The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) REPORT NO.: RES32394 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF STRENGTHENING THE REGULATORY AND INSTITUTIONAL FRAMEWORK FOR MSME DEVE APPROVED ON JANUARY 24, 2014 TO GOVERNMENT OF JORDAN FINANCE, COMPETITIVENESS AND INNOVATION MIDDLE EAST AND NORTH AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Saroj Kumar Jha Senior Global Practice Director: Ceyla Pazarbasioglu-Dutz Practice Manager/Manager: Nabila Assaf Task Team Leader: Ghada Ahmed Waheed Ismail The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) ABBREVIATIONS AND ACRONYMS PDO Project Development Objective PMU Project Management Unit ADR Automated Dispute Resolution CBJ Central Bank of Jordan NBFI Non-Bank Financial Institution ERP Enterprise Resource Planning MFI Micro-Finance Institution TA Technical Assistance JLGC Jordan Loan Guarantee Corporation The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) BASIC DATA Product Information Project ID Financing Instrument P147875 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 24-Jan-2014 31-Aug-2018 Organizations Borrower Responsible Agency Government of Jordan Central Bank of Jordan Project Development Objective (PDO) Original PDO The project development objective (PDO) would be to enhance financial services and products and to strengthen financial protection mechanism for MSMEs, while enhancing governance. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-16588 09-Feb-2014 09-Feb-2014 04-Mar-2014 31-Aug-2018 3.00 1.72 1.28 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The project is progressing very well in achieving its development and intermediate development objectives. Disbursement stands at US$1.72 m (57.4%) as of March 5, 2018. The Project Management Unit (PMU) is responsive and working well. The project has witnessed consistent improvements in implementation of key activities. This included: a) Establishing a consumer protection department, developing Consumer Protection Strategy, hiring and training staff, developing an appropriate on-site and off-site monitoring framework suitable to the Jordanian context, respective systems and procedures; create reporting templates (such as consumer complaints reporting) and analytical tools, as well as effective enforcement mechanisms. Also setting an automated platform “Automated Dispute Resolution (ADR)” to address consumer complaints and reduces costs and time consumed in responding and processing consumer’s complaints in a timely manner. b) Technical assistance to Jordan Loan Guarantee Corporation (JLGC) to strengthen its core internal capabilities. This included: developing the overall risk management policy, tools and strategy which is currently being implemented, developing the marketing strategy and communication tools and hiring a new advisor for product and business development to launch new products and revamp the existing ones. c) Establishing the Microfinance Department at The Central Bank of Jordan (CBJ), and hiring staff including the Head of the department. d) Conducting a comprehensive Non-Bank Financial Institutions (NBFIs) market study to assist CBJ in adopting a more comprehensive approach of regulating and supervising NBFIs. e) Hiring a competent Insurance resident advisor to ensure transferring the regulatory function of Insurance to the CBJ hiring staff for the insurance unit. Technical Assistance (TA) covered: (i) Preparing the legal requirements needed to transfer Insurance under CBJ supervision. (ii) Developing the legal and regulatory framework. (iii) Developing a proposal for the setup, responsibilities and composition of the Insurance department, its cooperation with other units of CBJ and other stakeholders, as well as key requirements for the manager of the new department. (iv) Contracting number of audit firms and actuaries to examine all insurance companies. f) Reviewing the draft insurance law to ensure following international good practices by World Bank Global Team. The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) B. Rationale for Restructuring 2. There is a need to extend the closing date of the Project from its current closing date of August 31, 2018 to December 30, 2019. The objectives have been nearly fully met, the extension will provide the PMU adequate time to achieve the final objective of women's inclusion, and provide further support to strengthen implementation through additional institutional development and TA to deepen reforms initiated since the project’s inception especially following the decision to move Insurance under CBJ’s supervision. The project will provide TA to develop and implement a robust insurance supervisory through establishing insurance supervision department at CBJ, developing new Insurance law and regulations and establishing and transferring and upgrading IT systems related to the Insurance Supervision Department. II. DESCRIPTION OF PROPOSED CHANGES 3. The restructuring will ensure the completion of some deliverables under project components, namely: (a) Component I: Strengthening Credit Guarantees Schemes. Advisory services will be provided to JLGC to launch women focused products, and test the integration between the new archiving system and the newly developed Enterprise Resource Planning (ERP) system to ensure its internal compatibility. (b) Component II: Enhancing the Consumer Protection Mechanism: providing training and capacity building to the newly established Consumer Protection Unit staff; developing Dispute Resolution Law; and developing public awareness campaigns to promote financial literacy. While significant progress has been done under financial literacy focusing on the incorporation of the financial literacy programs within school curricula across Jordan, the coming period will focus on public awareness campaigns to promote financial literacy to empower women, job-seekers, and employees across Jordan. (c) Component III: Supporting the development of the institutional framework for microfinance and non-bank financial institutions (NBFIs) supervision. Continuation of TA to the newly established microfinance unit through developing inspection manuals, instructions and consumer protection instructions for Micro- Finance Institutions (MFIs), providing capacity building and training to microfinance unit staff and to microfinance auditors; providing TA to develop and implement a robust insurance supervisory through establishing insurance supervision department at CBJ, developing new Insurance law and regulations. 4. The PMU, in conjunction with the World Bank technical support, will place greater implementation focus to speed disbursements under components II and III as many activities were postponed until finalization of the institutional setup needed, including establishing the Microfinance and the Consumer protection departments and approving the setup, responsibilities and composition of the new departments. In addition, it is expected that technical assistance related to transferring the regulatory function of Insurance to the CBJ will accelerate implementation under the proposed expanded implementation period. The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Change in Implementation Schedule ✔ Change in Implementing Agency ✔ Change in Project's Development Objectives ✔ Change in Components and Cost ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Number of microfinance loans Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) Value 0.00 91222.00 100000.00 Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Number of SME loans guaranteed by JLGC Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 3000.00 8000.00 9000.00 Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Number of complaints resolved to the satisfaction of the consumer by the Consumer Protection Unit at CBJ within [30] days. Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 642.00 750.00 Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Intermediate Indicators IO_IND_TABLE Value of guarantees issued Unit of Measure: Amount(USD) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 49000000.00 85000000.00 69000000.00 Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Guaranteed loans by JLGC to women-owned SMEs Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 5.00 9.50 11.00 Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Consumer Protection Unit at CBJ fully staffed and operational Unit of Measure: Yes/No Indicator Type: Custom The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) Baseline Actual (Current) End Target Action Value No Yes Yes Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Completion of the necessary training programs for the staff in the Consumer Protection Unit Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 8.00 12.00 Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Number of public awareness campaigns and financial literacy programs Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 2.00 4.00 Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Microfinance Division at CBJ fully staffed and operational Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No Yes Yes Revised Date 31-Jan-2014 01-Feb-2018 30-Dec-2019 Insurance Division at CBJ fully staffed and operational Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No No Yes New Date 02-May-2018 30-Dec-2019 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Strengthening the Regulatory and Institutional Framework for MSME Deve (P147875) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-16588 Effective 31-Aug-2018 30-Dec-2019 30-Apr-2020