The Poverty Reduction & Socio-Economic Development Trust Fund II (TF071872) Annual Progress Report 2015 Finance and Markets Global Practice THE WORLD BANK GROUP CONTENTS HIGHLIGHTS OF 2015 .............................................................................................................................. 1 OVERVIEW OF THE TRUST FUND ............................................................................................................. 3 TRUST FUND FINANCIAL SUMMARY ........................................................................................................ 5 KTF SUPPORT – EAP COUNTRY AND REGIONAL OPERATIONS.................................................................... 7 Summary……………..…………………………………………………………………………………………………………………….7 Completed Projects…………………………………………………………………………………………………………………...9 Projects under Implementation…………………………………………………………………………………………….…18 GROWING PARTNERSHIPS ..................................................................................................................... 24 Progress on Partnership Activities…………..……………………………………………………………………………….25 Details of New Formal Partnerships…………..…………………………………………………………………………….27 KTF PROGRAM WORK PLAN 2016-2017 ................................................................................................. 29 Pipeline Projects………………………………………………………………………………………………………………………30 Focus on Partnership and Knowledge for Enhancing Delivery Quality………………………………………35 Monitoring and Evaluation……………………………………………………………………………………………………...36 ANNEX 1. RESULT CHAIN OF KTF-FUNDED PROJECTS.............................................................................. 38 ANNEX 2. F&M’S COMMONLY USED INDICATORS FOR MONITORING AND EVALUATION ......................... 41 List of Acronyms and Abbreviations ALM Asset Liability Management KoFIU Korea Financial Intelligence Unit AML/CFT Anti-Money Laundering and Combating KSD Korea Securities Depository the Financing of Terrorism KTF Poverty Reduction & Socio-Economic ASEAN Association of Southeast Asian Nations Development Trust Fund II BOK Bank of Korea M&E Monitoring and Evaluation BOM Bank of Mongolia MEF Ministry of Economy and Finance BPNG Central Bank of Papua New Guinea (Cambodia) CAR Capital Adequacy Ratio ML/FT Money Laundering and Financing of Terrorism CBM Central Bank of Myanmar MOF Ministry of Finance CBRC China Banking Regulatory Commission MOSF Ministry of Strategy and Finance CG Corporate Governance (Korea) CIFC Center for International Financial MOU Memorandum of Understanding Cooperation (Korea) MSE Mongolia Stock Exchange CLMV Cambodia, Laos, Myanmar, and Vietnam MSME Micro, Small, and Medium Enterprise DO Development Objective NBC National Bank of Cambodia EAP East Asia and the Pacific NBFI Non-Bank Financial Institution ERM Enterprise Risk Management NPS National Payments Strategy EWS Early Warning System OIC Office of Isurance Commission (Thailand) F&M Finance and Markets Global Practice PA Programmatic Approach FCPFL Financial Consumer Protection and Financial Literacy PBOC People’s Bank of China FRC Financial Regulator Commission PNG Papua New Guinea (Mongolia) RBC Risk-Based Capital FSAP Financial Sector Assessment Program RBS Risk-Based Supervision FSC Financial Services Commission (Korea) ROSC Reports on the Observance of FSS Financial Supervisory Service (Korea) Standards and Codes GST Global Solutions Team SC Seoul Center for Financial Sector Development ISA Insurance Supervision Agency (Vietnam) SME Small and Medium-sized Enterprise KAMCO Korea Asset Management Corporation SOB State-Owned Bank KDIC Korea Deposit Insurance Corporation TA Technical Assistance KoDIT Korea Credit Guarantee Fund WBG World Bank Group HIGHLIGHTS OF 2015 Seoul Center for Financial Sector Development (SC)  SC become operational in 2015 in Korea with two financial sector professionals joining the WBG Songdo office.  A total of $735,972.73 was disbursed in 2015 for the country and regional specific activities as well as the operations of the Seoul Center and other administrative and management expenses. Country and Region specific operational work support through KTF  At the end of 2015, 12 KTF proposals had been approved in 7 countries and focusing on Regional topics selected based on interest and feedback from the client countries. Six projects completed their activities in 2015 and four new projects were approved with a total approved allocation of $6,580,600.  One of these projects in Myanmar, the largest so far with an allocation of $3.3 million is the first one to be organized around a multi-year programmatic approach which allows for more strategic and comprehensive engagement with countries. New country engagements in EAP client countries are now being developed on similar programmatic approach. Accordingly, funding requests for KTF support are now more comprehensive and span larger time frames (and thus also larger in amount). This also responds well to the MOSF recommendation to develop larger proposals addressing strategic reforms and technical assistance needs in EAP countries.  There continues to be strong demand for KTF support from client countries and proposals to support engagements in Lao, Mongolia, Philippines and Vietnam under preparation. It is anticipated that by the middle of 2016, KTF allocation to country and regional programs will be finalized.  The SC team is now working closely with the country specific task teams to speed up implementation. For projects under implementation, several engagements and technical missions are planned in the first half of 2016. Leveraging Korean expertize and institutional capacity through partnerships  An important objective of the WBG and MOSF partnership is leveraging the expertize and capacity of Korean institutions to support EAP country needs and enhance/deepen the delivery of assistance to the client countries.  At the end of 2014 the WBG had already signed 4 formal MOUs towards strengthening the partnership. In 2015, 2 additional MOUs have been signed between WBG and Bank of Korea (BOK) and the Financial Supervisory Service (FSS).  In 2015, as part of the Korea Week celebration commemorating 60 years of WBG and Republic of Korea partnership, all the formal partners came together with the WBG and organized 2 working sessions to discuss areas of mutual interest and show their continued support for this partnership. 1  Partnerships are growing well, and in addition to the 6 formal MOU partners, we have strong interest in partnering from FSC, KoFIU, KDIC, CIFC, KoDIT, and KAMCO. With the staffing of the SC in the 2nd half of 2015, several other partnerships have been explored and progress has been made in connecting these institutions with specific country needs in the EAP region.  