The World Bank Inclusive Housing Finance Program (P150993) FOR OFFICIAL USE ONLY Report No: RES35978 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT RESTRUCTURING PAPER ON A PROPOSED PROGRAM RESTRUCTURING OF THE INCLUSIVE HOUSING FINANCE PROGRAM (LOAN NO. 8498-EG) {APPROVED ON MAY 5, 2015} TO THE ARAB REPUBLIC OF EGYPT April 10, 2019 Finance, Competitiveness And Innovation Global Practice Middle East And North Africa Region CURRENCY EQUIVALENTS The World Bank Inclusive Housing Finance Program (P150993) (Exchange Rate Effective April 10, 2019) Currency Unit = EGP EGP 1 = US$0.06 US$ 1 = EGP 17.34 FISCAL YEAR January 1 - December 31 The World Bank Inclusive Housing Finance Program (P150993) DATA SHEET (Inclusive Housing Finance Program - P150993) BASIC DATA Project ID Financing Instrument IPF Component P150993 Program-for-Results Financing No Approval Date Current Closing Date 05-May-2015 30-Jun-2020 Organizations Borrower Responsible Agency Social Housing Fund,Social Housing and Mortgage Finance Arab Republic of Egypt Fund Program Development Objective(s) The objective of the Program is to improve the affordability of formal housing for low-income households in the Arab Republic of Egypt and to strengthen the Social Housing Fund's capacity to design policies and coordinate programs in the social housing sector. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Approval Effectiveness Closing Ln/Cr/TF Signing Date Commitment Disbursed Undisbursed Date Date Date 05-May- IBRD-84980 10-Jun-2015 11-Nov-2015 30-Jun-2020 500.00 258.06 241.94 2015 Policy Waiver(s) Does the Program require any waivers of Bank policies applicable to Program-for-Results operations? No Page 1 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) I. PROGRAM STATUS AND RATIONALE FOR RESTRUCTURING Program Status 1. The Program-for-Results (PforR) in the amount of US$500 million was approved on May 5, 2015 and became effective on November 11, 2015. The Program was developed to be implemented over a 5-year period, and has 8 Disbursement-Linked Indicators (DLIs) designed to support the Government’s Social Housing Program in the following areas: (i) institutional consolidation and capacity building; (ii) development of housing policy, and the design of regulations and program guidelines; (iii) measures to improve the effectiveness, transparency, and accountability of housing programs; (iv) demand-side housing programs. 2. Overall, the PforR is progressing well in achieving its development and intermediate development objectives, as well as the DLIs. Progress towards achieving the PDO and Implementation Progress have been rated no less than Moderately Satisfactory since project inception. Disbursement as of March 2019 is US$258 million, representing 51.6% of the loan amount of US$500 million. 3. Of the 4 PDO indicators, 1 has been met and 2 are progressing, while 16 of the 23 intermediate indicators have met or exceeded their targets. All target indicators in the PDO, Intermediate and DLIs, related to institutional capacity building, have been met successfully. As a result, the implementing agency, the Social Housing and Mortgage Finance Fund (SHMFF) (formerly Social Housing Fund) is a well- functioning institution with strong governance that includes a professional board and management team, robust internal controls and Monitoring & Evaluation systems to monitor progress and impact of housing policies. Given the wider scope of responsibilities and bigger mandate, SHMFF capacity will be further strengthened through a combination of new DLIs and DLRs in the context of the proposed Additional Financing (AF), currently under preparation for a Board approval in FY19. 4. Of the 8 DLIs, 5 have been fully achieved, while the other 3, namely DLI 5 “ Number of households receiving demand-side home ownership subsidies for new housing units in each fiscal year during program implementation under the AMP” DLI 6 “Number of new households participating in rental subsidy program in each fiscal year during Program implementation” and DLI 8 “Number of demand-side subsidies provided supporting the purchase or rental of housing units developed by private sector entities”, are lagging. 5. While DLI 5 has not reached its’ projected targets as per project design, significant progress has been achieved and close to 181,000 subsidies have been delivered by SHMFF during the first half of the PforR implementation. The team notes that the delivery pace has plateaued at 10,000 subsidies per month mainly due to market capacity absorption limits and institutional capacity of SHMFF. With certain administrative and human resources reforms, SHMFF could potentially deliver up to 12,000 demand-side subsidies per month. 