Environmental and Social Monitoring Report 2nd Annual Report 1 January - 31 December 2018 May 2019 UZB: Small Business Finance Project Prepared by JSICB Ipak Yuli Bank, JSCB Hamkorbank, JSCB Davr Bank, and JSILC Uzbek Leasing International for Ministry of Finance, Republic of Uzbekistan and the Asian Development Bank ABBREVIATIONS ADB - Asian Development Bank CCRA - Climate change Risk Assessment CBU - Central Bank of Uzbekistan DVB - Davr Bank Joint-Stock Commercial Bank EA - Executive Agency EMP - Environmental Management Plan IA - Implementation Agency IEE - Initial Environmental Examination ESMS - Environmental and Social Management System FIL - Financial Intermediary Loan GAP - Gender Action Plan HKB - Hamkorbank Joint-Stock Commercial Bank IYB - Joint Stock Innovation Commercial Bank “Ipak Yuli” MOF - Ministry of Finance PFI - Participating Financial Institution PIAL - Prohibited Investment Activities List SPS - Safeguard Policy Statement TA - Technical Assistance ALC - Joint Venture “UzbekLeasing International A.O.”, JSC NOTES (i) The fiscal year (FY) of the Government of Uzbekistan ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 31 December 2018. (ii) In this report, "$" refers to United States dollars. This environmental and social monitoring report is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. TABLE OF CONTENTS PART I - INTRODUCTION ......................................................................................................... 4 1.1. Short Description of the Program ................................................................................ 4 1.2. Summary of Activities and Project Progress During the Previous 12 Months. ......... 4 1.3 Project organization and environmental management team, including organizational relationships with PFIs, sub-borrowers etc. .............................................. 6 Part II: Environmental issues ...........................................................................................10 Part III: Compliance with ADB’s Social Protection Requirements and ADB’s Prohibited Investment Activities List ............................................................. Error! Bookmark not defined. Part IV: ESMS operations (for PFIs which are financing B-category sub-projects) ...... Error! Bookmark not defined. Annex 1: Annual Environmental and Social Performance Report JSC “Uzbek Leasing International A.O.” ..................................................................................................................18 Annex 2: Annual Environmental and Social Performance Report - JSCB Hamkorbank ...36 Annex 3: Annual Environmental and Social Performance Report - PJSCB “DAVR BANK” .................................................................................................................................................49 Annex 4: Annual Environmental and Social Performance Report - JSICB “Ipak Yuli” .....66 Annex 5: Photos .................................................................................................................... 215 PART I - INTRODUCTION 1.1. Short description of the program 1. The proposed financial intermediary loan (FIL) of $100 million provide US Dollar funding to the participating financial institutions (PFIs) to finance investment and working capital loans to small businesses. In addition, $0.5 million technical assistance (TA) support the selected PFIs to improve their lending and outreach to small businesses, and enhance financial literacy of small businesses. The impact will be improved contribution of small businesses to economic growth and employment. The outcome will be increased sustainable provision of PFIs’ financing to small businesses. The PFIs are expected to set examples for other financial institutions on how to deepen their outreach, while retaining good asset quality and funding private enterprise activities that generate jobs. 2. The output will be expanded capacity of the PFIs for financing to small businesses. At project completion, at least 20% of the eligible sub-loans are expected to be made to women-owned small businesses, and at least 60% of the eligible sub-loans are expected to be made to rural small businesses outside the capital. The capacity development TA will complement this output by focusing on measures for strengthening PFIs’ credit underwriting policies and procedures, developing a credit scoring system as well as financial literacy training to small businesses. The output will also include an established environmental and social management system (ESMS) embedded in each PFI’s operations for adequate management of environmental and social issues in compliance with the ADB’s Safeguard Policy Statement (2009) and national laws and regulations. 