OFFICIAL DOCUMENTS LOAN NUMBER 8958-KE Loan Agreement (Affordable Housing Finance Project) between REPUBLIC OF KENYA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT LOAN NUMBER 8958-KE LOAN AGREEMENT AGREEMENT dated as of the Signature Date between the REPUBLIC OF KENYA ("Borrower") and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ("Bank"). The Borrower and the Bank hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement. ARTICLE II- LOAN 2.01. The Bank agrees to lend to the Borrower the amount of two hundred nineteen million Euro, (EUR 219,000,000), as such amount may be converted from time to time through a Currency Conversion ("Loan"), to assist in financing the project described in Schedule 1 to this Agreement ("Project"). 2.02. The Borrower may withdraw the proceeds of the Loan in accordance with Section III of Schedule 2 to this Agreement. 2.03. The Front-end Fee is one quarter of one percent (0.25%) of the Loan amount. 2.04. The Commitment Charge is one quarter of one percent (0.25%) per annum on the Unwithdrawn Loan Balance. 2.05. The interest rate is the Reference Rate plus the Fixed Spread or such rate as may apply following a Conversion; subject to Section 3.02(e) of the General Conditions. 2.06. The Borrower elects to apply the Automatic Rate Fixing Conversion to the Loan. Accordingly, without limitation upon the provisions of Article IV of the General Conditions and unless otherwise notified by the Borrower to the Bank in accordance with the provisions of the Conversion Guidelines, the interest rate basis applicable to the aggregate principal amount of the Loan withdrawn during each Interest Period shall be converted from the initial Variable Rate to a Fixed Rate for the full maturity of such amount in accordance with the provisions of Article IV of the General Conditions and of the Conversion Guidelines. -2- 2.06. The Payment Dates are January 15 and July 15 in each year. 2.07. The principal amount of the Loan shall be repaid in accordance with Schedule 6 to this Agreement. ARTICLE III - PROJECT 3.01. The Borrower declares its commitment to the objectives of the Project. To this end, the Borrower shall carry out, jointly through the National Treasury and the MLPP, Parts 1(a) and 2 of the Project and cause Part 1(b) of the Project to be carried out by the Project Implementing Entity in accordance with the provisions of Article V of the General Conditions, Schedule 2 to this Agreement and the Project Agreement. ARTICLE IV - REMEDIES OF THE BANK 4.01. The Additional Events of Suspension consist of the following, namely that: (a) the Project Implementing Entity's Legislation has been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of the Project Implementing Entity to perform any of its obligations under the Project Agreement; and (b) any action has been taken for the dissolution, disestablishment or suspension of operation (including cancellation of license to operate as a Financial Institution) of the Project Implementing Entity. ARTICLE V - EFFECTIVENESS; TERMINATION 5.01 The Additional Condition of Effectiveness consists of the following, namely that, the Borrower shall have adopted the Project Operations Manual and the Project Implementing Entity shall have adopted the KMRC Operations Manual and the Project Operations Manual, in form and substance satisfactory to the Bank. 5.02 The Effectiveness Deadline is the date ninety (90) days after the Signature Date. 5.03 For purposes of Section 9.05 (b) of the General Conditions, the date on which the obligations of the Borrower under this Agreement (other than those providing for payment obligations) shall terminate is twenty (20) years after the Signature Date. -3- ARTICLE VI- REPRESENTATIVE; ADDRESSES 6.01. The Borrower's Representative is the Cabinet Secretary for National Treasury and Planning. 6.02. For purposes of Section 10.01 of the General Conditions: (a) the Borrower's address is: The National Treasury and Planning Treasury Building P.0 Box 30007-00100 Nairobi, Kenya (b) the Borrower's Electronic Address is: Facsimile: 254 20 330426; 254 20 218475 6.03. For purposes of Section 10.01 of the General Conditions: (a) the Bank's address is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Bank's Electronic Address is: Telex: Facsimile: 248423(MCI) or 1-202-477-6391 64145(MCI) -4- AGREED as of the Signature Date. REPUBLIC OF KENYA By Authorized Representative Name: Title:_ Date: 5 Dic-kber 2011 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Authortepresentative Name: Q f\-- ~ OCW~l Title: 1\ 1 Date: FC-fl 1 t0 -5- SCHEDULE 1 Project Description The objective of the Project is to expand access to affordable housing finance to targeted beneficiaries. The Project consists of the following parts: Part 1: Support to the Kenya Mortgage Refinance