In late 2015, WBG facilitated a presentation by KoDIT at the WBG HQ and has successfully made a few connections between Korea institutions to respond to urgent needs of the client countries and other engagements (e.g., BOK financial stability expert traveled to Cambodia in January, KDIC connected to Lao Central Bank through teleconference to discuss training needs and implementing a training in March/April 2016, etc.). With regards to FSS, F&M team in Washington is developing a Basel II toolkit (which has KTF’s generous support) with support of a staff seconded by FSS to the WBG HQ and testing of the prototype is under discussion with FSS technical staff. We are also proactively discussing specific partnership needs on KTF-funded projects, especially for Myanmar and Cambodia KTF programs and upcoming programmatic approaches in other countries where the clients are interested in support from KTF.  Finally SC is also looking to develop a comprehensive partnership, knowledge transfer and knowledge generation program in the remaining period of the First phase of the KTF. A detailed work plan in that regard is under preparation and will be discussed with the MOSF and other partners in March/April 2016. Initial thoughts in looking to the future  Allocation of First phase of KTF (ending CY2017) is expected to be completed very soon given that we have a robust pipeline of projects coming online and the SC will be focusing on engaging partner institutions, client country counterparts and WBG teams to better leverage partnerships.  Given that these comprehensive programmatic engagements span a period longer than the closing of the First phase and given continued strong demand for support from several client countries as well as interest from Korean institutional partners for a longer term partnership, it would be useful to start looking at a Second phase of the KTF at the appropriate time.  In considering any next stages, it would be important to look at the lessons from the success of the First phase of KTF and developments at other WBG country hubs (especially in Malaysia and Austria). One consideration would be having a more strategic and global perspective centered on financial systems and stability issues in particular, which are areas where Korea has done very well over the past few years and has strong institutions and capacity. We believe, this will not only give Korea’s engagement a higher profile internationally and distinguish the Korea program from others in the region (e.g. WBG Malaysia hub) and elsewhere (WBG Austria hub), but could also allow for drawing more deeply on technical partners in Korea to share experiences more widely. 2 OVERVIEW OF THE TRUST FUND INTRODUCTION OF THE TRUST FUND On June 25, 2012, the Ministry of Strategy and Finance of Korea (MOSF, the donor) signed a trust fund Administration Agreement with the World Bank Group’s Financial and Private Sector Department (FPD), which is now the Finance & Markets (F&M) Global Practice. The objective of this Korean Trust Fund, titled Poverty Reduction and Socio-Economic Development Trust Fund II (KTF), is to improve and develop financial sectors in the East Asia and Pacific (EAP) Region by delivering better technical assistance and advisory services to EAP countries. The KTF is scheduled to operate for five years, from 2012 to 2017, under the management of F&M. The KTF provides financing for activities clustered around the themes of (i) mitigating financial crises, (ii) meeting international standards, (iii) balancing the role of the state in the financial systems, (iv) developing capital markets, (v) improving financial inclusion, (vi) deepening Asian regional integration, (vii) financing sustainable growth, and (viii) monitoring, reporting, and evaluation. 3 FINANCE & MARKETS GLOBAL PRACTICE IN EAP After several organizational changes during the initial year of the KTF operation, the past 1.5 years of operation have been more productive for the World Bank Group. The Bank is moving more towards results-oriented comprehensive solutions, which demands a new approach to the delivery of its activities to ensure a more integrated, strategic, and selective knowledge portfolio at the global and country levels. This has given birth to the Programmatic Approach (PA), which organizes activities within a program under the framework of an overarching development objective, and is thus expected to enhance the results of the overall regional or global multi-year comprehensive program rather than individual activities.F&M has also adopted this Programmatic Approach for its most recent engagements and projects. In the EAP region, F&M’s priorities are: (i) enhancing the stability of financial systems, (ii) improving financial inclusion and infrastructure, and (iii) supporting development finance initiatives, to address the region-specific challenges in the financial sector. To support these priorities and with support of the Government of Korea, the F&M Global Practice has established the Seoul Center for Financial Sector Development (Seoul Center) in accordance with the MOU signed with the MOSF on October 11, 2011. The Seoul Center was operated as a virtual pilot for the first two years and subsequently took presence in the WBG Korea Office in the fall of 2015, now housing two F&M technical staff.They will continue to build on the current F&M portfolio and strengthen the partnership between the WBG and the Korean counterparts in the financial sector to support country programs and client demanded engagements in the East Asia and Pacific region by sharing knowledge, expertise, and lessons from Korea’s successful experience. KTF GOVERNANCE The third Steering Committee Meeting was held in Seoul on February 13, 2015, where the following topics were discussed: o F&M Technical Assistance and Advisory Services funded by KTF o Pipeline projects for the Steering Committee’s approval o F&M Staffing in the Korea Office For details of the meeting, please refer to the Minutes of the Third Steering Committee Meeting for the Poverty Reduction and Socio-Economic Development Trust Fund II. Since the meeting took place, there have been several occasions for meetings between the MOSF and F&M (including one meeting in Washington DC) as well as periodic communications on the F&M technical assistance under the KTF. The pipeline projects have since been approved and under implementation and the Seoul Center in Korea has started operation. 