The World Bank Report No: ISR1704 Implementation Status & Results Madagascar Public Disclosure Copy MG-Microfinance (P052186) Operation Name: MG-Microfinance (P052186) Project Stage: Implementation Seq.No: 25 Status: ARCHIVED Last Modified Date: 08-Mar-2011 Country: Madagascar Approval FY: 1999 Product Line: IBRD/IDA Region: AFRICA Lending Instrument: Adaptable Program Loan Implementing Agency(ies): AGEPMF, CSBF Key Dates Board Approval Date 20-May-1999 Original Closing Date 31-Dec-2004 Planned Mid Term Review Date 30-Jun-2006 Last Archived ISR Date 31-May-2010 Effectiveness Date 28-Oct-1999 Revised Closing Date 31-Dec-2010 Actual Mid Term Review Date 30-Jun-2006 Project Development Objectives Project Development Objective (from Project Appraisal Document) The stated objectives of the project are to increase financial services to low-income populations who do not have access to commercial bank finance by encouraging the government to adopt a policy framework that is appropriate for microfinance institutions (MFIs) and to build the capacity of MFIs, increasing their outreach and sustainability. This first phase of a 15-year Adaptable Program Loan (APL)microfinance program will support achievement of these objectives through the implementation of four components: 1. Development of an appropriate legal/regulatory and supervisory framework for microfinance institutions; 2. Establishment of MFIs and in particular savings and loan associations (SLAs) in four of Madagascar's six provinces (Antananarivo, Antsiranana, Fianarantsoa, and Toamasina). If studies confirm their viability, programs will be started in the two remaining provinces (Mahajanga and Toliary). 3. Design and testing of a pilot national training program; 4. Undertaking of studies related to microfinance to expand knowledge in the field. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Public Disclosure Copy IMPROVE LEGAL, JUDICIAL, AND REGULATORY FRAMEWORK 0.55 DEVELOP MFIS 10.00 BUILD CAPABILITIES IN MICROFINANCE 0.42 CONDUCT STUDIES 0.68 COORDINATE PROJECT 0.74 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating NA Page 1 of 14 The World Bank Report No: ISR1704 Implementation Status Overview Official use only. Not for public disclosure Public Disclosure Copy Results Project Development Objective Indicators Public Disclosure Copy Page 2 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Enabling legal and regulatory environment for doing microfinance Several legal impediments exist for The program has successfully Microfinance law is effective and business in Madagascar exists MFIs operating in Madagascar supported the Government of regulations that reflect international Date Madagascar to resolved major best practice are issued, adopted issues that impede emergence and and implemented. Type Unit of Measure 20-May-1999 growth of MFIs. A favorable legal Date Custom Indicator Text Comment and regulatory framework for MFIs is in place and is being applied by 31-Dec-2010 the authorities to register, and Comment supervise the different types of MFIs. Prudential Regulations that meet international best standards have been issued as well as rules on financial transparency for all MFIs. The Banking Commission (CSBF) is charged with registration and supervisionof Level 1 & 2 MFIs. Level 1 MFIs are not subjected to strict regulations but they are monitored by the microfinance coordination unit at the Ministry ofFinance (CNMF). A new law on usuary has been drafted and will be presented to the parliament in 2011. Two decrees were passed (2007-012 & 2007-013/Jan 2007) concerning legal status and registration requirements for the different types of MFIs and minimum capital Public Disclosure Copy requirements for each level. Circular #7938/09 September 2009) was issued obliging MFIs to share operational costs of the Banking Commissio's unit in charge of supervising MFIs (CSBF). Eight instructions were issued regarding precedures for licencing level 1 MFIs, operating agreements for level 2 and 3 MFIs, authorizing operations of all types of MFIs , explaining requirements for anti moneylaundering, functioning and supervision of MFIs, transparency of MFIs, prudential norms and risk declarations for MFIs. Page 3 of 14 Date The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Increased access to financial