Company (a) Supporting the establishment, capitalization; and operationalization of the Kenya Mortgage Refinance Company ("KMRC" or "Project Implementing Entity"). (b) Provision of financing by the Borrower to KMRC to be utilized as a line of credit for providing the Mortgage Refinancing to the Eligible Participating Financial Institutions ("PFI"). Part 2: Technical Assistance Carrying out a program of activities designed to: (i) support the MLPP improve property registration; (ii) support the implementation of key legislations and regulations that have been enacted to fast track effective property registration; (iii) support the MLPP in addressing structural constraints in the existing land management system; (iv) provide capacity building to the staff of the registries and MLPP on computerization; (v) support the operationalization of KMRC, build capacity of KMRC, its supervisors and Eligible Participating Financial Institutions; (vi) support the development of an effective communication strategy by KMRC; and (vii) augment project management capacity. -6- SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements National Treasury The Borrower shall designate, at all times during the implementation of the Project, the National Treasury ("NT") to be responsible for implementation of Part 1(a) of the Project, and Part 2 of the Project jointly with MLPP. To this end, the Borrower shall ensure that the personnel and resources required to enable the NT to perform its functions under the Project are provided, such personnel to include a Project coordinator, a Project accountant and a procurement officer experienced in Bank procedures, all with terms of reference, qualifications and experience acceptable to the Bank. 1. Not later than twelve months after the Effective Date, the Borrower shall have recruited the consultants for purposes of carrying out the activities under Part 2 of the Project, in accordance with the Procurement Regulations, and under terms of reference, qualifications and experience satisfactory to the Bank. Ministry of Lands and Physical Planning 2. To be responsible for implementation of Part 2 of the Project, jointly with the National Treasury, MLPP will provide the required technical support and contract management and supervision. To this end, MLPP has appointed a senior officer to ensure ownership of the activities MLPP is responsible for under Part 2 of the Project. B. Project Operations Manuals 1. The Borrower shall carry out Parts 1(a) and (2) of the Project in accordance with the Project Operations Manual and shall cause KMRC to carry out Part 1(b) of the Project in accordance with the KMRC Operations Manual and the Project Operations Manual (both referred to as "Project Operations Manuals"). 2. The Borrower shall ensure that the Project Operations Manuals are not amended, suspended, repealed or abrogated without the prior written approval of the Bank. 3. In the event of any conflict between the provisions of the Project Operations Manuals and this Agreement, the provisions of this Agreement shall prevail. -7- C. Subsidiary Agreement 1. To facilitate the carrying out of Part 1(b) of the Project, the Borrower shall make the proceeds of the Loan allocated from time to time to Category I of the table set forth in Section III of this Schedule, available to the Project Implementing Entity, under a Subsidiary Agreement between the Borrower and the Project Implementing Entity under terms and conditions satisfactory to the Bank, which shall include, inter alia, the following: (a) the principal amount of the Loan made available under the Subsidiary Agreement ("Subsidiary Loan") shall be: (i) denominated and repayable in Kenya Shillings; (ii) charged interest on the principal amount withdrawn and outstanding from time to time at a rate not less than the rate determined under section 2.05of this Agreement; and (iii) under financial terms and conditions, including repayment and grace periods, acceptable to the Bank; (b) the obligation of the Project Implementing Entity to carry out its Respective Part of the Project with due diligence and efficiency, in conformity with appropriate administrative, financial and technical practices and in accordance with the Project Operations Manuals, and provide, or cause to be provided, promptly as needed, the facilities, services and other resources required for the Project; (c) the obligation of the Project Implementing Entity to comply with record keeping, auditing and reporting requirements set forth in this Agreement (operations, resources and expenditure) for its Respective Part of the Project; (e) the obligation of the Project Implementing Entity, at the request of the Borrower or the Bank, to exchange views with the Borrower and the Bank with regard to the progress of the Project