4 TRUST FUND FINANCIAL SUMMARY As of December 31, 2015 In USD Total Contributions, out of which 16,000,000 Received (2012-2015) 13,079,649 Pending (estimate of funds expected in 2016) 2,920,351 (+) Investment Income 69,322 (-) Allocation to Country and Regjonal Projects 9,803,660 (-) Seoul Center and other Administration and Management Costs 688,982 Remainiung KTF funds available for allocation 5,576,680 F&M KTF Allocation by Country (as of December 2015) 10% ASEAN 4% 14% Cambodia 5% China 15% Indonesia Mongolia Myanmar 34% 12% Papua New Guinea Thailand 3% World 4% 5 KTF – Status of Disbursements by Project (as of December 31, 2015) Project Name Country Project Grant Disbursemen Fund Outstanding Available Closing Amount t Balance Commitment Balance Indonesia Crisis Simulation Framework Indonesia 3/7/2014 314,063 314,063 - - - China Financial Reform Strategy Report China 2/13/2014 469,715 469,715 - - - China Financial Consumer Protection and Financial Literacy China 8/31/2015 490,000 456,756 33,244 - 33,244 * Thailand: Solvency Modernization and Risk Based Capital Thailand 5/15/2015 399,282 399,282 - - - TA for Implementing PNG Financial Competency Survey PNG 11/30/2015 475,000 469,801 5,199 - 5,199 * Mongolia Capital Markets Development Mongolia 8/31/2016 # 350,000 349,120 880 - 880 * East Asia Regional Financial Integration Region 10/16/2015 475,000 385,115 89,885 - 89,885 * Evaluation of Financial Consumer Education in China China 9/30/2016 # 250,000 105,442 144,558 23,063 121,495 * National Risk Assessment ASEAN Region 1/31/2017 898,000 6,454 891,546 35,220 856,326 Basel Pillar 2 Implementation Toolkit World 6/15/2017 940,000 - 940,000 - 940,000 Myanmar – Scaling Up Financial Services for the Poor Myanmar 8/31/2017 3,300,000 70,990 3,229,010 108,850 3,120,160 Cambodia: Financial Sector Development TA Cambodia 12/29/2017 1,442,600 - 1,442,600 - 1,442,600 Total 9,803,660 3,026,738 6,776,922 167,133 6,609,789 Notes: # : Activities under these projects have been completed earlier than planned and these projects are being closed. * : These residual funds following completion of the planned activities will be returned to the unallocated pool of funds and reallocated to new proposals and other planned activities. 6 KTF SUPPORT – EAP COUNTRY AND REGIONAL OPERATIONS SUMMARY  A total of 12 KTF proposals have been approved as of end of 2015. Nine of the proposals support specific Finance and Markets engagments 7 countries. Three proposal support Regional initiatives. Eight of the 12 projects have already been completed. Four projects, which were approved in 2015, are under implementation.  In 2015 the WBG F&M program started to focus on supporting client demand through multiyear programmatic approaches which allow for more strategic and comprehensive engagement with countries. Accordingly, funding requests for KTF support are now more comprehensive and span larger time frames (and thus also larger in amount). This also responds well to the MoSF recommendation to develop larger proposals addressing strategic reforms and technical assistance needs in EAP countries. GrantAmount Project Country Objective Status (USD) To contribute to the promotion of a sound and stable Crisis financial sector in Indonesia through improved Completed Simulation Indonesia 370,000 capacity of financial sector authorities to prevent, in 2014 Framework manage, and resolve financial crises. Financial To design and implement far-reaching and Completed Reform China 480,000 fundamental financial reforms to China’s financial in 2014 Strategy Report system. Financial Consumer To support the Chinese authorities in setting up an Completed Protection and China 490,000 effective Financial Consumer Protection &Financial in 2015 Financial Literacy system in China. Literacy Solvency To assist the Office of Insurance Commission of Modernization Thailand to improve risk-based supervision and and Risk-Based Completed Thailand 420,000 dynamic solvency regimes, including designing the Capital for the in 2015 required legal/regulatory framework, tools, and Insurance market practices. Sector 7 GrantAmount Project Country Objective Status (USD) Financial Papua To assist the PNG Central Bank to develop a baseline Completed Competency New 475,000 for understanding the financial capability of the PNG in 2015 Study TA Guinea population. Capital Market To support the Mongolian authorities in developing Completed Mongolia 350,000 Development robust deep capital markets. in 2015 East Asia To support sustained economic growth and poverty Regional reduction through the expansion of investments and Completed Regional 450,000 Integration financing under the ASEAN agenda of financial in 2015 Project integration. Evaluation System for To assist the People’s Bank of China to develop a Completed Consumer China 250,000 system for evaluating the effectiveness of consumer in 2015 Financial financial capability programs. Education National Risk To help the ASEAN countries improve the Assessment Regional 898,000 effectiveness in detecting and preventing financial Ongoing ASEAN crime. Basel Pillar 2 To develop a supervisory toolkit for the use of banking Implementation Regional 940,000 supervisors in client jurisdictions to improve the Ongoing Toolkit effectiveness of their Basel II implementation. Scaling up To help increase access to financial services by the Financial Myanmar 3,300,000 poor in Myanmarthrough technical assistance and Ongoing Services for the advisory services. Poor Financial Sector To support the Cambodian financial authorities in core Development Cambodia 1,442,600 Ongoing areas of financial sector modernization and reform. TA 8 COMPLETED PROJECTS CHINA: FINANCIAL CONSUMER PROTECTION AND FINANC IAL LITERACY Grant amount: USD 490,000 Project Duration: May 2013 – August 2015 Context Since the onset of the financial crisis in 2008, financial authorities have begun to realize the significance of financial consumer protection and financial literacy (FCPFL) for a sustainable financial market. But in the absence of a vision and strategy, the authorities have thus far leaned on prudential supervisory measures to realize the goals of FCPFL, using ad hoc administrative orders and moral suasion. They have so far failed to provide the needed protection for the average financial consumers. An integrated legal framework and a functioning institutional arrangement would be crucial for an effective FCPFL system in China, especially considering the fact that now all three financial regulatory authorities and the central bank have (or