Report on Advisory Services Operations in the Middle East and North Africa
REPORTING PERIOD JULY 2011 – JUNE 2012
IFC Advisory Services in the Middle East and North Africa is supported by the Canadian International Development Agency, the European Commission, Harakat, International Bank for Reconstruction and Development, Islamic Development Bank, Switzerland’s State Sec- retariat for Economic Affairs, UKaid, USAID, and the governments of Denmark, Japan, Luxembourg, Netherlands, and Spain.
Contents
List of Abbreviations ...... 5
Overview of Fiscal Year 2012 ...... 6 I.Introduction ...... 6 II.Key Development Results ...... 6 III.Geographical Coverage ...... 7 IV.Expenditure ...... 9 V.Partnerships ...... 9 VI.Going Forward – Continuing to Respond to Challenges in MENA ...... 9
Responding to Thematic Challenges ...... 11 I .Introduction ...... 11 II. Fostering MSME Development to Accelerate Economic Growth and Job Creation ...... 11 III.Reducing Resource Intensity and Supporting Green Growth ...... 13 IV. Fostering Economic Inclusion ...... 15 V.Creating Private Sector Investment Opportunities in Agribusiness ...... 18
Investment Climate ...... 21 I.Operational Context ...... 21 II.Purpose and Approach ...... 21 III.FY12 Results ...... 22 IV.Program Highlights ...... 23 V.Challenges and Lessons Learned ...... 25 VI.Future Prospects ...... 26
Access to Finance ...... 27 I.Operational Context ...... 27 II.Purpose and Approach ...... 27 III.FY12 Results ...... 27 IV.Program Highlights ...... 29 V.Challenges and Lessons Learned ...... 33 VI.Future Prospects ...... 33 Sustainable Business Advisory ...... 34 I.Operational Context ...... 34 II.Purpose and Approach ...... 34 III.FY12 Results …………………………………………………..………...... ………..34 IV.Program Highlights ...... 36 V.Challenges and Lessons Learned …………………………………………….…...41 VI.Future Prospects ……..…………………………………………...……...…………..42
Public-Private Partnerships ...... 43 I.Operational Context ...... 43 II.Purpose and Approach ...... 43 III.FY12 Results ………………………………………..………...... …………………..44 IV.Program Highlights ...... 45 V.Challenges and lesson Learned ……………………………………………….…...47 VI.Future Prospects ………………..………………………………...……...…………..47
Sources and Uses of Funding ...... 48 I.FY12 Expenditure ...... 48 II.Sources of Funding ...... 49 III.Client and Partnership Overview …………………………..………...... ………..50
Annexes ...... 55 Annex A: Indicator Definitions and Methodology Notes ...... 55 Annex B: Fiscal Year 2012 Results and Targets ...... 63 Annex C: Targets: Fiscal Years 2011-2017 ...... 67 List of Abbreviations
A2F Access to Finance ABA Alexandria Business Association ACRI Arab Credit Reporting Initiative ADR Alternative Dispute Resolution AFFI Arab Financing Facility for Infrastructure AMB Al Amal Microfinance Bank AMF Arab Monetary Fund AS Advisory Services BoP Bank of Palestine BLC Bank Lebanon Commercial BLF Banque Liban Francaise CIDA Canadian International Development Agency CG Corporate Government CEO Chief Executive Officer CGAP Consultative Group to Assist the Poor DFID Department for International Development (UKaid) DBACD Dakahlya Businessmen Association for Community Development DAB Da Afghanistan Bank e4e e4e Initiative for Arab Youth FY Fiscal Year HBL Habib Bank Limited GHG Green House Gas GIZ Gesellschaft Fur Internationale Zusammenarbeit IBRD International Bank for Reconstruction and Development IC Investment Climate ICT Information and Communication Technology IDA International Development Association IDRC International Development Research Centre IFI International Finance Institution LGBC Lebanon Green Building Council MENA Middle East and North Africa MFI Microfinance Institution MSME Micro, Small, and Medium Enterprises MISFA Microfinance Investment Support Facility for Afghanistan NPL Non-Performing Loan OECD Organization for Economic Cooperation and Development PPIAF Public-Private Infrastructure Assistance Facility PPP Public-Private Partnership PICG Pakistan Institute for Corporate Governance SBA Sustainable Business Advisory SECO State Secretariat for Economic Affairs SEF Sustainable Energy Finance SME Small and Medium Enterprises UNEP United Nation Environments Program UAB Union Arab Bank USAID United States Agency for International Development WBI World Bank Institute 6 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
Overview of Fiscal Year 2012
I. Introduction
Our challenge in the Middle East and North Africa (MENA) this year has been to effectively respond to the widespread changes in the region. We have focused on engaging clients and partners to help rebuild our portfolio in line with MENA’s evolving demands. At the beginning of the year, over 40 percent of our portfolio was suspended due to instability in various countries. Projects in Yemen and Syria had to be closed, while others in Egypt had to be re-designed or delayed until stability was re-established. At the same time, we were challenged to deliver in markets like Tunisia, where we had not operated for several years.
Despite the hurdles, the 2012 fiscal year proved to be a success. At the end ofthe 12-month period ending in July, we had 27 new projects approved, and another five in the late stages of the approval process. We ramped up activities across the region, particularly in the areas of investment climate, access to finance, and corporate governance. Those efforts are reflected in the growth in program expenditures, which increased 22 percent this year. A prime example of that expansion is in Tunisia, where we now have four active engagements, up from none. We have focused on microfinance, corporate governance, investment climate reform, small and medium enterprise (SME) banking, and training to strengthen youth employability. In our efforts to respond to challenges across the region, we will continue to ramp up our program this fiscal year, and expect another year of rapid portfolio growth.
II. Key Development Results
Despite the significant challenges as we began the year, the program has largely delivered on our targets, as can be seen from the table opposite. We had a very strong performance in our SME banking as we continue to rapidly increase that portfolio. Demand from banks continues to build as they seek to diversify their portfolios and access new markets. Our microfinance targets undershot as we moved to get more projects into execution, after the delays suffered due to regional turmoil. While our main focus in investment climate this year was to re-build the portfolio, we continued to see strong performances in our Alternative Dispute Resolution (ADR) program, as well as some early results in regulatory reform in Afghanistan. These helped us to exceed our target for private sector savings.
Our work in the Sustainable Business Advisory business line continued to show strong results. Our programs in SME training, corporate governance, energy efficiency, and supply chain development all helped firms improve their productivity, reduce costs, and increase transparency. This helped us exceed our targets for this business line, despite working primarily in International Development Association (IDA) and conflict-affected states. Finally, our Public-Private Partnership (PPP) program, despite exceedingly difficult market conditions, helped deliver two transactions: one involving two hospitals in Alexandria, Egypt and the other involving an airport in Medina, Saudi Arabia. That allowed us to exceed our yearly target, and put us on track to meet expected program targets through 2014. OVERVIEW OF FISCAL YEAR 2012 7
Business Ratio of Indicator Targets Results Line achievement Value of SME loans 164,477,720 430,343,109 262% Access to disbursed ($) Finance Value of micro loans 558,948,960 241,882,593 43% disbursed ($) Estimated value of Investment aggregate private 21,750,949 56,699,431 261% Climate sector savings ($) from recommended changes Sustainable Number of entities Business reporting improved 533 812 152% Advisory performance Public-Private Value of financing 190,800,000 1,525,000,000 800% Partnerships facilitated ($)
III. Geographical Coverage
As discussed in last year’s report, our portfolio was expected to shift from one heavily weighted towards IDA and conflict-affected countries toward a portfolio with a better balance across the region. That will include a pivot toward middle-income countries in North Africa and the Levant.
As can be seen in the tables opposite, our commitment to IDA and conflict-affected countries has remained strong, and they continue to form a large part of our portfolio. Despite the difficulties inherent in these countries, we have launched a wide range of projects in Iraq, Pakistan, and the West Bank and Gaza. We expect to continue to build on this portfolio, especially in Pakistan, where we have now built strong relationships with several provincial governments. We are also exploring areas where we can do more in Yemen and Afghanistan, while we focus on implementation in Iraq.
At the same time, we have been very active in North Africa and the Levant, significantly increasing our portfolio in Jordan, Lebanon, Egypt, Morocco, and Tunisia. We expect this trend to continue, particularly in Access to Finance, where we expect more projects in SME banking and housing finance, and in climate change mitigation, where our clean energy program is likely to expand into Egypt, Jordan, Morocco, and Pakistan. 8 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA egional R OVERVIEW OF FISCAL YEAR 2012 9
IV. Expenditure on program results. We also developed reporting templates and detailed plans for program evaluation, As expected, given the growth in our activities, the size which we will share at our partnership meeting in of our Advisory Services (AS) program in MENA this September. We hope this will allow us to continue year grew by 22 percent in expenditure terms. Growth to build robust partnerships, focused on achieving was particularly strong in the Access to Finance and strong, positive results on the ground. Investment Climate business lines as they sought to ramp up and re-build their portfolios. The Public- Private Partnership (PPP) business line recorded “DFID has been a long-term supporter of fewer transactions than last year due to disruptions IFC’s work in the Middle East and North caused by multiple governmental changes. We spent a significant amount of time on business development Africa. At this historic time in the region, we and engaging with new governments, which we have expanded our collaboration with IFC hope will translate into a growing portfolio in the next fiscal year. Lastly, the Sustainable Business Advisory to help address some of the most pressing business line maintained the same level of expenditure economic challenges. This includes support as in FY11 and did not meet expected growth. This was mainly due to delays in project launches in Iraq through the UK’s Arab Partnership to IFC’s and in the clean energy program, since many clients new e4e Initiative for Arab Youth and the chose to delay investment decisions due to events in the region. Overall, however, this was a strong year, Micro, Small, and Medium Enterprise Financ- and the acceleration of the program in the last two ing Facility. These programs will stimulate quarters bodes well for our continued expansion in FY13. enterprise growth and job creation - helping to brighten the prospects of hundreds of V. Partnerships thousands of people.” We continued to build on the strong partnership base that is essential for our operations. We enjoyed con- Lindy Cameron, Deputy Director, Middle East tinued support from several long-term partners and and North Africa Department, UKaid. engaged in new partnerships with other donor orga- nizations. We signed six new agreements this year with UKAID, SECO, USAID, and Japan to extend their VI. Going Forward – Continuing to Respond support for Advisory Services programs in MENA. We to Challenges in MENA also signed new agreements with Denmark and the European Union. Overall, we signed agreements to- While we responded well to the challenges in MENA taling $14.3 million this year while leveraging an addi- this year, we still have much to do. FY12 was about tional $3.9 million from centrally-managed trust funds, building the foundation for the MENA program: we all targeted at countries in North Africa and the Levant. refined products, hired specialized staff, carried out This is a step in the right direction for the MENA pro- scoping, and secured financing. While we made good gram and covers a significant portion of the financing progress in these areas, we need to do more scoping gap that we have been facing. In addition, we have and pilot new approaches in mobile banking, housing been involved in ongoing discussions with a number finance, and our e4e Initiative for Arab Youth. There of donors, which we expect to lead to further signings are also other parts of our program, including projects early in the new fiscal year. in Afghanistan and Pakistan, where we are continuing to secure funding. In addition to signing agreements, we continued to work on improving our monitoring and evaluation system, and increasing our ability to track and report 10 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
The majority of our work over the next few years will be focused on implementation. This is a dynamic process for any program and we will be heavily engaged in monitoring progress, learning lessons from our experience, and adapting to ensure the highest level of impact.
We are also increasing our emphasis on integration, moving toward a more thematic focus in areas such as agribusiness, inclusion, green growth, and micro, small, and medium enterprises (MSMEs). We are increasingly integrating products from multiple business lines, and combining both advisory and investment services. This new way of working with our clients provides a more holistic viewpoint and helps us maximize the value that IFC can offer. For example, while working with a bank to design SME loan products, we also discuss the importance of non-financial services for SME customers. The latter includes management training, instruction in corporate governance, and the provision of easy-to-use business planning programs.
The following section includes more information about this approach. The feedback from clients has been overwhelmingly positive, but we are still at the beginning of this journey. We expect to do much more in this area, with an increased array of products. RESPONDING TO THEMATIC CHALLENGES 11
Responding to Thematic Challenges
I. Introduction
We are moving increasingly toward a thematic approach to responding development challenges. This does not mean that we are changing our business line structure. But we are increasingly seeking to integrate various products when tackling certain thematic issues. What follows are four thematic areas that correspond to large development challenges in MENA and how IFC is addressing the issues. We expect to continue to experiment in these thematic areas over the next few years and report back on the lessons learned.
II. Fostering MSME Development to Accelerate Economic Growth and Job Creation
Why It Matters
The Arab Spring began with an act of desperation by one young Tunisian entrepreneur. There are at least 85 million others like him throughout the Arab World. At the same time, 33 percent of the region’s population is under 15, meaning governments already struggling to address the needs of youth will face more pressure in the future. As these countries look for solutions, they are turning increasingly to MSME development as a tried-and-tested strategy for boosting job creation, and creating equitable growth.
Their attention is well placed. MSMEs are an important part of economies throughout the Arab World, accounting for up to 40 percent of employment in some countries. However, this is well below employment rates in other regions. A recent study of 99 developing countries found that MSMEs account for an average of 68 percent of employment. The same study also found that MSMEs generate for 86 percent of new jobs in these economies. Clearly then, the potential for MSMEs to kick-start economic growth and foster hope in young people is huge. However, as the gap in job creation with other developing regions shows, there are very high barriers in MENA that are not allowing that potential to be realized.
These barriers include excessive red tape, poorly conceived regulations, equally poor implementation, a severe lack of access to finance, and weak business development support services. Unlocking the potential of MSMEs, through smart policies, efficient regulations, and increased capacity building, is a key goal of IFC and its partners in MENA. This effort hinges especially on the robust partnership between IFC and the World Bank, which brings a depth and breadth of knowledge to the policy landscape in MENA countries.
IFC Services and Approach
IFC and its partners have developed a series of products that help address barriers to MSME growth. These are laid out below. However, we are still in the early stages of understanding how we can best combine these products to provide a holistic and integrated strategy to support MSMEs in MENA. This is a significant part of our current work program. 12 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
Encouraging smart policies and efficient regulations for MSMEs: IFC and the World Bank work with governments throughout the region to identify barriers to MSME development and improve the business environment for these enterprises. This includes the IFC/World Bank flagship Doing Business program, as well as other programs aimed at creating an enabling environment for investments, and streamlining regulation for easier business registration and licensing.
Improving access to finance for MSMEs: IFC works with financial service providers to help them establish dedicated MSME units, and develop innovative products to reach a larger segment of the population. We also work with governments to improve financial infrastructure (such as credit bureaus and moveable asset registries) to foster lending to MSMEs. Finally, IFC is helping to reform insolvency frameworks, and set up alternative debt resolution programs. This helps MSMEs in debt and aids creditors in recovering the assets of firms that are truly insolvent. This also provides the possibility for efficient debt workouts for viable firms.