and the performance of its obligations under the Subsidiary Agreement; (f) the obligation of the Project Implementing Entity to promptly inform the Borrower and the Bank of any condition which interferes or threatens to interfere with the progress of Part 1(b) of the Project, or the performance of its obligations under the Subsidiary Agreement; and (g) the Borrower shall obtain rights adequate to protect its interests and those of the Project Implementing Entity and the Bank, including the right to suspend or terminate the right of the Project Implementing Entity to use the proceeds of the Subsidiary Loan, or obtain a refund of all or any part of the amount of the Subsidiary Loan then withdrawn, upon the Project -8- Implementing Entity's material failure to perform any of its obligations under the Subsidiary Agreement. 2. The Borrower shall exercise its rights under the Subsidiary Agreement in such manner as to protect its own interests and the interests of the Bank in order to accomplish the purposes of the Loan. The Borrower shall not assign, amend, abrogate or waive the Subsidiary Agreement without the prior written approval of the Bank. 3. In the event of any conflict between the provisions of the Subsidiary Agreement and the provisions of this Agreement, the provisions of this Agreement shall prevail. D. Environmental and Social Risk Management for Part 1(b) of the Project 1. For purposes of managing the environmental and social risks and impacts associated with the implementation of Part 1(b) of the Project, the Borrower shall ensure, and cause the Project Implementing Entity to ensure, that: (a) Loan proceeds are provided only to Eligible Participating Financial Institutions for carrying out Mortgage Refinancing that meet the criteria detailed in the KMRC Operations Manual and that are not utilized for refinancing Eligible Mortgage Loans that support Excluded Activities as set out in Schedule 5 of this Agreement; (b) all Eligible Mortgage Loans refinanced under Part 1(b) of the Project by Eligible Participating Financial Institutions meet the Applicable Environmental and Social Requirements through adequate implementation of the ESMS; (c) all Eligible Participating Financial Institutions fulfill their respective obligations with regard to carrying out environmental and social due diligence and monitoring of Eligible Mortgage Loans, in accordance with the ESMS; and (d) all Eligible Participating Financial Institutions manage the working conditions of their workforce in accordance with relevant aspects of the World Bank Performance Standard 2 on Labor and Working Conditions. 2. For purposes of carrying out Part 1(b) of the Project, the Borrower shall cause the Project Implementing Entity to ensure that Eligible Participating Financial Institutions notify the Project Implementing Entity (which in turn shall promptly notify the Bank), of any social, labor, health and safety, security or environmental incident, accident or circumstance which may have any material impact on the compliance of the Applicable Environmental and Social Requirements. -9- 3. The Borrower shall cause the Project Implementing Entity to regularly collect and compile, and submit to the Bank, as part of the Project Reports, information on the status of compliance with environmental and social risk management requirements set forth in this Agreement, providing details on measures taken, conditions, if any, which interfere or threaten to interfere with the implementation of the Applicable Environmental and Social Requirements and the ESMS; and remedial measures taken or required to be taken to address such conditions. The Borrower shall cause the Project Implementing Entity to furnish to the Bank a consolidated annual environmental and social performance report within forty-five (45) days after the end of each calendar year. 4. Prior to the carrying out of any activities under Part 1(b) of the Project, the Borrower shall cause the Project Implementing Entity to: (i) adopt and publish an environmental and social risk management policy acceptable to the Bank; and (ii) establish, and thereafter maintain through the period of implementation of the Project, an easily accessible grievance redress mechanism acceptable to the Bank, to address feedback and grievances relating to the Project. 