The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) Financial Sector Rapid Response Project (P119047) SOUTH ASIA | Afghanistan | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2012 | Seq No: 12 | ARCHIVED on 24-May-2019 | ISR35970 | Implementing Agencies: Ministry of Finance, DA AFGHANISTAN BANK, Islamic Republic of Afghanistan Key Dates Key Project Dates Bank Approval Date: 25-Aug-2011 Effectiveness Date: 06-Sep-2011 Planned Mid Term Review Date: 04-Oct-2014 Actual Mid-Term Review Date: 25-Apr-2015 Original Closing Date: 30-Jun-2014 Revised Closing Date: 31-Oct-2019 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project's development objective is to assist DAB to develop actions plans for improved banking supervision and implementamodernnational payment system for efficient and transparent payment transactions. 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) To assist DAB to develop action plans for improved banking supervision and to establish key building blocks of financial sector infrastructure: payment system, movable collateral registry, and public credit registry. Components Table Name Strengthening the DAB's capacity:(Cost $9.00 M) Development of the financial sector infrastructure:(Cost $29.70 M) DAB Skill Development; Technical Assistance and project implementation:(Cost $7.00 M) 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 Substantial Substantial Implementation Status and Key Decisions Component 1: Strengthening of DAB’s capacity 5/29/2019 Page 1 of 8 The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) There are three key TA activities under this component, mainly (i) Strengthening Financial Supervision Department (FSD), (ii) Adoption of Risk Based Internal Audit (RBIA) and (iii) adoption of International Financial Reporting Standards (IFRS). Under this component, a firm would be recruited to provide TA to strengthen the capacity of the Financial Supervision Department in the areas of banking regulation and supervision. The contract was signed off in November 2017 between DAB and international firm Unicorn. This is a two years’ time-based contract. The firm has provided deliverables to DAB that are currently under review. Currently DAB and Unicon are in discussion on deliverables for next year and how to best streamline them to cater to FSD’s needs while complying with the terms of the signed contract between both parties. The request for expression of interests (REOIs) for the RBIA and as well as adoption of IFRS were both announced on April 25, 2018 and procurement process was unsuccessful. Both REOIs were re-announced in January 2019 and currently in shortlisting process. Component 2: Development of the financial sector infrastructure: Support to establishment of Collateral Registry (CR) and Public Credit Registry (PCR): The Collateral Registry (CR) and the Public Credit Registry (PCR) remain a significant achievement, since the registries officially started operations in 2013 and 2014 respectively. CR is now utilized by DAB’s FSD, 15 commercial banks, 4 microfinance institutions as well as the Revenue’s department of MoF. The implementation of the PCR has been undertaken in partnership with IFC Advisory Services. As per a DAB circular issued on November 18, 2014, all commercial banks are mandated to make an inquiry to the PCR and obtain a Credit Report before issuing a loan. As of end-February 2019 DAB indicated that the cumulative number of inquiries in the PCR system since its inception reached 369,474 and the number of items of collateral registered in the CR reached 7,547 with number of inquiries by banks reaching 22,012 Modernization of National Payment Systems: including setting up an Automated Transfer System (ATS), National Card and Mobile Payment Switch (Afghanistan Payment System) and an Interbank Communication Network: The Modernization of National Payment Systems included financing the setup of ATS which entails the Real Time Gross Settlement System (RTGS), Automated Clearing House (ACH) and Centralized Securities Depository (CSD). It is meant to modernize the national payment system for efficient and transparent payment transactions. DAB is currently finalizing the staff training and operational testing and the system is expected to go live by end May 2019. Another key component of NPS modernization is the national card and mobile payment switch. The switch, which became operational in April 2016 was instated by DAB as one of its directorate in April 2019. Progress with regards to automation of the Financial Intelligence Unit (FIU) and procurement of the Core Banking Systems (CBS) is still underway. Component 3: DAB Skill Development; Technical Assistance and project implementation: Afghanistan Institute of Banking and Finance (AIBF) continues to provide accredited certificates for Association of Chartered Certified Accountants (ACCA) courses in Afghanistan. It also acquired the necessary authorizations to hold exams. The Institute also acquired advanced curriculum to provide Association of Certified Anti-Money Laundering Specialists (ACAMS) courses relating to AML/CFT and Certified Internal Auditor (CIA) professional courses. As of January 2019, AIBF has trained 8,898 professionals from commercial banks in different