6. The limited progress in the other two DLIs were discussed with the authorities – especially during the Mid-Term Review (MTR) held in July 2018, and subsequent implementation support missions in August and October 2018 – and remedial measures were identified, which include potentially a private sector solution for DLI 6 and breaking down DLI 8 into 3 DLRs that would further stimulate the development of public-private partnerships. Discussion is ongoing, and Page 2 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) it was decided to treat any revisions and subsequent restructuring of these DLIs (#5, 6, 8) in the proposed AF. The AF would finance scaling up of exiting DLIs and introduce new DLIs. Rationale for Restructuring 7. This restructuring proposes to: (i) amend the Loan Agreement and Program Agreement (Loan no. 8498-EG) to replace the Program Implementing Entity (PIE) from the Social Housing Fund (SHF) to the Social Housing and Mortgage Finance Fund (SHMFF); and (ii) extend the closing date by 22 months from June 30, 2020 to April 30, 2022. This will be the second restructuring of the PforR, and the first extension of the closing date. The first restructuring, approved in June 2017, revised the Demand-side Housing Subsidy Support Component to provide more flexibility in the indexing of income level of beneficiaries, and to allow for private management of the public rent component. 8. In June 2018, by Presidential Decree, the Government adopted Law 93 of 2018 establishing a fund named “Social Housing and Mortgage Finance Fund (SHMFF)” to replace the SHF, the PIE of the Inclusive Housing Finance Program, and the Mortgage Finance Guarantee. All funds, assets, and staffs of these two institutions were devolved to the SHMFF. As a result of the merger, the Bank conducted a fiduciary assessment of the SHMFF and concluded that both financial management and procurement arrangement have not been affected by the merger. The restructuring will amend the Program’s Loan Agreement (Ln. 8498-EG) to reflect the change of PIE from the SHF to the SHMFF. This legal change will also allow future disbursements to proceed. The Independent Verification Agent report for FY17/18 is currently under preparation and should become available in mid-April 2019. 9. The extension of the closing date would allow DLIs that are experiencing delays and are not expected to be met by the current closing date of June 30, 2020 to reach their targets. As noted above, DLIs 6 and 8 would be restructured in due time, while DLI 5 has a slower than expected pace of disbursement. This is because DLI 5 has plateaued at 10,000 subsidies per month, and the team is reviewing with the authorities the possibility of increasing the target upward to 12,000 per month. This will require additional time to reach its target of 725,000. In this regard, potential actions to unlock the bottlenecks in DLIs 6 and 8, as well as to accelerate the pace of delivery of DLI 5 were discussed with the authorities during the MTR and follow-up missions. This Action Plan will be implemented in the course of the proposed upcoming Additional Financing. 10. There are no overdue interim Unaudited Financial reports (IFRs) or overdue project annual audited financial statements. The latest audit report for the year ended June 30, 2018 was received and is satisfactory to the Bank. Fiduciary is rated Moderately Satisfactory in the December 2018 ISR. 11. The team confirms that the Project Development Objective (PDO) remains both achievable and is highly relevant to the priorities of the Government. Social housing remains a key Presidential priority since 2014, and in this context, the authorities has requested an additional financing of US$500 m to the Inclusive Housing Finance Program which is under preparation for delivery in FY19. II. DESCRIPTION OF PROPOSED CHANGES Amendment to Loan Agreement Page 3 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) 12. The project development objectives under paragraph 1 of Schedule 1 to the Loan Agreement are hereby deleted and amended to read as follows: “The objectives of the Project is to improve the affordability of formal housing for low income houses in the Arab Republic of Egypt and to strengthen SHMFF’s capacity to design policies and coordinate programs in the social housing sector.” 13. Part A of the Program Description of Schedule 1 to the Loan Agreement is hereby deleted and amended as follows: “Part A: Institutional Strengthening of SHMFF 1. Enhancing the capacity of SHMFF to improve the Borrower’s housing sector through, inter alia: (a) coordination and consolidation of housing entities and functions; (b) formulation of social housing policy, programs, regulations and procedures; and (c) preparation and implementation of reforms to improve the efficiency and equitability of the housing system. 