5. Prior to the carrying out of any activities under Part 1(b) of the Project, the Borrower shall cause the Project Implementing Entity to submit an acceptable capacity building plan on Applicable Environmental and Social Requirements for its staff and Participating Financial Institutions, and to designate an Environmental and Social Coordinator. E. Participating Agreements 1 . In order to implement Part 1(b) of the Project, the Borrower shall ensure that the Project Implementing Entity shall: (a) enter into Participating Agreements with Eligible Participating Financial Institutions ("Participating Agreements"), as the case may be, on terms and conditions acceptable to the Bank, which shall include terms and conditions set forth in Schedule 4 to this Agreement to make the proceeds of the Subsidiary Loan available to said Eligible Participating Financial Institutions; and (b) except as the Bank shall otherwise agree, not assign, amend, abrogate or waive any such Participating Agreements. 2. The Borrower shall take all measures in its powers to ensure that the Project Implementing Entity shall exercise its rights under the Participating Agreements in such manner as to protect its interests and the interests of the Bank in order to accomplish the purposes of the Loan. The Project Implementing Entity shall not assign, amend, abrogate or waive the Participating Agreements without the prior written approval of the Bank. -10- Section II. Project Monitoring Reporting and Evaluation The Borrower shall furnish to the Bank each Project Report not later than forty- five (45) days after the end of each calendar semester, covering the calendar semester. Section III. Withdrawal of Loan Proceeds A. General Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Borrower may withdraw the proceeds of the Loan to finance Eligible Expenditures in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table: Amount of the Loan Percentage of Allocated Expenditures to be (expressed in Euro) financed (inclusive of Taxes) (1) Mortgage Refinancing under 166,400,000 100% Part 1(b) of the Project (2) Goods, non-consulting 8,800,000 100% services, consulting services, Training and Incremental Operating Costs for Part 2 of the Project (3) Eligible Expenditure 43,800,000 100% of each DLI Program under Part 1(a) of Amount set out in the Project Schedule 3 (or such lesser percentage as represents the total Eligible Expenditures incurred by the Borrower under the Eligible Expenditure Program as of the date of withdrawal). TOTAL AMOUNT 219,000,000 -ll- B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A above, no withdrawal shall be made: (a) for payments made prior to the Signature Date, except that withdrawals up to an aggregate amount not to exceed Eurol5,000,000 may be made for payments made prior to this date but on or after January 1, 2019, for Eligible Expenditures under Categories (2) and (3); (b) under Category (1), until the Borrower has provided evidence satisfactory to the Bank that: (i) the Project Implementing Entity has been established, made operational, and capitalized in a manner satisfactory to the Bank, and the relevant licenses, permits, and approvals required for its operation have been obtained; (ii) the Subsidiary Agreement has been entered into in accordance with the provisions of Section I.C. of Schedule 2 to this Agreement, and the Bank has received a legal opinion(s) or certificate(s) satisfactory to the Bank confirming on behalf of the Project Implementing Entity and the Borrower that the Subsidiary Agreement to which each is a party has been duly authorized by, and executed and delivered on behalf of, the Project Implementing Entity and the Borrower and is legally binding upon such party in accordance with its terms; and (c) under Category (3) for Eligible Expenditures Program unless and until the Borrower has furnished evidence satisfactory to the Bank that: (i) the Borrower and the Project Implementing Entity have executed the Subsidiary Agreement, in accordance with Section I.C. of Schedule 2 of this Agreement; (ii) the Project Implementing Entity has been established, made operational, and capitalized in a manner satisfactory to the Bank, and the relevant licenses, permits, and approvals required for its operation have been obtained; (iii) payments for Eligible Expenditures Program have been made in accordance, and in compliance, with the procedures set forth in the Verification Protocol and in the Borrower's applicable laws and regulations; and (iv) the DLIs set forth in Schedule 3 for which payment is requested have been met and verified in accordance with the Verification Protocol. 2. Notwithstanding the provisions of paragraph I of this Part B, if the Bank shall determine based on the evidence provided by the Borrower under paragraph 1(c) of this Part B, that any DLIs have not been achieved or have been partially achieved by the end of the year during which such DLIs were scheduled to be met in -12- accordance with Schedule 3, the Bank may in its sole discretion, by notice to the Borrower: (a) withhold in whole or in part the amount of the Loan allocated to such DLls; (b) disburse in whole or in part the amount of the Loan allocated to such DLIs at any later time when such DLIs are met; and/or (c) reallocate in whole or in part any amount of the Loan allocated to such DLIs to other Categories. 