The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

REPORT NO.: RES32225 Public Disclosure Authorized

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF SOMALI CORE ECONOMIC INSTITUTIONS AND OPPORTUNITIES PROGRAM (SCORE) For Official Use Only APPROVED ON JANUARY 20, 2016 TO Public Disclosure Authorized MINISTRY OF FINANCE

FINANCE, COMPETITIVENESS AND INNOVATION

AFRICA Public Disclosure Authorized

Regional Vice President: Makhtar Diop Country Director: Bella Bird Senior Global Practice Director: Sebastian-A Molineus Practice Manager/Manager: Niraj Verma Task Team Leader: Thilasoni Benjamin Musuku, Fred Zake Public Disclosure Authorized The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

Note to Task Teams: The following sections are system generated and can only be edited online in the Portal.

BASIC DATA

Product Information

Project ID Financing Instrument P152241 Investment Project Financing

Original EA Category Current EA Category

For Official Use Only Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 20-Jan-2016 30-Apr-2019

Organizations

Borrower Responsible Agency Government of Ministry of Planning and Ministry of Finance Development,Federal Republic of Somalia Ministry of Finance

Project Development Objective (PDO) Original PDO The Project Development Objectives are to: (i) improve the enabling environment for private and financial sector development; and (ii) catalyze private investment and job creation.

OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed

TF-A1688 20-Jan-2016 15-Feb-2016 16-May-2016 30-Apr-2019 $3.30M $2.68M $0.62M TF-A1698 20-Jan-2016 15-Feb-2016 27-May-2016 30-Apr-2019 $1.50M $0.88M $0.62M TF-A1709 20-Jan-2016 15-Feb-2016 16-May-2016 30-Apr-2018 $9.20M $7.97M $1.23M TF-A1711 20-Jan-2016 15-Feb-2016 27-May-2016 30-Sep-2018 $4.60M $0.77M $3.83M The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

Policy Waiver(s)

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

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I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING

Introduction For Official Use Only 1. The SCORE Project is a US$28.50 million Investment Project Financing (IPF), whose Project Development Objectives (PDO) are to: (i) improve the enabling environment for private and financial sector development; and (ii) catalyze private investment and job creation. It has the following components: (i) Component 1: Strengthening Core Economic Institutions; (ii) Component 2: Expanding Economic Opportunities; (iii) Component 3: Program Management. Components one and two are recipient executed (RETF) while component three is bank executed on behalf of the recipient (BEBR).

2. SCORE covers both Federal Government of Somalia (FGS) including Puntland, and Somaliland. Consequently, the project has four Trust Funds: (a) TF0A1688: Recipient Executed Trust Fund (RETF) for FGS and Puntland; (b)TF0A1709: Bank Executed on Behalf of the Recipient (BEBR) for FGS; (c) TF0A1698: Recipient Executed Trust Fund (RETF) for Somaliland; (d) TF0A01711: Bank Executed on Behalf of the Recipient (BEBR) for Somaliland

3. Project performance is currently rated Moderately Satisfactory (MS) for both Implementation Progress (IP) and progress towards achievement of PDO. This rating arises because the underlying implementation problems that delayed disbursements under the main instrument used by the project to achieve the PDO “to catalyze private investment and job creation in key productive and service sectors” - the Somali Business Catalytic Fund (SBCF) - have been satisfactorily resolved. The resolution was achieved because the SME Advisory Panels (SAPs), the government- led grant review panels, become operational and their terms of reference properly understood, particularly in FGS and Puntland. Consequently, SBCF Round One disbursements were launched in November 2017.

4. The mid-term review (MTR) for the SCORE Program was concluded in February 2018. The results achieved at MTR are attached in Annex 1 (Results Achieved at MTR). MTR findings are that PDO remains broadly relevant and achievement of project outcomes achievable. Proposed changes at MTR include alignment of project components to reflect an updated country and sector context, and long inception phase that has resulted in a condensed period remaining for implementation and delivery of results to guarantee efficient delivery and systemic impact of interventions.

5. Accordingly, Component one will focus on consolidating efforts aimed at laying the foundations for long-term financial sector development to enable market-based financial intermediation; Component two will target improved risk appetite and capacity of participating financial institutions to undertake investments and innovation thereby supporting enterprise growth, jobs and livelihoods on a sustainable basis using market tools, and; Component three will extend coverage of the PIU in Mogadishu to strengthen coordination and maintenance of robust relations across FGS member states. The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

Rational for Restructuring

6. This restructuring paper seeks to extend the closing date of: i) TF0A1709 (BEBR) to April 30, 2019 from April 30, 2018; and ii) TF0A1688 (RETF) to June 30, 2020 from April 30, 2019. The Project was approved on January 26, 2016. Thus, with this extension, the Project will be 4.5 years old at the time of the new closing date.