Strengthening the capacity of MSMEs: Through its flagship Business Edge program, IFC offers MSMEs training in business planning, sales, and human resources. The training is delivered by local providers. We also work with strong, well-placed partners to provide easy-to-use tools that help MSMEs move toward more transparent accounting and better business planning. Among those is the SME Toolkit, a web-based platform that provides information and business tips, among other things. Finally, IFC, through its Corporate Governance program, has developed training initiatives that help midsize enterprises understand the importance of good corporate governance, carry out a corporate governance diagnostic and develop an improvement plan. Increasingly, firms are beginning to understand the importance of corporate governance, especially in how it affects their ability to access capital.
Improving access to markets: IFC helps MSMEs gain better access to markets, both directly and indirectly. We assist MSMEs directly to adopt environmental, social and trade standards. This helps MSMEs gain access either directly to international markets, or to the supply chains of larger firms. Indirectly, our PPP and trade logistics work helps MSMEs access new markets by providing new or improved infrastructure. It can also give them access to improved logistic networks and services (trade logistics). These efforts help lower production and transport costs, thus making market entry more attractive and viable for smaller producers.
New approaches: In the last few years, we have been experimenting with different ways to combine these products to increase impact. Examples include:
In our olive oil project in the West Bank, IFC helped oil-producing SMEs apply international standards to improve productivity, quality, food safety and traceability. We also supported access to international markets, and worked closely with the United Nations Environment Program (UNEP) Regional Activity Centre for Cleaner Production to find solutions to improve the sector’s sustainability. IFC also brought in Business Edge trainers to help the SMEs improve their financial management. This year, three firms created a joint brand, marketing their high quality oil at a gourmet food fair in the United States. Through this initiative, they were able to sign new supply contracts with US firms, and also field inquiries from marketers in Australia. RESPONDING TO THEMATIC CHALLENGES 13
In Pakistan, we helped one of our clients, Habib Bank, restructure and scale up its SME banking business. This involved designing and implementing a new business model, re-engineering its credit underwriting process, and developing risk assessment tools to ensure the bank handled this new asset class in a sustainable manner. In addition, the engagement involved training new sales and credit officers, and developing new financing products for SMEs. IFC is also helping Habib Bank provide business advisory and training services to the SMEs themselves by linking them to IFC Business Edge training partners in Pakistan. The bank is being equipped to provide a unique combination of financial and nonfinancial services to support SMEs in Pakistan.
III. Reducing Resource Intensity and Supporting Green Growth
Why It Matters
Economic growth, climate change and demographic drivers are expected to exacerbate the current resource intensity problem in MENA. The total water withdrawn from renewable sources amounts to around 800 cubic meters per capita, the third highest after North America and Australia, and well above the natural regeneration rates in all MENA countries. Energy intensity (the ratio of energy used to GDP) is some 60 percent higher than that of OECD countries, and 40 percent higher than the world average, making the region the second most energy intensive globally. In terms of greenhouse gases (GHG), it is estimated that meeting MENA’s increased demand for energy will make the region the second biggest contributor to the increase in GHG emissions by 2020.
IFC Services and Approach
IFC Advisory Services has increased its efforts across the region to mitigate climate change. We help the private sector reduce resource intensity and increase growth, with the lowest possible carbon emissions. More specifically, we assist resource- intensive private sector companies to identify, and implement energy- and water- 14 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
efficient practices and technologies. We also help develop voluntary codes for green buildings, promote sustainable energy finance, and support the uptake of renewable energy technologies to generate clean power.
Resource efficiency: IFC is supporting the private sector across the region, with cleaner production assessments to identify and implement resource-efficient practices and technologies. We work with individual firms and groups of firms to achieve this. Examples of resource efficiency projects include supporting a pulp and paper company to reduce operating costs by $1.5 million annually by reducing its annual energy consumption by roughly 6,000 MWh, and water use by 117,000 cubic metres. This is equivalent to avoiding 21,000 tons CO2 emissions annually.
Green buildings: IFC is supporting NGOs and governmental institutions as they develop codes and regulations that promote, or enforce, energy efficiency in the building sector. This is particularly relevant in MENA since a high proportion of GHG emissions come from buildings. With this in mind, IFC implemented a project with the Lebanon Green Building Council (LGBC) to develop the ARZ (Cedar in Arabic) rating to improve efficiency in existing commercial buildings. Once widely adopted, the ARZ rating system will go a long way toward helping the building sector, a major source of carbon emissions in the country, reduce emissions, and save building owners considerable money.
Sustainable energy finance: IFC encourages financial institutions to develop and launch solutions to increase the use of energy-efficient equipment, promote clean technology, and introduce renewable solutions across the region. IFC is currently assisting financial institutions in Jordan, Lebanon and Tunisia with a combination of advisory services and credit lines to promote the use of clean technologies. As a result of IFC’s sustainability credit line, and Sustainable Energy Finance (SEF) advisory work, one microfinance institution (MFI) in Jordan has seen the number and value of solar power loans triple in just nine months.
Renewable energy: IFC is embarking on a comprehensive program focused on promoting private sector investments in clean energy technologies. The program RESPONDING TO THEMATIC CHALLENGES 15
seeks to develop renewable energy solutions in resource-intensive industries, off- grid power for productive use in rural areas, and distributed power to meet peak load demand. For example, IFC is engaging with industrial estates, electricity distribution companies, and energy-intensive private sector companies in Pakistan to utilize biomass and solar for the self-generation of electric and thermal energy. It is also helping the private sector access the small-scale hydropower market. To further encourage private sector investments in clean energy, IFC is working with regulatory bodies to streamline existing regulations, and develop simplified new codes for licensing, and access to land, resources, and power infrastructure.
New approaches: In the green growth/climate change space, we are already combining a number of products to help our clients. In addition to this, we are also piloting two further approaches to see how we can continue to increase our impact.
Combining energy efficiency and clean energy engagements: Rising energy prices and power outages resulting from an increasing supply gap, constitute a major constraint to growth and investment in the region. We are, therefore, seeing a growing interest in captive power from our clients. Increasingly, we help these clients first examine ways in which they can reduce consumption by using more efficient equipment with emphasis on solutions which can be implemented very quickly and has a very short re-payment period. We then support these clients to identify, and invest in, suitable technologies for captive power generation, based on renewable energy sources, such as biomass, biogas and solar power. This combined approach helps our clients lower their energy bills, while at the same time optimizing and converting their capital investment into green technologies.
Moving energy efficiency up-stream: While we have had some success in dealing with individual companies through cleaner production audits (and these are important to show real benefits), we understand that this activity is unlikely to lead to market transformation, due to limited replication among individual, or groups of, firms. As a result, we are now exploring engagements with market aggregators, such as electricity distribution companies and industrial parks, to help them advance energy-efficient solutions for their customers. This approach will seek to identify replicable technological solutions that can be offered to a large number of customers (particularly in energy-intensive industries), and will be combined with financing programs from financial institutions (using our sustainable finance product). By leveraging the outreach and organizational strengths of the market aggregators, we hope to help lead market transformation for important sectors of some economies.
IV. Fostering Economic Inclusion
Why it Matters
The calls for social justice at the center of the Arab Spring were fueled by a reality in which large sections of the population were often both disenfranchised and economically alienated. Private sector elites often enjoyed privileged access to approvals, land, markets, contracts, finance and tax incentives, which enabled some investment and growth. These privileges did not extend to the vast majority, who 16 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
faced substantial obstacles. The result was a growth pattern that was concentrated, less dynamic, less productive, and ultimately created fewer jobs, than more competitive, inclusive markets.
Excluded communities include the micro, SME and informal sector, women, youth, and enterprises outside the main economic centers. Many are economically engaged, but in very small or informal activity. A survey conducted by IDRC across 13 MENA countries indicates that around 26 million adults participate in some form of entrepreneurial activity. That includes nearly 6 million in Egypt, the vast majority of whom are involved with enterprises with less than five employees. The exclusion of youth is common. Egypt’s youth unemployment currently stands at about 25 percent, while Tunisia’s stood at 30 percent before the revolution, and has now reached 42 percent. Finally, women are excluded. Young educated women face unemployment rates above 40 percent, and MENA has the lowest female labor force participation in the world.
IFC Services and Approach
IFC Advisory Services seeks to remove obstacles to the effective integration and participation of the target communities into a more broad-based, inclusive private sector. IFC will focus its efforts on the sub-national level of government where many MSMEs register, on social enterprises that may reach poor communities, and on specific programs tailored to the needs of women and youth.
Inclusive business and social entrepreneurship: In Egypt, in response to dialogue with the private sector, civil society, and social investors, IFC has recognized the need to address the role of social enterprises. Such enterprises seek to have a positive social impact, while being sustainable in private sector development. IFC is now developing a project to improve the investment climate for social entrepreneurs in Egypt by identifying and developing the most appropriate legal form to maximize efficiency and advocating for the adoption of this new legal form by the government. We are also creating a network for social enterprises to raise awareness and RESPONDING TO THEMATIC CHALLENGES 17
advocate for their needs. In addition, IFC, jointly with the World Bank and other partners, is assisting in a pilot project to financially and technically support social enterprises and inclusive businesses focusing on agriculture supply chains, through the Development Marketplace competition in Egypt this year.
Sub-national Doing Business: In Egypt, IFC is working to address geographical inclusion through the launch of a baseline Sub-national Doing Business assessment, covering 15 cities representing port cities and urban centers around the country. Five indicators will be measured: starting a business, dealing with construction permits, registering property, enforcing contracts, and trading across borders. The project, working with the Ministry for Local Government, seeks to generate information on service standards, and help the private sector to initiate reform dialogues with local governments. It also pushes for the improved application of regulations and service delivery outside the capital.
Women in business: IFC is seeking to broaden economic opportunities for women, whether they be entrepreneurs, executives or employees, with expected benefits for them and their families, as well as the economy at large. More specifically, IFC is working on expanding women’s access to finance, business and management skills training, and removing barriers they may encounter in ascending to corporate boards. The latter has the added benefit of greater board effectiveness and firm performance. To this end, IFC has pioneered several projects. In Lebanon, we partnered with BLC Bank to launch the “Women Empowerment Initiative,” which aims to deliver a suite of financial products and services targeting women entrepreneurs. IFC also assisted BLC in conducting market research to better understand the needs of SMEs, in particular women-owned SMEs. Bank staff were trained on sales strategies to grow and develop a specific product bundle and value proposition for the women-owned SMEs, which could include training. We are now working with BLC to expand their non-financial services to women-owned SMEs through the use of an SME Toolkit, which will help these firms access tools, information and products that meet their business needs.
In Afghanistan, Pakistan, and Yemen, IFC has sought to increase the number and share of women offered management and business training by local partners. A variety of operational strategies were tested to enhance outreach. Existing IFC- accredited training providers were shown how to improve their training delivery skills and how to better stimulate demand for training among women. Partnerships were developed with new training providers with a specific interest in serving women. New partnerships were formed with chambers of commerce, NGOs, and associations catering specifically to women. Finally, focused efforts to reach out female-dominated sectors were made. Last but not least, as an integral part of IFC’s efforts to improve corporate governance practices in the Jordanian and Pakistani markets, activities to increase gender diversity in the boardroom for improved board effectiveness were implemented. These included awareness-raising on the business case for diversified boards, and the training of existing, and potential, female directors. e4e Initiative for Arab Youth: This was launched in collaboration with the Islamic Development Bank to increase the employability of youth, including young women, initially focusing on Egypt, Jordan, Morocco and Tunisia. Region-wide and in-depth 18 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
country diagnostic assessments have either been undertaken, or are in progress, to review the role of the private sector in education, and identify specific actions to increase youth employment. In Jordan, IFC has identified the need to develop a sustainable and coordinated approach to providing the ICT industry with a skilled, competent labor force. The aim is to encourage growth through industry- led standards and government-supported quality assurance, as well as enhance the employability of ICT university and college graduates, and those already in the ICT workforce who require continuous professional development. Initiatives are also being developed in Tunisia, Morocco, and Egypt to address key employment- generating sectors.
V. Creating Private Sector Investment Opportunities in Agribusiness
Why It Matters
The MENA region, given its geography and severe water issues, is heavily dependent on food imports to meet its needs. In many of these countries, the agricultural sector is characterized by low productivity, inefficiency, and high levels of subsidies. It faces significant challenges, including the limited capacity of stakeholders, lack of conformity to international food standards, low efficiency of water use, and poorly functioning and inefficient supply chains. All these lead to a significant decrease in both productivity and the quality of agriculture products.
IFC Services and Approach
IFC Advisory Services is increasing its efforts across the agribusiness value chain. Projects implemented range from training farmers to improve productivity, to implementing public-private partnerships for the development of modern grain storage facilities. This covers all aspects of the food value chain, from farmers to end consumers. With a focus on IDA and conflict-affected countries, IFC has been providing advice to public and private stakeholders on introducing best practices to ensure the sustainability of greater private sector participation in agribusiness. RESPONDING TO THEMATIC CHALLENGES 19
Improving agricultural infrastructure through PPPs: IFC is advising the governments of Punjab and Sindh provinces in Pakistan to introduce modern bulk storage facilities under a public-private partnership model. The introduction of such a system through these two pilot projects will add about 600,000 metric tons of additional storage capacity, and result in significant cost savings for these provincial governments, due to a reduction in grain storage and handling losses. The projects will also be an important step toward modernizing the country’s grain storage infrastructure, allowing the storage of grain in a safe and secure environment. If successful, these projects are expected to be replicated across Pakistan, and will result in significant private sector participation in the country’s agribusiness industry. The implementation of these two pilot projects is expected to help more than 60,000 farmers and 6 million consumers.
Access to markets through environmental, social and technical standards, and farmer and SME training: In the West Bank, IFC has been working with a group of olive oil bottling companies to increase their exports by establishing compliance with industry best practices, implementing food safety and traceability standards, and improving environmental practices. Three hundred and sixty farmers were trained on traceability practices, and the companies were able to access high- end markets through a unified brand, “Daskara.” This was officially launched at a global food exhibition in Washington DC in June 2012, resulting in an initial export contract of $184,000. We also brought in Business Edge trainers to help the SMEs improve their financial management, and find solutions to new financing needs resulting from export growth.
In Kandahar, Afghanistan, the Sustainable Business Advisory business line is reaching out to 1,500 raisin and pomegranate farmers through 40 extension workers, helping them adopt improved technology and best practices in post- harvest treatment, and facilitating access to markets in India. As a result, farmers were able to achieve a 50 percent increase in their farm gate selling price. Raisin productivity increased by 200 percent due to the adoption of new practices. And export contracts with a value of $782,500 were signed with Indian importers.
