The World Bank Report No: ISR15796 Implementation Status & Results Sri Lanka Small and Medium Enterprise Development Facility (P121328) Public Disclosure Copy Operation Name: Small and Medium Enterprise Development Facility Project Stage: Implementation Seq.No: 7 Status: ARCHIVED Archive Date: 25-Oct-2014 (P121328) Country: Sri Lanka Approval FY: 2011 Product Line: IBRD/IDA Region: SOUTH ASIA Lending Instrument: Financial Intermediary Loan Implementing Agency(ies): Key Dates Board Approval Date 07-Sep-2010 Original Closing Date 31-Mar-2014 Planned Mid Term Review Date 10-Jun-2013 Last Archived ISR Date 22-Feb-2014 Effectiveness Date 05-Jan-2011 Revised Closing Date 30-Sep-2015 Actual Mid Term Review Date 11-Oct-2013 Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project Development Objective is to improve access to finance (including term finance) for SMEs affected by the Global Financial Crisis in Sri Lanka. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Component 1: Financing and Risk Sharing Facility 50.40 Component 2: Policy and Capacity Enhancement for SME Banking 7.00 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Public Disclosure Copy Overall Implementation Progress (IP) Satisfactory Moderately Satisfactory Overall Risk Rating Moderate Implementation Status Overview The SME Development Facility (SMEDeF) Project underwent a level-two restructuring in June 2013 that: (i) reallocated funds among the Project’s components; (ii) revised the Results Framework accordingly; and (ii) extended the closing date by 18 months from March 31, 2014 to September 30, 2015. The Project Development Objective (PDO) remained unchanged. The Project Midterm Review (MTR) took place in October 2013. The Project Development Objective (PDO) rating is still rated as Satisfactory but the Implementation Progress (IP) rating has been downgraded to Moderately Satisfactory (MS). There has been an improvement in disbursements since the MTR and the disbursement rate is now up from 49% in October 2013 to 63.1% (as of September 24, 2014). The project Page 1 of 5 The World Bank Report No: ISR15796 has already met two of the five PDO level indicators and is on track to meet the remaining three indicators. However, the IP rating has been downgraded to MS due to the slow pace of committing and disbursing the additional funds (by the partner financial institutions) reallocated to component 1 after the MTR for Phase 2 of the Line of Credit (LOC 2). The partner financial institutions (PFIs) promised during the May 2014 mission to commit the allocated funds under LOC 2. As of end July, 2014, the PFIs had committed USD 17.4 million out of the USD 22 million under LOC 2 but only about USD 2 million has been disbursed. Additional progress on commitments and disbursements of these funds will be monitored over the Public Disclosure Copy next six months and will form the basis for the re-evaluation of the IP rating. Under Component One, 90% of the original amount of the line of credit (LOC) of USD 28 million had been disbursed prior to the June 2013 restructuring and currently, 99% of that USD 28 million is already committed, with 93% disbursed. The amount of the LOC under this component has been increased to USD 50 million during the restructuring to cater for a Phase 2 of the LOC. This second phase of the LOC (LOC 2) has already been launched and the associated allocations made to the PFIs. Funds allocated in Phase 1 of the LOC have been leveraged almost fivefold in terms of volume of credit to small and medium enterprises (SMEs) as the USD 28 million LOC has led to the allocation of USD 136 million by the eight Partner Financial Institutions (PFIs) to the SMEs targeted by the Project. The major sectors that have been funded under the SMEDeF are Agro processing (22%), tourism (22%), manufacturing (15%), and services (15%). By March 2014, more than 2,000 SMEs had received a loan from the eight PFIs thanks to the Project, of which there were 388 active loans granted from the LOC. The average SMEDeF loan size is USD 58,000 and over three quarters of the SME beneficiaries have received long term finance. In addition, as of May 2014, 8,600 SMEs (target 9,000) have been trained by PFIs on business development services and accounting and 6,500 loan officers (target of 8,000) have been trained in