3. Notwithstanding the foregoing, if the Bank determines, at any time, that any portion of the amounts disbursed by the Borrower under Category (3) was made for reimbursement of expenditures that are not eligible under the Eligible Expenditures Program or not in compliance with the provisions of paragraphs 1(b) and 2 of this Part B, the Borrower shall promptly refund any such amount to the Bank as the Bank shall specify by notice to the Borrower. 4. The Closing Date is June 30, 2024. -13- SCHEDULE 3 Disbursement Linked Indicators for Category (3) of the Withdrawal Table DLIs Description DLI Amount Indicative Target Date DLI 1: The Project The Borrower has established, operationalized Euro 8,800,000 By June 2019 Implementing Entity is and capitalized the Project Implementing Entity legally established, has and the Project Implementing Entity has the required regulatory received the relevant licenses, permits, and capital and approvals to approvals required to start operations. start operations DLI 2: The Borrower The Borrower has executed a Subordinated Euro 8,800,000 By February 2020 has provided Tier 2 Debt Agreement with the Project Implementing Capital to the Project Entity pursuant to which EUR 8,800,000 Implementing Entity equivalent has been paid to the Project Implementing Entity. DLI 3: The Borrower Upon completion of a bond issuance by KMRC, Euro 26,200,000 By February 2022 has provided additional the Borrower has executed an updated Tier 2 Capital to the Subordinated Debt Agreement with the Project Project Implementing Implementing Entity pursuant to which EUR Entity 26,200,000 equivalent has been paid to the Project Implementing Entity. -14- SCHEDULE 4 Principal Terms and Conditions of Participating Agreements The provisions of this Annex shall apply for the purposes of the implementation of Project Implementing Entity's Respective Part of the Project and in accordance with Section I.E. of Schedule 2 to this Agreement. 1 . The principal amount to be re-lent out of the proceeds of the Subsidiary Loan to an Eligible Participating Financial Institution under a Participating Agreement shall be: (a) denominated and repayable in Kenya Shillings; and (b) charged interest on the principal amount withdrawn and outstanding from time to time at a rate reasonable to cover the cost of borrowing of the Borrower. 2. Each Participating Agreement shall contain a requirement that the Proceeds of the Subsidiary Loan shall: (a) be used only to refinance Eligible Mortgage Loans, made by the Eligible Participating Financial Institutions, as the case may be, and for no other purpose; and (b) not be utilized for refinancing Eligible Mortgage Loans that finance Excluded Activities as set out in Schedule 5 of this Agreement. 3. Each Participating Agreement shall contain provisions pursuant to which the Project Implementing Entity has the right to: (a) suspend or terminate the right of an Eligible Participating Financial Institution, as the case may be, to use the proceeds of the Subsidiary Loan, declare it to be immediately due and payable, or obtain a refund of all or any part of the amount of the Subsidiary Loan then withdrawn, upon the Eligible Participating Financial Institution's failure to perform any of its obligations under a Participating Agreement; and (b) require each Eligible Participating Financial Institution, as the case may be to: (i) carry out its activities under Part 1(b) of the Project with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices satisfactory to the Bank, including in accordance with the provisions of the World Bank Performance Standards, and the provisions of the Anti-Corruption Guidelines applicable to recipients of Subsidiary Loan proceeds other than the Borrower; (ii) provide, promptly as needed, the resources required for achievement of the objectives of the Project; -15- (iii) maintain policies and procedures adequate to enable it to monitor and evaluate, in accordance with indicators acceptable to the Bank, the refinancing of Eligible Mortgage Loans and the achievement of the Project objectives; (iv) provide adequate financial and technical information to the Project Implementing Entity to justify that only Eligible Mortgage Loans have been refinanced out of the proceeds of the Subsidiary Loan; (v) enable the Borrower, the Bank and the Project Implementing Entity to inspect the Eligible Mortgage Loans, its operation and any relevant records and documents; (vi) not assign, amend, abrogate or waive any of its agreements providing for Eligible Mortgage Loans, or any provision thereof, without prior approval of the Project Implementing Entity; and (vii) (A) exchange views with, and furnish all such information to the