7. All the other changes to the project discussed and agreed with the Government, stakeholders and Bank management will covered in a separate restructuring paper. This will include revisions to the project indicators and targets so as to align them with the new closing date alongside the reallocation of resources across components, in addition to other changes.

8. The request for the closing date extension has been requested by the Federal Government of Somalia, the Recipient, in their letter dated April 19, 2018. Even though the Recipient’s request to restructure covers a broad range of areas For Official Use Only to reflect an updated country and sector context to guarantee efficient delivery and systemic impact of interventions, this paper only addressed the need for extending the closing date for TF0A1709 (BEBR) which closes soon on April 30, 2018 and TF0A1688 (RETF) which covers continuing activities under components one and three.

9. The Task Team confirms that the requirements of IPF Bank Policy/Bank Directives OP/BP10.00 regarding closing dates have been met, specifically: (i) the project objectives continue to be achievable; (ii) the performance of the Borrower remains satisfactory; (iii) the Bank and the borrower agree on actions that will be undertaken by the borrower to complete the Project; and (iv) there are no outstanding audits, or IFRs for the Grant.

II. DESCRIPTION OF PROPOSED CHANGES

10. An additional 12 months of implementation support is needed under TF0A1709 to end on April 30, 2019 from April 30, 2018. This closing date extension compensates for the long inception phase experienced by the matching grant program under the SCORE Program, called Somali Business Catalytic Fund (SBCF). The long inception phased delayed commencement of grant disbursement to beneficiaries. Consequently, implementation support for SBCF round one grants, including monitoring of environmental and social safeguards compliance, is expected to end in December 2018 and not April 2018 as originally envisaged. It is then that the US$7.7 million awarded SBCF round—one grants are expected to be fully disbursed to beneficiaries.

11. Parallel to providing implementation support to round one grantees under SBCF, business development services activities under the SME Facility (SMEF) will continue to March 30, 2019 focusing on strengthening lending operations of participating financial institutions, and assessing the feasibility of a range of financing instrument to increase the risk appetite for investments by financial institutions, especially through mobile money and micro-finance channels for women and women entrepreneurs. The focus will be on improving financial institution risk appetite to drive innovation, and access to finance for individuals and SMEs. Accordingly, SBCF and SMEF will be phased out by December 2018 and March 2019 respectively thereby necessitating the extension of the closing date for TF0A1709 to April 30, 2019.

12. The extension of the closing date for TF0A1688 (RETF) by 14 months to June 30, 2020 from April 30, 2019 allows for the time needed to initiate and complete the agreed changes with the recipient and other stakeholders under The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

components one and three relating to laying the foundations for strengthening market-based financial intermediation and capability of financial institutions as well as PIU project management support.

13. Given that the FGS and Puntland activities will be consolidated and coordinated centrally from FGS, maintenance of the Puntland Designated and Project Accounts under TF 0A1688 is no-longer warranted. The authorities will file withdrawal application together with all the supporting expenditure with a request to the Bank to document all the incurred eligible expenditures. Puntland will transfer all the cash balances in Puntland Project Account to the Designated Account in CBS and immediately close the Bank account. Subsequently FGS will close the DA at CBS and transfer the bank balances to the Bank Grant Account.

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For Official Use Only III. SUMMARY OF CHANGES

Changed Not Changed Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Change in Implementation Schedule ✔ The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔

IV. DETAILED CHANGE(S)

OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK

For Official Use Only Project Development Objective Indicators PDO_IND_TABLE Number of recommended laws/regulations/amendments/codes enacted or policies adopted Unit of Measure: Number Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 15.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020

Number of recommended laws/regulations/amendments/codes enacted in Somaliland Unit of Measure: Number Indicator Type: Custom Breakdown

Baseline Actual (Current) End Target Action Value 0.00 1.00 9.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Private Capital Mobilized Unit of Measure: Amount(USD) Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 643000.00 10000000.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Total number of direct jobs created in enterprises supported by the project Unit of Measure: Number Indicator Type: Custom The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

Baseline Actual (Current) End Target Action Value 0.00 20.00 2000.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020