will) set up an internal department each in charge of FCPFL in their respective areas of responsibilities. Thus, the People’s Bank of China (PBoC) requested assistance from the Bank to help it formulate a strategic vision and framework for the future financial consumer protection regime in China. In parallel, the China Banking Regulatory Commission (CBRC) also requested a TA to obtain a solid base and needed authenticity for its policy making in strengthening its role and tools in FCPFL. KTF Assistance The KTF-funded project consisted of two components:  Component I is to respond to the PBOC’s request for establishing a strategic vision and framework for the future FCPFL regime in China, including the design of the legal framework, institutional 9 arrangement and coordination, proper principles and good practice, information system, dispute resolution mechanism, and financial literacy programs;  Component II is to respond to the CBRC’s request for a review on the conditions of FCPFL for different layers of financial consumers in China (focusing on banking sector), especially those who are low and middle income consumers, followed by policy recommendations for strengthening the CBRC’s role and tools in FCPFL. The activities also included (i) learning from international experiences through desk research, study tours, international seminar(s) and other forms of activities for knowledge exchange; (ii) designing and implementing surveys by questionnaires, combined with focus group discussions; (iii) evaluating the existing conditions of FCPFL in China through a diagnostic review, based on desk research and the survey results as well as against the international good practices; (iv) drafting two policy notes, one for the PBOC and the other for the CBRC; (v) conducting two workshops, including an interim workshop to report and discuss the key results of the surveys, and a concluding workshop to disseminate the key findings and recommendations, which serves to promote the discussion and consensus among the stakeholders. Results Both PBOC and CBRC are among the most crucial policy makers and regulatory agencies for FCPFL in China. In the report to PBOC, The key preliminary findings and recommendations covered five areas: (i) Institutional Arrangements; (ii) Legal and Regulatory Framework; (iii) Disclosure and Business Practices; (iv) Dispute Resolution Mechanisms; and (v) Financial Literacy. In the report to CBRC, the key findings and recommendations covered four thematic areas: (i) Disclosure and Transparency, (ii) Fair Treatment, (iii) Complaints Handling and Dispute Resolution Mechanisms, and (iv) Financial Capability. Financial Consumer Protection departments in PBOC and CBRC were newly set up teams. During the project, the teams had intensive interaction with international experts from within and outside the Bank. The teams benefited from the exchange of ideas, information, and methodology. The project funded the translation of World Bank’s Good Practices for Financial Consumer Protection to Chinese language. The Good Practices provided guidance to the regulators in establishing effective mechanism for resolution of financial consumer disputes. A report entitled Report on Institutional and Legal Framework for Consumer Protection in Financial Services provided guidance to PBOC in its establishment of Shanghai Financial Ombudsman Services in April 2015, a non-government organization, and is registered with the Shanghai Civil Affairs Bureau and Shanghai Administration Bureau of NGOs. The Financial Consumer Protection survey provides a detailed demand-side assessment of the current state of consumer protection in the banking sector in China. The report entitled Strengthening Financial Consumer Protection in China: A Demand-Side Assessment established a prioritized set of recommendations that tackle identified financial consumer protection challenges not only from the legal and regulatory but also from the demand-side perspective. 10 THAILAND: SOLVENCY MODERNIZATI ON AND RISK-BASED CAPITAL FOR THE INSURANCE SECTOR Grant amount: USD 420,000 Project duration: June 2013 –May 2015 Context The Thailand Office of Insurance Commission (OIC)’s objective is to create an efficient and transpar ent local insurance industry while protecting policyholders. To achieve this, the OIC is following the strategy of strengthening the industry’s finances, as well as better oversight, utilizing financial analysis, and a risk -based capital (RBC) regime. Technical knowledge in terms of risk management of insurance companies and human capacity has been brought into examination, but the lack of experience in risk assessment and applying judgement slows down the learning process, and therefore decelerates effective risk-based supervision (RBS). The main question faced by the OIC is which supervision strategy should be set once the risk assessment is conducted and whether OIC has adequate authorities to impose intervention measures based on the risk of insurance companies. Consequently, a legal framework to support risk-based supervision is a significant factor for accomplishment. The changes supported by this project will also promote transition to capital requirement principles that are more comprehensive and better capture the insurance industry risks in Thailand. KTF Assistance In order to fully develop the RBC/RBS framework, the KTF-funded project filled the missing pieces through the following tasks: 1. Assess the capacity of the OIC, the legal framework for RBS and modernize the EWS 2. Based on the assessment, strengthen and improve the solvency capital regime for insurers 3. Strengthen prudential supervision 4. Provide training The project provided assistance to implement the quantitative goals into the current RBC formula. The project also supported the development of instruments (a) to strengthen and improve the solvency capital regime for insurers with relevant recommendations on enhanced risk-based capital through the introduction of operational risk and a white paper on enhanced supervision tools; and (b) to strengthen prudential supervision with prepared manuals and training. Results At the end of the project, the OIC and the Bank team jointly conducted an in-depth consultation workshop with market participants and stakeholders and presented main findings and key recommendations. The workshop was divided into 4 sessions covering: (1) future directions of Thai insurance industry; (2) supervisory perspective on ERM; (3) industry view on data requirements under newly proposed supervisory requirements; and (4) the global