Project Implementing Entity and the Borrower, as may be, reasonably requested by the Bank, the Borrower or the Project Implementing Entity, with regard to the progress of its activities under Part 1(b) of the Project, the performance of its obligations under its respective Participating Agreement, and other matters relating to the purposes of Part 1(b) of the Project; and (B) promptly inform the Bank, the Borrower and the Project Implementing Entity of any condition which interferes or threatens to interfere with the progress of its activities under its respective Participating Agreement. -16- SCHEDULE 5 Excluded Activities A. List of Excluded Activities 1. Real estate construction deemed illegal or non-compliant according to applicable national and local laws and regulations.' 2. Properties or land associated with illegal forced evictions of previous owners or occupants. 3. Properties built on land from which government agencies or builders have removed/ involuntarily resettled local communities, including squatters or encroachers, without proper compensation. 4. Properties involving outstanding land disputes. 5. Properties built in locations and/ or in a manner that involves significant degradation or conversion of critical habitats' and/or legally protected areas.' 6. Properties built in locations and/ or in a manner that involves significant adverse impacts on critical cultural heritage.67 B. Footnotes on Excluded Activities 1. Examples include unauthorized construction; housing construction in zones not designated as residential; encroachment on public/ government land or private land etc. 2. Permanent or temporary removal against their will of individuals, families and/or communities from the homes and/or land which they occupy, without the provision of, and access to, appropriate forms of legal or other protection. Prohibition on forced evictions does not, however, apply to evictions carried out by force in accordance with national law and is conducted in a manner consistent with basic principles of due process, including provision of adequate advance notice, meaningful opportunities to lodge grievances and appeals, and avoidance of the use of unnecessary, disproportionate or excessive force. These criteria will apply where land associated with such evictions was subsequently used for construction of housing developments in which Eligible Participating Financial Institutions are seeking to originate mortgages 3. Resettlement activities should follow the process through which adverse social and economic impacts are minimized through: (a) providing compensation for loss of assets at replacement cost defined as the market value of the assets plus transaction costs and (b) ensuring that resettlement activities are implemented with appropriate -17- disclosure of information, consultation, and the informed participation of those affected. These criteria will apply where land associated with such resettlement/ displacement was subsequently used for construction of housing developments in which Eligible Participating Financial Institutions are seeking to originate mortgages. 4. Critical habitat is a subset of both natural and modified habitat that deserves particular attention. Critical habitat includes areas with high biodiversity value that meet the criteria of the World Conservation Union (IUCN) classification, including habitats of significant importance for critically endangered or endangered species as defined by the IUCN Red List of Threatened Species; habitats of significant importance for endemic or restricted-range species; habitats supporting globally significant concentrations of migratory species and /or congregator species; areas with unique assemblages of species or which are associated with key evolutionary processes. Primary forests or forests of High Conservation Value (HCV) shall be considered critical habitats. HCV areas do not directly correspond with definitions for modified, natural and critical habitat. The HCV Resource Network, an internationally-recognized group, provides information and support on the evolving usage of HCV to ensure a consistent approach. https://www.hcvnetwork.org/. 5. These criteria will apply where land associated with such degradation or conversion was subsequently used for construction of housing developments in which Eligible Participating Financial Institutions are seeking to originate mortgages and/or these impacts are likely to occur or continue post-construction. 6. Critical cultural heritage consists of one or both of the following types of cultural heritage: (a) the internationally recognized heritage of communities who use or have used within living memory the cultural heritage for long-standing cultural purposes; or (b) legally protected cultural heritage areas, including those proposed by host governments for such designation. 