-. The World Bank Colombo Office. Telephone: +94-11-2448070 / 2345281 INTERNATIONAL 3ANK FOR RECONSTRUCTION AND C EVE_OPM :NT 1" Floor, DFCC Building, Facsimile: +94-11-2440357 / 5561352 INTERNATIONAL :EVELOPMENT ASSOCIATION 73/5, Galle Road, Cable Address: INTBAFRAD COLOMBO Colombo 3, Sri Lanka. Mailing Address: P.O. Box 1761, Colombo. OFFICIAl July 04, 2013 Dr. P B Jayasundera Secretary to the Treasury 7 Ministry of Finance and Planning Tie Secretariat Colombo 1 Dear Dr. Jayasundera: RE: (Small end Mea ium Enterprises Development Facility Project) Credit Aumber '804-LK Amendmen to tiLe Financinjz Agreement We refer to :he Financing A)Ireement between the Democratic Socialist Republic of Sri Lanka (the Recipient) and t ie nter lational Development Association (the Association), dated \ovember 8, 2010. We also refer t > your request dated April 11, 2013 to amend a number of p-ovisions of the Fin incing /grceme it. We are pleased to inKorrn yo i that the Association, after due consideration, has agreed to the requested amendments, anc acc :rdingly, the Financing Agreement is hereby amended as follows: Section 3.01 of the Finaiicinj Agreement is amended to read as follows: "3.01. The Recipient c ecla es its commitment to the objectives of the Project and the Program. To this end, the F eci:ienl shall carry out the Project through the Ministry of Finance and Planning, in accordance with the provisions of Article IV of the General Conditions." 2. Schedule I tn the Agree nent is amended to read as reflected in attachment I to this Letter of amendment. 3. Schedule 2 t3 the Agree -nent is amended to read as reflected in attachment 2 to this Letter of amendment. 4. Appendix to the Agr-enent: hall be amended to read as reflected in Attachment 3 to this Letter of amendmen-. All terms and condil ion:; of 1 he Financing Agreement that have not been amended hereby shall remain unchanged and i i ft ll fo ce and effect. RCA 24E t23. L WUI 64145 Q FAX (202) 477-6391 I -2- July 04, 2013 Please confirm your Lgrc eme it to the amendments set out above by having an authorized r,presentative of the Recipiert sign tl e form of confirmation set forth herein below, and returning cne fully executed original of this amendment letter to us at your earliest convenience and retaining one original for your re:ord . Upon counte-signatu:e, this a nendment letter shall become effective. Very truly yours, INTERNAT ION kL DEVELOPMENT ASSOCIATION Doina Petrescu Actinj Country Director, Sri Lanka South Asia Region CONFIRMED AND AGREE D PEMOC IALIS- REPU3LIC OF SRI LANKA 13\ ame: A. Kumarasiri h\ame: Dir_________ ~ector General Tritle: urces_______ ___- f D:ate: AuqLAA__ -3- July 04, 2013 cc: Mr. S R Attygalle, Deput y Secret try to the Treasury/ Project Director SMEDeF, Ministry of Finance and Plannin Mr. Ajantha Kumarasiri, Diractoi General, Department of External Resources, Ministry of Finance & Planning Mr. Priyantha Ratnayake Additi(nal Director General, Department of External Resources, Ministry of Finance k Flann ng Mr. A M P M B Atapattt, A Iditional Director General, Department of Development Finance/ Deputy Pro ect Din ctor SMEDeF, Ministry of Finance and Planning Mr. Mukesh Nandan Pra: ad, Exe:,utive Director, The World Bank -4- July 04, 2013 Attachment 1 SCHEDULE 1 Project Description The objective of the Prcject s to improve access to finance, including term finance, for small and medium enterprise! in Sri I anka affected by the global financial crisis. The Project consists of the fo lowing parts: 1. Financing and Risk Shar ng (a) Carrying ou o ' pr< ductive investments for small and medium enterprises, through the es:abli: hment of Lines of Credit for Participating Financial Institutions for pirpo ;es of provision of Subproject Loans to such enterprises. (b) Expansion oi ac:ess to and terms of finance for small and medium enterprises, through the es:abli! hment of Lines of Credit for Participating Financial Institutions f or purpc ses of provision of Subproject Loans to such enterprises, some of wh ch Sub roject Loans to be covered by a Risk Sharing Facility proposed and finance] entirely by the Recipient. 2. Policy and Capacity Lnh nce nent for Small and Medium Enterprise Banking (a) Capacity bu Iding cf Participating Financial Institutions in relation to the provision of Tmancin ) to small and medium enterprises, and of such enterprises in relation to the effe tive utilization of such financing. (b) Provision of support to Project management, implementation, and monitoring and evaluation, i i Iclu( ing administrative and financial management, procurement, and cisburserment. -5- July 04, 2013 Attachment 2 SCHEDULE 2 Project Execution Section I. Implementaior Ariangements A. Institutional Arranl,ements 1. The Recipient shal' be re: ponsible for Project management, implementation, and monitoring and evaluation including administrative and financial management, procurement. and disbur;eme -it in accordance with the following arrangements. Steering Committee 2. The Recipient shall be rospoi sible for the provision of policy and strategic orientation to the Project tlrough tle Steeri ig Committee. 3. To this end, 1he Recii)ier t shz 11 maintain, throughout Project implementation, the Steering Committee, comprisi rig -i ma ority of representatives from the private sector, and with an adequate institutionil f-ame work, functions, and resources as shall be required for purposes of Project ii npl -met tation. Ministry of Finance and Plan ing Without limitation to paiagra )h I above, the Recipient shall cause its Ministry of Finance and Planning to be rcsponsib e for Project management, implementation, and monitoring and evaluation, inclidir g ac ministrative and financial management, procurement, and disbursemen:, throug -i tl e Pr, iject Implementation Unit. To this end, the Re,.ipi,-nt ,hall: (a) maintain, throughout Project implementation, the Project Impl.mentat on Unit, with an adequate institutional framework, functions, and resources, including coripett nt personnel in adequate numbers, as shall be required for purposes of Projecl inipler tentation; and (b) appoint to such Unit, and maintain throughout Project mp emeitation, a deputy Project director for small and medium enterprise banking, witt. qui lifications, experience, and terms of reference as shall be required for purpose,, of Projoct implementation. B. Anti-Corruption The Recipient shall ersure that the Project is carried out in accordance with the provisions of the Ani i-C rrul tion Guidelines. -6- July 04, 2013 C. Manuals 1 The Recipie-it shall: (a' ensLire that the Project is carried out in accordance with the Project Operations Manual, including the Project Financial Management Manual, and (b) except as the A ;so(iatic n shall otherwise agree, not assign, amend, abrogate, or waive, or pe-mit to be assigr ed, amended, abrogated, or waived, the aforementioned, or any provision thereo:. 