services by low-income populations 47 SLAs/MFIs exist and reach The five MFI Networks supported Existing Five SLA/MFI Networks 30,000 clients by the program are all licensed as are viable and able to offer savings Date MFI 2. These institutions have and loan serv ices to 300,000 proved to be viable, able to offer members Type Unit of Measure 20-May-1999 loans and mobilize substantial Date Custom Indicator Text Comment savings from members. The program started with two MFIs 31-Dec-2010 Networks and 47 branches with Comment 30000 members. Todate, there are 5 MFI networks with 241 branches against target of 225. Total membership is 370.037 against target of 300.000 Percentage of women clientele is 51% of total membership against 50% target. The average financial sustainability ratio of 103% has been achieved which is beyond the break-even point of 100%. Savings amounting to US$ 26, 2 millions have been mobilized. Date 30-Jun-2010 Comment Results have been achieved and exceeded targets. Public Disclosure Copy Page 4 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Greater efficiency in judicial system for microfinance Institutions There is a Usury law which applied Legal text on collateral - Liberalization of interest rates in to microfinance. There are no legal requirements in microfinance has microfinance. - Simplication oflegal texts on collateral requirements in been proposed to the Parliament procedures for collateral seizure. microfinance nor on seizure. for adoption. Despite that usury Date Type Unit of Measure Date law is no longer appllied, it still remains the law of the land until 31-Dec-2010 Custom Indicator Text 20-May-1999 when it is formally abolished by Comment Comment government decree. MFIs and other financial institutions are charging competitive market interest rates. The government is planning to pass a new law in 2011 that will formally abolish usury in the country. Date 30-Jun-2010 Comment Public Disclosure Copy Page 5 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Increased productivity and improved standards of living of MFI clients Very poor households with low impact study on positive effect of Impact studies to confirm improved productivity microfinance on members was standard of living of SLA members Date conducted. The report indicated Date that low income population had Type Unit of Measure 20-May-1999 socially and economically 31-Dec-2010 Custom Indicator Text Comment benefited from the program Comment through varioius products that are offered by MFIs. the proximity of services tothelow income segment is among some of the benefits. A thorough post implementation impact study is envisaged. This study will furthershed light on socio-economic benefits accrued to the low income segment in Madagascar. Date 30-Jun-2010 Comment Public Disclosure Copy Page 6 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Appropriate supervisory methodologies for MFIs established No method for supervision of MFIs A well organized supervision All licensed MFIs are adequately exists system for MFIs has successfully supervised by the authorities. Date been instituted and the different Date types of MFIs have a streamelined Type Unit of Measure 20-May-1999 registration and supervision 30-Dec-2010 Custom Indicator Text Comment mechanism that is strictly adhered. Comment No adequate institutional MFIs are being registered based framework for supervision of on size and capital structure. different types of MFIs. Threecategories of MFIs exist and they have different supevisory requirements. The Banking Supervision Comission (CSBF) undertakes registration and supervision of MFIs in level 2 & 3. The two categories have high capital requirements. Level 3 are those considered capable to become commercial banks. MFIs in level 1 are not subjected to strict regulations but they are coordinated by the MinistryofFinance through a special MF unit -the National Microfinance Coordination Unit (CNMF) CSBF undertakes regular on and off-site supervisions of licensed MFIs. All level 2 & 3 MFIs send reports to CSBF on a quarterly basis for review and Public Disclosure Copy feedback. Date 30-Jun-2010 Comment The results have been achieved. An MFI unit has been created in the Central Bank of Madagascar as part of institutional strengthening for the MF sector and improvement