7. These criteria will apply where land associated with such impacts was subsequently used for construction of housing developments in which Eligible Participating Financial Institutions are seeking to originate mortgages and/or these impacts are likely to occur or continue post-construction. -18- SCHEDULE 6 Commitment-Linked Amortization Repayment Schedule The following table sets forth the Principal Payment Dates of the Loan and the percentage of the total principal amount of the Loan payable on each Principal Payment Date ("Installment Share"). Level Principal Repayments Principal Payment Date Installment Share On each January 15 and July 15 2.5% Beginning July 15, 2024 through January 15, 2044 -19- APPENDIX Definitions 1. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 2. "Applicable Environmental and Social Requirements" means the technical requirements applicable to the eligible Mortgage Loans using the proceeds of the Subsidiary Loan supported under Part 1(b) of the Project and which are comprised of: (a) applicable environmental and social national and local laws and regulations of the Borrower, which may include national and local laws, County or municipal by-laws and other provision regulating housing development and certification by relevant authorities (e.g. building safety), waste management, life and fire safety, access to basic services such as water and sanitation; and (b) Excluded Activities set forth in Schedule 5 of this Agreement. 3. "Capacity Building Plan" means a program of activities designed to strengthen the capacity of staff of KMRC and Participating Financial Institutions on Applicable Environmental and Social Requirements. 4. "Category" means a category set forth in the table in Section III.A of Schedule 2 to this Agreement. 5. "Central Bank Act" means the Borrower's Central Bank Act Chapter 491 Laws of Kenya. 6. "Companies Act" means the Borrower's Companies Act No. 17 of 2015. 7. "Disbursement Linked Indicator" or "DLI" means, with respect of Categories (3), each of the indicators related to said Categories as set forth in the table in Schedule 3 to this Agreement, and "Disbursement Linked Indicators" or "DLIs" means, collectively, more than one such Disbursement Linked Indicator or DLI. 8. "Eligible Expenditure Program" and "EEP" means specific pre-identified expenditures of the Borrower acceptable to the Bank and made in connection with Part 1 of the Project, namely the Borrower's contributions to KMRC from the proceeds of the Loan, as more fully defined in the Project Operations Manual. 9. "Eligible Mortgage Loan" means a mortgage loan which meets the KMRC's eligibility criteria for the purpose of Part 1(b) of the Project, as set forth in the KMRC Operations Manual. -20- 10. "Eligible Participating Financial Institutions" or "Eligible PFI" means the selected banks and non-bank financial institutions to carry out Part 1(b) of the Project, as set forth in the KMRC Operations Manual and in accordance with the Participating Agreements. I1. "Environmental and Social Management System" or "ESMS" means the systematic process for identifying, assessing and managing environmental and social risks and impacts associated with activities supported under Part 1(b) of the Project and managing exposure to such risks and impacts by KMRC and Eligible Participating Financial Institutions in a manner that enables the Eligible Mortgage Loans to meet Applicable Environmental and Social Requirements; which systematic process contains the following core elements: (a) adequate environmental and social policies and procedures prepared by KMRC, as amended from time to time; (b) a customized ESMS prepared and implemented at the level of Eligible Participating Financial Institutions in accordance with the relevant regulations of the Borrower and the Applicable Environmental and Social Requirements; and (c) adequate capacity within KMRC and Eligible Participating Financial Institutions to develop and maintain adequate policies, procedures, organizational structure, budget, and capacity for identifying, managing, monitoring, and reporting on risks and impacts of activities supported under Part 1(b) of the Project. 12. "General Conditions" means the "International Bank for Reconstruction and Development General Conditions for IBRD Financing, Investment Project Financing", dated December 14, 2018. 