New Approaches: As in other areas, we are increasingly drawing on several products to bring more value to clients. In the agricultural space, this has taken several formats. The following are a few examples of projects under development that seek to apply this principle.
Farmer Training with a Resource Efficiency Twist: A number of current IFC projects are working on ways in which to help farmers improve productivity by implementing enhanced environmental, social and technical standards, boost resource efficiency, and take advantage of renewable energy opportunities. For example, scoping is underway for a project in Pakistan’s dairy sector which could combine improved practices to increase productivity, meet food safety standards, optimize use of fodder and water, and use renewable energy to help power the vital cooling capacity, all of which should boost farmer incomes. At the same time, we are also bringing together some of the country’s major dairy processors and banks with our investment services to establish a risk sharing facility to provide farmers with medium-term financing. This will help small farmers access financing for growth. 20 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
Improving Outreach of SME Banking to the Agricultural Sector: In Pakistan (the largest agricultural producer in the region) we have been working with financial institutions to improve their SME banking operations, including targeted non- financial services for MSMEs. We are in discussion with several banks to help them extend this work to SMEs in rural areas and the agricultural sector. We expect to conduct one or two pilots in this area in FY13, and we will scale up our Agri SME portfolio if results are promising. INVESTMENT CLIMATE 21
Investment Climate
I. Operational Context
The political grievances at the heart of the Arab Spring, rooted in economic disenfranchisement, led to the improbable overthrow of four long-standing regimes, and the introduction of constitutional reforms in others. But the revolutions have been costly. International reserves, investment flows, and fiscal balances have deteriorated. Libyan unrest sent Egyptians and Tunisians back home, adding to unemployment. While the political process played out, little was done to address long-standing issues of youth unemployment; at 30 percent in Tunisia before the revolution, for example, and now standing at 42 percent.1
The private sector holds the key to employment, fiscal revenue, exports, and investments to rebuild reserves. But the private sector cannot play these roles while being hampered by an investment climate that remains rooted in a culture of administrative control, inconsistent implementation of laws, corruption, and the disproportionate economic influence of privileged groups. They cannot move into the formal sector if the right to operate depends on an uncoordinated maze of licenses, authorizations, and inspections. They will not undertake risky ventures if failure could result in a criminal conviction. They will not hire new graduates if their skills are irrelevant. They will be unable to compete in export markets if inefficient trade logistics increase costs and cut margins.
As a result of this climate, the rate of new firm formation in MENA is lower, the exit of inefficient businesses is slower, and more costly, interregional trade is far lower, and educational outcomes relative to spending are worse, than in Asia, Latin America or Eastern Europe2. Newly elected governments in MENA now have the mandate to address these problems urgently. We are facing a window of opportunity to move the agenda forward.
II. Purpose and Approach
The Investment Climate business line works with reformers in MENA to create an investment climate that enables a more competitive and more inclusive private sector. We work with counterparts to: • Support dialogue that contributes to bridging the trust gap between the private sector, civil society and government, and realize a shared vision for reform; • Introduce modern, streamlined and risk-based systems that are more efficient and effective in increasing compliance; • Create a better risk environment for the private sector through more efficient commercial dispute resolution and modernized bankruptcy systems; • Support reform in employment-creating industries that are enablers of higher productivity in the region, such as logistics and renewable energy; and • Work with the private sector to create more relevant education, and more employable youth, by better aligning education outputs with the needs of the private sector.
1 IMF, Regional Economic Outlook. 2012 2 World Bank, ‘From Privilege to Competition. Unlocking Private-Led Growth in the Middle East and North Africa’, 2009. IFC / Islamic Development Bank, Education for Employment: Realizing Arab Youth Potential, 2011. 22 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
III. FY12 Results
The focus in FY12 was to engage, and build, new programs and projects with governments, which would contribute to addressing the economic causes of the Arab Spring. The new projects, described below, are not yet mature enough to report results. Rather, results reflect the portfolio that existed 12 to 18 months ago, of which 70 percent was based in Yemen. As projects in Yemen could not report results due to political instability, results are based on Alternative Dispute Resolution (ADR), and projects in Jordan, Egypt and Afghanistan. Despite this, the program substantially exceeded targets for the fiscal year.
In this fiscal year, the value of funds released exceeded $120 million, nearly four times its target. More than 60,000 firms benefited from procedures streamlined by IFC projects in Afghanistan, Jordan, and Egypt, resulting in savings to the private sector exceeding $56 million, against a target of around $22 million. The number of cases resolved through ADR mechanisms supported by IFC reached 727, against a target of 220. (Thousands) INVESTMENT CLIMATE 23
IV. Program Highlights
Following the early closure of seven projects in Yemen due to political violence, the Investment Climate business line was successful in refocusing and expanding its response to the Arab Spring by delivering a total of eight new projects in Tunisia, Egypt, Jordan, Lebanon, and the West Bank and Gaza. Two new regional pro- grams, the e4e Initiative for Arab Youth and Debt Resolution, were also developed.
Program expenditures grew by 38 percent to $6.8 million, the highest ever total for the MENA Investment Climate program and the fastest growing investment climate program globally. Our client survey has indicated 100 percent satisfaction with services provided by the Investment Climate business line, up from 86 percent in FY11.
Projects Approved in FY12
• Lebanon: Alternative Dispute Resolution • Jordan: Inspection Reform II • Lebanon: Simplification and Automation • West Bank and Gaza: Business Start-up • Egypt: Sub-national Doing Business • Jordan: Debt Resolution • Tunisia: Regulatory Reform • Lebanon: Debt Resolution
Business Regulatory Reform
The Business Regulatory Reform program grew from one active project to six.
• In Jordan, we started an ambitious program to rationalize inspection procedures across government, and introduce risk-based processes for targeting the most important inspections. • With IFC support, the Afghan Ministry of Commerce and Industry is streamlining the issuance of new trade licenses by eliminating six redundant procedures. Over the past six months, more than 5,500 businesses have obtained new licenses and benefited from the reform. • In Tunisia, while working closely with the World Bank, IFC launched a wide- ranging effort to remove barriers to competition, reform the investment framework, and rapidly eliminate unnecessary procedures. The Ministry of Finance has already reviewed 300 formalities and will eliminate over 10 percent of these, as well as streamline many others. • In Egypt, IFC is carrying out a diagnostic assessment of the investment climate in 15 governorates, complementing policy dialogue on decentralization. • In Lebanon, the Regulatory Reform and Automation project will streamline licensing processes, while also creating a model for ICT-based regulatory reform, with one-stop shops to be applied across a number of sectors. 24 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
compared to most of the world’s regions, except for “The success of the this project will not only South Asia, in the Closing a Business indicator in the lead to financial savings, but will extend Doing Business 2011 Report, with a recovery rate of just 33 cents per dollar. to other areas vital to the success of the inspectorate, including upgrading the skills IFC is working on reforming bankruptcy regimes in Tunisia, Egypt, Jordan and Lebanon. In-country of the inspectors, implementing an identi- consultations with stakeholders on the proposed fied mechanism for communication, and reforms have been held in Egypt and Tunisia, based on technical reviews of the insolvency regimes prepared coordination among the relevant monitoring for each country. Work has also begun on redrafting entities.” laws and regulations.
IFC has also assisted the World Bank and the Tunisian Maha Ali, Secretary General of the Ministry of government in coming up with a strategy to deal with Industry and Trade, Jordan. the very high levels of non-performing loans in the tourism sector. Alternative Dispute Resolution and Debt Industry-Specific Reform Resolution Industry-specific reform efforts focused on preparatory The Alternative Dispute Resolution portfolio is now and scoping activities, targeted logistics in Egypt, in full implementation with a large effort to train agribusiness in Morocco, and renewable energy in practitioners in Lebanon, Egypt, Morocco, and Egypt and Pakistan, all of which serve a dual-role. Pakistan, as well as a regional network of practitioners They are important industries in their own right from created in Morocco, Lebanon and Egypt. an employment standpoint, and they also serve – in particular, education, logistics and renewable energy • In Morocco, IFC organized a Judicial Mediation – to improve the investment climate for all firms. conference attended by the Ministers of Justice of Morocco and Egypt, the Swiss Ambassador, and judges and experts from the United States, United The e4e Initiative for Arab Youth Kingdom, France, and the region. Consensus was reached to introduce a law on judicial mediation. The e4e Initiative focuses on providing Arab youth with skills relevant to the marketplace to increase their • A new project was approved in Lebanon in August, job prospects. The initiative offers a framework for and the first Lebanon Mediation Center was focused IFC investment and advisory efforts targeting opened in April. The event was attended by the youth employability. The strategy rests on three pillars: Minister of Information, the head of the Chamber of Commerce, Industry and Agriculture of Beirut I. Catalyzing private investment in employment- and Mount Lebanon, lawyers, and the media. focused education. • In Pakistan, we refocused on Lahore, assigning a II. Improving the enabling environment by addressing cooperation agreement with the Lahore Chamber ecosystem failures and regulatory constraints, and of Commerce and Industry. The Lahore Mediation strengthening quality assurance and accreditation Center opened in August. frameworks. Debt Resolution and Exit: A sound loan recovery, III. Changing mindsets on the role of the private sector restructuring, and insolvency system promotes in education, and the perception of vocational growth and stability by allowing unviable firms to exit and workforce-readiness training as a choice for efficiently, or reorganize operations and debt, thereby enhancing employment prospects. saving jobs. The MENA region has underperformed INVESTMENT CLIMATE 25
Diagnostic assessments have now been completed in Jordan and Tunisia, and shared in workshops. The results have influenced Jordan’s employment strategy, while the Prime Minister of Tunisia has requested deeper e4e engagement. Diagnostics for Egypt and Morocco are being completed.
The first e4e advisory project, approved in July, focuses on the ICT sector in Jordan. The sector can potentially employ thousands more people and become regionally competitive, but is unable to obtain graduates with the leadership, teamwork, and problem solving skills demanded by the industry.
Public-Private Dialogue
With more citizens mobilized, public-private dialogue is now more important than ever to ensure a participatory reform process that includes all voices.
• More than 120 invitees from government, business and development partners attended the launch of the second Islah Reform Index in Egypt in June, led by the Alexandria Business Association (ABA). Representatives from different ministries and governmental authorities committed to engage in reform dialogue and set up collaborative working groups. Several business associations were also interested in collaborating with ABA for the third issue of the Reform Index. • In Cairo, IFC organized and delivered, along with the World Bank Institute and World Bank, a workshop on social entrepreneurship and inclusive business. Over a dozen progressive businesses agreed to partner with us in efforts to reach new entrepreneurs through the Development Marketplace, which kicks off in October 2012. We are also developing a pilot project to remove obstacles to inclusive businesses and social entrepreneurs.
V. Challenges and Lessons Learned
It was a year of major challenges - creating new programs, new products, and new client relationships, while also contending with some very difficult, and sometimes violent, political transitions in Egypt, Yemen, Tunisia, and Pakistan. These transitions, while creating opportunities, were also the source of some disappointment when government counterparts with whom we had reached an understanding were replaced.
The team was stretched by new challenges throughout the year, including understanding a rapidly changing political environment, establishing effective relationships with new clients, negotiating new projects, managing the rigorous IFC project design process, and raising funds to support new programs. For new programs, such as Debt Resolution and the e4e initiative, the team worked hard to manage the tension between establishing results frameworks that are standardized and can be aggregated, but also flexible enough to respond to individual client needs. We learned, most of all, to be patient, pragmatic, and motivated by the challenges we faced. 26 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
Egypt: Empowering the Private Sector as a Reform Partner
For years, many would-be entrepreneurs have struggled to overcome the red tape that goes along with starting a business or getting an operating permit in Egypt. This has hampered development in a country hungry for growth.
To help change that, IFC is working with the Alexandria Business Association to drive business reform. In June 2012, the association launched the second edition of the Islah (Reform) Index, which looks at the business environment in the country’s two largest cities. It is part of a process that has seen IFC support the association as it takes on the role, first, of a government watchdog, and, now, a true partner in the reform process.
“The Egyptian private sector has tremendous potential, but complex procedures and regulations are holding back many businesses, especially smaller firms,” says Magdi M. Amin, the head of the Investment Climate business line. “By having its own index, the private sector can focus the agenda on the most important reforms, necessary to create jobs and encourage economic development.”
The Islah Index examined the ease of doing business in Cairo and Alexandria, focusing on 10 policy areas, including starting a business, dealing with licenses, registering property, employing workers, and paying taxes. This initiative was a culmination of a two-phase, five-year project supported by IFC, which has supported the ABA and helped develop the methodology behind the Islah Index since 2007.
While uncertainty remains, ABA Chairman Mohamed Ghatwary says it is important to move forward with efforts to encourage foreign and local investment.
VI. Future Prospects
We face a unique moment, and an opportunity to rethink how the private sector is regulated and create a more inclusive and competitive economy. In addition to the projects approved in FY12, we enter FY13 with a robust pipeline, based on pre-implementation work done this year, including Debt Resolution projects in Tunisia and Egypt, e4e projects in Tunisia, Morocco and Egypt, and the previously mentioned projects in renewable energy and logistics.
This gives us the basis for helping clients realize the potential of this opportunity. The focus will therefore shift from program growth to working with clients to successfully initiate and scale up reform in FY13. This will require us to be carefully attuned to the political economy of reform, while also focusing on our clients’ technical needs. We expect to moderate the pace of growth, but to continue to increase the number of projects, annual program expenditure, and reported results. ACCESS TO FINANCE 27
Access to Finance
I. Operational Context
Micro, small, and medium enterprises are important parts of every economy, creat- ing employment, and playing a key role in economic growth. In the MENA region, MSMEs account for up to 40 percent of private sector employment. Yet lack of ac- cess to finance for many MSMEs continues to be a key barrier to business growth. The regional credit gap for MSMEs is estimated at more than $150 billion3. Accord- ing to the global Findex study, the MENA region also has the lowest penetration rate in the world for retail finance, combined with the widest gender gap for women to access finance4.
In the context of the Arab Spring, addressing the demand for jobs and equity through the development of MSMEs is one of IFC’s top priorities. With most of the region’s financial institutions inclined to extend credit only to large commercial clients and top retail customers, IFC’s work to improve access to finance among MSMEs is of critical importance.
New opportunities to improve access to finance among MSMEs are emerging in countries such as Egypt, Jordan, Lebanon, Libya, Morocco, Pakistan and Tunisia, as the government and private sector put greater emphasis on MSMEs to create jobs and foster more equitable growth.
II. Purpose and Approach
The Access to Finance business line aims to enhance access to financial services for MSMEs and poor households by providing them with new investment opportunities, as well as affordable options to save and insure themselves against risk. To achieve this goal, IFC seeks to strengthen the capacity of banks and microfinance institutions in the areas of corporate governance, risk management, product development and business strategy, to enhance their outreach to MSMEs.