training programs. This is beyond the set target of 6,000 till end of project. There are no major issues in the report hence meeting the Financing Agreement covenant. Risks 5/29/2019 Page 2 of 8 The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance -- High High Macroeconomic -- High High Sector Strategies and Policies -- High High Technical Design of Project or Program -- Substantial Substantial Institutional Capacity for Implementation and Sustainability -- Substantial Substantial Fiduciary -- Substantial Substantial Environment and Social -- Low Low Stakeholders -- Substantial Substantial Other -- -- -- Overall -- Substantial Substantial Results PDO Indicators by Objectives / Outcomes Action Plans Developed and Payment System Conforms to International Norms IN00585915 ►Actions plans developed, with initial implementation monitored,for the ten banks audited (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The firm delivered 66% of agreed deliverables as per the Procurement of the contract including targeted TA on banking manuals, draft Action plans under Value No action plan supervision has been regulations..etc. implementation finalized the firm was remaining deliverables mobilized on the ground. are mainly on-site training and capacity building. Date 01-Aug-2011 25-Apr-2018 29-Mar-2019 31-Oct-2019 The firm is currently operating on the ground and an action plan is being developed in coordination with Comments: the FSD. IN00585941 ►Payment system conforms to international norms (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target partially conform: A regulation relating to Value Not conform Not conform PSPs was issued. Substantially Conform APS is functional and ATS was installed 5/29/2019 Page 3 of 8 The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) within DAB and in the testing stage. Date 01-Aug-2011 25-Apr-2018 29-Mar-2019 31-Oct-2019 Intermediate Results Indicators by Components Strengthening the DAB's capacity IN00585946 ►Approval by DAB of financial sector regulations ensuring consistency with international standards (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target A new banking law A new banking law and and AML/CFT AML/CFT regulations regulations were Afghanistan financial were approved. approved. sector regulations not Procurement of TA for Key regulations Value Procurement of TA for fully aligned with Financial Supervision approved Financial Supervision international standards Department completed Department completed and implementation and implementation started in Nov, 2017 started in Nov, 2017 Date 01-Nov-2013 25-Apr-2018 29-Mar-2019 31-Oct-2019 IN00585914 ►Audit reports completed highlighting strengths and weaknesses of each bank (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target No audit reports to Value Audits completed Audits completed Audits completed international standards Date 01-Aug-2011 25-Apr-2018 29-Mar-2019 30-Jun-2016 IN00585953 RTGS operational and transactions settled in real time by end of project (Text, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value No RTGS No RTGS No RTGS RTGS goes live Date 01-Aug-2011 25-Apr-2018 29-Mar-2019 31-Oct-2019 IN00585959 of which the number of female commercial bank staff trained (Text, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 243.00 470.00 751.00 1,200.00 Date 31-Dec-2011 25-Apr-2018 29-Mar-2019 31-Oct-2019 IN00585958 Number of commercial banks? staff trained in AIBF reaches 6,000 by end of project (Text, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 1,017.00 7,873.00 8,898.00 6,000.00 5/29/2019 Page 4 of 8 The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) Date 01-Aug-2011 25-Apr-2018 29-Mar-2019 31-Oct-2019 IN00585950 ►Increased transparency through the adoption of international central bank accounting and auditing standards (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Financial statements Financial statements prepared based on DAB financial prepared based on local local accounting statements for the year Financial statements accounting standards. standards. The ended in 2018 Value prepared based on local The procurement procurement process prepared in accounting standards process for “adoption of for “adoption of IFRS accordance with IFRS IFRS standards” project standards” project (as applicable in 2016) already started. already started. Date 16-Aug-2016 25-Apr-2018 29-Mar-2019 31-Oct-2019 This is an indicator relating to the IFRS activity under the second additional financing and is currently in Comments: the procurement stage. We expect results to reflect as we progress on implementation. Development of the financial sector infrastructure IN00585945 ►Effective Financial Supervision Department (FSD) organization with training processes in place to ensure sustainable capacity development (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Procurement of TA for Procurement of TA for Revised FSD Financial Supervision Financial Supervision Continuous organization Value Department completed Department completed implementation of approved by and implementation and implementation action plan DAB started in Nov, 2017 started in Nov, 2017 Date 01-Nov-2013 25-Apr-2018 29-Mar-2019 31-Oct-2019 This is an indicator relating to