13. "Incremental Operating Costs" means reasonable incremental costs, as approved by the Bank, required for the day-to-day coordination, administration, operation and supervision of Project activities, including leasing and/or routine repair and maintenance of vehicles, equipment, facilities and office premises, fuel, office supplies, utilities, consumables, communication expenses (including postage, telephone and internet costs), translation, printing and photocopying expenses, bank charges, publications and advertising expenses, insurance, Project-related meeting expenses, Project-related travel, subsistence and lodging expenses, support staff and other administrative costs directly related to the Project, but excluding salaries, bonuses, fees and honoraria or equivalent payments of members of the Borrower's civil service. 14. "KMRC" means the Kenya Mortgage Refinance Company, established and operating in accordance with the Project Implementing Entity's Legislation. 15. "KMRC Operations Manual" means the manual referred to in Section LB of Schedule 2 to this Agreement, for the implementation of Part 1(b) of the Project, including the criteria and requirements for selecting and appraising eligible PFIs, -21- and the terms and conditions for the Mortgage Refinancing, as said manual may be revised from time to time with the prior written agreement of the Bank. 16. "Mortgage Refinancing" means refinancing made or proposed to be made out of the proceeds of the Subsidiary Loan to refinance Eligible Mortgage Loans, by the Project Implementing Entity to a Participating Financial Institution which meets the eligibility criteria set forth in Schedule 4 to this Agreement. 17. "Ministry of Lands and Physical Planning" or "MLPP" means the Recipient's ministry in charge of national land matters; or any successor thereto acceptable to the Bank. 18. "Participating Agreements" means any of the agreements to be entered into between the Project Implementing Entity and Participating Financial Institutions, as the case may be, in accordance with Schedule 4 of this Agreement. 19. "Project Implementing Entity's Respective Part" means Part 1(b) of the Project. 20. "Primary Forests" means forests of native tree species, where there are no clearly visible indications of human activities and their ecological processes are not significantly disturbed. 21. "Procurement Regulations" means, for purposes of paragraph 85 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017 and August 2018. 22. "Project Implementing Entity" means KMRC. 23. "Project Implementing Entity's Legislation" means the memorandum and articles of association of KMRC, the Companies Act, the Central Bank of Kenya Act and any other relevant legislation of the Borrower that regulates the operations of KMRC. 24. "Project Operations Manual" means the manual to be adopted by the Borrower and KMRC and acceptable to the Bank, setting forth implementation, organizational, administrative, monitoring and evaluation, financial management, disbursement, and procurement arrangements for purposes of implementation of the Project, as said manual may be revised from time to time with the prior written agreement of the Bank. 25. "Project Operations Manuals" means the Project Operations Manual and the KMRC Operations Manual. 26. "Signature Date" means the later of the two dates on which the Borrower and the Bank signed this Agreement and such definition applies to all references to "the date of the Loan Agreement" in the General Conditions. -22- 27. "Subordinated Debt Agreement" means the Agreement between the Borrower and KMRC whereby the Borrower provides supplementary capital (or tier 2) to KMRC as defined per the Prudential Guidelines of the Central Bank of Kenya dated January 2013 and amended from time to time. 28. "Subsidiary Agreement" means the agreement referred to in Section I.C of Schedule 2 to this Agreement pursuant to which the Borrower shall make the Subsidiary Loan available to the Project Implementing Entity. 29. "Subsidiary Loan" means the proceeds of the Loan made available by the Borrower to KMRC for Part 1(b) of the Project through the Subsidiary Agreement 30. "Tier 2 Capital" means supplementary capital as defined per the Prudential Guidelines of the Central Bank of Kenya dated January 2013 and amended from time to time. 31. "Training" means the reasonable costs for the following expenditures incurred in providing Project-related training or workshops: travel by participants and presenters to the training or workshop site, per diem allowances of such persons during the training or workshop, honoraria for the presenters, rental of facilities, materials, supplies and translation and interpretation services. 32. "Verification Protocol" means the process by which the achievement of the Disbursement Linked Indicator will be verified, and which is included in the Project Operations Manual. 33. "World Bank Performance Standards" means the Bank's operational policies and procedures set forth in the World Bank's Operational Manual under OP/BP 4.03 - Performance Standards for Private Sector Activities, as said manual is published under www.WorldBank.orW/sites/ppr3.