The World Bank Implementation Status & Results Report Modernizing Afghan State-Owned Banks Project (P161348) Modernizing Afghan State-Owned Banks Project (P161348) SOUTH ASIA | Afghanistan | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2018 | Seq No: 2 | ARCHIVED on 13-Mar-2019 | ISR33747 | Implementing Agencies: ISLAMIC REPUBLIC OF AFGHANISTAN, Ministry of Finance Key Dates Key Project Dates Bank Approval Date: 28-Mar-2018 Effectiveness Date: 10-Apr-2018 Planned Mid Term Review Date: 01-May-2020 Actual Mid-Term Review Date: -- Original Closing Date: 28-Mar-2023 Revised Closing Date: 28-Mar-2023 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The proposed project development objective is to enhance the corporate governance and operational efficiency of the supported Afghan state- owned banks, thereby contributing to their improved financial soundness and outreach. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Component 1: Improving MOF’s Ownership Role and the Corporate Governance of SBs:(Cost $7.00 M) Component 2: Institutional Development, Business Strategy, and Information Technology of SBs:(Cost $30.00 M) Component 3: Project Implementation and Monitoring:(Cost $3.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Moderately Satisfactory Overall Risk Rating Substantial Substantial Implementation Status and Key Decisions Covenants compliance and disbursement conditions need to be further accelerated. At the time of the mission (January 14-20, 2019), significant progress has been made in addressing actions needed to fulfill project disbursement condition related to reforming the corporate governance framework of the state owned banks. This disbursement condition should be met to enable withdrawals under sub-component 2(b) that is funding the TA for to institutional reform of these banks. Most of the required actions under the first disbursement condition were met including developing an ownership policy, establishing an ownership unit and defining the terms of reference of the supervisory boards by means of a Presidential decree that was issued in December 2018. 3/13/2019 Page 1 of 6 The World Bank Implementation Status & Results Report Modernizing Afghan State-Owned Banks Project (P161348) The World Bank team is working closely with MoF and banks to prioritize corporate governance reforms and critical IT upgrades towards boosting operational efficiency of the state banks. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance High High High Macroeconomic High High High Sector Strategies and Policies Substantial Substantial Substantial Technical Design of Project or Program Substantial Substantial Substantial Institutional Capacity for Implementation and Sustainability Substantial Substantial Substantial Fiduciary Substantial Substantial Substantial Environment and Social Low Low Low Stakeholders Substantial Substantial Substantial Other -- -- -- Overall Substantial Substantial Substantial Results PDO Indicators by Objectives / Outcomes To enhance the corporate governance and operational efficiency of the supported SOB in Afghanistan IN00620185 ►Effective Governance of SBs in line with key OECD guidelines (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Non-compliant Non-compliant Fully compliant with Value Non-compliant key chapters Date 31-Dec-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 Measured by: compliance with the following chapters of OECD Guidelines on Corporate Governance of State-Owned Enterprises that have been identified as priority implementation areas: Board composition: Board has at least 5 members in line with fit and proper DAB requirements; Majority of the board Comments: independent according to DAB definition of independence Board operations: frequency of meetings (monthly), balance of decisions between strategic and operational issues (at least 25% of board meetings on strategy issues) Board decision making: Board approves strategy and risk management guidelines; sets executive remuneration competitive with commercial competitors IN00620259 ►Increased outreach of SBs (measured by number of SBs clients served) (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target 3/13/2019 Page 2 of 6 The World Bank Implementation Status & Results Report Modernizing Afghan State-Owned Banks Project (P161348) Value 2,206.00 2,330.00 2,330.00 3,200.00 Date 30-Jun-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 Comments: Total number of SBs clients IN00620267 Of which percentage of female clients (Percentage, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 9.00 8.00 8.00 15.00 IN00620262 ►Improved operational efficiency of SBs (Measured by System uptime) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 90.00 90.00 90.00 99.00 Date 30-Jun-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 IN00620263 ►Improved Financial Soundness of SBs (SBs meet the central bank's minimum capital requirements) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 33.00 33.00 33.00 100.00 Date 30-Jun-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 Intermediate Results Indicators by Components Component 3: Project Implementation and Monitoring IN00620266 ►Improved credit risk management policies (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 31-Dec-2017 13-Jul-2018 31-Dec-2018 23-Mar-2023 Component 1: Improving MOF’s Ownership Role and the Corporate Governance of SBs IN00620256 ►Improved oversight capacity of MoF as per OECD Guidelines (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Fully operational Value None none none ownership unit Date 30-Jun-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 IN00620257 ►Improved efficiency (Measured by average adjusted Operating Income Margin) (Percentage, Custom) 3/13/2019 Page 3 of 6 The World Bank Implementation Status & Results Report Modernizing Afghan State-Owned Banks Project (P161348) Baseline Actual (Previous) Actual (Current) End Target Value 65.00 65.00 65.00 77.00 Date 30-Jun-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 based on the most recent annual audited financial statements FY 2017 Comments: IN00620261 ►Improved Soundness of SBs (Measured by average adjusted ROE) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3.40 3.40 3.40 10.00 Date 30-Jun-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 based on the most recent annual audited financials FY 2017 Comments: IN00620265 ►All senior management functions have been filled and performance contracts in place for CEOs (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target All senior Vacancies in senior Vacancies in senior Vacancies in senior management functions management functions management functions of management functions of are filled in SBs; Value of SBs. No SBs. No Performance SBs. No Performance Performance Performance contract contract in place. contract in place. management contracts in place. in place for CEOs. Date 31-Jan-2018 13-Jul-2018 31-Dec-2018 28-Mar-2023 no improvement on this front of corporate governance has taken place. Comments: IN00620258 ►Percentage point increase in SB client satisfaction rate (disaggregated by gender) over baseline survey (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 15.00 Date 30-Jun-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 discussion for baseline survey and data collection are underway during July (14th-22nd) 2018 ISM. Comments: Component 2: Institutional Development, Business Strategy, and Information Technology of SBs IN00620260 ►Increase in the number of Digital Financial Services users in SBs (disagreggated by gender) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 15.00 Date 30-Jun-2017 13-Jul-2018 31-Dec-2018 28-Mar-2023 no remarkable increase is observed in this indicator since the baseline. Comments: IN00620264 3/13/2019 Page 4 of 6 The World Bank Implementation Status & Results Report Modernizing Afghan State-Owned Banks Project (P161348) ►Savings in Staff time (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 50.00 Date 30-Jun-2017 -- 31-Dec-2018 28-Mar-2023 discussions on data collection will take place during the ISM dated (July 14th-22nd) 2018 Comments: Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P161348 IDA-D2830 Effective USD 40.00 40.00 0.00 1.82 36.74 4.7% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P161348 IDA-D2830 Effective 28-Mar-2018 10-Apr-2018 10-Apr-2018 28-Mar-2023 28-Mar-2023 Cumulative Disbursements 3/13/2019 Page 5 of 6 The World Bank Implementation Status & Results Report Modernizing Afghan State-Owned Banks Project (P161348) Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 3/13/2019 Page 6 of 6