trend on Own Risk & Solvency Assessment (ORSA). Workshop participants, comprising of 11 140 representatives from life and non-life insurers and all insurance-related associations, fully supported the reports’ recommendations and encouraged the OIC to implement these recommendations as soon as possible. Bank staff collaborated and coordinated with OIC and industry representatives to understand and document the ongoing activities by OIC and the insurance industry in their effort in enhancing the industry. These efforts supported by the project built a detailed base knowledge on the industry on which appropriate recommendations and plans for moving forward were formulated. These were extensively discussed with OIC staff. This approach was effectively carried out with all the activities supported by the project, including the reports and recommendations on (1) strengthening the solvency regime with the introduction of operational risk and group risk, (2) models for the ALM, ERM, and stress-testing; (3) strengthening prudential supervision and EWS; and (4) training. Each document covering these areas included a section on the then existing status and experiences thus far as an effective background on which to build the assessment and recommendations for the next steps. This collaborative approach provided the vehicle for OIC officials and the representatives of the industry to take stock of the existing situation with up-to-date information and to involve all the stakeholders for a better outcome of the technical assistance while enhancing the support and ownership of OIC and industry stakeholders. Apart from the above reports, the Bank staff also conducted an extensive training program on on-site “The advice and recommendation received from examination practices including case study discussions this project have contributed greatly to the for both on-site and off-site examiners. The objective development of the supervisory practices in of this training program was to assist the OIC staffs in Thailand, namely in Asset Liability strengthening their risk focused examination Management, Enterprise Risk Management, procedures and approach. The OIC’s supervisors Stress Testing, Early Warning System, and especially On-site Examination. We sincerely actively participated in this capacity building program and exchanged various practical experiences. The look forward to cooperation closely with the Deputy Secretary General expressed that the case World Bank again in the near future.” study discussions were good sessions to learn practical Mr. Pravej Ongartsittigul, Secretary-General, experiences from our insurance experts especially Office of Insurance Commission since the discussed cases were very similar to the Thai context. In addition to the above project’s objectives, the Bank staff also shared practical examples of full liberalization of motor third parties liabilities (MTPL) tariffs in other countries. The OIC expressed concern on the current practices of the MTPL in Thailand. Bank staff working on the project also benefitted from the experiences and inputs from OIC officials and stakeholders during this exercise, creating a common diagnostic knowledge base to develop relevant actions and recommendations. With this approach, the recommendations and manuals produced with the support of the project were tailored to the needs and requirements of the industry stakeholders and thus they have had a better chance for successful implementation and operationalization. 12 PAPUA NEW GUINEA: TA FOR IMPLEMENTING FINANCIAL COMPETENCY SURVEY Grant amount: USD 475,000 Project duration: July 2013 –November 2015 Context Papua New Guinea (PNG)’s dualistic economy has offered incentives to the large commercial banks to serve more elite and corporate clients than the restof the population. The challenge is a lack of understanding of the demand from the unserved or unbanked 85% of the population and the high risks and costs of service delivery in the rural areas. Thus, the Central Bank of PNG (BPNG) identified financial inclusion as one of the top priorities for financial sector development. To better understand the demand for financial services, BPNG commissioned several studies on the financial capability of the population withthe aim of promoting targeted and affordable financial education and financial services to the rural areasand local SMEs. Under the request of BPNG, the Bank provided technical assistance through a Russian TF in 2010-2012 to assist in developing a pilot for a financial competency survey tool. KTF Assistance Following the request of BPNG, KTF funded a technical assistance project to build upon the pilot survey tool and expand the base for a regional survey, by developing the survey instrument and constructing a representative sample. Project launch workshops with stakeholders and capacity building workshops for the local interviewers were also carried out.The sampling unit for the regional survey is the household: however, the sampling strategy and research methodology was developed to ensure a gender-specific understanding of financial capability. After rigorous data collection and analysis, the team produced the final report titled “Financial Inclusion and Financial Capability in Morobe and Madang Provinces, Papua New Guinea” which is made public at the following World Bank website: http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/Documents/Publications/FinCapabilitySurvey- Madang-Morobo-Provinces-PapuaNewGuinea-20160114-FINAL.pdf 13 Results This was the first population level study on financial inclusion and financial capability in PNG, with many implications for policy and practice towards the achievement of the Maya Declaration Goals. The report makes a significant contribution to increasing understanding and, whilst limited in geographic scope to Morobe and Madang provinces, provides an important input to the further development of financial inclusion and financial literacy strategy in PNG. The findings from the study suggest that the current National Financial Inclusion and Financial Literacy Strategy may need to be further developed, in particular to facilitate significant strengthening of the rural financial services architecture. The findings also indicate that significant strengthening of financial inclusion and financial literacy programmes, in particular urban programmes, will be required in order to increase financial inclusion by women. Levels of financial knowledge, in particular knowledge of the cost of financial services suggest a continuing commitment is required to