IFC also provides advisory services to governments to improve critical financial sector infrastructure for MSME banking, including credit bureaus, secured lending systems, and mobile banking.
III. FY12 Results
In an effort to meet the challenges of the region, the business line has significantly increased activities in FY12, with 12 new project approvals with a total value of $6.1 million. They include initiatives in Lebanon, Morocco, Tunisia, and the West Bank and Gaza. Overall, the Access to Finance business line had 27 active projects in 13 countries, including 14 projects in IDA and fragile and conflict-affected countries. To support the growth of the business line with continued focus on quality and client satisfaction, we strengthened our expertise base by hiring six senior specialists cov- ering SME banking, housing finance and microfinance. We also joined forces with the World Bank and established the joint World Bank IFC MSME facility to scale up outreach and strengthen financial services to MSMEs in MENA.
3 McKenzie Study commissioned by IFC. 4 The Global Findex Database. 28 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
The MENA MSME Facility - a World Bank Group initiative - mobilizes a comprehensive package of advisory services and policy support to scale up and strengthen financial services to MSMEs in the Arab World. It is a holistic and timely response to the increased priority placed on generating opportunities for MSMEs and employment in the MENA region.
The MSME Facility aims to improve the business environment for MSME finance, build the capacity of financial institutions for sustainable microfinance and SME banking, and support MSMEs through more relevant business development services. The facility is expected to impact more than 250,000 MSMEs over the next four years.
The facility combines the leadership and expertise of the World Bank and IFC, and provides a powerful platform for collaboration with other donors, focused on accelerating inclusive growth and job creation through the region’s MSMEs.
It focuses on five priority countries: Morocco, Tunisia, Egypt, Jordan and Lebanon. The total budget is $32.5 million of which $15 million has already been mobilized, with significant donor contributions from DFID/ UKaid ($10.5 million) and Japan. Switzerland’s SECO, Italy, and Luxembourg have also expressed an interest in contributing.
In FY12, we exceeded our targets in the SME banking space due notably to the successful outcome of Habib Bank (HBL), one of Pakistan’s leading banks, and Bank of Palestine in the West Bank and Gaza. With regard to the microfinance program, the results are behind target. One of the assumptions in setting targets for both the number and value of micro-loans was based on 11 microfinance projects contributing in FY12. However, only three projects reported results and the remaining were either delayed or dropped, as a result of the volatile conditions in the region. We expect strong results in FY13 both for microfinance and SME banking as 12 new projects have been approved in FY12. ACCESS TO FINANCE 29
Another excellent result is the level of client satisfaction with the services provided by the business line. Client satisfaction with the overall work delivered increased significantly to reach 90 percent, from 65 percent in 2011.
IV. Program Highlights
The Access to Finance business line has three programs: Bank Advisory Services, which helps banks scale up their MSME finance as well as housing finance; Micro- finance Advisory, which helps microfinance institutions grow responsibly; and the Financial Infrastructure Advisory, which works to improve the enabling environment for lending to MSMEs.
Bank Advisory
The Bank Advisory Services program provides services to strengthen the capacity of financial institutions to better serve MSMEs. It offers technical advice and expertise in key business areas such as market segmentation, product development, and risk management, with a special focus on women enterprises and sustainable energy finance.
The program continued its work across the region with engagements in Lebanon, Pakistan, Saudi Arabia, Tunisia, and the West Bank and Gaza, focusing on developing SME lending, and supporting the creation of robust risk management frameworks. In FY12, $1 million in cash fees was collected from clients, signaling their strong commitment to growing the MSME lending portfolio, and the value they placed in IFC services. In addition, business development efforts have led to a robust pipeline of projects in Egypt, Jordan and Pakistan, which will be launched in FY13.
30 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
Jordan have also expressed an interest in these “The conference ‘Small and Medium En- products; and terprises, An Attractive Sector for Maghreb • Launching a survey for businesswomen in the Middle East and North Africa at the first MENA Banks’, held in Tunisia in April 2012 in Businesswomen Network forum, which attracted partnership with IFC, highlighted the impor- more than 350 participants. The survey, a collaboration between MENA Businesswomen tance of SMEs through the presentation of Network, Vital Voices, and IFC, will gather various studies. IFC played a pivotal role in information from 2,500 women entrepreneurs in 10 MENA countries to help financial institutions formulating the important topics and show- better target their product offering to women in casing the significance of the Arab banking business.
sector in general, and the Maghreb banking Microfinance sector in particular, to contribute to, and The Microfinance program seeks to help microfinance support, SME financing.” institutions (MFIs) reach scale, diversify their product offering beyond microcredit and improve their capacity Wissam Fattouh, Secretary General of UAB to manage risks.
In FY12, the program had a portfolio of eight active In FY12, the program was successful in: projects in Egypt, Iraq, Morocco, Pakistan, Tunisia and Yemen. Among other achievements, the program • Providing in-depth advisory services on succeeded in helping: SME banking, including improving customer segmentation, sales delivery channels, • Al Amal MF Bank, the leading microfinance bank management information systems, and the in Yemen, to develop a world class financial development of a business strategy in Pakistan, management system and sound product Saudi Arabia, the West Bank, and Lebanon. We development capacity; helped a leading bank in Pakistan, HBL, establish • Al Amana, the largest microfinance institution in a state-of-the-art SME unit leveraging advanced Morocco, to put in place a state-of-the-art risk scoring tools, including psychometric testing. management system and better control its non- We also helped BLC Bank in Lebanon launch a performing loans; successful new banking program, the Women • ENDA, the largest microfinance lender in Tunisia, Entrepreneur (WE) initiative. We are now planning develop a comprehensive advisory package to roll out the Women Entrepreneur banking including corporate governance, risk management program to banks in Jordan, Oman and Pakistan; and product development, with a focus on youth • Strengthening the banking industry’s understanding entrepreneurs; of SME lending and risk management by holding • DBACD, a leading MFI in Egypt, to launch a conferences in cooperation with the Central Bank housing microfinance product; and of Lebanon, Central Bank of Saudi Arabia, Union of Arab Banks (UAB), and the State Bank of • The integration of MFIs in Egypt and Pakistan Pakistan; into the credit bureau system to help them better manage credit risk, avoid over-indebtedness • Raising awareness among local banks on the of borrowers, improve efficiency, and service a business opportunities related to sustainable larger number of micro and small entrepreneurs. energy efficiency lending. Agreements have been signed with Lebanon’s BLF and Tamweelcom Overall, six new projects were approved in FY12 with in Jordan to advise them on developing energy a total value of $3.4 million. efficiency products. Other banks in Egypt and ACCESS TO FINANCE 31
IFC Helps Micro and Small Businesses in Yemen
During his second year at university, Mohammed Al Sharabie was short on money, and on the verge of dropping out. He was running a fruit and vegetable shop in the Yemeni capital, Sana’a, on the side, but he had little money to stock it properly and business was slow. But one day, after hearing an advertisement on the radio, Al Sharabie decided to go to Al Amal Microfinance Bank, an IFC client, for help. They gave him a loan of 80,000 Yemeni Rial (about $375), which he managed to parlay into a thriving shop.
Mohammed is one of thousands of micro and small business owners who have benefited from the support of Al Amal, which has been an IFC Advisory Services client for three years. IFC has helped Al Amal shore up its financial management systems, develop a marketing and product development department, and train staff members. During these three years, the bank has seen its number of active borrowers jump to 24,000, and its loan portfolio increase to $4 million.
“IFC is one of the most reliable partners of Al Amal Microfinance Bank,” says Mohammed Al Lai, the bank’s chief executive, adding that IFC’s support has helped the bank attract financing from a host of major donors.
Support for Al Amal is part of IFC’s Access to Finance business line, which helps banks and other financial institutions reach out to micro and small enterprises across the region. IFC helps build the capacity of these lenders by offering advice on risk management, product development, corporate governance, and business strategy. The work is especially important in Yemen where there is a dearth of microfinance institutions and more than half the population lives in poverty.
“Smaller businesses are the backbone of most economies in the Middle East and North Africa,” says Luke Haggarty, IFC’s head of Advisory Services in the MENA region. “By supporting lenders as they reach out to these firms, we can help create jobs and stoke economic growth, making lives better for people across the region.”
He adds IFC is eager to continue working with Al Amal and other microfinance providers to enhance access to finance across the country. 32 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
Financial Infrastructure
The Financial Infrastructure program seeks to improve the enabling environment for lending to MSMEs by developing a best practice secured lending framework, effective credit reporting infrastructure, mobile payment platforms, and conducive leasing laws.
In FY12, the program operated in seven countries through the implementation of 13 projects, including three IDA and conflict-affected states (Afghanistan, Pakistan, and the West Bank and Gaza).
In FY12, the following results were achieved:
• Credit Reporting: Three new projects were launched in FY12 with the focus on integrating microfinance providers with private credit bureaus. The aim is to ensure greater outreach of the bureaus and address problems with cross- lending and the over-indebtedness of borrowers. In addition, as part of the Arab Credit Reporting Initiative, a regional partnership with the Arab Monetary Fund (AMF), two in-depth country assessments were completed in Iraq and Morocco. Support has also been provided to stakeholders in Jordan to ensure the establishment of the first private credit bureau • Secured Lending: The program expanded into two new countries – Lebanon and the United Arab Emirates - where work began on drafting and supporting the enactment of a best practice legal framework for secured transactions. In the West Bank and Gaza, work has begun on the establishment of an online collateral registry for movable assets, with the software application under development. In Afghanistan, the collateral registry has been fully developed in the Central Bank (DAB) and will be launched soon under a new legal framework previously created. • Leasing: A new, best-practice leasing law was adopted by the Council of Ministers of the Palestinian Authority, with its full enactment expected soon. The program has also engaged with Afghanistan Growth Finance, a local finance company, on establishing a leasing company. Discussions have been held on IFC’s potential role in supporting the establishment of this company under the new legal framework we have been helping to create in Afghanistan. IFC is also conducting a comprehensive leasing market assessment in Egypt, to be completed in early FY13, with the findings due to be presented to the Egyptian government. It includes information on how to improve and strengthen the country’s leasing sector. • Mobile payment: In FY12, the business line began to explore ways of supporting the deployment and uptake of mobile financial services in MENA as a way to promote financial inclusion in the region. This included:
- Conducting market assessments and diagnostics to better understand the mobile payment space, identify partnership opportunities for IFC in high/ medium potential MENA countries, and articulate proposals to clients (regulators, banks, MNOs, PSPs) on how to introduce and scale up mobile financial services in select countries of the region; and ACCESS TO FINANCE 33
- Sharing and broadening information on the latest developments in mobile money through knowledge sharing and awareness raising activities.
Country assessments were conducted in Egypt, Tunisia, Lebanon and Morocco with reports developed and published. Going forward, the program will focus on developing projects in high potential countries, such as Egypt, Lebanon, Morocco, and Pakistan. Several knowledge management activities are planned for FY13 as part of the program implementation.
V. Challenges and Lessons Learned
The Access to Finance business line faces the challenge of striking a balance between responding to a broad range of client needs, and diverse country situations. In response, the business line is moving toward a client-centric strategy by offering client solutions integrating two or three advisory products. Our project with BLC bank in Lebanon is a good example of this, integrating corporate governance, risk management, and gender finance. We are also bringing products from other business lines to the offering. For example, we are partnering with the Sustainable Business Advisory business line to offer SME capacity building services through banks. Three such projects were implemented in FY12 and more are planned for FY13. Likewise, within the framework of the MSME Facility, the World Bank and IFC are conducting joint scoping missions with country officials and private sector representatives to identify the main hurdles to MSME development. In FY12, we developed a holistic plan for MSME development in Jordan and Egypt. Morocco and Tunisia will follow in early FY13.
VI. Future Prospects
In FY13, we will continue to ramp up access to finance programs across the region. We will deepen our successful partnership with the World Bank and other donors in the MSME Facility in western MENA, and continue to build our expertise to better serve our clients. We will also put more emphasis on collaboration with long-term partners, such as CGAP and GIZ, on microfinance regulations, and local organizations, such as Silatech, the Arab Monetary Fund and the Union of Arab Banks. In addition, IFC will increase its focus on women-run businesses, and develop a new practice on Islamic finance products and housing finance. 34 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
Sustainable Business Advisory
I. Operational Context
Although the Arab Spring of early 2011 has brought hope and better long-term prospects for the democratization and economic development of the MENA region, post-revolution turbulence has exacerbated the short- and medium-term challenges. While private sector development and infrastructure investments have stalled in many middle-income countries, millions of young people will enter the region’s work force over the next decade, greatly increasing the demand for jobs. Limited arable land and severe water scarcity are expected to become major constraints to establishing food security across the region, which already imports nearly 40 percent of its food. At the same time, the region struggles to meet the increasing demand for already scarce energy and water resources, necessitating greater focus on improving efficiency and ensuring sustainable development.
The private sector, in particular MSMEs in manufacturing, agriculture and services, is expected to be the main driver of economic growth and innovation. However, limited access to international markets, lack of a skilled workforce, and high resource intensity prevent firms from exploiting their potential for growth.
Poor corporate governance also remains a major obstacle to accessing financing, limiting business growth and job creation. The political upheaval across the region has decreased investor confidence and further undermined the investment environment.
II. Purpose and Approach
The Sustainable Business Advisory business line aims to help the private sector adopt environmental, social, trade, and governance standards and practices, as well as technologies that create a competitive edge. We seek the broad adoption of these practices to transform markets and improve people’s lives in sectors such as agribusiness, manufacturing, services, and infrastructure. We do this by helping SMEs improve their performance and competitiveness by supporting them to adopt better management practices and technologies, thereby enabling them to access new markets and attract investment. We also work with lead companies to identify opportunities and mobilize capital to invest in inclusive and sustainable businesses in the region. The business line also helps businesses mitigate the effects of climate change.
III. FY12 Results
In FY12, the business line had 17 projects spanning eight countries, including two regional projects. Of these projects, nine were in IDA countries (Afghanistan, Pakistan, Yemen), and six in conflict-affected areas (Afghanistan, the West Bank and Gaza, Yemen). Results continued to improve over FY11, with results at the outcome and impact level exceeding overall targets for the year.
More specifically, the business line has facilitated capacity building services - primarily through our local and regional partners - to more than 7,300 individuals (21 percent women) and over 1,800 MSMEs, with the aim of improving their performance and competitiveness. SUSTAINABLE BUSINESS ADVISORY 35
This year, we also have a record 812 entities, including large corporations, SMEs and farmers, reporting that they have improved their performance as a result of capacity building services provided by IFC, or an IFC-supported market intermediary.
Moreover, our efforts to contribute to the reduction of GHG emissions have started to bear fruit, with over 12,000 metric tons per year expected to be avoided as a result of measures put in place by building owners and companies, in response to recommendations made by IFC, and an IFC-supported market intermediary. These measures include changes in operational practice and the adoption of new technologies.