2 In the event of a con: lict betv 'een the provisions of any of such manuals, and those of this Agreement, the latter sh,.ll pr,-vail. 1). Lines of Credit, Risk SiarinLg Facilities, and Subproject Loans 1 General (a) The Recipie:lt shall ensure that its resources are made available, in a timely manner, to find the I abilities of the Risk Sharing Facility. (b) The Recipie t hall review and appraise Line of Credit proposals, and cause Participating Financ al Institutions to review and appraise Subproject Loan proposals ard thereLfter monitor and evaluate Subprojects, on behalf of the Recipient, ii accor lance with the provisions of this Part D, the Project Operations Mar ual, including the Project Financial Management Manual, the Environmeni al and Social Risk Management Frameworks, and any Environmeni al and / )r Social Management Plans. (c) The Recipiet it shall ensure that Lines of Credit and Subprojects are carried out, in accordance wv ith the provisions of the respective Line of Credit Agreement, and Subproject L oar Agr ,ement, respectively. (d) The Recipie it ;hall adopt a model Line of Credit Agreement, in form and subs:ance sa. isfactor i to the Association and reflecting the terms and conditions set forth or rferred t > in paragraph 3 (a) of this Part D. 2 Eligibility No Line of Credit shall be e ytended, and no Subproject shall be eligible for financing, under the Pr:ject, urles!;, on the basis of an appraisal conducted in accordance with this Part D, the Project Oporations Manual, including the Project Financial Management Manual, and the En vironme rital and Social Risk Management Frameworks, the Line of Credit, or Subproject is dee-ned to satisfy the eligibility criteria specified below and in further detail in t .e Proj ct Operations Manual, including the Project Financial Managemeni. Manual, and th Environmental and Social Risk Management Frameworks, which shall include the Iblo, ing: (a) the prcpos d Line of Credit has been requested by a financial institution esta)listed and operating pursuant to the laws of the Recipient; -7- July 04, 2013 (b) the propose. Subproject has been prepared by a small or medium enterprise, defined as being an enterprise: (i) established and operating pursJant to :he law; of the Recipient; and (ii) (A) requesting a Subproject Loan, excep t for hc using and consumer Subproject Loans, of less than Sri Lankan Rurees 10 million, (B) if requesting a Subproject loan exceeding Sri Lankan I'upees 10 million, having an annual turnover of less than Sri Lankan Rurees 30( million, or (C) fulfilling such other criteria as may be agreed with the Ass :ciation; (c) the proposed Subproject satisfies the requirements of Part I of the Project as dscribed in further detail in the Project Operations Manual; (d) a Subpr:jec Loan may not be made otherwise than for increased prodiction of g:)ods and services; (e) the piroposed Line of Credit, or Subproject is consistent with the relevant teclini -al, financial, and administrative standards and national sectcr polices, an( the proposed Subproject is financially viable, and technically, co nm rcially, managerially, environmentally, and socially sound; (f) the Participating Financial Institution has put in place all necessary arrangements, including financial and human resources, for the managemeni of the >roposed Line of Credit; and (g) the imc unt of a Subproject Loan does not exceed Sri Lankan Rupees 60 million. 3. Terms and Condition, (a) A Line of Cr:dit shall be established and managed pursuant to a Line of Credit Agreement 10 D:e concluded between the Recipient and the respective Participating Financial Institution, and a Subproject shall be carried out pursuant to a Subpro ect Los n Agreement to be concluded between the respective Participating Fiaanc al Institution and the respective Subproject Loan Beneficiary, L nd(r ter ns and conditions satisfactory to the Association, described in fu-ther de:ail in he Project Operations Manual, which shall include the following: (i) a des4 rip ion of the Line of Credit, or the Subproject, and the budget and perfo:marice i idicators for the Subproject; (ii) denomination of the Line of Credit or the Subproject Loan in Sri Lankan Rupe s; -8- July 04, 2013 (iii) repa ,ment ( f the Line of Credit and the Subproject Loan over a max mum p riod of ten (10) years, including a grace period of up to two (2) yea -s, a nd payment of interest on the Line of Credit and the Subproj :ct L Dan at a rate competitive to that for similar monies; (iv) the obligati )n of the Participating Financial Institution and the Subproj -ct Loan Beneficiary to: (A) manage the Line of Credit, and carr, out th e Subproject, respectively, in accordance with the Project Ope: ations Manual, including the Project Financial Management Man aal: anc (B) with due diligence and efficiency and in accordance with sound t .chnical, financial, administrative, environmental, and social prac ice;; (v) the o liga ion of the Participating Financial Institution to participate n the capacity building program under Part 2(a) of the Project on z cost-sharing basis in accordance with the provisions of the "ro ect )perations Manual; (vi) the ob igati n of the Participating Financial Institution and the Subproj -ct Loan Beneficiary to: (A) ensure that the resources required for ihe Line of Credit, and the Subproject, respectively, are provided promptly a, needed; (B) maintain adequate records to reflect, in acccrdaice vith sound accounting practices, the resources, operations, and expendi:ures relating to the Line of Credit, and the Subproject, resp,:cti vely; and (C) at the request of the Recipient or the Association, have stch