Bank's Address referred to in Section 7.01 of the Standard Conditions is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: INTBAFRAD 248423 (MCI) or 1-202-477-6391 Washington, D.C. 64145 (MCI) -5- AGREED at (IA. ,L, as of the day and year first above written. HASHEMITE KINGDOM OF JORDAN By Authorized Representative Name: cmr. -n0rC,-yCy,, 'Smi Title: CL%n INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION (acting as Implementation Support Agency of the Trust Fund for the Transition Fund) By Authorized Representative Title: ~ - L -6- SCHEDULE I Project Description The objectives of the Project are to enhance financial services and products and to strengthen financial protection mechanism for MSMEs, while enhancing governance. The Project consists of the following parts: Part I: Strengthening Credit Guarantee Schemes Carrying out a program of activities to strengthen the Recipient's credit guarantee schemes through assisting JLGC in: (a) enhancing its core internal capabilities, expanding its outreach and increasing the impact of its products especially those targeting SMEs with focus on marginalized groups, including women and underserved areas; (b) designing a guarantee product for micro, small, and medium lending to enhance MSMEs access to finance through, inter alia: (i) the provision of training to JLGC staff to improve their expertise in technical areas, including product and business development, risk management and marketing; (ii) the carrying out of study tours to learn from best practice guarantee institutions; (iii) the development and implementation of a training and certification program for financial institutions managers and team leaders; and (iv) capacity building for the development and implementation of technologies-based tools, including, inter alia: an Enterprise Resource Planning System, a management information system mechanism, an automation process to build interfaces with banks; and (c) the provision of goods required for this purpose. Part II: Enhancing the Consumer Protection Mechanism Carrying out a program of activities to create a reliable and strong consumer protection system guaranteeing that MSME clients are receiving timely, appropriate and adequate service by: (a) establishing a Consumer Protection Division; (b) providing capacity building to establish appropriate on-site and off-site monitoring systems and procedures; and (c) developing financial literacy programs on clients' legal rights, financial products and complaint resolutions; all through, inter alia: (i) developing and carrying out public awareness campaigns, media programs, and Training; and (ii) provision of goods required for this purpose. Part III: Developing the Regulatory and Institutional Framework for Micro Finance Institutions and NBFIs Carrying out a program of activities to: (a) assist the Recipient in developing the institutional framework for the microfinance and NBFI sector, through: (i) the carrying out of a comprehensive market study; (ii) the provision of technical assistance in preparing necessary internal regulations; and (iii) the provision of training to strengthen staff capacity in charge of supervising micro finance institutions; (b) support the -7- establishment and equipping of a micro finance division within CBJ to be responsible for enforcing rules, ensuring compliance with the regulations and supervising MFIs; and (c) the provision of goods required for this purpose. -8- SCHEDULE 2 Project Execution Section I. Institutional and Implementation Arranpements A. Institutional Arrangements 1. The Recipient shall ensure that the Project Implementing Entity is maintained at all times during Project implementation with functions, staffing and resources, satisfactory to the World Bank. B. Subsidiary Agreement 1. To facilitate the Project Implementing Entity to carry out the Project, the Recipient shall make the proceeds of the Grant available to the Project Implementing Entity under a subsidiary agreement to be entered into between the Recipient and the Project Implementing Entity (the "Subsidiary Agreement"), under terms and conditions approved by the World Bank, among which, inter alia, the requirement of the Project Implementing Entity to comply with the terms of this Agreement, the Project Operational Manual, and the Anti-Corruption Guidelines. 2. The Recipient shall exercise its rights and carry out its obligations under the Subsidiary Agreement in such manner as to protect the interest of the Recipient and the World Bank and to accomplish the purposes of the Grant. Except as the World Bank shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive the Subsidiary Agreement or any of its provisions. C. Implementation Arrangements 1. The Recipient shall ensure that the Project is implemented in accordance with the Project Operational Manual. The Recipient shall ensure that the Project Implementing Entity does not assign, amend, abrogate or waive the Project Operational Manual or any provisions thereof if, in the opinion of the World Bank, such assignment, amendment, abrogation or waiver will materially and adversely affect the implementation of the Project. Any amendments to the said manual shall be made with the prior written agreement of the World Bank. In case of any conflict between the provisions of the Project Operational Manual and the provisions of this Agreement, the provisions of this Agreement shall govern. 