2. Enhancing the effectiveness of SHMFF to provide oversight to the implementation of the Program through, inter alia: (a) the establishment of an improved management information system; (b) the establishment of a sound fiduciary management and governance structure; and (c) improving monitoring and evaluation capacity.” 14. All references to “SHF” in the Table in Section IV.A of Schedule 2 to the Loan Agreement are hereby deleted and replaced with “SHMFF”. 15. Section IV.B.4 of Schedule 2 is hereby deleted and replaced with the following: “4. The Closing Date is April 30, 2022.” 16. The following definitions are hereby deleted and amended: “13. “Program Implementing Entity” means SHMFF.” “14. “Social Housing and Mortgage Finance Fund” or “SHMFF” means the Borrower’s Social Housing and Mortgage Finance Fund, established by the Promulgating Law on Social Housing and Mortgage Support Law 93 of 2018 as ratified by Presidential Decree of June 11, 2018 for the purposes of establishing a fund for social housing and mortgage support.” Change to the Program Agreement 17. The Program Agreement between IBRD and SHF, dated June 10, 2015, is cancelled as of June 11, 2018, date of ratification of the Presidential Decree promulgating Law on Social Housing and Mortgage Support Law 93 of 2018, and replaced with a new Program Agreement between IBRD and SHMFF, the new PIE. Page 4 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) III. SUMMARY OF CHANGES Changed Not Changed Change in Implementing Agency ✔ Change in Loan Closing Date(s) ✔ Change in Institutional Arrangements ✔ Change in Implementation Schedule ✔ Change in Program's Development Objectives ✔ Change in Program Scope ✔ Change in Results Framework ✔ Change in Cancellations Proposed ✔ Reallocation between and/or Change in DLI ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Systematic Operations Risk-Rating Tool ✔ (SORT) Change in Safeguard Policies Triggered ✔ Change in Legal Covenants ✔ Change in Technical Method ✔ Change in Fiduciary ✔ Change in Environmental and Social Aspects ✔ Other Change(s) ✔ Page 5 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_IA_TABLE IMPLEMENTING AGENCY Implementing Agency Name Type Action Implementing Social Housing Fund Marked for Deletion Agency Implementing Social Housing and Mortgage Finance Fund New Agency 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 IBRD-84980 Effective 30-Jun-2020 30-Apr-2022 30-Aug-2022 OPS_DETAILEDCHANGES_EA_TABLE . Page 6 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) ANNEX 1: RESULTS FRAMEWORK . . Results framework Program Development Objectives(s) The objective of the Program is to improve the affordability of formal housing for low-income households in the Arab Republic of Egypt and to strengthen the Social Housing Fund's capacity to design policies and coordinate programs in the social housing sector. Program Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target PDO Number of targeted households accessing ownership and rental 0.00 830,000.00 housing units with support from the Program (Number) female-headed households as a percentage of benefeciaries 0.00 24.00 (Percentage) Percentage of Program beneficiaries in bottom 20% of the 0.00 50.00 income distribution (Percentage) Percentage of income spent on housing costs by Program 0.00 30.00 beneficiaries (Percentage) Establishment of a housing M&E system functioning and No Yes informing the Multi-Year Plan and Annual Targets (Yes/No) PDO Table SPACE Page 7 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) Intermediate Results Indicators by Result Areas RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Strengthening Governance and Institutional Set-up of Housing Sector Completed executive by-laws, organizational structure, financing model, fiduciary arrangements, operating systems for the SHF No Yes (Yes/No) SHF fully staffed as per organizational plan (Yes/No) No Yes Internal audit function providing assurance services for the ownership and rental programs affiliated with the SHF No Yes established and operating (Yes/No) Adequate staffing of social officers as per organizational plan No Yes (Yes/No) Number of capacity building and training workshops conducted for the hired social workers at the Central and Governorate level. 