r,-cords audited by independent auditors acceptable to the Association, in accordance with consistently applied auditing standards acce ptable t > the Association, and promptly furnish the records as so audii:ed to th: Recipient and the Association; (vii) the obligatic n of the Participating Financial Institution to furnish to the Rec pie it, t roughout Project implementation, no later than six (6) months aftei the end of such Institution's fiscal year, its annual audited finai icia I sta ements for such year; (viii) the ob igation of the Participating Financial Institution and the Sub-)roject -oan Beneficiary to manage the Line of Credit, and imp em nt the Subproject, respectively, in accordance with the pro\ isic ns o the Anti-Corruption Guidelines; (ix) the ob igat on of the Participating Financial Institution and the Sub )roject loan Beneficiary to manage the Line of Credit, and imp emnt the Subproject, respectively, in accordance with the proN isions of the Environmental and Social Risk Management Framem orks and any Environmental and / or Social Management Plans, and en.ure that no activity involving land acquisition or Involuntary -9- July 04, 2013 Restlerneni is included under any Subproject financed, or financed undcr arty St bproject Loan made, under the respective Line of Credit (x) the bligaticn of the Subproject Loan Beneficiary to ensure that the gooc s, work:, and consultants' services to be financed from the proceeds of the Subp roject Loan are procured in accordance with procedures ensu-in& effi-:iency and economy and in accordance with the provisions of S-cti )n II of this Schedule, and used exclusively in the carrying out of the Subpriject; (xi) the -ight of the Recipient in its own right, and of the Participating Fina!ci.l Im titution on behalf of the Recipient, to: (A) inspect by itself, or jointly with the Association, if the Association shall so request, the gooc s, work s, and sites included in the Subproject, the operations thereof, anc any relevant records and documents; (B) obtain all infoima ion is it, or the Association, shall reasonably request regarding the trianagenent and operations of the Line of Credit, the Risk Sharing Faci ity, or t ie Subproject and the financial condition of the Subproject; and (C) susr end or terminate the right of the Participating Financial Insti ution oi the Subproject Loan Beneficiary to use the proceeds of the Line of Cre,lit, the Risk Sharing Facility, or the Subproject Loan, or obta n a refu id of all or any part of the amount of the Line of Credit, the Risk SI-arinl Facility, or the Subproject Loan then withdrawn, upon failure ty th: Participating Financial Institution or the Subproject Loan Benficiary o perform any of its obligations under the Line of Credit Agrmemnt, ir the Subproject Loan Agreement, as the case may be; and (xii) the )bligati n of the Subproject Loan Beneficiary to monitor and evaliate implementation of the Subproject, and to operationalize it follo wir g co npletion. (b) The Recipiei it s iall ,xercise its rights under the Line of Credit Agreement, and caus the Parti,;ipat ng Financial Institution to exercise its rights under the Subproject loan Ag -eement, in such manner as to protect the interests of the Recipient, 1ie Par icipating Financial Institution as applicable, and the Asscciation, anc to Eccomplish the purposes of the Financing, and, except as the Asscciation she11 o.herwise agree, the Recipient shall not assign, amend, abro gate, or waive, c r permit to be assigned, amended, abrogated, or waived, the aforementioned, or a iy provision thereof. E. Safeguards The Recipient shall ca -ry (ut the Project in accordance with the provisions of the Environmenial and So-:ial Risk Management Frameworks and any Environmental Assessments and En-iro imei tal and / or Social Management Plans. -10- July 04, 2013 2 The Recipie-t shall en,ure :hat no activity involving land acquisition or Involuntary Resettlemeni is included und,r any Subproject, or financed under any Subproject Loan. Wherever required in tern s of the Environmental and Social Risk Management Frameworks, the R(:cipient shall, for the purposes of any Subproject, and prior to implementation thercof, proc eed to have an Environmental Assessment, setting out the potential adverse en vironme ntal impacts of the Project, and Environmental and / or Social Management Plans, setting out mitigation, enhancement, monitoring, and institutional measurcs, inclu ding capacity building through training, that have been identified by the Rec pient to eliminate any adverse environmental and / or social impacts of activities to be implomer ted under the Subproject, offset them, or reduce them to acceptable levels, or ent ancc positive impacts, in accordance with the provisions of the Environmental and Soci, l Ri, k Management Frameworks: (a) prepared in f rm and substance satisfactory to the Association; (b) except as otherwkise agreed with the Association, submitted to the Association for review and alpproval; and (c) thereafter, adoptod ar d locally disclosed. 4. The Recipiert shall take all r ieasures necessary on its part to regularly collect, compile, and submit to the As!:ociatior, as part of the Project Reports, information on the status of compliance with the En-iron nental and Social Risk Management Frameworks and any Environmental Asse:,smnts and Environmental and / or Social Management Plans, providing details of: (a) measures tak,.n i i fur herance of such instruments; (b) any conditicns whi :h interfere or threaten to interfere with the smooth implementati)n of su. h instruments; and (c) remedial mee sures tal len or required to be taken to address such conditions. 5. The Recipier,t shall I repare, no later than three (3) months after the Effective Date, a document, in form and Eubstance satisfactory to the Association, setting out environmental guidance for small and medium enterprises, and including baseline environmental infonr ation in relation to such enterprises. 