1.2. Summary of Activities and Project Progress During the Previous 12 Months 3. In the course of project implementation, 166 subprojects were financed within 12 months. Most projects, in particular 126 projects (making 75.9% of the projects financed by the banks engaged in the Project), are financed by JSICB “Ipak Yuli”. PJSCB “DAVR BANK” and JSCB Hamkorbank finnaced 15 projects (9.04%) each, while bank JSC “Uzbek Leasing International A.O.” financed 10 projects (6.02%) in 2018. 4. For each sub-project, a State Environmental Expertise (SEE) was carried out on the basis of a draft EIS (Environmental Impact Statement) and obtained approvals (Environmental Conclusions) of the State Committee for Ecology and Environmental Protection. Control over observance of the requirements of environmental legislation at the enterprises of each sub-project is assigned to the regional department for ecology and environmental protection (depending on which region and district the particular subproject belongs to). 5. All subprojects underwent preliminary environmental screening by the PFIs strictly following the Environmental and Social Management System (ESMS) procedures. All 166 projects belonged to Category “C” in a social respect and did not need the development of a Resettlement Action Plan within the scope of the Project. 6. In an environmental respect, as the Project screening demonstrated, 68 out of 166 financed projects (40.9%) were assessed as the projects of Category "B", while 98 projects (59.1%) were evaluated as Category “C” projects. As the results of the project screening evidence, none of the projects belonged to Category “A”. 7. Table 1 gives the total number of the sub-projects financed within the scope of the Project and number of projects of different categories based on the screening results. Table 1: Summary of activities and project progress during 12 months PFIs Total number Environmental Environmental Environmental of financed Category „A“ Category „B“ Category „C“ projects Projects Projects Projects Qty % Qty % Qty % Qty % JSICB “Ipak Yuli” 126 75.9 - 0 53 77.91 73 74.5 PJSCB “DAVR 15 9.04 - 0 15 22.1 - 0 BANK” JSCB 15 9.04 - 0 - 0 15 15.3 Hamkorbank JSC “Uzbek 10 6.02 - 0 - 0 10 10.2 Leasing Total 166 100 - 0 68 100 98 100 8. Most of the 166 subprojects financed within the Small Business Financed Project, including 52 subprojects (31.2%) belong to production and construction and 51 subprojects (30.7%) belong to wholesale trade, which is one of the strategic directions of the economy of Uzbekistan. There is also a demand for financing of construction materials (14%) and food production (14%). Detailed information on the quantity of the total portfolio by sectors under Small Business Finance Project is given in Table 2 below. 1 The percentage ratio of the total number of projects of a concrete category is given. Table 2: Quantity of the total portfolio by sectors under Small Business Finance Project # PFI Number of Subprojects Total Textile Production of construction materials Food beverages and Road Construction Agriculture Chemical industry Printing publishing and Wholesale trade tourism Pharmaceutica industry l 1 JSICB “Ipak 9 43 10 5 3 - 2 51 - 3 126 Yuli” 2 PJSCB “DAVR 7 6 - - 2 - - - - - 15 BANK” 3 JSCB 2 5 8 15 “Hamkorbank” 4 JSC “Uzbek 1 1 3 1 4 10 Leasing International A.O.” Summary 16 52 15 5 14 3 3 51 - 7 166 % 9.2 31.2 9.0 3.0 8.3 1.7 1.7 30.7 - 4.2 100 1.3 Project organization and environmental management team, including organizational relationships with PFIs, sub-borrowers etc. 9. The Ministry of Finance (MOF) is the executing agency. The MOF is responsible for: (i) Executing subsidiary loan agreements with the PFIs; (ii) Monitoring PFIs’ performance and compliance with project agreements against design and monitoring framework; (DMF) targets; (iii) Ensuring timely disbursement of ADB loan funds to PFIs; (iv) Submitting project completion report to ADB within 6 months from project closing date. 10. Participating financial institutions (PFIs) - Hamkorbank, Ipak Yuli Bank, Davr Bank, and Uzbek Leasing International A.O., acting as implementing agencies (IA) to carry out the project in accordance with the loan and project agreements of the government of Uzbekistan. 11. In each PFI established a project implementation unit (PIU) under its existing