further strengthen consumer protection. This report is an initial output from the national financial capability study, and focuses on Morobe and Madang provinces only due to both financial and logistic constraints to conduct a national survey at this stage. It is intended that the study will, in time, progress to become a nationally representative study of financial inclusion and financial capability in PNG. EAST ASIA: REGIONAL FINANCIAL INTEGRATION Grant amount: USD 450,000 Project duration: January 2014 – October 2015 Context The agenda for financial integration of the ASEAN countries is part of the overall strategy for regional economic cooperation to enhance growth, improve trade linkages, and increase prosperity by contributing to poverty alleviation. In April 2011, the ASEAN Central Bank Governors highlighted the imperative for financial integration and endorsed a Study on Assessing the Financial Landscape and Formulating Milestones for Monetary and Financial Integration in ASEAN, outlining the need to strengthen financial integration by 2015. According to the Roadmap, the main elements of financial integration include capital account liberalization, financial services liberalization in the ASEAN banking sector and developing capital markets, together with institutional and policy reforms. Progress towards deepening the ASEAN Economic Community has been significant but has mainly involved trade; developments in the financial services integration have lagged. However without similar progress in the financial sector, further economic integration of the ASEAN region is likely to be limited. KTF Assistance KTF funded the project to conduct a study on ASEAN’s financial markets integration, which entailed (i) developing an index of regional financial integration, (ii) formulating a model of an alliance structure of a 14 regional stock market, (iii) assessing banking systems’ regulatory procedures for further harmonization and assisting with implementation, and (iv) developing a roadmap for ASEAN regional financial integration. The specific activities of the project were as follows: 1) Analyze the status of regional financial integration in the ten ASEAN member countries, with a particular focus on banking and capital markets; 2) Engage in policy discussions with senior policy makers in ASEAN in order to discuss current gaps and challenges that prevent further financial integration and examine existing regional initiatives; 3) Discuss with stakeholders (the ASEAN, ADB and APEC) as well as a broad range of international development partners. Results The final report on the ASEAN Financial Integration was completed in June 2015 and its key findings were presented to the stakeholders and the international community at meetings including: 1) The ASEAN meeting in Kuala Lumpur on March 10, 2015. Participants included around 40 senior officials of central banks and ministries of finance of all ten ASEAN member countries. 2) The Conference organized by the Ministry of Finance of Malaysia and the IMF on ASEAN Regional Financial Integration on November 17, 2015. Participants included 25 representatives of think tanks and research institutes of ASEAN member countries. 3) The 2nd International Financial Cooperation Forum organized by the Financial Services Commission (FSC) and the Center for International Financial Cooperation (CIFC) in Seoul, Korea, on December 1, 2015. Participants included representatives of the Korean financial sector and policy makers from ASEAN member countries and Korea. Overall, the project and the report contributed to enhancing the integration across the capital markets and banking systems of the ten ASEAN member countries. Such integration will translate into more ASEAN banks operating across borders and providing services to new customers, particularly low income households and small and medium enterprises. Financial integration will also lead to new initiatives to enable countries to raise debt in neighboring countries and expand their sources of funding for developmental activities. It was also recognized that there are more needs for technical assistance for the individual ASEAN countries, particularly the low income countries such as Laos, Myanmar, Cambodia, and Vietnam. MONGOLIA: CAPITAL MARKETS DEVELOPMENT TA Grant amount: USD 350,000 Project duration: September 2013 – December 2016 Context The World Bank conducted a FSAP for Mongolia in February 2012, of which one of the three areas was capital market development. This was at the request of the Mongolian authorities because they recognized that the development of the capital market in Mongolia is vital to mobilizing domestic and foreign investment for productive use by the growing enterprise sector, including but not limited to, mining companies. The authorities recognize the urgent need to diversify the financial sector through supporting the development of 15 the capital market so as to keep pace with the growth momentum that the country aspires to over the next 10 years. KTF Assistance The objective of the TA is to support the Mongolian authorities in developing robust and deep capital markets in the following areas: (i) develop a strategy and an implementation plan that prioritizes and sequences the necessary development initiatives for the securities and broader capital markets; (ii) strengthening supervisory and enforcement effectiveness of the FRC; (iii) improving efficiency of supervisory and regulatory framework for the securities market; and (iv) enhancing capacity of the Financial Regulator Commission (FRC), Mongolia Stock Exchange (MSE), and Ministry of Finance (MOF) and contribute towards institutional development of the FRC. Results The trust fund has supported work this year in continuing to build the capacity of the Mongolian capital markets and regulatory authorities to improve efficiency and effectiveness. Specifically, the team was able to deliver all the outputs earlier than planned with the final deliverable being the the Capital Market Development Strategy (CMDS) dissemination event. The event was organized to officially launch the CMDS and its implementation plan, targeting both the public and the private sectors. In FY15, the team conducted two dissemination sessions on the b, which was produced in FY14 along with its implementation plan. One session was for the FRC and other public sector agencies including Bank of Mongolia (BOM) and MOF; and another session for private sector stakeholders and participants (together with public sector stakeholders). Attendance was high with active participations from