6. The Recipiert shall carry ou:, no later than one (1) year after the Effective Date, and thereafter on an annial basi; throughout Project implementation: (a) an independent audit, in form and sub5tanc: satisfactory to the Association, of implementation and monitoring and ev,lua:ion of the Environmental and Social Risk Management -11- July 04, 2013 Frameworks and any Envirinmental Assessments and Environmental and / or Social Managemeni Plans; ,.nd (b) a social impact assessment of the Project. In the event of a con flic: bet veen the provisions of any of such instruments and those of this Agreement, the latter shall prevail. F. Annual Work Plam and Bt dgets The Recipient shall: (a) furnish to th-- Assoc ation for approval as soon as available, but in any case not later than October -11 of each year, the annual work plan and budget for the Project for each sub;equent year of Project implementation, of such scope and detail as the As ;ociz tion shall have reasonably requested, except for the annual work plan ard budge t for the Project for the first year of Project implementation, which shall be furnis led no later than one (1) month after the Effective Date; and (b) thereafter en;ure: thal the Project is carried out in accordance with such plans and budgets as approved :y the Association. G. Semi-Annual Reviews The Recipient shall revi -w j ointly with the Association, every six (6) months throughout Project imp ementalion the two (2) most recent Project Reports furnished to the Association, and, the rea 'ter, ake all measures required to ensure the efficient completion of the Project and th, achiev ment of the objective thereof, based on the conclusions and recommendations of such Re )orts and the Association's views on the matter. i. Midterm Review The Recipient shall: (a) carrv out jointly witl the Association, no later than eighteen (18) months after the Effe-tive Date, i mi Iterm review to assess the status of Project implementation, as measured against the performance indicators referred to in Section II.A.1 (a) of tFis Schedule. St ch review shall include an assessment of the following: (i) overall prores; in Project implementation; (ii) results of monitoring and evaluation a.:tivties; (iii) progress on implementation of annual work plans and budgets; (iN)piogre3s on procurement and disbursement; (v) progress on implementation of sifeguards measures; (vi) implementation arrangements; and (vii) the need to make any adjustments to the Project and reallocate funds to improve per:ormancn; (b) prepare and furnish to the Association, at least three (3) months before such review, a re)ori, in scope and detail satisfactory to the Association, needed to undertake tf e rview, integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section on the progress achieved in i he ,arry ing out of the Project during the period preceding the date of the said report end s tting out the measures recommended to ensure the efficient -12- July 04, 2013 carrying out of the Project and the achievement of the objective thereof during the period following such date; and (c) review, jointly witl the Association, the report referred to in paragraph (b) of this Section and th reafter take all measures required to ensure the efficient com-letion (if tF e Pr )ject and the achievement of the objective thereof, based on the conclusions and: ecommendations of said report and the Association's views on the mattei. Section II. Project Morlitorin. Reporting and Evaluation A. Project RepDrts 1 (a) The Recipieint shall i ionitor and evaluate the progress of the Project and prepare Project Repc rts in ac zordance with the provisions of Section 4.08 of the General Conditions aid on th,- basis of the indicators set forth below in sub-paragraph (b) of this parag-aph. E.ch Project Report shall cover the period of one (1) calendar quarter, and ihall be Furnished to the Recipient and the Association not later than forty-five (4:) days a fter the end of the period covered by such report. (b) The perform ince ind icators referred to above in sub-paragraph (a) consist of the following: No. Indicator Project Objectiv, 1. Lending, includir g term ending (defined as having a maturity of at least five (5) years), to small a id medi im enterprises, as evidenced by the number of Subproject Loan Beneficiaries ar d thi volume of Subproject Loans 2. Percentage of non -pe -forn ting Subproject Loans (defined as being at least ninety (90) days past due) Part 1 of the Project 3. Volume of Lines of C redi- Part 2 of the Pro ect 4. Number of Participa:ing Financial Institutions having introduced enhanced credit scoring techniqu.s, prac:ices, and products in relation to small and medium enterprise lending 5. Number of loan officer at Participating Financial Institutions having received training under the Prcject -13- July 04, 2013 13. Financial Manageneni, Fir ancial Reports and Audits The Recipient shall maintain or cause to be maintained a financial management system in accordance vith the )ro"isio is of Section 4.09 of the General Conditions. 2. Without limitation oi the pr visions of Part A of this Section, the Recipient shall prepare and furnish ,o the A sso-i ati in, not later than forty-five (45) days after the end of each calendar quarter, interin une udited financial reports for the Project covering the quarter, in form and substance sEtisfa,,tory to the Association. 3 The Recipicnt shal have ts Financial Statements audited in accordance with the provisions of Sectio!i 4 09 () of the General Conditions. Each audit of the Financial Statements shall cover tie p!riod of one (1) fiscal year of the Recipient. The Recipient shall ensure that tho audite I Financial Statements for each such period shall be: (a) furnished to the Associa ion iot later than six (6) months after the end of such period; and (b) made publicly ivailabh in a timely fashion and in a manner acceptable to the Association. Section III. Procurement A. General Goods, Non-Consulting Sei vices, and Works. All goods, non-consulting services, and works required for the Projct and to be financed out of the proceeds of the Financing shall be procured in iccordai ce with the requirements set forth or referred to in Section I of the Procurement C:uicelinm s, and with the provisions of this Section. 2 Consultants' Services. Al consultants' services required for the Project and to be financed out of the pro(eeds of the Financing shall be procured in accordance with the requirement5 set for h or ref arred to in Sections I and IV of the Consultant Guidelines, and with the provisicns of this Section. 