The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

REPORT NO.: RES32394

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

STRENGTHENING THE REGULATORY AND INSTITUTIONAL FRAMEWORK FOR MSME DEVE

APPROVED ON JANUARY 24, 2014

TO

GOVERNMENT OF JORDAN

FINANCE, COMPETITIVENESS AND INNOVATION

MIDDLE EAST AND NORTH AFRICA

Regional Vice President: Hafez M. H. Ghanem Country Director: Saroj Kumar Jha

Senior Global Practice Director: Ceyla Pazarbasioglu-DutzPractice Manager/Manager: Nabila Assaf

Task Team Leader: Ghada Ahmed Waheed Ismail

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The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

ABBREVIATIONS AND ACRONYMS

PDO Project Development ObjectivePMU Project Management UnitADR Automated Dispute ResolutionCBJ Central Bank of JordanNBFI Non-Bank Financial InstitutionERP Enterprise Resource PlanningMFI Micro-Finance InstitutionTA Technical AssistanceJLGC Jordan Loan Guarantee Corporation

The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

BASIC DATA

Product Information

Project ID Financing Instrument

P147875 Investment Project Financing

Original EA Category Current EA Category

Not Required (C) Not Required (C)

Approval Date Current Closing Date

24-Jan-2014 31-Aug-2018

Organizations

Borrower Responsible Agency

Government of Jordan Central Bank of Jordan

Project Development Objective (PDO)

Original PDOThe project development objective (PDO) would be to enhance financial services and products and to strengthen financial protection mechanism for MSMEs, while enhancing governance.OPS_TABLE_PDO_CURRENTPDOSummary Status of Financing

TF Approval Signing Effectiveness ClosingNet

Commitment Disbursed Undisbursed

TF-16588 09-Feb-2014 09-Feb-2014 04-Mar-2014 31-Aug-2018 3.00 1.72 1.28

Policy Waiver(s)

Does this restructuring trigger the need for any policy waiver(s)?No

The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURINGA. Project Status

1. The project is progressing very well in achieving its development and intermediate development objectives. Disbursement stands at US$1.72 m (57.4%) as of March 5, 2018. The Project Management Unit (PMU) is responsive and working well. The project has witnessed consistent improvements in implementation of key activities. This included:

a) Establishing a consumer protection department, developing Consumer Protection Strategy, hiring and training staff, developing an appropriate on-site and off-site monitoring framework suitable to the Jordanian context, respective systems and procedures; create reporting templates (such as consumer complaints reporting) and analytical tools, as well as effective enforcement mechanisms. Also setting an automated platform “Automated Dispute Resolution (ADR)” to address consumer complaints and reduces costs and time consumed in responding and processing consumer’s complaints in a timely manner.

b) Technical assistance to Jordan Loan Guarantee Corporation (JLGC) to strengthen its core internal capabilities. This included: developing the overall risk management policy, tools and strategy which is currently being implemented, developing the marketing strategy and communication tools and hiring a new advisor for product and business development to launch new products and revamp the existing ones.

c) Establishing the Microfinance Department at The Central Bank of Jordan (CBJ), and hiring staff including the Head of the department.

d) Conducting a comprehensive Non-Bank Financial Institutions (NBFIs) market study to assist CBJ in adopting a more comprehensive approach of regulating and supervising NBFIs.

e) Hiring a competent Insurance resident advisor to ensure transferring the regulatory function of Insurance to the CBJ hiring staff for the insurance unit. Technical Assistance (TA) covered:

(i) Preparing the legal requirements needed to transfer Insurance under CBJ supervision.

(ii) Developing the legal and regulatory framework.

(iii) Developing a proposal for the setup, responsibilities and composition of the Insurance department, its cooperation with other units of CBJ and other stakeholders, as well as key requirements for the manager of the new department.

(iv) Contracting number of audit firms and actuaries to examine all insurance companies.

f) Reviewing the draft insurance law to ensure following international good practices by World Bank Global Team.

The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

B. Rationale for Restructuring

2. There is a need to extend the closing date of the Project from its current closing date of August 31, 2018 to December 30, 2019. The objectives have been nearly fully met, the extension will provide the PMU adequate time to achieve the final objective of women's inclusion, and provide further support to strengthen implementation through additional institutional development and TA to deepen reforms initiated since the project’s inception especially following the decision to move Insurance under CBJ’s supervision. The project will provide TA to develop and implement a robust insurance supervisory through establishing insurance supervision department at CBJ, developing new Insurance law and regulations and establishing and transferring and upgrading IT systems related to the Insurance Supervision Department.

II. DESCRIPTION OF PROPOSED CHANGES

3. The restructuring will ensure the completion of some deliverables under project components, namely:

(a) Component I: Strengthening Credit Guarantees Schemes. Advisory services will be provided to JLGC to launch women focused products, and test the integration between the new archiving system and the newly developed Enterprise Resource Planning (ERP) system to ensure its internal compatibility.