Total number of direct jobs for women Unit of Measure: Number Indicator Type: Custom Breakdown

Baseline Actual (Current) End Target Action Value 0.00 20.00 650.00 Revised

For Official Use Only Date 15-Apr-2016 31-Jan-2018 30-Jun-2020

Total number of direct jobs for youth Unit of Measure: Number Indicator Type: Custom Breakdown

Baseline Actual (Current) End Target Action Value 0.00 20.00 800.00 Revised Date 15-Apr-2016 31-Jan-2018 30-Jun-2020

Intermediate Indicators

IO_IND_TABLE Total annual number of actionable on-site and off-site examination reports issued Unit of Measure: Number Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 0.00 8.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Total annual number of actionable on-site and off-site examination reports issued by the Bank of Somaliland(Number - Sub-Type: Breakdown) Unit of Measure: Number Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 0.00 4.00 Revised The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Annual number of diagnostic reports on legal, regulatory, institutional and infrastructure setting aimed at supporting orderly financial sector development Unit of Measure: Number Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 3.00 12.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020

Annual number of diagnostic reports on legal, regulatory, institutional and infrastructure setting aimed at For Official Use Only supporting orderly financial sector development issued by Bank of Somaliland Unit of Measure: Number Indicator Type: Custom Breakdown

Baseline Actual (Current) End Target Action Value 0.00 3.00 6.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Number of new business licenses issued under the Licensing Act during the Project Unit of Measure: Number Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 0.00 400.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020

Number of new business licenses issued under the Licensing Act during the Project in Somaliland Unit of Measure: Number Indicator Type: Custom Breakdown

Baseline Actual (Current) End Target Action Value 0.00 0.00 200.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Implementation of a Management Information System in Mogadishu Port Unit of Measure: Yes/No Indicator Type: Custom

Baseline Actual (Current) End Target Action The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

Value No No Yes Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Total annual increase in revenue of firms supported by SBCF and SMEF that received training and advisory services Unit of Measure: Number Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 0.00 25.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Number of individuals receiving subsidized BDS or advice financed by the SMEF For Official Use Only Unit of Measure: Number Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 497.00 1000.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Number of individuals receiving subsidized TVET or other forms of training financed by the SMEF Unit of Measure: Number Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 565.00 1500.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020 Citizen engagement: Proportion of STEP beneficiaries who consider that design and/or implementation of project subjected to consultation is responsive to their view Unit of Measure: Percentage Indicator Type: Custom

Baseline Actual (Current) End Target Action Value 0.00 0.00 60.00 Revised

Date 15-Apr-2016 31-Jan-2018 30-Jun-2020

OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

LOAN CLOSING DATE(S)

Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A1688 Effective 30-Apr-2019 30-Jun-2020 30-Oct-2020 TF-A1698 Effective 30-Apr-2019 TF-A1709 Effective 30-Apr-2018 30-Apr-2019 30-Jun-2018 TF-A1711 Effective 30-Sept-2018

For Official Use Only

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ANNEX I: RESULTS ACHIEVED AT MTR

Component 1 - Strengthening Core Economic Institutions

1a. Strengthening Supervision and Regulation (Original component budget: US$4 million; available balance: US$1.6 million) The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

Deliverables to date (May 2016 – Mar 2018):

o In FGS, six diagnostics relating to: ports; legal and regulatory frameworks, demand/supply side of the financial sector, and payment systems. This also included drafting of the mobile money regulations under the CBS Act and a roadmap for setting up National Payment Systems (NPS) as a collaborative initiative of the CBS and Somali financial institutions; o In Somaliland, supported Central Bank of Somaliland (CBSL) undertake legal review of the Central Bank of Somaliland Act, Remittances Bill and completed drafting of Central Bank Bill, Islamic Finance Bill, AML/CFT Bill and Payment Systems Bill; o In FGS, implementation of the core-banking and accounting system at CBS; and o In FGS, CBS organizational restructuring, capacity development and onboarding of expertise in the areas of banking operations, accounting, ICT.