3 Definitions. The c.ipitalized terms used below in this Section to describe particular procurement methoes o- me.hods of review by the Association of particular contracts, refer to the correE por ding method described in the Procurement Guidelines, or Consultant Guidelines, as the case may be. B. Particular Methods of Proc arement of Goods, Non-Consulting Services, and Works I National Competitive Bidd ing. Except as otherwise provided in paragraph 2 below, goods, non-consultirg sorvic:s, and works shall be procured under contracts awarded on the basis of National Compe itive Bidding, subject to the additional procedures set out in Annex 2 to t)is Schedule. -14- July 04, 2013 2. Other Methods of Pr,)cur,-ment of Goods, Non-Consulting Services, and Works. The follow ng tab e !peci Fies the methods of procurement, other than National Competitive Bidding, which may be used for goods, non-consulting services, and works. The Procurement Plan shall pecify the circumstances under which such methods may be used: Procurement Metiod (a) Shopping (b) Established prix ate secttr or commercial practices acceptable to the Association C. Particular Method of Pro urement of Consultants' Services 1. Quality- arid 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-B ised Sel -ction. 2. Other Methods of P -ocu -ement of Consultants' Services. The following table specifies_methods o 'procur ment, other than Quality- and Cost-Based Selection, which may be used for consulta-its' services. The Procurement Plan shall specify the circumstances under which s ich methods may be used. Procurement Met hod (a) Quality-Based Seletior (b) Least-Cost Selecticn (c) Selection Basec on the Consultants' Qualifications (d) Single- Source Sele:tior (e) Selection of Ind ivicual Consultants (f) Established priv ate sect( r or commercial practices acceptable to the Association ). Review by t he Assc cia ion f Procurement Decisions The Procurement [lan sha 1 set forth those contracts which shall be subject to the Association s Prior Reiiew. All other contracts shall be subject to Post Review by the Association. Section IV. Withdrawa I of the ?roceeds of the Financin2 A. General I. The Recipient may withdn.w the proceeds of the Financing in accordance with the provisions of Article II of the General Conditions, this Section, and such additional instructions as the Associalion shall specify by notice to the Recipient (including the -15- July 04, 2013 "World Ban< Disbu-serient Guidelines for Projects" dated May 2006, as revised from time to time by the AsEocia ion and as made applicable to this Agreement pursuant to such instructions), to fin ince Eligible Expenditures as set forth in the table in paragraph 2 below. 2 The following tablt specifes the categories of Eligible Expenditures that may be financed oul. of the pr:)cee Is of the Financing ("Category"), the allocations of the amounts of :he Financing to each Category, and the percentage of expenditures to be financed for Eligible Expend tures in each Category: Category Ai nount of the Financing Percentage of Expenditures Allocated to be Financed (expressed in SDR) (inclusive of Taxes) (1) Subproject Loans 12,720,000 100 under Lines of Credit (Part 1 (a) of the Project), completed prior to the date of thi!; amendment (2) Risk Sharing 0 100 Facilities (Part 1 (b) oF the Project) (3) Goods, non- 4,605,000 100 consulting services, works, consultants' services, Tralning, an,I Operating Costs (Part 2 of the Projec:) (4) Unallocaled 0 100 (5) Subproject Loans 20,475,000 100 under Lines of Credit (Part 1 (a) of the Project) not covered by Category (1) and Line; of Credit (Part 1 (b) cf the Project) 37,800,000 -16- July 04, 2013 B. Withdrawal ConI.itic ns; I Vithdrawal Period 1. Notwithstanding the provisio is of Part A of this Section, no withdrawal shall be made for payments made under Categ,)ry (1) and (5), unless the Recipient has adopted a model Line of Crecit Agretmerit in accordance with the provisions of Section I.D.1 (d) of this Schedule; or 2. The Closing Date is Sep emb,-r 30, 2015. Section V. Access to Inforinati )n The Association may disclosi the Legal Agreements and any information related to the Legal Agree:nents in ac orda nce with its policy on access to information, in effect at the time of such disclosL re. -17- July 04, 2013 AN REX 1 TO SCHEDULE 2 Risl. Sharing Facility Account The Recipient shall, for the 3urposes of Risk Sharing Facilities, establish and maintain, on terms and conditio is s itisfactory to the Association, the Risk Sharing Facility Account. 2. Deposits into, and piyrr ents out of, such Account shall be made in accordance with the terms and zonditions set 'orth in the Line of Credit Agreement in the Project Implementation Mar ual 6. In order to ensure continu,-d management of Risk Sharing Facilities following the Closing Date, the Rc cip ent ! hall, no later than three (3) months before the Closing Date, deposit in the Risk Starin, Facility Account, such amount, to be agreed with the Association, as shall be requ red to cover commitments under any outstanding applicable Line of Credit Agreement. -18- July 04, 2013 ANI EX 2 TO SCHEDULE 2 National Competitive Bidding: Additional Procedures The additional proccdures set out below shall apply to the procurement of goods and works under contracts awarded on th- basis of National Competitive Bidding in order to ensure eConomy, efficiency, transpa en y, and broad consistency with the provisions of Section I of the Procurement Guideli ies, pur:..uait to paragraph 3.3 of said Guidelines. In the event of a conflict between the Recipient's pr:)cedure. and the provisions of paragraphs 3.3 and 3.4 of the Procurement Guidelines, said pai agra )hs shall govern, including the following: 1. Only Recipient-specific stan,lard bidding documents satisfactory to the Association, as may be amended fro n time I time with the prior written agreement of the Association, shall be used. 2. Invitations for bids s iall be a ivertised in at least one (1) widely circulated national daily newspaper, and bidd ng Jocu rnents shall be made available at least twenty-one (21) days prior, and issued up, o the de idline for submission of bids. 3. Bidding documents s hal' be issued by mail or in person to all who are willing to pay the required fee. 4. Foreign bidders shall no: be >recluded from bidding and no preference of any kind shall be given to nationil tidde-s (including Recipient-owned enterprises or small-scale enterprises) n the b dd ng I rocess. No special preferences shall be accorded to any enterprises or bodies. 