(b) Component II: Enhancing the Consumer Protection Mechanism: providing training and capacity building to the newly established Consumer Protection Unit staff; developing Dispute Resolution Law; and developing public awareness campaigns to promote financial literacy. While significant progress has been done under financial literacy focusing on the incorporation of the financial literacy programs within school curricula across Jordan, the coming period will focus on public awareness campaigns to promote financial literacy to empower women, job-seekers, and employees across Jordan.

(c) Component III: Supporting the development of the institutional framework for microfinance and non-bank financial institutions (NBFIs) supervision. Continuation of TA to the newly established microfinance unit through developing inspection manuals, instructions and consumer protection instructions for Micro-Finance Institutions (MFIs), providing capacity building and training to microfinance unit staff and to microfinance auditors; providing TA to develop and implement a robust insurance supervisory through establishing insurance supervision department at CBJ, developing new Insurance law and regulations.

4. The PMU, in conjunction with the World Bank technical support, will place greater implementation focus to speed disbursements under components II and III as many activities were postponed until finalization of the institutional setup needed, including establishing the Microfinance and the Consumer protection departments and approving the setup, responsibilities and composition of the new departments. In addition, it is expected that technical assistance related to transferring the regulatory function of Insurance to the CBJ will accelerate implementation under the proposed expanded implementation period.

The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

III. SUMMARY OF CHANGES

Changed Not Changed

Change in Results Framework ✔

Change in Loan Closing Date(s) ✔

Change in Implementation Schedule ✔

Change in Implementing Agency ✔

Change in Project's Development Objectives ✔

Change in Components and Cost ✔

Cancellations Proposed ✔

Additional Financing Proposed ✔

Reallocation between Disbursement Categories ✔

Change in Disbursements Arrangements ✔

Change in Disbursement Estimates ✔

Change in Overall Risk Rating ✔

Change in Safeguard Policies Triggered ✔

Change of EA category ✔

Change in Legal Covenants ✔

Change in Institutional Arrangements ✔

Change in Financial Management ✔

Change in Procurement ✔

Other Change(s) ✔

IV. DETAILED CHANGE(S)

OPS_DETAILEDCHANGES_RESULTS_TABLE

RESULTS FRAMEWORK

Project Development Objective Indicators PDO_IND_TABLE

Number of microfinance loansUnit of Measure: NumberIndicator Type: Custom

Baseline Actual (Current) End Target Action

The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

Value 0.00 91222.00 100000.00 Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Number of SME loans guaranteed by JLGCUnit of Measure: NumberIndicator Type: Custom

Baseline Actual (Current) End Target Action

Value 3000.00 8000.00 9000.00 Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Number of complaints resolved to the satisfaction of the consumer by the Consumer Protection Unit at CBJ within [30] days.Unit of Measure: NumberIndicator Type: Custom

Baseline Actual (Current) End Target Action

Value 0.00 642.00 750.00 Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Intermediate IndicatorsIO_IND_TABLE

Value of guarantees issuedUnit of Measure: Amount(USD)Indicator Type: Custom

Baseline Actual (Current) End Target Action

Value 49000000.00 85000000.00 69000000.00 Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Guaranteed loans by JLGC to women-owned SMEsUnit of Measure: PercentageIndicator Type: Custom

Baseline Actual (Current) End Target Action

Value 5.00 9.50 11.00 Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Consumer Protection Unit at CBJ fully staffed and operationalUnit of Measure: Yes/NoIndicator Type: Custom

The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

Baseline Actual (Current) End Target Action

Value No Yes Yes Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Completion of the necessary training programs for the staff in the Consumer Protection UnitUnit of Measure: NumberIndicator Type: Custom

Baseline Actual (Current) End Target Action

Value 0.00 8.00 12.00 Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Number of public awareness campaigns and financial literacy programsUnit of Measure: NumberIndicator Type: Custom

Baseline Actual (Current) End Target Action

Value 0.00 2.00 4.00 Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Microfinance Division at CBJ fully staffed and operationalUnit of Measure: Yes/NoIndicator Type: Custom

Baseline Actual (Current) End Target Action

Value No Yes Yes Revised

Date 31-Jan-2014 01-Feb-2018 30-Dec-2019

Insurance Division at CBJ fully staffed and operationalUnit of Measure: Yes/NoIndicator Type: Custom

Baseline Actual (Current) End Target Action

Value No No Yes New

Date 02-May-2018 30-Dec-2019

OPS_DETAILEDCHANGES_LOANCLOSING_TABLE

The World BankStrengthening the Regulatory and Institutional Framework for MSME Deve (P147875)

LOAN CLOSING DATE(S)

TF StatusOriginal Closing

Revised Closing(s)

Proposed Closing

Proposed Deadline for Withdrawal

Applications

TF-16588 Effective 31-Aug-2018 30-Dec-2019 30-Apr-2020