The World Bank Implementation Status & Results Report Madagascar Financial Inclusion Project (P161491) Madagascar Financial Inclusion Project (P161491) AFRICA | Madagascar | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2018 | Seq No: 3 | ARCHIVED on 21-Jun-2019 | ISR37544 | Implementing Agencies: Ministere des Finances et du Budget, Ministere des Finances et du Budget Key Dates Key Project Dates Bank Approval Date: 28-Feb-2018 Effectiveness Date: 27-Sep-2018 Planned Mid Term Review Date: 15-Jul-2020 Actual Mid-Term Review Date: -- Original Closing Date: 31-Jul-2022 Revised Closing Date: 31-Jul-2022 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The development objective of this project is to promote the financial inclusion of individuals and MSMEs in Madagascar. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Digitalization of transactions to increase usage of transaction accounts:(Cost $25.50 M) Access to credit for MSMEs:(Cost $16.50 M) Project Management and Impact Evaluation:(Cost $3.00 M) Contingent Emergency Response Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions In overall, the project implementation and progress toward achieving its PDO are satisfactory. The project has been effective for 8 months, and the implementation progress has been excellent given the preparation of major activities before it became effective: (i) The major payment system (RTGS, ACH) of the Central Bank has been procured and installed (ii) The guarantee component (like 20% of project financing) has exceeded its targets : Progress on two indicators: (i) Number of MMSEs guaranteed stood at 1,976 as of end March 2019 for a project end target of 5,000; (ii) the ratio of non-performing loans to total loans was 2.3%. (iii) The overall disbursement rate of project was 23.43% as of May 31, 2019. (iv) The project is on track toward achieving its PDO. 6/21/2019 Page 1 of 6 The World Bank Implementation Status & Results Report Madagascar Financial Inclusion Project (P161491) The digitalization component is progressing well. This component is now on track after it experienced a delay as the Government entered into a direct negotiation with the mobile money providers as the fee level offered by the operators was considered to be too high. A competitive process was relaunched in may to request proposals from all mobile payment providers to digitize government payments. Component 1- Digitalization of transactions to increase usage of transaction accounts Digitalization of Government Payment (G2P: Salaries, scholarships to students and P2G: taxes payment to the government in Tana): This has been delayed as the Government has entered into a direct negotiation with the mobile money companies. As a result, the fee level initially proposed by mobile money companies was deemed too high by the Government. It was agreed to have the Treasury launch a competitive bidding process to all mobile payment providers to make proposals for (i) the digitalization of teacher's salaries and students' scholarship ; (ii) a Request for Proposal to individual e-money providers for the perception of synthetic tax by mobile phone in 7 tax bureau centers around Antananarivo. An expression of interest has been launched in May 2019. Digitalization of MFIs: Initially this activity was designed to cover only large MFIs. It was greed to expand its coverage to all interested MFIs given their role in Financial Inclusion. The Request for Proposal has been therefore revised to cover all category of MFIs. A consultant is being hired to help the PIU (i) design a mutual back office and information and management system for MFIs; and (ii) select and help MFIs connect and use the mutual information system. Payment System. Progress in upgrading the payment system’s infrastructure is satisfactory. Major parts of the payment system (RTGS, ACH) of the Central Bank have been procured and installed. Regarding the implementation of the National Switch, the Central Bank has published terms of reference to recruit a consultant to assist in defining its technical specifications, business model, and implementation. The Steering Committee for the financial inclusion project consisting of the Central Bank, MEF, Bankers association, the mobile payments companies’ associations and the MFI association has been created to participate in the design and management of the national switch. It will be involved in the selection of the consultant. For the reimbursement of retroactive financing, the Bank’s fiduciary team has received from the borrower the relevant documentation on June 11, 2019 and found it to be satisfactory. The reimbursement is expected to be processed before the end of the FY. Component 2. Access to finance by MSME The Partial Guarantee Scheme. It has progressed well with the disbursement of the third tranche of the SME window (US$1.5 million in addition to the US$2.5million already disbursed). The number of MSMEs guaranteed under the PPCG has increased substantially. The number of beneficiaries MSMEs stood at 1,976 as end of May 2019, for an end of project target of 5,000). The PPCG will issue a Request for Proposal before end June 2019 to attract additional financial institutions, especially MFIs active in peri urban and rural areas, that are well placed to reach female or female owned enterprises. The Fintech Innovation Fund. Given the limited capacity on and knowledge of Fintech, it was agreed to hire a firm to: (i) conduct a diagnostic study on Fintech initiatives in Madagascar; (ii) develop and deliver a training program on Fintech for relevant stakeholders; and (iii) help with the design and operation of the Fintech Fund. The web-based secured transaction and collateral registry. The adoption of the legal framework on secured transactions and collateral registry and the definition of the institutional set-up of the web-based registry are key success factors for the implementation of this component: The law has been drafted. However, its approval and implementation are substantially delayed by the parliamentary elections and the lack of clarity and decision from the Government on the implementing entity of the registry. The team has advised the government to have the registry jointly managed by the Central bank and the Ministry of Justice for better efficiency. It was agreed during the March supervision that: (i) the draft law will be discussed by the Commission de réformes du droit des affaires (CRDA); and (ii) the government will submit it to Parliament for adoption at its next session. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance High High High Macroeconomic Substantial Substantial Substantial Sector Strategies and Policies Moderate Moderate Moderate Technical Design of Project or Program Substantial Substantial Substantial Institutional Capacity for Implementation and Sustainability Substantial Moderate Moderate Fiduciary Substantial Moderate Moderate Environment and Social Moderate Moderate Moderate 6/21/2019 Page 2 of 6 The World Bank Implementation Status & Results Report Madagascar Financial Inclusion Project (P161491) Stakeholders Substantial Moderate Moderate Other -- -- -- Overall Substantial Moderate Moderate Results PDO Indicators by Objectives / Outcomes Number of currently unbanked (i) FRAM teachers/students that receive their government salary/scholar IN00714280 ►Number (cumulative) of MSME borrowers that banks and MFIs have registered under the partial portfolio credit guarantee since effectiveness of the project (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 1.97 5.00 Date 18-Oct-2017 28-May-2018 31-May-2019 29-Jul-2022 IN00714281 ►Number of currently unbanked (i) FRAM teachers/students that receive their government salary/scholarship and (ii) businesses that pay the "impot synthetique" through a transaction account (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 130.00 Date 18-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 Intermediate Results Indicators by Components Digitalization of transactions to increase usage of transaction accounts IN00714282 ►Number of currently unbanked female (i) teachers/students that receive their government salary/scholarship and (ii) businesses that pay the "impot synthetique" through a transaction account (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 65.00 Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714284 ►The number of MFIs that allow loan repayment through a mobile money account (“wallet-to-account”) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 2.00 Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714286 ►Shared MIS developed and operational (Yes/No, Custom) 6/21/2019 Page 3 of 6 The World Bank Implementation Status & Results Report Madagascar Financial Inclusion Project (P161491) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714288 ►National Switch developed and operational (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714290 ►Number of consumers reached by the financial education campaign via mobile phone messages (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 60.00 Date 17-Oct-2017 28-May-2018 28-May-2018 30-Jun-2021 IN00714293 Number of female consumers reached by the financial education campaign via mobile phone messages (Number (Thousand), Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 30.00 Access to credit for MSMEs IN00714283 ►Percentage of loans extended to MSMEs registered under the portfolio guarantee that are non-performing (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 1.70 1.70 1.70 3.00 Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714285 ►Number of enterprises reached with BDS (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 500.00 Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714287 Number of women-led enterprises reached with BDS (Number, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 250.00 IN00714289 ►Number of clients of the new MFI branches established through the project (Number (Thousand), Custom) 6/21/2019 Page 4 of 6 The World Bank Implementation Status & Results Report Madagascar Financial Inclusion Project (P161491) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 20.00 Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714291 Number of female clients of the new MFI branches established through the project (Number (Thousand), Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 8.00 IN00714292 ►Banks and MFIs report data to a centralized electronic collateral registry (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714294 ►Percentage of banks and microfinance institutions reporting data to the CBSF on financial consumer complaints (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 30.00 Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 IN00714295 ►Report drafted annually on Citizen Engagement Survey (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 17-Oct-2017 28-May-2018 28-May-2018 29-Jul-2022 Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P161491 IDA-61890 Effective USD 45.00 45.00 0.00 10.21 33.38 23% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P161491 IDA-61890 Effective 28-Feb-2018 19-Apr-2018 27-Sep-2018 31-Jul-2022 31-Jul-2022 6/21/2019 Page 5 of 6 The World Bank Implementation Status & Results Report Madagascar Financial Inclusion Project (P161491) Cumulative Disbursements Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 6/21/2019 Page 6 of 6