For Official Use Only Post-MTR deliverables (Apr 2018 – June 2020): Additional budget post-MTR: $4 million.

o In FGS, CBS organizational restructuring to cover central bank regional branches across the Somali peninsula, capacity development and onboarding of expertise in the areas of banking operations, accounting and ICT; o Extension of core-banking and accounting system capability to CBS regional branches in Jubbaland and Puntland; o In Somaliland, drafting regulations relating to Islamic Financial Institutions Law, Central Bank Act, AML and Payment Systems Act and financial institutions examination manuals o In FGS, drafting amendments to the Financial Institutions Law, National Payment Systems Bill, Insurance Bill, Movable Collateral Registry Bill, and Credit Registry Bill. o Investments in the National Payment Systems (ATS and National Switch) o Investments in credit and movable collateral registries

1b. Improving the Investment Climate (Original component budget: US$1.5 million; available bal.: US$0)

Deliverables to date (May 2016 – Mar 2018):

o In Somaliland, Company Act drafted and enacted o In FGS, Company Act drafted and approved by Cabinet o ICT assessments for business registration OSS paving way for the operationalization o Business registrar’s office reorganization

Post-MTR deliverables (Apr – Jun 2018): Additional budget post-MTR: US$0

o In FGS, enactment of the Company Act o In FGS and Somaliland, operationalization of OSS o Phase out of component by June 2018 The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

1c. Port Sector Development (Original budget: US$2.5 million; available bal.: US$1.6 million, reallocated to 1a)

Deliverables to date (May 2016 – Mar 2018):

o Diagnostics relating to Port Sector Review, Master Planning and Assessment of private sector participation in the sector. Masterplan developed for Mogadishu, and ports. o Technical and analytical TA to support renegotiation of the Mogadishu port concession and institutional strengthening/capacity building for the FGS Ports Authority

Post MTR deliverables (Apr 2018 – Sep 2018). Additional budget post-MTR: US$0.

o Technical and analytical TA to support renegotiation of the Mogadishu port concession and institutional For Official Use Only strengthening/capacity building for the FGS Ports Authority o Phase out of the component by September 2018.

Component 2 – Expanding Economic Opportunities

2a. Somali Business Catalytic Fund (SBCF) (Original budget: US$12.5 million; available bal.: US$2.3 million, partially reallocated to component 1a (US$500k) & component 3 (US$300k))

Deliverables to date (May 2016 – Mar 2018):

o Round One call for proposals: 101 firms selected and US$7.7 million committed of the original US$10 million SBCF fund. Agriculture, manufacturing and fisheries are the three largest sectors to receive grants. o Private capital mobilized is US$ 1.2 million (i.e. US$643k from grantees and US$528k from financial institutions) o Expected direct jobs created is expected to between 3,000 – 5,000 against target of 2,000 o Formalization and professionalization of more than 1800 firms who acquired necessary licenses, paid taxes and opened bank accounts to qualify for SBCF grant.

Post-MTR deliverables (Apr 2018 – Dec 2018). Additional budget: US$300,000

o Implementation support for round one grants, including monitoring of environmental and social safeguards compliance until the US$7.7 million awarded grants are fully disbursed o Feasibility assessments for a broad range of financing instruments to increase risk-appetite by financial intermediaries to increase financial access for individuals and SMEs and support jobs and livelihoods o Phase out SBCF by December 2018.

2b. SME Facility (SMEF) (Original budget: US$5.5 million; available bal.:US$0)

Deliverables to date (May 2016 – Mar 2018): The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

o BDS market catalyzed. 75 BDS providers received specialized training comprising 366 individual technicians and entrepreneurs; o TA support to SBCF applicants and grantees. 213 SBCF applicants and 60 grantees supported; o 156 SMEs supported by SMEF under one-on-one consultations and workshop training; o 124 girls trained in Somaliland through the STEP pilot and 20 have job placements so far.

Post-MTR deliverables (Mar 2018 – Mar 2019). Additional budget: $500k

o Continuous TA support to 60 SBCF grantees firms; o Continuous TA support to STEP; o MFI training and capability strengthening to drive market-based intermediation to improve access to finance for individuals and SMEs to support jobs and livelihoods, particularly for women and For Official Use Only women-owned enterprises, and; o Phase out of SMEF by March 2019.

Component 3 – Project Management (Original budget: US$2 million; available bal.: US $0)

Deliverables to date (May 2016 – Mar 2018):

o PIU structures established and staffed in Mogadishu, and Garowe.

Post-MTR deliverables (Mar 2018 – Jun 2020). Additional budget: $300k

o Phase out PIUs in Garowe and Hargesia by March and December 2018, respectively o Mogadishu PIU to cover FGS member states including M&E The World Bank Somali Core Economic Institutions and Opportunities Program (SCORE) (P152241)

For Official Use Only