all involved, including from the top management from FRC. CHINA: EVALUATION OF FINANC IAL CONSUMER EDUCATION Grant amount: USD 250,000 Project Duration: March 2014 – September 2016 Context The Bank supported People’s Bank of China (PBOC) in establishing a strategic framework for the future financial consumer protection and financial literacy regime in China, including the design of the legal framework, institutional arrangement and coordination, proper principles and good practice and financial 16 literacy program. As a result, the Bank delivered a Report on Institutional and Legal Framework for Consumer Protection in Financial Services. In this connection, in a letter dated March 6, 2013, the PBOC requested the Bank’s continued assistance to develop an assessment system for evaluation of financial consumer education in China. Additionally, PBOC requested, during the September 2013 mission, the Bank’s assistance to improve their financial capability questionnaire and to build the capacity of PBOC staff. KTF Assistance The objective of this TA is to assist the PBOC in developing a system to evaluate the effectiveness of consumer financial education programs. This initiative would support the Government's effort in developing a National Strategy on Consumer Financial Education (NSFE). The overarching goal of the NSFE is to provide guiding principles, strategic direction and a coordination mechanism for organizations which provide (or could potentially contribute to the provision of) financial education in China. Results The World Bank has been working closely with the PBOC’s Financial Consumer Protection Bureau and provided timely technical assistance, support and training in relation to national financial education strategy, diagnosis of institutional foundations for financial consumer protection, international good practices, and financial education program design and evaluation. 17 PROJECTS UNDER IMPLEMENTATION ASEAN: NATIONAL RISK ASSESSMENT Grant amount: USD 898,000 Project Duration:May 2015 – January 2017 Context With the expansion of ASEAN membership to the Mekong countries (Cambodia, Laos, Myanmar, and Vietnam, “CLMV”) in the 1990s, ASEAN now encompasses high-, middle-, and low-income countries. Among them, the CLMV countries are at significant risk of money laundering and financing of terrorism (ML/FT) issues and the abuse of their economies threatens sustainable growth in the future. Their regional environment and the weaknesses of their legal system constitute substantial concerns and make them susceptible to proceed generating criminal activities. Cambodia and Myanmar have already asked for the technical assistance of the WB, and early WB engagement with Lao and Vietnam is taking place. This project is part of a broader collaboration with the ASEAN countries on issues related to anti-money laundering and combating the financing of terrorism (AML/CFT). Project Objective The project helps improve the effectiveness of some of the countries in the ASEAN region to detect illicit financial flows, investigating and prosecuting financial crime such as corruption, tax evasion, and fraud. The results/indicators for the activity will be measured by the following: (1) Some of the ASEAN countries have a detailed and comprehensive report that identifies and analyzes the proceeds of crime in the country and identifies the key vulnerabilities of law enforcement agencies to investigate and prosecute financial crime; (2) Some of the ASEAN countries officially adopts concrete time bound action plan that is endorsed by the government through appropriate processes such as a national coordination committee on anti-money laundering and terrorism financing or at cabinet level.; and (3) 50-60 key experts from the judicial, law enforcement, financial regulators and senior policy makers are trained on how to identify the money laundering and terrorism financing risks and vulnerabilities facing some of the ASEAN countries. Progress Cambodia. The first workshop was held from January 20-22, 2016. The authorities are expected to provide preliminary findings of the assessment within a tight time frame to be agreed upon during the mission. A video conference was held on December 16, 2015 to launch the national risk assessment process. The Philippines. A World Bank team visited Manila in October 2014 to launch the national risk assessment on money laundering and terrorism financing. It was agreed in October 2014 that the risk assessment process would be concluded in July 2015 at a final workshop to be held in Manila. However, there has been a delay in complete this project due to lack of progress on the part of the authorities. A letter was sent in early November 18 2015 to the authorities expressing concern on the delay and asking for progress to be expedited in 2016. On February 15, 2016, the authorities submitted the draft National Risk Assessment report and related documentation for review and comments by the World Bank. The final workshop has now been set for May 11-13, 2016. The project is expected to be closed by mid-June 2016. Vietnam. It has been agreed to begin the national risk assessment work in early 2016. The authorities however, are still negotiating on the modalities of delivery of the World Bank support. Nevertheless, it is likely that we will have the first workshop within the first quarter of 2016. Lao PDR. The authorities have not yet indicated when they would want the World Bank to begin the support on the national risk assessment. However, the World Bank has been in constant dialogue with the authorities on the matter. The expectation is that the work will start in the second half of this calendar year. WORLD: BASEL II PILLAR 2 – IMPLEMENTATION TOOLKIT Grant amount: USD 940,000 Project duration: September 2015 – June 2017 Context The Basel Committee on Banking Supervision (BCBS) issued a comprehensive revised capital adequacy framework in 2004 (known more popularly as Basel II), which was designed to be more risk-sensitive than the Basel I framework. Basel II has three pillars: Pillar 1 – prudent capital regulation; Pillar 2 – supervisory review, and Pillar 3 – market discipline. Pillar 2 involves two main steps – (a) requiring banks to maintain an internal capital adequacy assessment process (ICAAP) and complying with the internal targets; and (b) supervisory evaluation of how well banks are assessing their capital needs relative to all risks incurred by the bank. Pillar 2 implementation is mandatory and critical to the effective implementation of Basel II. Within Pillar 2, some jurisdictions have