0.00 27.00 (Number) Enhancing Transparency and Accountability of Social Housing Programs Mechanism to monitor occupancy of housing post-subsidy No Yes established and functioning as per DLI definition (Yes/No) Percentage of rental housing units occupied by targeted 0.00 75.00 beneficiaries at least 1 year after lease (Percentage) Percentage of housing units occupied by low-income residents 0.00 85.00 after at least 1 year (AMP) (Percentage) Establish a unified social programs and beneficiary databases No Yes (Yes/No) Establish an accountability and transparency mechanism No Yes established and functioning as per DLI definition (Yes/No) Page 8 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Average time required to resolve complaints in AMP (days) 60.00 20.00 (Days) Percentage of resolved complaints received by SHF and 0.00 90.00 Governorate housing offices (Percentage) Annual published reports on complaints and how issues were No Yes resolved, including resolution rates (Yes/No) Improving Access to Affordable Housing Number of households receiving demand side housing subsidies 0.00 725,000.00 (AMP) for new units (Number) Number of households participating in rental subsidy programs 0.00 105,000.00 (Number) Number of previously vacant units occupied 1 year after 0.00 30,000.00 inclusion into the Program (Number) Promoting Well Located Social Housing Percent of demand-side subsidies supporting the purchase or rental of housing units within a 60 minute travel time to an 0.00 50.00 employment center (Percentage) Percent of demand-side subsidies supporting the purchase or rental of housing units within a 45 minute travel time to an 0.00 50.00 employment center (Percentage) Percent of demand-side subsidies supporting the purchase or rental of housing units within a 30 minute travel time to an 0.00 15.00 employment center (Percentage) Percentage of land made available for SHF developments that complies with location and service criteria stated in Law 0.00 100.00 (Percentage) Page 9 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Promoting Private Sector Participation in Low-Income Housing Number of demand-side subsidies supporting the purchase or 0.00 250,000.00 rental of housing units developed by the private sector (Number) PPP guidelines publicly disseminated (Yes/No) No Yes %of demand side subsidy supporting the purchase or rental of 0.00 43.00 housing units developed by private sec (Percentage) IO Table SPACE Disbursement Linked Indicators Matrix DLI IN00668688 ACTION Establishment and operation of an internal audit function within SHF providing assurance service for the ownership and DLI 1 rental programs affiliated with the SHF Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Process No Yes/No 25.00 60.00 Period Value Allocated Amount (USD) Formula Baseline No 2020 Yes 25.00 Page 10 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) DLI IN00668689 ACTION DLI 2 Establishing a housing M&E system functioning and informing the Multi-Year Plan and Annual Targets Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Process No Yes/No 25.00 20.00 Period Value Allocated Amount (USD) Formula Baseline No 2020 Yes 25.00 DLI IN00668690 ACTION DLI 3 Establishment and functioning of an accountability and transparency mechanism Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Process No Yes/No 50.00 40.00 Period Value Allocated Amount (USD) Formula Baseline No 2020 Yes 50.00 DLI IN00668691 ACTION Establishment by SHF of a functioning mechanism to monitor occupancy and vacancy of housing units by households DLI 4 receiving demand–side housing subsidy Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Process Yes Yes/No 50.00 40.00 Period Value Allocated Amount (USD) Formula Page 11 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) Baseline No 2020 Yes 50.00 DLI IN00668692 ACTION Number of households receiving demand-side homeownership subsidies for new housing units in each Fiscal Year during DLI 5 Program implementation under the AMP Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Number Outcome Yes 225.00 5.84 (Thousand) Period Value Allocated Amount (USD) Formula Baseline 0.00 2020 725.00 225.00 DLI IN00668693 ACTION DLI 6 Number of new households participating in rental subsidy programs in each Fiscal Year during Program implementation Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Number Outcome Yes 48.75 1.21 (Thousand) Period Value Allocated Amount (USD) Formula Baseline 0.00 2020 102.40 48.75 Page 12 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) DLI IN00668694 ACTION Percentage of demand-side subsidies provided supporting the purchase or rental of housing units located within a DLI 7 commute of 60 minutes or less to an employment cente Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome Yes Percentage 25.00 20.00 Period Value Allocated Amount (USD) Formula Baseline 0.00 2020 50.00 25.00 DLI IN00668695 ACTION Number of demand-side subsidies provided supporting the purchase or rental of housing units developed by private sector DLI 8 entities Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Number Output Yes 50.00 