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:i+, t: - K AGINCCT PRPWUV IN .AttonI. .N'r I. "A ASACIION 1DE DOCaAL4CO PROJECT DATA SHEET CI Lar 3 I 0 D De-'tE COUNTRYLLrY . PROJECT NULMER BCUADOR I RT~O7'J-f -. URL UOFCS' 5. PR.OJECT TITLE. (mmua, 40 ch- -M) T.AC: Ctionza Shelter Delivery SystemPr~a OIL!GATtON 6. PROJECT ASSISTANCE COMPLETION DATE (RACD) 7. (UnW,LsTrAATED bJ:',,w. DATEMeer OF . Z I of,4) 3Sf DD Y 3. COSTS (3000 OREQ1V.ALEE- S; IiIAl 1 _______ ______ _____O______ _ o____ LIFEOF PROJEC A. FL'NDL'G SOURCE 'XF C. LICI D. To,- L lr F. k C G. Toad AD Approprtmed Towa .oa ____ ( )( ) ( )1, 1500)h t(1,500 I ,'aa-,(Grant, ( )1( ____________ ( (i ___________ OtherV HG *20,000 1 2000_S_00IO_ Host Counav _________ __ __ _ __ _ __ _ _ _ - 12___ Other Don.s)r__ _ u ___ _--_'- TOTAL S 20_r__0,00 12,900 i 41,000 1 36',500 12,900 49,400 9. SCHEDULE OF AM FNDING 1000),, APPROjiRDbAAY D.~OBLIGATIONS TO DATE L AION APPOVE F. LEM!OF PROJECT PR1.OJNilg.'MA. .TECH.CODE I T.'S ACTION SCODE ,7.G, tjZ.Lo , L Grnt 1 2._oan1. Grant 2. Loa 1. Grant 2. Loan (I) P .4 '72-1 M j nnn ,nn 1.5nI (2) pr -7 3r.9." R- nM .... ____ ,,-- -' - . a -.. I, TOTALS G Ioa1,000 35,0001 500 1 .500 1 .5.00 l0. SECONDARY TECHNICAL CODES (maaawn 6 coi of 3 posaai man I1L SECONDARY PRPOSE CODE 8641 865 I I 12. SPECIAL CONCERNS CODES (xwxmum 7 coats of4 poouna owAl A. Code I R I P~~ . Amount I I I I 13. PROJECT PURPOSE (,, ainM,.480 cAw.tP). 7'dincrease the supply of shelter af,'.ordable to the urban poor by: (a) Ipromting a greater involvement by the private sector in the production I and financing of such shelter; (b) lowering the cost of private and public shelter programs; and (c)developing viable, self-sustaining systems to finance shelter and basic infrastructure. 14. SCHEDULED EVALUATIONS 1 SOURMCIOF-.J7T OF GOODS AND SERVi-ES tat + 19 10I l , l I Fn4 y + ,,--,o,, . 941 om. ,-,O..(SM.". 16. AMNDMNTS/NATURE OF CHANGE PROPOSED (ThiA& Me I of a._. pr P AnPAWN0) &LDATEDOCUMEINT RECENVED IL'AID/W. OR FOR AM/W DOCUs 17.APPROVED MNTS. DATE OF DISTRI5L'TON * mat DWD yy M3 1 DD YY1 TABLE OF CONTENTS GLOSSARY i I. EXCUTIVE SUMMARY A. Background B. DAEC Issues 2 1. Policy agenda 2. Infrastructure policy agenda 3. Institutional development plan 4. Technical assistance plan C. Summary Financial Plan 14 II. BACKGROUND AND RATIONALE A. Background 16 B. Rationale for Program Amendment 17 1. Need and opportunity to modify project emphasis. 2. Financing of expanded infrastructure component III. PROGRAM DESCRIPTION A. Program Goal and Purpose 20 1. Goal 2. P,,rpose B. Program Policy Objectives 20 1. Financial iolicies of FFH 2. Financial Management of Municipal Infrastructure 3. Expanded Private Sector Low-Cost Shelter Program 4. Relation of Policy Objectives to Broader Mission Objectives C. Supplemental Project Design 27 1. Supplemental Project Activities 2. Institutional Roles in Supplemental Project 3. Outputs 4. End of Project Status 5. Consolidated Program Financial Plan IV. PROJECT SUMMARY ANALYSES A. Institutional Analysis 36 1. Assessment of Institutional Capacity 2. Rncommended Institutional Strengthening 3. Project Affordability B. Financial Analysis 39 1. Institutional Financial Capacity 2. Project Cost Recovery 3. Project Affordability C. Technical Analysis 52 D. Environmental Analysis 55 E. Social Soundness Analysis 55 V. TECHNICAL ASSISTANCE PLAN A. TA Plan for the BCE/FFH 61 1. Housing finance policy development 2. Institutional strengthening of the FFH B. TA in support of the infrastructure component 63 1. Developing project design and evaluation criteria 2. Strengthening municipal financial managementPhase II 3. Consolidating gains in municipal policy reform C. Credit Unions 68 1. Access to FFH 2. Expanded shelter lending D. Housing cooperatives 72 VI. Financial Plan A. Infrastructure Component financing 75 B. Overall Program Financing 76 1. Allocation of HG financing by Program Components VII. Implementation Plan A. Implementation Schedule 80 1. Program Implementation 2. Policy and institutional benchmarks B. Evaluation and Audit 82 1. Evaluation 2. Certification of end use/audit ANNEXES A. Program Logical Framework B. Financi \l Fund for Housing Pipeline Projections C. Documents Related to Infrastructure Activity D. Categorical Exclusion E. WASH Evaluation of Infrastructure Activity F. Terms of Reference for TA Activities GLOSSARY of ACRONYMS AME-INFODEM Association of Municipalities Asociaci6n do of Ecuador/Municipal Development Municipalidades Ecuatorianas/ Institute Instituto do Fomento do Do sarrollo Municipal BCE Central Bank of Ecuador Bunco Central del Ecuador BEDE Ecuadorian Development Bank Banco de Desarrollo BEV Ecuadorian Housing Bank Banco Ecuatoriano de la Vivienda CHF Cooperative Housing Foundation Fundaci6n para la Vivienda Cooperativa COLAC Latin American Confederation of Confederaci6n Latinoamericana Credit Unions de Cooperativas de Ahorro y Cridil o CONADE National Planning Board Consejo Nacional de Desarrollo CUNA/WOCCU Credit Union National Asociacion