of supervision of MFIs. Page 7 of 14 The World Bank Report No: ISR1704 Intermediate Results Indicators Public Disclosure Copy Indicator Baseline Current End Target Indicator Name Value Value Value Prudential and operating rules are issued for all mutualist and non- Existing prudential rules that fit Prudential regulations have been Appropriate laws and regulations mutualist MFIs commercial banks are not always issued for licensed MFI 2 and MFI passed and implemented for all appropriate for microfinance 3. A law and prudential regulations types of MFIs. institutions. specific to the microfinance Date Type Unit of Measure Date industry and in conformity with international guidelines have been 31-Dec-2010 Custom Indicator Text 20-May-1999 issued. 2 decrees (#2007-012 & Comment Comment #2007-013 of Jan. 2007) explaining legal status and registration requirements for the different types of MFIs (MFIs in level 1, MFI in level 2 & MFI in level 3) including the minimum capital requirements for each level. - A circular (#7938/09 of Sept. 2009) obliging MFIs to share operational costs of the Banking Commission's unit in charge of supervising MFIs (CSBF). - 8 Instructions regarding: ... Procedures for licencing level 1 MFIs ...Operating agreements for level 2 & 3 MFIs ...Authorized operations of all types of MFIs ... Anti money laundering ... Functioning and supervision of MFIs ...Transparency of MFIs ... Prudential norms for MFIs level 2 & Public Disclosure Copy 3 ...Risk declarations by MFIs. This allow theregulatory and supervisory authorities to undertake appropriate supervision of the microfinance industry to ensure longterm viability of the sector. Date 30-Jun-2010 Comment Results have been achieved. Page 8 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Two existing SLAs (Fianarantsoa and Toamasina) are strengthened 47 SLAs exist in Fianarantsoa and 241 SLAs/MFI branches are in 225 SLAs reach about 300,000 and two new SLA networks are created in Tana and Antsiranana and Toamasina and have 30,000 operation in five regions with (50% women; 25% from perform well members 304,000 members of whom 51% disadvantaged groups.) Total Date Total deposits reached US$26 savings US$ 25 million and total Type Unit of Measure million and US$20 million in loan loans reach US$ 23million 20-May-1999 outstanding. These SLAs have Custom Indicator Text Date Comment also achieved operational self sufficiency. 31-Dec-2010 Date Comment 30-Jun-2010 Comment Results have been achieved and targets exceeded in some cases. Indicator Baseline Current End Target Indicator Name Value Value Value Build capacity in Microfinance Only few Malagasy have had This intermediate indicator had a Training program delivers specially formal training and can properly target to delivers series of specially designed and adapted technical manage an MFI designed and adapted technical modules to practitioners from all Date modules to practitioners from all MFIs in the country. Type Unit of Measure MFIs in the country. The program Date 20-May-1999 was able to design and deliver 16 Custom Indicator Text 31-Dec-2010 Comment training modules through APIMF (umbrella MF association) with co- Comment financing from MCA in 2008. MFI practitioners valued the knowledge acquired through training programs received. There is a preference for Public Disclosure Copy tailored courses as opposed to generic courses though. Date 30-Jun-2010 Comment Results have been achieved. Page 9 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Financial Self-Sufficiency 55.00 103.00 100.00 Date Date Date 30-Jun-2006 30-Jun-2010 31-Dec-2010 Type Unit of Measure Comment Comment Comment Core Indicator Percentage Target met on average. However not all MFI networks are financially self-sufficient. Indicator Baseline Current End Target Indicator Name Value Value Value Portfolio at Risk - Microfinance 8.90 5.00 Date Date Date 30-Jun-2010 31-Dec-2010 Type Unit of Measure Comment Comment Comment Core Indicator Percentage The portfolio at risk is 8.9% down from 13% recorded in Dec 2009. Political crisis affected loan recoveries by MFIs. Special recovery policies and campaigns have been initiated by MFIs with objective being to improve their portfolio quality. These measures are expected to lower this risk ratio and improve performance of MFIs. Public