0.60 (Thousand) Period Value Allocated Amount (USD) Formula Baseline 0.00 2020 250.00 50.00 Page 13 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) ANNEX 2: PROGRAM ACTION PLAN . . PAP_NOT_CHANGE_TBL Action Description Source DLI# Responsibility Timing Completion Measurement Multi-institutional governance structure established and functioning to facilitate coordination across Government entities (Advisory Committee) Client Due Date 30-Jun-2015 Establishment and functioning of a housing monitoring and evaluation system and an M&E unit within SHF, and the preparation of the Multi-Year Plan and Annual Targets informed by the M&E system DLI 2 Client Recurrent Yearly Establishment by SHF of a functioning mechanism to monitor occupancy and vacancy of housing units by households receiving demand–side housing subsidy DLI 3 Client Due Date 30-Jun-2016 Full staffing of SHF based on agreed organizational structure and staff skills Client Due Date 31-Jan-2016 Integrate housing Client Due Date 30-Jun-2017 Page 14 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) location criteria and requirement to collect physical coordinates into housing program guidelines Monitoring and enforcement of location criteria for housing programs Client Due Date 30-Jun-2016 The annual audited financial statements of the Program are issued on a timely basis and made public. Client Recurrent Yearly The SHF needs to establish robust integrated grievance redress mechanism and link it to the local level grievance redress system. SHF will also need to design and implement an improved mechanism for disseminating information. Both Due Date 30-Jun-2016 Provide incentives for energy savings among Program beneficiaries through setting targeted energy consumption rates and awareness leaflets about the best practices for energy saving. Households achieving the targets are subject to incentives. Both Recurrent Continuous Establishment of unified beneficiary database Client Due Date 30-Jun-2016 Page 15 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) The operational and financial management arrangements for the rental subsidy should be laid out in regulation and detailed in a Procedures Manual, consistent with GSF’s Manual when applicable. Client Due Date 30-Jun-2016 SHF programs should be integrated with the State budget, using the national budget classifications and chart of accounts. Client Due Date 01-Jan-2016 For the new rental subsidy programs, beneficiary enrollment, monitoring, and payment databases should be integrated in the program’s management information system (MIS) Client Due Date 30-Jun-2016 Establishment and operation of an internal audit function within SHF providing assurance service for the ownership and rental programs affiliated with the SHF. Client Due Date 31-Dec-2016 The SHF and its sub-programs should be subject to periodic and timely reporting on budget execution, using the GFMIS or an Client Due Date 30-Jun-2016 Page 16 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) accounting system that can seamlessly feed information into the GFMIS. The financial reports should be publicly available. Raise beneficiaries’ awareness about waste management through distributing leaflets that explain the importance of waste management at the household level. Client Recurrent Continuous Ensure that beneficiaries use safe buildings through Including building validity certificate among required application documents Client Recurrent Continuous Guidelines and training provided to SHF staff and other stakeholders about addressing occupational safety related to construction activities and handling of building chemicals and construction wastes Both Due Date 31-Jan-2016 Deliver training and capacity building to the SHF and other relevant stakeholders on issues related to land acquisition, involuntary Both Due Date 31-Jan-2016 Page 17 of !Syntax Error The World Bank Inclusive Housing Finance Program (P150993) resettlement Strengthening the institutional Setup through developing comprehensive ToRs for the social team to be hired, and hiring social officers Both Due Date 31-Jan-2016 Strengthening the institutional capacity through developing and delivering training packages to the relevant teams, and sharing best practices and similar successful global experiences Both Due Date 31-Mar-2016 Designing and implementing context sensitive information sharing and disclosure mechanisms Both Due Date 31-Mar-2016 Designing and implementing consultation, communication and reaching out plans Both Due Date 31-Mar-2016 Establishing robust integrated grievance redress mechanism and link it to the local level grievance redress system Both Due Date 31-Mar-2016 . 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