the FSD capacity building TA.This activity suffered many delays and the Comments: issues was recently resolved and we expect the this to reflect on achieved results shortly. IN00585954 Percentage increase in the number of on-site and off-site examinations by the department (Number, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 10.00 IN00585944 ►Rating of national payment system (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Low: a, e, f; Med-low: d; Low: a, e, f; Med-low: d; Low: a, e, f; Med-low: Med-High: a, b, d, f; Value n.a. b, c n.a. b, c d; n.a. b, c Med-Low: c, e Date 01-Aug-2011 12-Sep-2017 29-Mar-2019 31-Oct-2019 This indicator will be updated as soon as the installation of the network equipment as well as the ATS is Comments: finalized and they become operational. IN00585947 ►Increase in the number of creditreports sent by the Public Credit Registry to commercial banks (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 263,189.00 369,474.00 250,000.00 5/29/2019 Page 5 of 8 The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) Date 01-Nov-2013 25-Apr-2018 28-Feb-2019 31-Oct-2019 IN00585948 ►Increase in the number of items of collateral registered in the Collateral Registry (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 815.00 19,480.00 7,547.00 10,000.00 Date 01-Nov-2013 25-Apr-2018 28-Feb-2019 31-Oct-2019 IN00585949 ►Improved sustainability of APS and AIBF (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 15.00 22.00 50.00 Date 16-Aug-2016 25-Apr-2018 29-Mar-2019 31-Oct-2019 IN00585943 ►Card payment system (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Implementation of Implementation of interbank card system interbank card system System goes live and, underway. The Afghan underway. The Afghan on an ongoing basis, Payment system Payment system platform processes over 80% of platform was No interbank card was inaugurated on April domestic Value inaugurated on April system 26, 2016. Discussions interbank/inter- 26, 2016. Discussions ongoing to increase institution payment ongoing to increase number of participants. card and mobile number of participants. The system is live. (6 money transactions The system is live. (6 banks) banks) Date 01-Aug-2011 25-Apr-2018 29-Mar-2019 31-Oct-2019 System is live and 6 banks are already part of the APS. There are ongoing negotiations to increase this Comments: number. IN00585942 ►Interbank payment (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target T+1 for Kabul area and T+1 for Kabul area and T+1 for Kabul area and Same day all over Value T+3 for other areas T+3 for other areas T+3 for other areas Afghanistan Date 01-Aug-2011 25-Apr-2018 29-Mar-2019 31-Oct-2019 DAB Skill Development; Technical Assistance and project implementation IN00585952 ►DAB training - Number of key DAB staff trained (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 205.00 226.00 1,443.00 Date 16-Aug-2016 25-Apr-2018 29-Mar-2019 31-Oct-2019 5/29/2019 Page 6 of 8 The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) This is an indicator relating to the capacity building component and was added under the second additional financing. The guidelines for the program were finalized and it was launched in February 2018 Comments: and will reflect on the results indicator shortly. IN00585955 Number of DAB staff who have completed or enrolled into a Bachelor or Masters program (Number, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 88.00 220.00 136.00 250.00 IN00585956 DAB training - Percentage of eligible staff in critical functions who completed specialized, professional training sessions (Percentage, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 55.00 55.00 50.00 IN00585957 Number of key DAB female staff trained under the project (Text, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 12.00 12.00 172.00 Date 16-Aug-2016 25-Apr-2018 29-Mar-2019 31-Oct-2019 IN00585951 ►Enhanced operational efficiency of DAB staff : percentage reduction in time spent to prepare DAB balance sheet (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 80% Date 16-Aug-2016 25-Apr-2018 29-Mar-2019 31-Oct-2019 This is an indictor relating to the IFRS activity under the second additional financing and is currently in the Comments: procurement stage. We expect results to reflect as we progress on implementation. Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P119047 IDA-D1400 Effective USD 20.00 20.00 0.00 0.00 19.56 0% P119047 IDA-H7320 Effective USD 19.00 19.00 0.00 16.96 0.26 98% P119047 IDA-H8930 Effective USD 6.70 6.70 0.00 3.65 2.54 59% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date 5/29/2019 Page 7 of 8 The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) P119047 IDA-D1400 Effective 27-Oct-2016 04-Jan-2017 12-Apr-2017 31-Oct-2019 31-Oct-2019 P119047 IDA-H7320 Effective 25-Aug-2011 27-Aug-2011 06-Sep-2011 30-Jun-2014 31-Oct-2019 P119047 IDA-H8930 Effective 26-Nov-2013 10-Mar-2014 04-Jun-2014 30-Jun-2016 31-Oct-2019 Cumulative Disbursements Restructuring History Level 2 Approved on 26-Jan-2015 ,Level 2 Approved on 25-May-2016 Related Project(s) P147624-Additional Financing to Financial Sector Rapid Response Project ,P160073-Financial Sector Rapid Response - Additional Financing 5/29/2019 Page 8 of 8