In FY12, 80 percent of business line clients responding to our annual client satisfaction survey indicated that they were satisfied with our work overall. 36 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA (Metric tons)
IV. Program Highlights
The Sustainable Business Advisory business line is structured around three program areas: (i) climate change; (ii) farmer and SME training, and environmental, social, and trade standards; and (iii) corporate governance.
Climate Change
The program works to reduce resource intensity and support low carbon growth by facilitating investments in technologies and tools to enable and improve the efficient use of energy, water, and materials. We also identify opportunities to utilize, and demonstrate, the commercial viability of clean energy, and remove barriers to such investments. The aim is to displace fossil fuel-based power generation and increase access to clean energy. Against this backdrop, the program engages in three different areas, namely resource efficiency, green buildings, and clean energy.
Resource Efficiency:
IFC is supporting the private sector across the region with cleaner production assessments to identify and implement resource efficient practices and technologies. We work with individual, groups of firms, and electricity and water utility companies to extend these services to their industrial and commercial consumers. Key highlights from FY12 include:
• Support to Nuqul Group – a pulp and paper company based in Jordan - to reduce operating costs by $1.5 million annually by reducing annual energy consumption by roughly 6,000 MWh, and water use by 117,000m3. This is equivalent to avoiding 21,000 tons of CO2 emissions annually; and • Cleaner Production audit completed for FUBA, specialized in producing printed circuit boards, in Tunisia. The major cost-effective opportunities identified are metals recovery from industrial wastewater amounting to annual savings of $156,947, and annual energy savings of 2,000 MWh. SUSTAINABLE BUSINESS ADVISORY 37
IFC Supports Recycling in Pakistan
A few years ago, one of Pakistan’s leading paper and board manufacturers had a hard time getting its hands on recycled paper. The company, Packages, wanted to increase its share of local wastepaper because it was environmentally friendly and more cost efficient, but there was a severe shortage of suppliers in Pakistan.
That prompted a partnership with IFC, which worked with the company to build a supply network from the ground up, beginning in 2010. Packages now has contracts with 85 businesses – from office complexes to dedicated suppliers – and collects 250 tons of recycled paper a month.
The program has not only helped conserve a valuable resource, it has also shown other companies that there is a significant financial benefit to recycling. In the last nine months, Packages has saved $124,000 and channeled an additional $270,000 into the local economy.
“Given the scarcity of natural resources facing many countries in the region, it’s important for companies to understand that sustainable business is good business” says Sylvia Zulu, head of IFC’s Sustainable Business Advisory business line in the Middle East and North Africa.
The recycling initiative is part of a wider effort by the Sustainable Business Advisory business line, which works with firms to adopt environmental, social and governance practices that create a competitive edge. Its programs support small firms, female entrepreneurs, and farmers, while engaging the private sector in fighting climate change.
The partnership with Packages is a prime example of how sustainability- related projects can take off. The recycling program became commercially viable in nine months – less than half the target time. “The program makes environmental and financial sense for both us and our partner companies, while it helps develop the local economy,” says Aslam Mehdi, General Manager of Packages.
IFC and Packages are now exploring ways to expand the system across Pakistan. One option being studied is the establishment of a franchising system, where smaller businesses will be provided with a turnkey solution for organizing wastepaper collection. 38 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
productive use in rural areas, and distributed power “The ARZ rating not only paves the way for with utilities for meeting peak load demand. environmental benefits but it also makes The program has begun to explore the possibility of business sense, because it provides cost working with industrial estates, electricity distribution savings with the return on investment in a companies, and energy intensive private sector companies in Pakistan, Jordan, and Egypt to utilize period of less than five years. Such an initia- biomass and solar for the self-generation of electric tive needs to be undertaken by all compa- and thermal energy. It is also supporting the private sector’s entrance into the small-scale hydropower nies as it is an easy thing to do.” market.
Mr. Raoul, General Manager of BLC Bank – the Farmer and SME Development first building in Lebanon to be ARZ-rated. This program aims to improve the business performance and competitiveness of farmers and Green Buildings: SMEs in local and international markets. The idea is to leverage lead firms and strengthen local IFC supported the Lebanon Green Building Council market intermediaries (mostly training providers) to (LGBC) in developing and formally inaugurating deliver practical, localized management training and Lebanon’s first green building rating system, ARZ information, using IFC’s Business Edge and SME (Cedar in Arabic), initially targeting existing commercial Toolkit. It also promotes the adoption and deployment buildings. Once widely adopted, the ARZ rating system of internationally recognized standards, enhancing will lead to significant carbon emission reductions in environmental and social performance. the building sector, as well as considerable economic savings for building owners. Key highlights from FY12 The program was successful in: include: • Creating 240 direct jobs by enabling farmers to • BLC Bank’s headquarters being awarded a scale up and improve their packing operations in bronze certificate by LGBC, thus becoming the response to export requirements. It also built the first building in Lebanon to be ARZ-rated. capacity of 40 agriculture graduates, who became qualified to work as extension workers, providing • Two clients - Bank Audi and Byblos - technical support to grape and pomegranate investing in measures aimed at improving the farmers in Kandahar, Afghanistan. In addition, resource efficiency of buildings, informed by 100 grape drying houses were constructed in recommendations made by LGBC. Bank Audi accordance with global best practices, resulting invested a total of $780,000, mainly into improving in increased farm productivity by reducing its lighting system as well as installing variable processing times by half; frequency drives. Byblos Bank announced a tender for lighting, amounting to over $150,000. • Facilitating export contracts worth $184,000, awarded to West Bank SMEs after they showcased their olive oil brand Daskara at the Fancy Foods Clean Energy: Fair in Washington D.C.. A group of West Bank SMEs involved in olive oil bottling and exporting IFC launched its Clean Energy program to encourage received IFC support to improve their operations the private sector to adopt, and invest in, clean energy through compliance with industry best practices, technologies. The program includes interventions traceability, and environmental practices, and at company, sector and regulatory levels to develop gained access to high-end markets through a renewable energy solutions for captive power in unified marketing framework initiative; resource-intensive industries, off-grid power for SUSTAINABLE BUSINESS ADVISORY 39
“My training made me confident. We were IFC Helps a Small Woman-owned trained to talk intelligently about business, Education Business to Grow in Yemen. to conduct market surveys, and to save Laila Uthman owns a school in the Yemeni port for unexpected situations. We were also city of Hodiedah. Struggling to compete with the given the chance to consult successful dairy many private schools in the country and facing a national crisis in 2011, when poverty indicators farmers. When we surveyed the market, we in the poorest Arab country skyrocketed, Laila’s discovered that selling fresh milk made busi- school was in bad shape. ness sense. We then bought a cow and two With her 25-member staff also unhappy, she calves, a stock of feed, and a shredder. With found herself constantly having to recruit to our new business, we are making around replace those leaving. The school revenues 6000 rupees a month, in addition to my had never broken the $42,000 mark. Laila wanted to reach $50,000, and she also wanted husband’s income. It is much easier to take her staff to stay, but she wasn’t sure how she care of the family now. With profits over a could make this happen. Then she heard about few months, we may be able to buy poultry Business Edge and decided to invest her time in training workshops covering marketing, human and extend the business.” resources and basic accounting topics.
Mrs, Maimoona Kausar , Village Bochaal, Soon afterwards, Laila’s new learning began to bear fruit. She began including her staff in the Jehlum, Punjab Pakistan (attended Business Plan- decision-making process, and they supported ning Course) her in undertaking a market analysis. They discovered that their competitors charged • Increasing the outreach of its Business Edge higher fees but believed their school offered network of 28 training providers to 519 unique better quality. With strong teacher backing, MSMEs and 5,842 individuals, 25 percent of Laila decided to increase fees and deploy a whom were women, through the provision of promotional strategy whereby existing pupils management and business skills training in would receive a small discount for every new Afghanistan, Egypt, Pakistan, and Yemen; enrolment they brought to the school. • Launching localized versions of the SME Toolkit in Arabic and English, in collaboration with Qatar Development Bank, Khalifa Fund for Enterprise In the six months since undergoing the training, Development, and Jordan Ahli Bank, to enable Laila’s revenues increased by 50 percent, the wide dissemination of business information jumping to $65,000. She has also increased and tools to SMEs; staff salaries and recruited an additional five • Signing an agreement with the Microfinance teachers. Her new approach to management Investment Support Facility for Afghanistan is more inclusive, allowing for delegation and (MISFA) licensing them to deliver Business Edge a higher sense of ownership to problem solving training initially to 75 branch managers and staff in their network; by her staff. Laila herself now has more time to plan as she spends less time dealing with ‘urgent’ daily issues. 40 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
• Presenting and distributing the first ever global study on the business case and benefits of banks facilitating non-financial business development services to SMEs in emerging countries at IFC’s SME banking conference in Beirut, attended by 200 participants; and • Conducting the first impact assessment of Business Edge training on SME owners in Pakistan. This showed that 73 percent of respondents used the skills they learned, 62 percent saw a positive impact on their business, and 43 percent saw an increase in revenue, as a result of the training. Most of the respondents were from the farming and trading sector.
Corporate Governance
The program helps companies, including family-owned businesses and SMEs, attract investment by improving their corporate governance practices. It also works with investors to incorporate sustainable investment practices into their investment decisions.
The Corporate Governance program continued its efforts to strengthen corporate governance practices across the region, with an increased focus on helping restore investor confidence in the wake of the Arab Spring. The program was particularly successful in:
• Launching bank governance training in Tunisia and Pakistan for directors and senior executives of banks and financial institutions. IFC helped strengthen the capacity of partners to improve overall corporate governance practices in the financial industry in both countries. In Tunisia, IFC delivered thefirst ever corporate governance training package for directors and CEOs from the country’s leading banks and financial institutions, in collaboration with the World Bank and the Central Bank of Tunisia. Thirty-six bank executives, audit and risk committee members, and members of the Central Bank’s supervision team, attended this event. In addition, a one-day workshop was held, training 14 participants, comprising directors and CEOs of financial institutions and banks. Both events reinforced the key elements of the Tunisian Banking Code - developed in collaboration with the World Bank – which focus on transparency and disclosure, the importance of audit and risk committees for the board, and the need for independent board directors. In Pakistan, 24 faculty members from the Pakistan Institute of Corporate Governance (PICG) were trained in a two- day workshop, which led to building institutional capacity for bank governance training in Pakistan. PICG launched its first intake of bank governance training based on IFC governance material, and 15 bank directors and senior managers were trained by PICG on good corporate governance practices of banks. • Developing the first corporate governance initiative for SMEs, aimed at training SMEs in how to implement sound corporate governance standards to improve their performance, increase access to finance and foster sustained growth. In cooperation with several partners, IFC conducts interactive workshops using newly developed SME corporate governance training material, one of the first of its kind in MENA. A training of trainers’ workshop was also conducted with partners to increase the outreach of the newly developed material, in addition to training consultants to equip them with the necessary tools to provide corporate SUSTAINABLE BUSINESS ADVISORY 41
governance assessments to SMEs. These workshops have already reached over 100 participants in Cairo and Dubai, with plans for roll out in IFC globally. • Engaging with various central banks and other regulators in Tunisia, Morocco, Jordan, Pakistan, and Yemen, to strengthen corporate governance codes and disclosure requirements, and enact three new codes.
New Initiative to Improve Listed Companies through Scorecards
The Corporate Governance Program provided technical assistance to the Jordan Securities Commission to develop a Corporate Governance Scorecard for Listed Companies. This is the first corporate governance scorecard of its kind in MENA. It provides a framework for securities regulators and stock exchanges to promote international standards of corporate governance to listed companies. It also enables companies to self-assess the scope and quality of their own governance, and provides a systematic and succinct overview of corporate governance issues for analysts and investors to incorporate into their due diligence process.
• Delivering training and consultations to 580 companies around the region on board oversight, transparency, and corporate conduct. The aim was to help these companies demonstrate sound governance to the market and advance gender diversity in board participation, especially in Egypt, Jordan and Pakistan. As a result of IFC’s efforts on advising on the importance of (gender) diversity to increase board effectiveness, seven women have been appointed as board directors in Pakistani companies. • Strengthening the capacity of local partners, such as the Moroccan Institute of Directors, Pakistan Institute of Corporate Governance, and Jordanian Forum for Corporate Governance and Responsibility, to provide corporate governance services on a sustainable basis.
V. Challenges and Lessons Learned
Despite the disruptions caused by the Arab Spring and the consequent economic slow down, we succeeded in implementing more than 80 percent of our planned activities for FY12. First, our increased focus on expanding the reach and scope of our corporate governance activities, through our three hubs in Morocco, Egypt and Pakistan, was well received, and seen as an effective and efficient way to help restore investor confidence in the private sector, especially among SMEs. Second, our efforts to expand our management skills training and standards work to new areas (North Africa) and new segments (unemployed youth, micro enterprises and farmers), combined with greater sector focus and integration across other advisory service programs (agribusiness and financial markets) increased opportunities for firms, including MSMEs, and improved youth employability, providing immediate response to the needs of the private sector and governments in the region, specifically in post-revolution countries. Finally, although the high fuel, electricity and water subsidies have adversely affected the expansion of our resource efficiency program, we have recorded a significant interest and found new ground 42 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
for supporting resource efficiency and renewable energy by focusing on countries and sectors that are already impacted by the scarcity of energy and water resources.
VI. Future Prospects
In FY13, we will continue to expand our work program in response to the identified areas of need in the region, including agribusiness and food security, water and energy scarcity, SMEs and farmer skills, access to markets, youth employability, and corporate governance. In particular, we will increase our impact on MSMEs by developing integrated solutions to support their development and upgrade in key sectors such as agribusiness, finance and manufacturing. This will include scaling up work with lead companies that work with MSMEs and farmers. We will also expand both our training delivery network and training content and, in countries in political transition, continue to contribute to increasing youth employability. In addition, we plan to continue building on our work in IDA, and fragile and conflict- affected countries, especially Afghanistan, Iraq and Pakistan. Our corporate governance footprint will increase across North Africa and in conflict-affected countries, such as Afghanistan and Iraq. Further, we will increase the reach of our corporate governance offering for SMEs. In the climate change area, we will continue to promote resource efficiency by focusing on work with aggregators, such as water and electricity utility companies, industrial estates and other lead companies. We will also support the private sector in adopting the use of renewable energy through captive power solutions, as well as promoting off-grid renewable energy technologies such as hydro in Pakistan, and solar across the region, to support improved access to energy for productive use in rural areas. PUBLIC-PRIVATE PARTNERSHIPS 43
Public-Private Partnerships
I. Operational Context
Economic growth in the MENA region is hampered by poor infrastructure. Regional governments often lack the financial resources to make the necessary investments in new infrastructure, or the capacity to improve the operation and use of existing infrastructure assets.