Nacional de Coope Association/World Council rativas de Ahorro y Cridito/ of Credit Unions Consejo Mundial de Coope rativas de Ahorro y Cridito EMA-Q Quito Municipal Sewerage Empresa Municipal de Alcanta- Authority ri3.Xado de Quito EMAP-Q Quito Municipal Water Empresa Municipal de Agua Authority Potable de Quito ETAPA Cuenca Municipal Water, Empresa Pfiblica Municipal de Sewerage and Telephone Telifonos, Agua Potable y Authority Alcantarillado de Cuenca FFH Financial Fund for Housing Fondo Financiero para la Vivienda FODEM Municipal Development Fund Fondo de Desarrollo Municipal FONADE National Development Fund Fondo Nacional de Desarrollo GOE Government of Ecuador Gobierno del Ecuador IEOS Ecuadorian Institute of Instituto Ecuatoriano de Sanitary Works Obras Sanitarias IESS Ecuadorian Social Security Instituto Ecuatoriano de Institute Seguridad Social IFE Intermediary Financial Entity Entidad Financiera Intermediaria JNV National Housing Board Junta Nacional de Vivienda I. EXECUTIVE SUMMARY This Project Paper Supplement for Uie National Shelter Delivery System Program (518-HG-007) responds directly to the issues and concerns raised by AID/W at the September, 1988 DAEC review of the Mission's request to amend the Program to finance an expanded infrastructure component. The Mission is not seeking HG authority beyond the level of $35 million approved in FY 88. The $10 million required to finance the infrastructure activity will be obtained by a reduction of $5 million in HG authority previously allocated to finance other Program components. On the basis of this revised PP Supplement, USAID/Ecuador iu requesting LAC approval to amend the Program Implementatin Agreement: - to reflect the increase of $5 million in HG funding that was authorized in September, 1988 - to authorize the use of HG advances by the Ecuadorian Development Bank (BEDE) to provide construction financing for municipal infrastructure projects; and, - to expand the definition of eligible beneficiaries to include commurities in which no less than 75% of the residents have incomes below the median. Once signed, the amendment will enable the GOE to seek reimbursement for eligible infrastructure expenditures, and to negotiate the corresponding $10 million HG loan as and when required, bringing total HG loans to $20 million. No further borrowing on the remaining $15 million in HG authority will be approved until there is significant, measurable progress toward use of market interest rates in the operation of the FFH. In addition, following AID/W review of this PPS, the Mission will amend the Program technical assistance component to: - authorize an increase of $500,000 in grant funding for a total of $1,500,000 to fund technical assistance and training in support of the broader policy reform and the institutional strengthening agendas of the project, and - extend the Project Grant Agreement PACD, from 8/31/89 to 12/31/91, in order to meet the objectives of the TA 1ian. A. Background The original design of HG-007 included a pilot urban upgrading component. The focus and the emphasis of the original Project Paper clearly was on the production and sale of new shelter by the private sector and on home improvement lending. Investments in infrastructure to upgrade existing settlements, while contemplated in that Project Paper, are mentioned briefly and not treated in any detail (see, for example, pages 35 and 48). Based on continuing studies of the shelter sector in Ecuador, the Mission has come to realize that upgrading deserves greater emphasis in the implementation of a national shelter delivery system in Ecuador. -2- There is both an urgent need and a real opportunity to support the self-help efforts of poor urban families to improve their living conditions in the growing number of spontaneous settlements on the periphery of cities in Ecuador by funding residential infrastructure projects in those municipalities willing to adopt cost recovery measures and to undertake other reforms to strengthen the financing and delivery of such services. A national shelter delivery system, such as that contemplated in HG-007, must respond to the need and to the opportunity. In September, 1988, The Mission requested $10 million in additional Housing Guaranty authority earmarked to finance the infrastructure investments of the supplemental project. At that time LAC authorized $5 million and asked the Mission for additional information on the Program status and on the design of the supplemental project. In preparing this response to the Bureau's concerns, the Mission has decided not to seek authorization of the additional $5 million to complete funding of the supplemental project, as requested in September, 1988. The decision is not based on a change in the projections of demand for Program resources. Rather, it reflects a more conservative approach to the management of those resources. Current estimates still show a need for over $30 million in HG financing for FFH discount of home improvement and new housing loans.