Disclosure Copy Page 10 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Volume of Bank Support: Institutional Development - Microfinance 5118886.19 6730139.39 3898375.00 Date Date Date 20-May-1999 30-Nov-2010 31-Dec-2010 Type Unit of Measure Comment Comment Comment Core Indicator Amount(USD) There was additional financing for Target met and exceeded. There this project which increased funds was additional financing to the available to spend. program which increased amounts originally allocated under each component. Right after the political crisis, project staff intensified supervision and direct technical support to MFIs with special focus on financial management which facilitated increased disbursements. Data gathered from retrofit exercise. (1 SDR = $1.564) Indicator Baseline Current End Target Indicator Name Value Value Value Volume of Bank Support: Enabling Environment - Microfinance 0.00 483567.77 698704.00 Date Date Date 20-May-1999 30-Nov-2010 31-Dec-2010 Type Unit of Measure Comment Comment Comment Core Indicator Amount(USD) Target not met mainly due to the halt on expenditure but project results were completed Public Disclosure Copy satisfactorily. Page 11 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Outstanding Microfinance Loan Portfolio 8058379.00 20478119.50 23000000.00 Date Date Date 30-Jun-2006 30-Jun-2010 31-Dec-2010 Type Unit of Measure Comment Comment Comment Core Indicator Amount(USD) Value of loan portfolio has consistently been on the increase except for this trimester mainly due to the cyclic effects of the political crisis. MFIs have prudently decided to slow down loan underwriting and increase collections and savings. The result is slightly under target but with strict collection policies being implemented, it is expected to resume lending again in 2011. Indicator Baseline Current End Target Indicator Name Value Value Value Percentage of project-supported institutions that are reporting on this 47.00 241.00 225.00 indicator Type Unit of Measure Sub-Type Core Indicator Percentage Supplemental Indicator Baseline Current End Target Indicator Name Value Value Value Public Disclosure Copy No of active loan accounts -Microfinance 29475.00 48412.00 70212.00 Date Date Date 30-Jun-2006 30-Jun-2010 31-Dec-2010 Type Unit of Measure Comment Comment Comment Core Indicator Number Number of active loan accounts decreased from 54820 recorded in December 2009 as MFIs tightened lending as the political and economic crisis saw a deterioration of quality of loan portfolio. Page 12 of 14 The World Bank Report No: ISR1704 Indicator Baseline Current End Target Public Disclosure Copy Indicator Name Value Value Value Percentage of project-supported institutions that are reporting on this 47.00 241.00 225.00 indicator Type Unit of Measure Sub-Type Core Indicator Percentage Supplemental Indicator Baseline Current End Target Indicator Name Value Value Value Active Loan Accounts for Women 24690.00 4505.00 Date Date Date 30-Jun-2010 31-Dec-2010 Type Unit of Measure Comment Comment Comment Custom Indicator Number No baseline indicators were The target on this indicator has provided. been exceeded as women make up more than the 50% of MFI membership that was originally planned. Inaddition there are 17412 group loans given to women groups. Data on Financial Performance (as of 13-Dec-2010) Financial Agreement(s) Key Dates Project Loan No. Status Approval Date Signing Date Effectiveness Date Closing Date P052186 IDA-32170 Closed 20-May-1999 10-Jun-1999 28-Oct-1999 31-Dec-2007 P052186 IDA-32171 Closed 10-Apr-2007 22-May-2007 26-Sep-2007 31-Dec-2010 Public Disclosure Copy P052186 IDA-3217A Closed 20-May-1999 10-Jun-1999 28-Oct-1999 31-Dec-2006 Disbursements (in Millions) Project Loan No. Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P052186 IDA-32170 Closed XDR 4.94 4.63 0.31 4.63 0.00 100.00 P052186 IDA-32171 Closed XDR 3.40 3.40 0.00 2.93 0.47 86.00 P052186 IDA-3217A Closed XDR 7.16 7.16 0.00 7.16 0.00 100.00 Disbursement Graph Page 13 of 14 The World Bank Report No: ISR1704 Public Disclosure Copy Key Decisions Regarding Implementation Official use only.. Not for public disclosure Restructuring History Level two Approved on 22-Oct-2002 Related Projects P104883-Madagascar Microfinance Project - Additional Financing Public Disclosure Copy Page 14 of 14