Through public-private partnerships (PPP), the private sector can facilitate better infrastructure investments while reducing the budgetary and fiscal constraints on governments. The private sector can also help improve efficiency, innovation, and managerial capabilities, which can translate into better services. Given the substantial need for investment in building and upgrading infrastructure, PPPs alone will not be sufficient. However, in sectors with identifiable revenue sources, PPPs could be the preferred procurement method, thereby allowing limited public funds to flow towards other priority areas. PPPs also tend to have shorter construction times and fewer cost over-runs. They have successfully integrated development and construction with operations and long-term asset maintenance.
While these advantages should result in more PPPs, the number of projects undertaken through PPPs remains small, despite the high priority attached to them by several governments. This is because successful PPPs often require: a legal, regulatory, and institutional environment that allows them to be well-structured, balanced and sustainable; political commitment at the highest level, to attract the private investment; and capacity within the public sector to understand the public- private interface, and improve the transparency of the procurement.
The need for the private provision of infrastructure and social-infrastructure services (including health and education) has been greatly heightened following the Arab Spring, primarily for two reasons. First, a realization that inadequate and poor quality public services were part of the reason for the general discontent among the population and, second, the further shrinking of the fiscal space for the public financing of infrastructure projects.
II. Purpose and Approach
While IFC is addressing these issues by continuing to focus on our traditional role in implementing bankable transactions, we have also begun to address this situation, together with our partners. Our aim is to increase knowledge of PPPs among regional governments, strengthen their capacity to identify and prepare potential PPPs for the market, and increase available funding and guarantees to help increase the maturity, and/or reduce the risk perception, of investors. As such, our approach is as follows:
• In an effort to help governments understand the opportunities and limitations of PPP arrangements, we are intensifying our knowledge dissemination efforts in the region by holding more PPP seminars. These bring together public service participants and private investors, lenders and operators. • We also intend to work upstream on project development (which had not been our focus previously) in project identification and initial project preparation 44 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
phases, to help address the issue of capacity and increase the deal flow in the region. Activities under this category will focus on supporting the PPP units to conduct preliminary project screenings by undertaking initial due diligence and feasibility studies, as necessary, to improve the project pipeline. • We will continue to increase our focus on building the necessary capacity within the public sector to prepare bankable projects through the development of strategic partnerships.
To help finance these activities, we established the Arab Financing Facility for Infrastructure (AFFI), together with the IBRD and Islamic Development Bank (IsDB), to support private infrastructure and PPPs in the Arab World through various instruments. These include a policy forum, a technical assistance facility, the Arab Infrastructure Investment Vehicle, and a public window (to be financed by an IBRD loan). AFFI is designed as an umbrella facility to support in-country and cross- border infrastructure projects, in particular PPPs, in the region. While the AFFI- Technical Assistance Facility is initially financed by IsDB, IFC and IBRD, the facility is designed to attract other donors to provide funds for project preparation and knowledge sharing.
III. FY12 Results
FY12 continued to be affected by the political unrest in the region and the resulting slow-down in public decision-making. This resulted in only two mandate signings: an extension of the programmatic MoU in Egypt, and a solid waste management project in the West Bank and Gaza. IFC has completed its report with recommendations to the client in the West Bank and Gaza; the client has accepted it and has now decided to move forward with the transaction.
Despite the political situation, IFC successfully closed three deals: the first health sector PPP and second PPP deal in Egypt, via 20-year concession contracts for two new hospitals in Alexandria, and the successful close of Medina Airport in Saudi Arabia.
In FY12, 100 percent of our PPP clients who responded to our annual client satisfaction survey indicated that they were satisfied with our work overall. PUBLIC-PRIVATE PARTNERSHIPS 45
IV. Program Highlights
During FY12, IFC signed one new mandate for the West Bank and Gaza, an extension of its PPP program in Egypt, and successfully closed three deals: two in Egypt and one in Saudi Arabia.
• In Egypt, the business line facilitated the closure of the first health sector PPP and second-ever PPP deal, with the award of a 20-year concession contract to a private consortium for two new hospitals in Alexandria, Egypt’s second largest city. The Alexandria Hospitals project is estimated to provide access to improved health services to more than 78,500 patients in a population center of 7.4 million. This project establishes the viability and validity of PPP projects in building Egypt’s future in a rapidly changing political climate. IFC also signed an extension of its program in the country to identify new infrastructure projects that could be procured on a PPP basis. • In Saudi Arabia, IFC helped our clients conclude a major deal - Medina Airport. This is a 25-year concession for the rehabilitation, expansion, development, operation, and maintenance of the airport. The project is likely to serve as a model for replication for major airports elsewhere. Medina Airport alone will result in approximately $1.3 billion in private investment, and handle up to 8 million people in its initial years of operations. That will be recorded as a result in future fiscal year • In Pakistan, IFC is providing advisory services to the governments of Punjab and Sindh, relating to the development of Punjab and Sindh Grain Storage projects. At the end of FY12, the prequalification process for both projects was completed, and bidders were shortlisted on key technical and financial criteria. Seven parties were prequalified for the Punjab Grain Storage Project, and three for the Sindh project. Following prequalification, the bidding process for both projects was launched in June 2012, with the Request for Proposals and Draft PPP Concession Agreement shared with all prequalified parties. Following this tender launch, and in accordance with Punjab and Sindh’s PPP Acts, a series of pre-bid one-on-one investor meetings are planned to be held in July 2012 with each prequalified party for both projects. These meetings will cover detailed discussion with investors and their advisors on technical and legal aspects of the Project. In addition, IFC is seeking to sign an MoU on both governmental and provincial levels, to identify new PPP development opportunities. Although it is still in its early stages, IFC is also looking at a livestock vaccines project, as well as an infrastructure investment fund project, to help locally finance any potential new infrastructure opportunities. • The business line also held a forum on knowledge dissemination and capacity building with more than 200 participants. The focus of the forum was to provide an opportunity for senior policymakers, investors, lenders, advisors, and other experts to discuss the implications of the Arab Spring, share global and regional experiences and lessons learnt, identify opportunities, and promote ways to improve the viability of PPPs in the region. The seminar was co-hosted by the Higher Council of Privatization of the Republic of Lebanon, and held in collaboration with the Public-Private Infrastructure Advisory Facility (PPIAF) and the Islamic Development Bank. 46 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
IFC Supports State-of-the-Art Hospitals in Egypt
In an effort to improve healthcare in Egypt, IFC recently advised the country’s government on a groundbreaking public-private partnership to build two teaching hospitals in the coastal city of Alexandria.
The deal was the first of its kind in Egypt’s healthcare sector and is expected to help many of the 7.4 million people who live in and around Alexandria. The agreement, signed in April, will see a private consortium construct and operate a 200-bed obstetrics and gynecology center along with a 224-bed hospital specializing in neurosurgery and nephrology.
“This agreement will expand access to high quality health services to thousands of Egyptians,” says Osama Ibrahim Al-Sayed Ahmad, the president of Alexandria University.
The deal marked the culmination of years of hard work by the Public-Private Partnership (PPP) business line, which has spearheaded several other major PPPs in the region, including a waste-water plant outside Cairo and an airport in Amman, Jordan. Based in part on that track record, the Egyptian government is looking at similar projects in other sectors, including power and transport.
“This project demonstrates that the private sector can play an important role in extending high-quality basic services to those who need it most,” says Moazzam Mekan, Manager of IFC’s Infrastructure Advisory in the Middle East and North Africa.
The agreements also demonstrate the excellent long-term potential of Egypt’s economy, despite its struggles since a popular uprising in early 2011.
“Despite the current economic challenges, this signing demonstrates that investors have confidence in Egyptian public-private partnerships and the country in general,” says Atter Hannoura, the director of the government unit in charge of PPPs.
The agreement will see Alexandria University and Bareeq Hospitals Company, a consortium comprising Bareeq Capital, Detac, G4S, and Siemens, combine forces to design, finance, construct, and partially manage the new Smouha and Mowassat university hospitals. PUBLIC-PRIVATE PARTNERSHIPS 47
V. Challenges and Lessons Learned
PPPs offer an important mechanism for procuring public services with a focus on their delivery. While nearly all MENA countries have some sort of PPP program, most have achieved few results. Shifting to a more successful program will require a greater commitment to bring about much-needed change and make decisions in a timely manner. The present political environment in the region presents both a challenge and an opportunity. The challenge involves moving away from rhetoric to the implementation of significant PPP transactions, which requires strong focus, leadership, human capacity, and timely decision-making. The opportunity lies in the form of increased awareness of the lack of good quality and insufficient public services and a desire to rectify this situation. The cash-strapped situation of many governments may also increase their move towards PPPs.
There is a substantial lack of capacity in the public sector when it comes to understanding PPPs and addressing key concerns. PPP contracts are different from other public procurements, due to their long tenures and risk profile. It is thus essential for public sector officials to understand the need for adequately balancing risk allocation between the parties. Appropriate training, in conjunction with transactions, is essential to build capacity within the public sector to undertake successful PPPs.
Our experience shows that governments have much greater chances of success in PPPs when they have a PPP program rather than a one-off transaction. A program allows governments to provide signals to investors on their willingness to include the private sector in the infrastructure space. It also helps build investor confidence and interest as they see a pipeline of projects, builds capacity within the public sector, and lowers transaction costs by standardizing the contractual framework. IFC has entered into memoranda of understanding with a number of governments, including Egypt, to assist in a series of pilot transactions across various sectors. We are also focusing on building awareness and capacity building in terms of PPP by organizing knowledge events and providing client-tailored PPP training.
VI. Future Prospects
The continued upheaval in the MENA region has highlighted the need for better access and improved public services at affordable prices. In response, IFC has increased its efforts to work with member states to maintain investor interest and restructure projects, based on the new economic and political situation. We believe that successful PPP transactions in infrastructure are essential to restoring market confidence in these post-revolutionary economies.
The IFC has strengthened its base to meet emerging client demand. The completion of very high profile mandates in Egypt and Saudi Arabia has given the IFC the necessary leverage in the region to develop a strong transactional presence and support for the implementation of PPPs. In light of this success, IFC has increased its focus on PPPs in fragile and conflict-affected states. Both in the West Bank and Gaza, and Afghanistan, we have identified a number of possible areas for further collaboration with governments, including health, electricity, water, and transport, which will improve access and underpin governmental efforts to increase private participation in infrastructure. 48 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
Sources and Uses of Funding
I. FY12 Expenditure
In FY12, we sought to scale up our operations in response to the development challenges in the region, many of which had been highlighted by the Arab Spring, and increased demand. Initially, we had planned to increase the advisory services program by 11 percent - from $24.8 million in FY11 to $27.5 million in FY12. However, we were able to ramp up faster than originally planned and, with strong support from IFC management, exceeded the plan and executed just over $30 million, a 22 percent increase from last year.
We have been particularly successfully in ramping up our Access to Finance and Investment Climate programs with increases in expenditures of 65 percent and 38 percent respectively over the last year, despite the reduction in our portfolio in Yemen. As expected, our PPP operations continue to be affected by the political transition processes in the region, which has made it more difficult to sign new mandates in many countries. As such, the business line has intensified efforts in IDA and fragile and conflict-affected countries, and has hence been more active in Afghanistan and Iraq. Overall, the FY12 expenditure level of the PPP program was above our original plan. The Sustainable Business Advisory business line saw spending in line with FY11, although an increase had been expected this year. The under-run was due to the fact that the launching of new operations in Iraq and in the area of renewable energy took longer than anticipated, due to the cautious approach taken by many companies to investing, given the current uncertainty.
In FY11, IFC initiated an in-depth study into the cost allocation methodology of overhead costs (including rent, utilities, security, furniture, communications, IT costs) to project budgets. Initially, we had hoped to receive clarity and institutional guidance about how to budget and charge such expenses in FY12. When this proved not to be the case, given the complexity of the issue, regional management decided to absorb all overheads into Management and Administration (M&A), so as not to assign any of these costs to project budgets in FY12 (as the uncertainty of application was causing difficulties in planning and budgeting). Thus, in FY12, we are showing all overhead costs in the M&A category which makes it appear that there has been a substantial rise in M&A relative to FY11. To have comparable FY11 and FY12 figures, we have recalculated these costs using the old methodology (see figure opposite) which results in M&A charges of around 17 percent of the total costs in FY12; very similar to the 16 percent seen in FY11. The slight rise is mainly due to the overheads and security associated with the cost of our new office space in Iraq, as well as the addition of a donor relations officer in the region.
Going forward, we will be implementing IFC’s new standardized overhead cost allocation methodology to allocate costs to project budgets. This will make advisory services projects comparable throughout the corporation, and ensure that projects reflect their true cost of implementation. We expect that M&A costs will be approximately 15-16 percent of total costs next fiscal year. SOURCES AND USES OF FUNDING 49
II. Sources of Funding
The IFC business model is predicated on strong partnerships with like-minded partners and a consistent application of our pricing guidelines on projects, thus helping us to significantly leverage IFC funds with client and partner funding. To ensure stronger partner relationships and help us meet our goals in rapidly growing the program, we have added a senior donor relations officer this year.
Despite the transitional nature of this year, our partners continued to strongly support IFC’s efforts. This, together with the consistent application of our pricing guidelines for clients, has meant our leverage increased slightly in both areas, so that IFC is now meeting 38 percent of costs.
There have been questions this year from partners and our board on the application of the pricing guidelines, so it is worth taking a moment to review these, including how we apply them and why we believe they are important. In essence, the guidelines say that the higher the level of private benefits from a project (that is, those that accrue to specific firms) then the larger the share of project costs to be paid by the client; while projects with a higher level of public benefits (that is, benefits not captured to specific firms) then the higher the case for subsidy, and, therefore, lower levels of client contribution.
In our experience, we have much higher levels of impact in projects where client commitment and ownership is high and the client is motivated to make it succeed. In addition, we have consistently found that client commitment and ownership of project goals are much stronger when they contribute to the project cost. The IFC pricing guidelines are clear in intent, but adaptable to actual circumstances. Therefore, we do not have a one-size-fits-all pricing structure but, rather, we look 50 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
at each project individually, considering the flow of benefits to private and public actors and the situation of our clients when establishing pricing. We will continue to consider each project on a case-by-case to ensure we maintain our focus on developmental impact.
Funding Structure
48% 50% Donors
10% 12% Cash Fees IFC 42% 38%
FY 11 FY 12
III. Client and Partnership Overview
Client Partnerships
In FY12, we had 76 active client agreements, of which 55 were new agreements. These agreements are expected to bring in a total of $17 million over the course of project delivery. In FY12, the clients paid $4.8 million toward the agreements.
The PPP business line accounts for the lion’s share of cash fees to be collected from client agreements (77 percent) with most of this coming from success fees, which will only be collected from those projects that reach financial closure (globally, about 50 percent of PPP projects reach financial closure). The A2F business line has 17 client agreements totaling $3.3 million, nine of which were signed in FY12. The SBA business line has 44 active client agreements with 42 of these signed in FY12. Unlike other business lines, the SBA business line typically has several clients in each project, both at the intermediary and end client level, some of which are for delivery of advisory services which are very specific in scope and of relatively short duration. The IC business line has nine active client agreements, of which four were signed in FY12.