5. Qualification criterik sVall le stated in the bidding documents, and if a registration process is required, a foreig i firm declared as the lowest evaluated responsive bidder shall be given a reascnal le tii ne for registering, without let or hindrance. 6. There shall not be any restri :tions on the means of delivery of the bids, which shall be either by mail or han.J-delivei ed. Electronic submissions shall not be permitted. 7. Bids shall be opened in :ubl c in one (1) location, immediately after the deadline for the submission of bids, is stipul ited in the bidding document (The bidding document shall indicate the date, tim , a id pl ace of bid opening). 8. Evaluation of bids hall be made in strict adherence to the criteria disclosed in the bidding document, in a fi rmat and within the specified period agreed with the Association, and witlin 'he b d validity period specified in the bidding document. 9. Except in cases of,"orce majeure or exceptional situations beyond the control of the implementin, agenc-, tFe ex ension of bid validity shall not be allowed without the prior -19- July 04, 2013 written agreement of thc Ass 3ciation: (i) for the first request for extension if it is beyond four (4) weeks; anc (ii) foi all subsequent requests for extension irrespective of the period. . Contracts shall be av,arded t< the lowest evaluated responsive bidder. I. Bids shall not be rej-.ctc d mi rely on the basis of a comparison with an official estimate, without the prior wri len agrc ement of the Association. 2. Except with the prior w -itter agreement of the Association, there shall be no negotiation of price with bidders, ev.n w 'th the lowest evaluated bidder. .3. Re-invitation of bid,, sh all n )t be carried out without the prior written agreement of the Association. !4. All bidders and con.ractors I suppliers shall provide bid and performance securities as required in the biddil ig end c )ntract documents. 15. A bidder's bid securi-y shall apply only to the specific bid, and a contractor's performance securiti shall a)ply only to the specific contract, under which such security is furnished. 16. Bids shall not be invited o: the basis of a percentage premium or discount over the estimated cost without the pr or written agreement of the Association. -20- July 04, 2013 SCHEDULE 3 Repayment Schedule Date Payment Due Principal Amount of the Credit repayable (expressed as a percentage)* On each March 15 and Septenber 15 5 commencing September 15, 202) to .nd including March 15, 2030 The percentage represents the per:entage of the principal amount of the Credit to be repaid, except as the Association may othcrwise specify pursuant to Section 3.03 (b) of the General Conditions. -21- July 04, 2013 APPENDIX Section I. Definitions 1. "Anti-Corruption Guidelines" mean the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by I HRD Loans and IDA Credits and Grants", dated October 15, 2006, with the modifications set forth in Section III of this Appendix. 2. "Consultant Guidelines" me ins the 'Guidelines: Selection and Employment of Consultants by World Bank Borrowers" put-lish[ed t y the Bank in May 2004 and revised in October 2006 and May 2010. 3. "Development Finance Departrient' means the department of the Ministry of Finance and P anning (as hereinafter defir ed), resionsible for development finance, or any successor thereto. 4. "Environmental Assessment' n eans the Recipient's assessment, including an Environmental Management Plan (as hereinafter de,,ined) and referred to in Section I.F.3 of Schedule 2 to this Agreement, as the same may be moc ified from time to time with the prior written agreement of the Association, and such term ir clud es any schedules or annexes to such assessment. 5. "Environmental Risk ManaE,emnt I ramework" means the Recipient's framework, dated June 2010, agreed with the Associatior, setting out mitigation, enhancement, monitoring, and institutional measures, incluc ing cap;acity building through training, that have been identified by the Recipient to eliminate any acvers environmental impacts of Project activities, offset them, or reduce them to acceptable levels or c nhance positive impacts, as the same may be modified from time to time with the prior wri-ten tgreement of the Association, and such term includes any schedules or annexes to such fratnework. 6. "Environmental Managemert Flan" means the Recipient's plan, part of the Environmental Assessment and refered to in Scctioi I.E.3 of Schedule 2 to this Agreement, as the same may be modified from time :o time vith the prior written agreement of the Association, and such term iicludes any schedules or anriexe s to ;uch plan. 7. "General Conditions" means the "Int nmational Development Association General Conditions for Credits and Grants", dated Jul- 1, 2005 (as amended through October 15, 2006), with the modifications set forth in Sec:ior II o7this Appendix. 8. "Involuntary Resettlement" rneais: (t) the involuntary taking of land, resulting in (i) relocation, ci loss of shelter; (ii) loss of issets, oi access to assets; or (iii) loss of income sources, or means of 1 velihood, whether or not the affi cted person must move to another location; or (b) the involuntary restrictic n of access to legally designated parks and protected areas, resulting in adverse impacts on the livelihood of t ie affected person. 9. "Line of Credit" means a lin. of crec it made or proposed to be made by the Recipient out of the proceeds of the Financing to a Participating Financial Institution (as hereinafter defined) to -22- July 04, 2013 11nance Subproject Loans including , ubproject loans covered by a Risk Sharing Facility financed by the Recipient. 