SME banking procedures and credit risk management . Moving forward, the project will increase its focus on measuring the quality of training provided to SMEs. With about 14 months to the project closing date, all the Intermediate Result indicators are on track to meet their targets. The Project has benefited SMEs across the country, though the North and East provinces remain underrepresented. That may be due to availability of grants and credit at subsidized rates from other sources and a private sector that remains nascent in those provinces. An awareness campaign is going to be conducted among stakeholders to sensitize them about the availability of the LOC Phase 2 funding and the conditions for accessing the funds. The Project also has leveraged policy dialogue with the client to enhance financial sector development and supported IFC's initiative to establish the Collateral Registry and Credit Information Bureau. Locations Country First Administrative Division Location Planned Actual Sri Lanka Not Entered Western Province Sri Lanka Not Entered Province of Uva Sri Lanka Not Entered Southern Province Public Disclosure Copy Sri Lanka Not Entered Province of Sabaragamuwa Sri Lanka Not Entered North Western Province Sri Lanka Not Entered North Central Province Sri Lanka Not Entered Central Province Sri Lanka Not Entered Northern Province Sri Lanka Not Entered Eastern Province Page 2 of 5 The World Bank Report No: ISR15796 Results Project Development Objective Indicators Public Disclosure Copy Indicator Name Core Unit of Measure Baseline Current End Target Cumulative number of active SME loans (>36 Number Value 243.00 306.00 500.00 months maturity) Date 31-Dec-2012 31-Mar-2014 30-Sep-2015 Comments Baseline data at restructuring Indicator Revised at restructuring Cumulative volume of loans to SMEs (>36 Amount(USD) Value 17000000.00 26500000.00 25200000.00 months maturity, US$ equivalent) Date 31-Dec-2012 31-Mar-2014 30-Sep-2015 Comments Baseline data at restructuring Indicator revised at restructuring PFI SMEDeF Project Portfolio Quality (NPL Percentage Value 10.00 1.00 8.00 (% ) of >90 days) Date 07-Sep-2010 31-Mar-2014 30-Sep-2015 Comments Cumulative total number of SME loans Number Value 306.00 388.00 1000.00 Date 31-Dec-2012 31-Mar-2014 30-Sep-2015 Comments Baseline data at restructuring New indicator Cumulative total volume of loans to SMEs Amount(USD) Value 19100000.00 29334000.00 50400000.00 Date 31-Dec-2012 31-Mar-2014 Comments Baseline data at restructuring New indicator added at restructuring Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Volume of Bank Support: Lines of Credit - SME Amount(USD) Value 0.00 38700000.00 50400000.00 Date 07-Sep-2010 31-Mar-2014 30-Sep-2015 Public Disclosure Copy Comments Revised indicator Cumulative no. of PFI introducing processes/ Number Value 0.00 6.00 8.00 products/management systems specific to SME Date 07-Sep-2010 31-Mar-2014 30-Sep-2015 Comments Revised indicator Cumulative no. of PFI loan officers trained in Number Value 0.00 6500.00 8000.00 SME Banking products and credit risk Date 30-Sep-2010 16-May-2014 30-Sep-2015 management Comments Revised indicator at restructuring Number of SMEs trained Number Value 4500.00 8600.00 9000.00 Page 3 of 5 The World Bank Report No: ISR15796 Date 31-Dec-2012 16-May-2014 30-Sep-2015 Comments Baseline at time of New indicator restructuring Public Disclosure Copy Data on Financial Performance (as of 25-Aug-2014) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P121328 IDA-48040 Effective 07-Sep-2010 08-Nov-2010 05-Jan-2011 31-Mar-2014 30-Sep-2015 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P121328 IDA-48040 Effective XDR 37.80 37.80 0.00 22.84 14.96 60.00 Disbursement Graph Public Disclosure Copy Key Decisions Regarding Implementation The Mid Term Review (MTR) mission took place from September 30 to October 11, 2013. The LOC Phase 2 (USD 22 million) has already been launched, the funds allocated to the PFIs and USD 17.4 million has already been committed to various SMEs by the PFIs. However, disbursement of funds to the SMEs is still very low at about USD 2 million. Restructuring History Level 2 CD Decision on 26-Jun-2013 Page 4 of 5 The World Bank Report No: ISR15796 Related Projects There are no related projects. Public Disclosure Copy Public Disclosure Copy Page 5 of 5