Donor Parterships
The implementation of the IFC Strategy and the Advisory Services program in MENA has benefited greatly from the enhancement of already excellent relations with our traditional partners, as well as the establishment of positive relations with new partners.
This year, we signed six new agreements with Japan, Denmark, the European Commission, SECO, UKAid and USAID, which are essential for scaling up our Advisory Services program in North Africa and the Levant. Additional agreements SOURCES AND USES OF FUNDING 51
– currently under finalization – will be crucial to A wide number of initiatives have also been carried out implement the e4e Initiative for Arab Youth as well as to ensure better coordination and alignment with our our new debt resolution program seeking to secure partners and other IFIs, particularly in the framework higher returns to creditors in insolvency cases. The of the Deauville Partnership. We are hopeful that mobilization of funding through centrally managed this effort will help ensure more coordination for the trust funds has also been instrumental to the programs being implemented across the region, and implementation of our activities in FY12. a common approach and eventually more harmony on approaches to clients and issues such as pricing. We have made a special effort over the last two years “The € 1.4 million administration agree- to provide our partners with better information for ment signed between the European Union planning and reporting, including a clearer definition of the relevant set of indicators and targets to be and the IFC is the first joint cooperation in achieved. We hope this information is a useful tool Lebanon of this kind. The EU-IFC program for our donor partners to better assess the value for money proposition offered by our advisory services aims to improve the Lebanese business program. We are confident this will contribute to climate and puts together the best prac- reinforcing the “win-win” partnership with our partners tices, commitment, and added value of IFC, and ensure continued focus on results that make a real difference in MENA. the Lebanese Government, and the Euro- pean Union, to the benefit of the people New Partnership Agreements
living in Lebanon. In FY12, we signed six new multi-year trust fund agreements totaling $14.3 million. Of this amount, Angelina Eichhorst, Head of the European Union $5.4 million has been deposited in our accounts Delegation to Lebanon and $1.9 million has been spent or committed. All
Table 1 : New agreements signed in FY12
Amount Amount Geographical Donor Scope / Purpose Grant ($) deposited Committed / Coverage ($) Spent ($) Denmark Advisory Services program North Africa 915,000 915,751 825,845 UKaid A2F activities - MSME Facility North Africa & 5,587,5005 2,383,330 554,447 Levant USAID Jordan Inspection Reform Jordan 1,750,000 50,000 - EC Investment Climate, including Lebanon 1,374,505 - - Financial Infrastructure SECO Advisory Services program Egypt 3,212,632 617,868 592,816 (Private Sector Development) Japan A2F - MSME Facility North Africa & 1,500,000 1,500,000 - Levant TOTAL 14,339,637 5,466,949 1,973,108
5 UKaid actually signed a tripartite agreement with IFC and WB to support, with $10.7 million, the implementation of the Joint IFC-WB MENA MSME Technical Assistance Facility. $5.5 million is the amount earmarked to IFC. 52 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
six agreements are focused on the implementation implementation of our program in the region in the new of IFC’s strategy in North Africa and the Levant in fiscal year, combined with the increased predictability the aftermath of the Arab Spring. Japan and UKaid of funding availability for the Access to Finance and contributed to the implementation of the joint IFC-WB Investment Climate programs in the coming years. Technical Assistance Window of the MENA MSME With the revival of the Iraq Business Assistance Facility. SECO’s contribution is aimed at supporting Facility last year, we have also continued to dedicate the development of the private sector in Egypt, and resources to increasing our advisory services program Denmark contributed to private sector development in Iraq. At the beginning of the year, we fielded a in North Africa. USAID and European Commission country officer in our Baghdad office, located within funding will contribute to the enhancement of the premises of the UK Embassy, and sent multiple the investment climate in Jordan and Lebanon missions to the country to scope and design the first respectively. tier of interventions there.
In addition to the six new agreements, we also mobi- “We have chosen IFC as our partner in lized an additional $3.9 million through centrally man- aged trust funds to support the delivery of advisory private sector development for its innova- services in the countries of North Africa and the Le- tive approach. It is this creative and forward vant, as well as IDA countries and fragile and conflict- affected states. Out of this amount, we committed or looking way of thinking that we appreciate.” spent $2.5 million during FY11. Funding has been provided by the trust funds established by the gov- Nicole P. F. Bollen, Head of International ernments of Canada, Luxembourg, the Netherlands, Financial Institutions Division, Multilateral Spain and UKaid (via the Global SME Financing Facil- ity). Relevant contributions also come from the Perfor- Organisations and Human Rights Department, mance Based Grant Initiative (PBGI) which is funded The Netherlands from IFC retained earnings, and the Public-Private Infrastructure Advisory Facility(PPIAF)56. The funding mobilized through centrally managed trust funds ben- efited all the four business lines.
Overall in FY12, a total of $18.2 million in funding was mobilized, of which 85 percent will support the delivery of advisory services in North Africa and the Levant, and 15 percent will go to IDA countries and fragile and conflict-affected situations. With these new agreements in place and additional agreements in the pipeline to be finalized in the first quarter of FY13, we believe we have laid the foundation for the smooth
6 The Public-Private Infrastructure Advisory Facility (PPIAF) is a multi-donor technical assistance facility created to help govern- ments in developing countries improve the quality of physical infra- structure through partnerships with the private sector. PPIAF helps governments to create policy, legal, and regulatory measures as well as capacity building to strengthen their ability to design, manage, and regulate reform programs. Capacity building and training is also provided for policy makers, regulators, and civil society groups. PPI- AF is financed by 16 multilateral and bilateral donors: Asian Develop- ment Bank, Australia, Austria, European Bank of Reconstruction and Development, France, Germany, International Finance Corporation, Italy, Japan, Millennium Challenge Corporation, Netherlands, Swe- den, Switzerland, the United Kingdom, the United States, and the World Bank SOURCES AND USES OF FUNDING 53
Table 2: Funding obtained through centrally managed Trust Funds in FY12
Amount Geographical Amount Donor Scope / Purpose Grant ($) deposited Coverage Spent ($) ($)
Credit Bureau Netherlands Business Edge – IDA Pakistan 490,000 490,000 488,855 Countries Corporate Governance II Olive Oil Supply Netherlands Chain – Fragile Microfinance West Bank and Conflict- 588,000 588,000 421,321 Project and Gaza affected Situations Business Registration Netherlands Off-Grid Power – Renewable Pakistan 214,000 214,000 15,920 Production Energy Microfinance Syria 310,000 310,000 161,643 PBGI DBACD Home Egypt 285,000 285,000 85,000 Loans PPP Transaction West Bank PPIAF 199,975 199,975 199,975 Structure and Gaza Canada - MENA SEF MENA 255,000 51,772 TATF Program 255,000
UKaid Alfalah SMEbank Pakistan 800,000 697,070 800,000 Credit Bureau & UKaid Pakistan 150,000 - Microfinance 150,000 SBA - Business Luxembourg Edge & SME MENA 190,000 190,000 54,020 Toolkit PPP - Solid West Bank Spain - TATF Waste 395,000 395,000 310,995 and Gaza Management TOTAL 3,876,975 3,876,975 2,401,571 54 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA
IFC in the Deauville Partnership
At the launch of the economic pillar of the Deauville Partnership (September 11 2011), the IFIs involved in the partnership, including IFC, decided to create a joint coordination platform at the operational level to facilitate information sharing and operational dialogue with partner countries, identify opportunities for joint transactions, and coordinate monitoring and reporting on its imple- mentation. The African Development Bank chaired the rotating secretariat for one year. From September 2012, this secretariat role will be occupied by the Islamic Development Bank.
IFC is strongly committed to the Deauville Partnership and has developed a number of initiatives relating to the modules in which the Deauville Partnership has been articulated. Under Module 1: Match making & co-investment vehicle, IFC launched the MENA Fund - a regional equity fund to catalyze new private sector investments in the region. Under Module 3: SME access to finance, IFC and the World Bank received board approval for a MENA SME Facility and ne- gotiations are ongoing for the participation of other IFIs in the initiative. Under Module 5: Facilitation of PPP programs, IFC – together with the Islamic Devel- opment Bank and the World Bank – set up the Arab Financing Facility for Infra- structure (AFFI) with other IFIs considering joining this initiative. Under Module 6: Skills upgrading and vocational training, IFC and the Islamic Development Bank jointly launched the e4e Initiative for Arab Youth as a tool to develop a private sector agenda to address the need for more relevant post-secondary education skills in MENA.
Since the launch of the Deauville Partnership, positive progress has been re- corded regarding better coordination between IFIs, bilateral donors and part- ner countries at all levels. More generally, IFC has been trying to ensure ef- fective donor/partner consultation through meetings to help define win-win opportunities for partnerships with other IFIs and harmonize the approach to donor reporting. ANNEX A: INDICATOR DEFINITIONS AND METHODOLOGY NOTES 55 - - - - tional reports. Results will be counted for clients that implement at least one IFC recommendation. The results for this indicator will be reported bi-annually by the The source of information for the results relating to project team. monthly and/or quarterly opera this indicator will be the clients’ tional reports. Results will be counted for clients that implement at least one IFC recommendation. The results for this indicator will be reported bi-annually by the The source of information for the results relating to project team. monthly and/or quarterly opera this indicator will be the clients’ The results for this indicator will be reported bi-annually by the The source of information for the results relating to project team. monthly and/or quarterly opera this indicator will be the clients’ tional reports. Results will be counted for clients that implement at least one IFC recommendation. Methodology Note for Reporting on Results The results for this indicator will be reported bi-annually by the The source of information for the results relating to project team. monthly and/or quarterly opera this indicator will be the clients’ tional reports. Results will be counted for clients that implement at least one IFC recommendation. Number of micro loans disbursed during the AS . reporting period by the MFI receiving IFC’s This indicator measures the volume of credit supply during that reporting period. Number of SME loans disbursed during the AS . reporting period by the FI receiving IFC’s This indicator measures the volume of credit supply during that reporting period. USD equivalent of the SME loan amounts disbursed during the reporting period by FI This indicator measures the AS. receiving IFC’s value of the credit supply during that reporting period. Definition USD equivalent of the micro loan amounts disbursed during the reporting period by MFI This indicator measures the AS. receiving IFC’s value of the credit supply during that reporting period. - MF: number of Micro loans disbursed (of which women) SME Banking: number of SME loans disbursed Value of SME loans dis Value bursed Indicator Value of micro loans Value disbursed Output Increased Access to Finance Outcome Annex A Indicator Definitions and Methodology Notes 56 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA - - tional reports. The results for this indicator will be reported bi-annually by the The source of information for the results relating to project team. monthly and/or quarterly opera this indicator will be the clients’ The results for this indicator will be reported bi-annually by the The source of information for the results relating to project team. monthly and/or quarterly opera this indicator will be the clients’ tional reports. The source of information for the results relating to this indicator monthly and/or quarterly operational reports. will be the clients’ Results will be counted for clients that implement at least one IFC recommendation. Methodology Note for Reporting on Results The results for this indicator will be reported bi-annually by the The source of information for the results relating project team. to this indicator will be the credit bureau/public registry. Results will be counted for clients that implement at least one IFC recommendation. Measures savings mobilization and outreach: new accounts opened during the reporting period for women depositors.This indicator is a sub-set of the indicator “Number deposit accounts opened (personal accts)”. Measures savings mobilization and outreach: new accounts opened during the reporting period. This percentage is calculated as follows: loans that are >90 days overdue/outstanding loans. Definition Number of credit reports sold represents the number of reports which financial institutions obtain from a credit bureau or public registry about debit accounts of their clients. - - Number of deposit ac counts opened (personal accts), of which women Number of deposit ac counts opened (personal accts) Risk mgt: percentage of non-performing loans (define more) Indicator Credit Bureau: number of credit reports sold Increased Access to Finance Output ANNEX A: INDICATOR DEFINITIONS AND METHODOLOGY NOTES 57 Data will be collected from project clients. Data will be collected from project clients. Data will be collected from project clients. Methodology Note for Reporting on Results A new tool is under development to estimate the cost savings. A - - -
Total value (US $) of funds transacted between Total parties as a result of enforced settlements (excluding any lawyer or other fees). Number of cases that are resolved through mediation centers or project-trained mediators The indicator is intended to track the change in the total number of businesses that completed the procedure improved by project. For example: 1) the project sets up a onestop- shop, the total number of companies registering through the one-stop-shop should be reported here; 2) the project streamlines construction licensing procedure, the total number of compa nies licensed since the new procedure was put in place should be reported here Definition Aggregated cost savings for businesses result ing from administrative procedures/policies/ practies that were improved/eliminated and/or law/regulation/amendments/codes passed in the jurisdiction in which project operates. firms X reduction in costs = Number of affected Aggregate savings. Reduction in costs =reduc time tion in official fees + (reduction staff X wage rate) + reduction in other costs (e.g., travel expenses, bribes, etc.) - - - Value of funds released Value ADR (of which through women) Number of cases suc cessfully settled (of which women) Number of businesses completing new/reformed procedure in a given juris diction (of which women) Indicator Estimated value of ag gregate savings to private sector Output Improved Investment Climate Outcome 58 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA Own count of law/regulations/codes enacted as per the definition Documentation will be obtained from public or of the indicator. client records and reports. Methodology Note for Reporting on Results Own count of law/regulations/codes drafts as per the definition the indicator. - - -