10. "'line of Credit Agreement' reans an agreement between the Recipient and a Participating Financial Institution, setting Iorti the terms and conditions governing a Line of Credit. I1. "\linistry of Finance and Planning" means the Recipient's ministry responsible for finance and planning, or any successor th 2rei o. 12. "Operating Costs" means inc rerT enta operating costs under the Project, based on the annual work plans and budgets referred to in Sec ion I.F (a) of Schedule 2 to this Agreement as approved by Ihe Association, aid incLrred b3 the Recipient for purposes of Project management, implementation, and monito ing and -valuation on account of utilities and supplies, bank charges, communications, ve)icle op.aration, -naintenance, and insurance, office space rental and related operational expenses, building and equipment maintenance, public awareness-related media expenses (including workshops, prin ing, and communications), domestic and international travel and subsistence, , and salaries ol' con ractual and temporary staff, but excluding salaries, fees, and bonuses of members of the R eci )ient's civil service. 13. "Participating Finan.ial Inst tut on" means, individually, a financial institution, established and operating pursuant to the laws of the Recipient, which has met the eligibility criteria specified in 1he Project Operations Manaal (as hereinafter defined), and as a result has received a Line of Credit covered or rot by a Risk Siaring Facility (as hereinafter defined); and "Participating inancial Institutions" meanm, colleclively, more than one (1) Participating Financial Institution. 14. "Procurement Guidelines" mearis ti e "Guidelines: Procurement under IBRD Loans and IDA Credits" published by the Bank n M ty 2004 and revised in October 2006 and May 2010. 15. "Procurement Plan" means the Recipient's procurement plan for the Project, dated August 9, 2010 and referred tc in parai)raph 1. 16 of the Procurement Guidelines and paragraph 1.24 of the Consultant Guidelines, as the same shall be updated from time to time in accordance with the :rovisions of said paragraph.. 16. "Project Financial Management Mai.ual" means the Recipient's manual, dated August 2010 and part of the Project Operatio is Man al (as hereinafter defined), agreed with the Association and setting out financial management and disbursement arrangements for purposes of Project Lnplementation, as the same may be amended from time to time with the prior written agreement of the Association, and such tertr includes any annexes or schedules to such manual. 17. 'Project Operations Manual ' means the Recipient's manual, dated August 2010, agreed with the Association and setting out i nple mentation, organizational, administrative, monitoring and evaluation, environmental a:id :ocia[ monitoring and mitigation, and procurement arrangements for purposes of Project implomentati n, and including the Project Financial Management Manual, as the same may be amended frcm time to time with the prior written agreement of the Association, and such term includes my annexes or schedules to such manual. -23- July 04, 2013 18. " roject Implementation Urit" meais the Recipient's entity, under the Development Finance Department, establisied and opcratirg pursuant to the Recipient's letter of April 29, 2010 to the A ssociation. 19. "Risk Sharing Facili:y" mea is, ndi, idually, a facility established for purposes of the sharing of risk over small and medium eriterf rise Subproject Loans made by a Participating Financial Institution and financed eritircly ty the Recipient; and "Risk Sharing Facilities" means, collectively, more than one ( 1) Risk 1 haring Facility. 20. "Risk Sharing Facility Account" n eans, in respect of Risk Sharing Facilities, the relevant dedicated account in which amounts 'elating thereto disbursed pursuant to Annex I to Schedule 2 tc this Agreement, together with any interest and fees earned by the Recipient in respect of such Facilities, shall be held pending payrr ent of any claims under such Facilities. 21. -Social Risk Manag;ement rainewoirk" means the Recipient's framework, dated June 2010, agreed with the Association. se ting out mitigation, enhancement, monitoring, and institutional rieasures, including capacity building through training, that have been identified by the Recipient to eliminate any adverse social iml acts of Project activities, offset them, or reduce them to acceptable levels, or enhancc pcsitive impacts, as the same may be modified from time to time with the prior written agreemert of the Association, and such term includes any schedules or annexes to such framework. 22. "Social Management Plan" n-eat[s thr Recipient's plan, referred to in Section I.F.3 of Schedule 2 to this Agreement, as the same m y be modified from time to time with the prior written agreement of the Association, anI su(h term includes any schedules or annexes to such plan. 23. "Sri Lankan Rupee" means tie c arrer cy of the Recipient. 24. "Steering Committee" mean; the R cipient's entity, established and operating pursuant to the Recipient's letter of June 14, .2010 to he Association. 25. "Subproject" means a speciFic actii ity carried out under Part I of the Project, financed or proposed to be financed throL gh a Su >project Loan (as hereinafter defined). 26. "Subproject Loan" means a loan mide or proposed to be made by a Participating Financial Institution out of the proceeds of tht Financing to a Subproject Loan Beneficiary to finance a Subproject. 27. "Subproject Loan Agreemeni" n ean, an agreement between a Participating Financial Institution and a Subproject Loan Beneficia-y, s!tting forth the terms and conditions governing a Subproject Loan. 28. "Subproject Loan Beneficiary," mnean; an enterprise to which or for whose benefit a Subproject Loan is made or proposed to )e nade -24- July 04, 2013 29. "rraining" means the cost ol traininj financed under the Project, based on the annual work plans aid budgets referrec to in Section I G (a) of Schedule 2 to this Agreement as approved by the Association, and attributablI to sen inars, workshops, and study tours, along with the cost of travel and subsistence for training Farticipants, services of trainers, rental of training facilities, preparation and reprmduction of trail ing materials, and other activities directly related to course preparation and implementation. Section II. Modificatioiis tc tht General Conditions The modifications to the Ger era. Conditions for Credits and Grants of the Association, dated July 2005 (as amended through Octobe 15, 2006) are as follows: Section 2.07 is modi flied to re ad as follows: "'Section 2.07. Refinancing Prep 2rath n Advance If the Finarcing Agree men provides for the repayment out of the proceeds of the Financing of an advance made by he Association or the Bank ("Preparation Advance"), the Association shall, on behalf of 1 he F ecipient, withdraw from the Financing Account on or after the Effective Date the amot nt requi -ed to repay the withdrawn and outstanding balance of the advance as at the date of suci withdr iwal from the Financing Account and to pay all accrued and unpaid charges, if any, on tV e advan -e as at such date. The Association shall pay the amount so wNithdrawn to itself or the Bank, as tl - case may be, and shall cancel the remaining un-withdrawn amount of the advance." 