2. Without any limitation to the provisions of Section 3.06 of the Standard Conditions, the Recipient shall ensure that the Grant funds are used for their intended purposes and not diverted to terrorists or their agents, or utilized to finance activities carried out by terrorists or their agents. -9- D. Anti-Corruption The Recipient shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. E. Donors Visibility and Visits 1. The Recipient shall take or cause to be taken all such measures as the World Bank may reasonably request to identify publicly the Trust Fund donors' support for the Project. 2. For the purposes of Section 2.09 of the Standard Conditions, the Recipient shall, upon the World Bank's request, take or cause to be taken all measures required on its part to enable the representatives of the Trust Fund donors to visit any part of the Recipient's territory for purposes related to the Project. Section II. Project Monitoring, Reporting and Evaluation A. Project Reports; Completion Report 1. The Recipient shall cause the Project Implementing Entity to monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of the indicators acceptable to the World Bank. Each Project Report shall cover the period of one calendar semester, and shall be furnished to the World Bank not later than forty-five (45) days after the end of the period covered by such report. 2. The Recipient shall cause the Project Implementing Entity to prepare the Completion Report in accordance with the provisions of Section 2.06 of the Standard Conditions. The Completion Report shall be furnished to the World Bank not later than six (6) months after the Closing Date. B. Financial Management; Financial Reports; Audits 1. The Recipient shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 2.07 of the Standard Conditions. 2. Without any limitation to the provision of Part A of this Section, the Recipient shall ensure that the Project Implementing Entity prepares interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the World Bank, and the Recipient shall ensure that the Project Implementing Entity furnishes such reports to the World Bank not later than forty-five (45) days after the end of each calendar quarter. -10- 3. The Recipient shall ensure that the Project Implementing Entity shall have the its Financial Statements for the Project audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one (1) fiscal year of the Recipient or any other period agreed upon with the World Bank. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six (6) months after the end of such period. C. Other Reports Without any limitation to the provisions of Section II.A and Section II.B of this Schedule 2, the Recipient shall, promptly upon request from the World Bank, provide or cause to be provided all information and reports relating to the Project and the use of the proceeds of the Grant, in order to enable the World Bank to fulfill its obligations under the FPA. Section III. Procurement A. General 1. Goods and Non-consulting Services. All goods and non-consulting services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the requirements set forth or referred to in Section I of the Procurement Guidelines and with the provisions of this Section. 2. Consultants' Services. All consultants' services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the requirements set forth or referred to in Sections I and IV of the Consultant Guidelines and with the provisions of this Section. 2. Definitions. The capitalized terms used below in this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, refer to the corresponding method described in Sections II and III of the Procurement Guidelines, or Sections II, III, IV and V of the Consultant Guidelines, as the case may be. B. Particular Methods of Procurement of Goods and Non-consulting Services 1. International Competitive Bidding. Except as otherwise provided in paragraph 2 below, goods, and non-consulting services shall be procured under contracts awarded on the basis of International Competitive Bidding. 2. Other Methods of Procurement of Goods and Non-consulting Services. The following methods, other than International Competitive Bidding, may be used for procurement of goods and non-consulting services for those contracts specified in the Procurement Plan: (a) Limited International Bidding; - 11 - (b) National Competitive Bidding, subject to the additional provisions listed in the paragraph 3 below; (c) Shopping; (d) procurement under Framework Agreements in accordance with procedures which have been found acceptable to the World Bank; and (e) Direct Contracting. 