For example: 1) A municipal decree is enacted A For example: 1) when signed by the mayor or municipal as ministerial decree is enacted when A sembly; 2) law is enacted A signed by the minister; 3) when passed by parliament and signed into law A and/or published into the official gazette; 4) presidential decree is enacted when signed by the president. Summary information on all laws/regulations passed should be provided in the comments section following the indicator in PSR. Include a description of the level imple mentation. Definition Laws/regulations/codes should be counted only if IFC has significantly contributed to the drafting The proj of new/amended law/regulation/code. ect should count amendments separately only if each amendement tackles a separate and distinct concept. For example, a project working on an enterprise law proposing amendments on minimum capital requirement and foreign ownership should count two amendments. if a project proposes two amendments However, to a law in order reduce capital requirement, this should only be counted as one. - - Number of recommended laws/regulations/amend ments that were enacted (will capture all BLs activity) Indicator Number of new laws/regu lations/amendments, codes drafted or contributing to the drafting (will capture all BLs activity) Improved Investment Climate Output ANNEX A: INDICATOR DEFINITIONS AND METHODOLOGY NOTES 59 - -
Data will be collected from the clients with supporting documenta tion including emails and expression of interests. Own count of law/regulations/codes enacted as per the definition Documentation will be obtained from a report or of the indicator. decree indicating that processes have been implemented. Own count of procedures/policies/practices proposed for im provement or elimination as per the definition of the indicator. provement or elimination as per the definition of indicator. - -
- - - - -
-
improvement is counted. Number of inquiries recorded by an investment/ industry promotion agency from potential inves tors that led to an actual recorded investment. Procedures/policies/practices should be count ed here only when the project finds reasonable proof of implementation. In cases decentral ized implementation, count improvement or elimination only if you can document at least a 10% implementation rate (following the Doing Business guidelines). Summary information on all procedures/poli cies/practices improved or eliminated should be provided in the comments section following indicator section in the PSR. Include a descrip tion of the level implementation. Number of improvements, additions or elimina tions recommended by the project. For example, 1) we propose to cancel 100 permits and improve issuing procedures for 10 improvements are counted; 2) permits - 110 we recommend to improve both Sanitary and Fire inspection through risk categorization - 2 improvements are counted; 3) we recommend the Customs Office computerize their process ing system - 1 improvement is counted; 4) we recommend eliminating notary fees when regis tering a business - 1 improvement is counted; 5) we recommend the municipality provide information on market prices to rubber planters - 1 - tor inquiries in targeted sectors (of which lead to investment) Industry: Number of inves Number of procedures, policies, practices that were improved or eliminated (will capture all BLs activity) Number of procedures, policies, practices that were proposed for improvement or elimination (will capture all BLs activity) Output Output 60 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA Head count and sign-in sheets at events. TBD based on corporate-wide efforts to determine methodology TBD based on corporate-wide efforts for reporting on results Methodology Note for Reporting on Results Please refer to separate methodology note. - - - Number of individuals attending workshops/ This training events/seminars/ conferences, etc. AS events that are run by IFC’s can include IFC clients and other project partners. Head-counts or sign-in sheets at project events can be used as this indicator does not require a unique count of trainees (e.g., if a person attends 3 different This does NOT training events, the count is 3). include those trained by project-trained NGOs/ training partners/consultants/educational institu trained are included here. Trainers tions. Measures the tons of greenhouse gas emis sions (GHG) a technology/improvement/ plantation is expected to avoid during one year of operation compared to a “business as This annual rate is derived usual” scenario. from energy use expected to be avoided and/ or renewable energy expected to be produced indicators. Definition Number of clients and/or beneficiaries reporting improved operations, clearer roles, reduced cost of capital, improved loan terms, higher valua AS received. tions, etc. as a result of the - - Number of participants in workshops, training events, seminars and conferences (of which women) (will capture all BLs activity) GHG Emissions avoided activity) (will capture all BL Indicator Number of entities report ing improved performance (e.g. improved productivity, operations, access to capi tal, etc) (Will capture results for all BLs) Output Sustainable Business Advisory Outcome ANNEX A: INDICATOR DEFINITIONS AND METHODOLOGY NOTES 61 - Ref. Definition Ref. Definition Report on the number of reports submitted during course the project, as per IFC internal records. Methodology Note for Reporting on Results Please refer to separatemethodology note. Based on the value in contract signed between govern ment and the winning bidder -
Number of unemployed youth training partici pants employed 6-12 months post training Number of individuals in workshops/training events/seminars/conferences, etc. conducted by project-trained trainers and/or institutions. 4. Bidding documentation ii) For other non-standard advisory projects (seminars), this includes a report about the proceedings of the seminar. i) Reports that are submitted to the client in a standard advisory services project: 1. Strategic Options Report 2. Information Memorandum 3. Pre-qualification report Definition Number of MSMEs/Farmers receiving capacity building support receiving capacity support from IFC or project-trained people and institutions (proposed definition) amount of private investment required to Total implement the project, expressed in US$. When investment is expected to take place over a period of time, the value is expressed as NPV using a 10% discount rate. It is assumed that no private investment would be mobilized without Advisory work. IFC - - - Number of unemployed youth training participants employed 6-12 months post training Number of individuals trained by project people/institutions (of which women) Number of reports (assess ments, surveys, manuals, Strategic Options Reports) completed Indicator Number of MSMEs/Farm - ers receiving capacity build ing support of financing facili Value tated (from agreed contract - not actual investment to date) Output Output Increased Investment in infrastructure Outcome 62 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA Report on the number of agreements signed between IFC and internal records. governments, as per IFC’s different Methodology Note for Reporting on Results Report on the number of reports accepted by client during internal records. course of the project, as per IFC’s
Signals the start of mandate - refers to Financial Advisory Services Agreement signed between IFC and the government. Definition Reports that are accepted by the client in a standard advisory services project (acceptance indicates their agreement with the reports and moving forward with the project at each stage): 1. Strategic Options Report 2. Information Memorandum 3. Pre-qualification report 4. Bidding documentation - - Number of advisory man dates signed (between IFC and government) Indicator Number of reports ac cepted by client Increased Investment in infrastructure Output ANNEX B: FISCAL YEAR 2012 RESULTS AND TARGETS 63 ment Ratio of achieve - Total Post-Imp FY11-12 Results to date Portfolio date Target to Target ment Ratio of achieve - Total Result FY12 Post-Imp Portfolio 533 483 329 812 152% 577 911 329 1,240 215% Target 190,800,000 1,525,000,000 - 1,525,000,000 799% 990,800,000 1,525,000,000 - 1,525,000,000 154% 21,750,949 50,917,145 5,782,286 56,699,431 261% 60,200,819 118,496,715 5,782,286 124,279,001 206% 164,477,720 137,547,490 292,795,619 430,343,109 262% 293,470,722 327,796,350 292,795,619 620,591,969 211% 558,948,960 190,824,380 51,058,213 241,882,593 43% 624,696,691 244,706,043 51,058,213 295,764,256 47% - tated (US$) (from agreed contract - not actual invest- ment to date) Value of financing facili Value Estimated value of aggre- gate private sector savings (US$) from recommended changes Number of entities report- ing improved performance (e.g., improvements in operations, productivity, loan terms, valuations) Value of SME loans dis- Value bursed (US$) Value of Micro loans dis- Value bursed (US$) Outcome Indicator Increased investment in infrastructure Improved investment climate Sustainable Business Advisory Increased access to finance Annex B 2012 Results and Targets Fiscal Year 64 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA ment achieve - 0 0% 58 48% Total 0 0 Post-Imp FY11-12 Results to date Ratio of Portfolio date Target to Target ment Ratio of achieve - 0 0% 3,253 0 30 67% 120 58 Total 0 0 Result FY12 Post-Imp Portfolio 45 30 220 727 0 727 330% 592 1,981 0 1,981 335% 3,253 0 3,296 2,908 10,183 13,091 397% 5,090 46,233 10,183 56,416 1108% 32,000 0 2,228,86923,944 2,228,869 6965% - 32,000 6,214 0 6,214 2,228,869 2,228,869 26% 6965% 29,208 0 6,214 6,214 21% 32,176 5,688 54,917 60,605 188% 32,176 10,587 54,917 65,504 204% 54,097 32,304 20,075 52,379 97% 61,824 47,533 20,075 67,608 109% 826,138 80,830 71,406 152,236 18% 864,193 80,830 71,406 152,236 18% 6,463,000 831,100 0 831,100 13% 14,653,000 1,066,275 0 1,066,275 7% 1,636,450 191,120 121,549 312,669 19% 1,724,758 231,676 121,549 353,225 20% 31,245,000 123,146,141 0 123,146,141 394% 71,525,000 176,716,550 0 176,716,550 247% Indicator Target Value of funds released Value ADR to women through (US$) Value of funds released Value through ADR (US$) Number of cases success- ADR fully settled through Number of cases success- ADR fully settled through involving women Number of businesses completing a new/reformed procedure in a given juris- diction, of which women- owned Number of credit reports sold by credit bureau Number of deposit ac- counts opened (personal accts) by women Number of businesses completing new/reformed procedure in a given juristiction Number of deposit ac- counts opened (personal accts) Number of micro loans disbursed to women Number of micro loans disbursed Number of SME loans disbursed Output Improved investment climate Increased access to finance ANNEX B: FISCAL YEAR 2012 RESULTS AND TARGETS 65 9 32% 66 440% 10 50% 0 1 0 9 9 0 0% 15 66 6 38% 20 8 40% 28 1 0 - 5 8 - 9 16 20 105 135 49 184 175% 122 150 49 199 163% 126 256 45 301 239% 153 259 45 304 199% 1,310 1,6727,008 5 7,360 1,677 0 128% 7,360 2,174 105% 3,370 11,408 13,597 5 0 3,375 155% 13,597 119% 6,641 6,797 69 6,866 103% 10,834 13,615 69 13,684 126% - ing events, seminars and conferences (All BLs) Number of individuals trained by project people/institutions Number of women partici- pants in workshops, train Number of participants in workshops, training events, seminars and conferences (all BLs) Industry: Number of inves- tor inquiries in targeted sectors Number of procedures/ policies/practices/stan- dards that were improved/ eliminated (All BLs) Number of procedures/pol- icies/practices/standards that were proposed for improvement or elimination (All BLs) Number of recommended laws/regulations/amend- ments/codes enacted (all BLs) Number of new laws/regu- lations/amendments/codes drafted or contributing to the drafting (all BLs) Sustainable Business Advisory Improved investment climate 66 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA ment achieve - 5 50% 6 41% 7 13% Total 0 0 0 Post-Imp FY11-12 Results to date Ratio of 5 6 7 Portfolio date Target to Target ment Ratio of achieve - 1 20% 10 2 24% 15 0 0% 52 Total 0 0 0 Result FY12 Post-Imp 1 2 0 Portfolio 5 8 30 1,296 1,5731,768 0 1,8104,000 10,896 1,573 0 121% 1,397 1,810 2,049 12,293 102% 307% 3,350 2,292 4,000 0 3,063 10,896 3,350 1,397 0 164% 12,293 3,063 307% 134% Indicator Target Number of advisory man- dates signed (between IFC and Government) Number of reports ac- cepted by client Number of reports (as- sessments, surveys, manuals, Strategic Options Reports) completed Number of women trained by project trained people/ institutions Number of SMEs/Farmers receiving capacity building support (all BLs) GHG emissions expected to be avoided (in metric ton/year) (all BLs) Output Increased investment in infrastructure Sustainable Business Advisory ANNEX C:TARGETS: FISCAL YEARS 2011-2017 67 Total Total Total Total 2,056,400,000 cycle cycle 778 454 184 3,726 Targets: 3 years post funding Targets: Targets: 3 years post funding Targets: Targets Targets 0 32,000 48,000 80,000 168,000 88,000 101,200 517,200 44 533 602 801 5,264 23,944 30,734 27,538 25,364 10,591 0 123,435 7,727 54,097 72,273 71,402 74,326 32,688 0 312,513 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY11 FY12 FY13 FY14 FY15 FY16 FY17 38,055 826,138 1,255,200 1,376,354 1,481,080 671,146 554,244 6,202,216 38,449,870 21,750,949 25,451,299 27,721,353 52,289,350 52,941,095 51,482,101 276,886,018 65,747,731 558,948,960 996,819,270 1,168,968,953 1,294,331,133 234,856,696 166,582,000 4,486,254,742 800,000,000 190,800,000 532,800,000 532,800,000 128,993,001 164,477,720 215,384,001 295,937,860 382,489,216 108,933,329 96,500,000 1,420,926,950 Indicator Indicator Number of deposit accounts opened (personal accts) by women (of which women) Number of deposit accounts opened (personal accts) Number of credit reports sold by credit bureau Value of financing facilitated (US$) Value (from agreed contract - not actual investment to date) Number of micro loans disbursed to women (of which women) Number of entities reporting im- proved performance (e.g., improve- operations, ments in productivity, loan terms, valuations) Estimated value of aggregate private sector savings (US$) from recommended changes Number of Micro loans disbursed 88,309 1,636,450 2,349,139 2,589,717 2,803,089 1,014,438 798,627 11,279,768 Value of SME loans disbursed Value (US$) Value of Micro loans disbursed Value (US$) Number of SME loans disbursed 1,794 3,296 4,118 5,740 8,738 7,096 2,720 34,607 Output Outcome Increased investment in infrastructure Sustainble Business Advisory Improved investment climate Increased access to finance Increased access to finance Annex C Targets: Fiscal Years 2011-2017 68 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA 76 52 163 308 240 400 Total Total 32 35 54 54 cycle 29 54 264 264 264 1,951 Targets: 3 years post funding Targets: 28 13 64 49 13 54 24 Targets 9 20 22 16 14 6 8 4 0 3,253 878 2,142 3,636 3,802 4,216 17,926 0 32,176 8,793 18,424 29,796 31,768 35,224 156,181 27 12617 88 105 67 75 45 50 372 220 240 260 FY11 FY12 FY13 FY14 FY15 FY16 FY17 8,190,000 6,463,000 7,938,000 9,199,000 9,232,000 9,232,000 9,232,000 59,486,000 40,280,000 31,245,000 37,550,000 43,855,000 44,020,000 44,020,000 44,020,000 319,990,000 Indicator Number of procedures/policies/prac- tices/standards that were improved/ eliminated (All BLs) Industry: Number of investor inqui- ries in targeted sectors Number of new laws/regulations/ amendments/codes drafted or con- tributing to the drafting (all BLs) Number of recommended laws/ regulations/amendments/codes enacted (all BLs) Number of procedures/policies/prac- tices/standards that were proposed for improvement or elimination (All BLs) Value of funds released through Value ADR to women (US$) Value of funds released through Value ADR (US$) Number of cases successfully set- ADR involving women tled through Number of cases successfully settled through ADR Number of businesses completing a new/reformed procedure in a given jurisdiction, of which women-owned Number of Businesses completing new/reformed procedure in a given juristiction Output Improved investment climate ANNEX C:TARGETS: FISCAL YEARS 2011-2017 69 33 28 105 4,584 23,384 6 5 22 6 5 8 5 6 5 0 4,000 20,000 139,468 163,202 290,935 338,669 956,274 22 30 22 524 1,768 1,380 1,420 1,000 240 200 7,535 753 1,296 1,284 1,638 1,051 403 319 7,858 863 1,310 897 836 4,400 7,008 7,660 8,656 5,256 2,456 1,924 41,195 4,194 6,641 4,586 3,975 - - Number of advisory mandates signed (between IFC and Govern- ment) Number of reports (assessments, surveys, manuals, Strategic Options Reports) completed Number of reports accepted by client GHG emissions expected to be avoided (in metric ton/year) (all BLs) Number of SMEs/Farmers receiving capacity building support (all BLs) Number of women trained by project trained people/institutions Number of women participants in workshops, training events, semi nars and conferences (All BLs) Number of individuals trained by project trained people/institutions Number of participants in work shops, training events, seminars and conferences (all BLs) Increased investment in infrastructure Sustainable Business Advisory Notes
Contact Information
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