2. Paragraph (i of Section 6.02 is modified to read as follows: "Section 6.02. Suspe,7sion by the Association ... (1) Ineligibility. The A!soci ition or the Bank has declared the Project Implementing Entity ineligible to receive pro eeds of any financing made by the Association or the Bank or otherwise to participate in the prepar ation or implementation of any project financed in whole or in part by the Association or the Ban -, as a result of: (i) a determination by the Association or the 13ank that the Project Imp emntin : Entity has engaged in fraudulent, corrupt, coercive or collusive practices in conneticn w th the use of the proceeds of any financing made by the Association or the Bank; and / o: (ii) a declaration by another financier that the Project Implementing Entit) is inel gible to receive proceeds of financings made by such financier or otherwise to participate in the p;epar ation or implementation of any project financed in whole or in part by such financier as a res ilt of a determination by such financier that the Project Implementing Entity has enga.ed in fraudulent, corrupt, coercive or collusive practices in connection with the use of the pi ocee ds of a financing made by such financier." 3. The following terms and definitiDns ,et forth in the Appendix are modified or deleted as follows, aid the following new terms anc definitions are added in alphabetical order to the Appendix as lllows, with the terms being reLumt ered accordingly: -25- July 04, 2013 (a) The term "Project Preparation Advnce" is modified to read "Preparation Advance" and its d:-finition is modified to read as Follo vs: 'Preparation Advance' m.,an! tht advance referred to in the Financing Agreement and repayable in accordaice with Se,:tion 2.07." Section III. Modifications to the A iti-Corruption Guidelines -The modifications to the Ant -Corrup:ion Guidelines are as follows: 1 . Section 5 is re-numbered as 1Section f(a) and a new Section 5(b) is added to read as follows: "... (b) 7hese Guidelines also provic e for the sanctions and related actions to be imposed by the Bank on Borrowers (other than the Membei Country) and all other individuals or entities who are recipients of Loan p-oceeds, in the (vent that the Borrower or the individual or entity has been debarred by another 'mancie- as a res ult of a determination by such financier that the Borrower or the individual or entity has engaged in fraudulent, corrupt, coercive or collusive practices in connection with the use of th.! procee is of a financing made by such financier." 2. Section 11(a) is mod fled to r ad as follows: "... (a) sanction in accordance with preva ling Bank's sanctions policies and procedures (fnl3) a Borrower (other than a Membei Country) (fn 14) or an individual or entity, including (but not limited to) declaring such Borro Ner, individual or entity ineligible publicly, either indefinitely or for a stated period of time: (i: to be a varded a Bank-financed contract; (ii) to benefit from a Bank-financed contract, financiall) or otherwise, for example as a sub-contractor; and (iii) to otherwise participate in the prepara: ion or implementation of the project or any other project financed, in whole or in parl, by the Bank, if at any time the Bank determines (fn 15) that such Borrower, individual or ertity ha, engaged in corrupt, fraudulent, collusive, coercive or obstructive practices in connection with the use of loan proceeds, or if another financier with wkhich the Bank has entered into an a: eement for the mutual enforcement of debarment decisions has declared such person oi entity neligible to receive proceeds of financings made by such financier or otherwise to par icipate in the preparation or implementation of any project financed in whole or in part by such financit r as a result of a determination by such financier that the Borrower or the individual :r entit) has engaged in fraudulent, corrupt, coercive or collusive practices in connection with 1 he ise c f the proceeds of a financing made by such financier." Footnotes: "13. An individual or enti y mi y be declared ineligible to be awarded a Bank financed contract upon comple:ion of lanctions proceedings pursuant to the Bank's sanctions policies and procedures, o under the proce lures of temporary suspension or early temporary suspension in connection w: th an or goi ig sa ictions proceeding, or following a sanction by another financier with whom the Bank has entere I into a cross debarment agreement, as a result of a determination by such financier thal thc firrk or individual has engaged in fraudulent, corrupt, coercive or collusive practices in connecti n with the use of the proceeds of a financing made by such financier." -26- July 04, 2013 "14. Member Country nclodes >fficials and employees of the national government or of any of its political or administral [ve subd visions, and government owned enterprises and agencies that are not eligible to bid un ler paragraph 1.8(b) of the Procurement Guidelines or participate under paragraph 1.1 1(c) of thi Consul ant Guidelines." "15. The Bank has es.ablished a Sanctions Board, and related procedures, for the purpose of making such determinat'ois. I e procedures of the Sanctions Board sets forth the full set of sanctions available to he 3ank In addition, the Bank has adopted an internal protocol outlining the process to be followNed in ii iplementing debarments by other financiers, and explaining how cross-debarments will be p:sted on the Bank's website and otherwise be made known to staff and other stakeholJers."