3. National Competitive Bidding Provisions (a) Standard bidding documents acceptable to the World Bank shall be used. (b) Invitations to bid shall be advertised in at least one widely circulated national daily newspaper and bidding documents shall be made available to prospective bidders, at least twenty-eight (28) days prior to the deadline for the submission of bids. (c) Bids shall not be invited on the basis of percentage premium or discount over the estimated cost. (d) Bidding documents shall be made available, by mail or in person, to all who are willing to pay the required fee. (e) Foreign bidders shall not be precluded from bidding and no preference of any kind shall be given to national bidders, to that end, having a presence in the Recipient's territory should not be a condition for bidding. (f) Qualification criteria (in case pre-qualifications were not carried out) shall be stated in the bidding documents, and if a registration process is required, a foreign firm determined to be the lowest evaluated bidder shall be given reasonable opportunity of registering, without any hindrance i.e. no non-registration status should be considered as a non- eligibility-to-bid criterion. Additionally, one envelop system shall be used. (g) Bidders may deliver bids, at their option, either in person or by courier service or by mail. (h) Except for late bids, bids shall be opened in public in one place preferably immediately, but no later than one (1) hour, after the deadline for submission of bids, and prices for all bids will be read out in this public session and no disqualification shall be made at that stage. (i) Evaluation of bids shall be made in strict adherence to the criteria disclosed in the bidding documents, in a format, and within the specified period, agreed with the World Bank. (j) Bids shall not be rejected merely on the basis of a comparison with an official estimate without the prior concurrence of the World Bank. (k) Bids shall be solicited and contracts shall be awarded on the basis of unit prices, and not on the basis of a schedule of rates, and award will be - 12 - based on all items included within the bid or the lot in case of multiple lots. (1) Split award or lottery in award of contracts shall not be carried out. When two or more bidders quote the same price, an investigation shall be made to determine any evidence of collusion, following which: (A) if collusion is determined, the parties involved shall be disqualified and the award shall then be made to the next lowest evaluated and qualified bidder; and (B) if no evidence of collusion can be confirmed, then fresh bids shall be invited after receiving the concurrence of the World Bank. (in) Contracts shall be awarded to the lowest evaluated and qualified bidder within the initial period of bid validity so that extensions are not necessary. Extension of bid validity may be sought only under exceptional circumstances. (n) Extension of bid validity shall not be allowed without the prior concurrence of the World Bank: (A) for the first request for extension if it is longer than eight (8) weeks; and (B) for all subsequent requests for extensions irrespective of the period. (o) Negotiations shall not be allowed with the lowest evaluated or any other bidders. (p) Re-bidding shall not be carried out without the World Bank's prior concurrence. (q) All contractors or suppliers shall provide performance security as indicated in the contract documents. A contractor's or a supplier's performance security shall apply to a specific contract under which it was furnished. (r) A sole bid can be considered if due diligence was observed in advertising the procurement opportunity. (s) A provision shall be included in bidding documents and in contracts financed by the Grant requiring bidders, suppliers and contractors to permit the World Bank to inspect their accounts and records and other documents relating to the bid submission and contract performance and to have them audited by auditors appointed by the World Bank. C. Particular Methods of Procurement of Consultants' Services 1. Quality- and Cost-based Selection. Except as otherwise provided in paragraph 2 below, consultants' services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. 2. Other Methods of Procurement of Consultants' Services. The following methods, other than Quality- and Cost-based Selection, may be used for - 13 - procurement of consultants' services for those assignments which are specified in the Procurement Plan: (a) Quality-based Selection; (b) Selection under a Fixed Budget; (c) Least Cost Selection; (d) Selection based on Consultants' Qualifications; (e) Single-source Selection of consulting firms; (f) Selection of Individual Consultants; and (g) Single-source procedures for the Selection of Individual Consultants. D. Review by the World Bank of Procurement Decisions The Procurement Plan shall set forth those contracts which shall be subject to the World Bank's Prior Review. All other contracts shall be subject to Post Review by the World Bank. Section IV. Withdrawal of Grant Proceeds A. General 1. The Recipient may withdraw the proceeds of the Grant in accordance with the provisions of: (a) Article III of the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the table in paragraph 2 below. 2. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Grant ("Category"), the allocations of the amounts of the Grant to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Category Amount of the Grant Percentage of Expenditures Allocated (expressed in to be Financed USD) (inclusive of Taxes) Goods, non-consulting 3,000,000 100% services, consultants' services, Training, and Operating Costs under the Project TOTAL AMOUNT 3,000,000 - 14- B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made for the payments made prior to the date of this Agreement. 2. The Closing Date referred to in Section 3.06 (c) of the Standard Conditions is August 31, 2018. - 15 - APPENDIX I Definitions (a) "Anti-Corruption Guidelines" means 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. (b) "Consultant Guidelines" means the "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011. (c) "Consumer Protection Division" means a division to be created within CBJ for compliance supervision of consumer protection laws and regulations and for the handling of consumers' complaints. (d) "Enterprise Resource Planning System" means a business management software to be used by the Recipient for the purpose of storing and managing data. (e) "Jordan Loan Guarantee Corporation" and "JLGC" each means a semi-public institution with the CBJ as a majority shareholder established with the objective of providing credit and loan guarantees to small and medium size enterprises and national exports in the Recipient's territory. (f) "MFIs" or "Microfinance Institutions" means non-banks microfinance institutions including but not limited to for-profit companies, not-for-profit companies, and non-governmental organizations, as referred to in Part III of schedule 1 of the Grant Agreement. (g) "MSME" means Micro, Small and Medium Enterprise in the Recipient's territory. (h) "NBFI" means non-Bank financial institutions in the Recipient's territory. (i) "Operating Costs" means Project related incremental costs incurred by the Project Implementing Entity on account of communication, translation and interpretation, printing, procurement-related advertising, office supplies, banking charges, local transportation, and other miscellaneous costs directly associated with Project implementation, subject to prior written approval by the World Bank, excluding salaries of the Recipient's civil servants. (j) "Procurement Guidelines" means the "Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011. - 16 - (k) "Procurement Plan" means the procurement plan dated January 6, 2014 prepared and updated from time to time by the Recipient for the Project in accordance with paragraph 1.18 of the Procurement Guidelines and paragraph 1.25 of the Consultant Guidelines ("Procurement Plan"). (1) "Project Implementing Entity", "CBJ" and "Central Bank of Jordan" each means the Recipient's central bank, established and operating under the Project Implementing Entity's Legislation, as referred to in Section I.A. 1 of Schedule 2 to the Grant Agreement. (m) "Project Implementing Entity's Legislation" means the Recipient's Law Number 23 of the year 1971 pursuant to which the Project Implementing Entity is established and operating. (n) "Project Operational Manual" means the manual satisfactory to the World Bank, referred to in Section I.C.1 of Schedule 2 to the Grant Agreement, as the same may be amended from time to time with the prior written agreement of the World Bank. (o) "SME" means small and medium enterprise. (p) "Standard Conditions" means the Standard Conditions for Grants Made by the World Bank Out of Various Funds, dated February 15, 2012. (q) "Steering Committee" or "SC" means the Transition Fund's decision making body, established in accordance with the procedures set out in the Trust Fund Operations Manual. (r) "Training" means the expenditures incurred on account of Grant implementation such as workshops, transportation and per diem of trainers and trainees, rent of training facilities; preparation, acquisition, reproduction and distribution of training materials; and fees for trainers and other reasonable expenditures as agreed upon in writing with the World Bank. (s) "Transition Fund Operations Manual" means the Manual approved by the Steering Committee, which sets out the detailed procedures applicable to the operation of the Trust Fund, as said Manual may be amended from time to time by the Steering Committee in accordance with procedures set out in the said Manual. (t) "Trustee" means the International Bank for Reconstruction and Development in its capacity as a trustee of the Trust Fund. - 17- APPENDIX 2 Modifications to the Standard Conditions The Standard Conditions are modified as follows: The first sentence of Section 4.05(a) of the Standard Conditions have been revised as follows: "If the World Bank or the Steering Committee (as defined in the Grant Agreement) determines or an audit conducted under the FPA (as defined in the Grant Agreement) indicates that an amount of the Grant has been used in a manner inconsistent with any provision of the Grant Agreement, the Standard Conditions, or the FPA, the Recipient shall, upon notice by the World Bank to the Recipient, promptly refund such amount to the World Bank."