progressed on part (a) above, but very few have progressed on implementation of part (b). This offers a vast potential for providing technical assistance in this specialised area to client authorities. Project Objective The objective for this project is to assist banking supervisors in client jurisdictions to improve the effectiveness of their capital adequacy framework, which would eventually help them achieve a higher level of compliance with international standards. This will be achieved through the development, customization and delivery of a supervisory toolkit. The toolkit would include two components: (i) guidance to supervisors for assessing banks’ internal capital adequacy assessment processes (ICAAPs) and risk profile; and (ii) quantitative supplement for assessing the adequacy of capital held by banks vis-à-vis their risks. This toolkit is aimed primarily at the authorities and jurisdictions where banks are on Basel I or on the basic levels of Basel II. The toolkit is also designed to be flexible to meet the needs of a better equipped authority. The toolkit will help to develop and promote a more risk sensitive approach to supervision in client jurisdictions, improve supervisory capacity and better equip the supervisors to perform more effective supervisory review. It will also help them to engage in 19 constructive supervisory discussions with the banks and their managements. For those countries that are yet to implement Basel II, this toolkit will help them to migrate smoothly towards effective Basel II and Basel III implementation. The toolkit will strengthen the capacity of banking system supervisors to maintain a resilient banking sector and to maintain banking system stability. Progress With the help of staff seconded from Korea’s FSS, the Bank team has developed a first stage prototype of the quantitative supervisory toolkit for assessing the adequacy of the capital held by banks. This has been subjected to initial desktop testing with dummy data, which seem to be giving reasonable outputs. Simultaneously, the Bank experts are in the early stages of preparing the initial drafts of the qualitative components of the toolkit, which are in the nature of guidance to banks for assessing banks’ risk profile. The next steps include subjecting the quantitative toolkit to testing with live bank data during February. This will provide the experts an opportunity to further test the components and also to see the collective output of the prototype in real-life cases. This testing is expected to help in identifying areas for further improvement in the toolkit. Thereafter, the team will develop the guidance on assessment of risks. The guidance note for assessment of one of the Pillar 2 risks would serve as a model/template for developing similar guidance for assessment of other Pillar 2 risks. In this context, the FSS has agreed to work with the team on the project. MYANMAR: SCALING UP FINANCIAL SERVICES FOR THE POOR Grant amount: USD 3,300,000 Project duration: October 2015 – August 2017 Context Financial inclusion is a key priority in Myanmar's development agenda. At present, over 70 percent of adults do not have access to credit, savings, and deposits. Thus, the Government of Myanmar has recently formulated a Financial Inclusion Roadmap 2014-2020 that aims at increasing the percentage of adults with access to basic financial services from 30% in 2015 to 40% by 2020. Project Objective The objective of this project is to provide TA to the Government to increase the percentage of adults with access to financial services. The program involves an integrated and comprehensive approach that centers on the following four pillars: (i) Modernizing Financial Sector Infrastructure (ii) Financial Institutions Reform and Development (iii) Promoting Digital Financial Services and Expanding Access and Depth of the Financial Sector 20 (iv) Upgrading the Legal and Regulatory Framework Progress The work has begun across all four pillars. Under Pillar 1, a series of TA missions were held in December 2015 and January 2016 with the CBM to discuss next steps related to plans for enhancement of the CBM net system and also for implementation of the draft National Payments Strategy. The work also focused on development of a national payments switch and providing TA to the Myanmar Payments Union as part of the CBM engagement. Under Pillar 2, a series of meetings were held with high level officials of the MOF and Office of the President with regard to planning for state-owned bank reform and next steps related to Myanmar Economic Bank (MEB) and Myanmar Agricultural Development Bank (MADB) diagnostics. In addition, a Technical Workshop on Myanmar State-Bank Reform will be held on February 18, 2016. This workshop will bring together approximately 45 representatives from the government, MOF, CBM, and the four state owned banks. The objective will be do discuss the challenges of State-Owned Bank (SOB) restructuring in Myanmar and also 21 identify and build consensus around next steps for reform. The workshop will also include sessions to share experiences from bank restructuring in other regions. Under Pillar 3 and 4, a week-long training session was held with the insurance supervisory staff of the Financial Regulatory Department (FRD) in August 2015, and microfinance supervisory training was also held in December 2015. An auditing and accounting workshop with state-owned banks was also held in August 2015, with participants of all four major state-owned banks: Myanmar Economic Bank, Myanmar Agricultural Development Bank, Myanmar Investment and Commercial Bank, and Myanmar Foreign Trade Bank. The TA work has been affected by the historic national elections that were held in Myanmar in November 2015, in that the WB team will need to confirm details of several elements of the TA program with the new government. However, at the same time, there is broad recognition of the importance of reforming the financial sector as priority in order to achieve the overall economic transition envisioned by the new government. Under Pillar 4, the World Bank team have been providing intensive support to the CBM in drafting the Banks and Financial Institutions Law. After several years of preparation, this law was enacted by Parliament in January 2016 and will significantly strengthen the legal and regulatory framework for the financial sector in Myanmar, and substantially improve compliance with the international banking standards and norms. The next step is to draft implementing regulations for this law, which will be a top priority of the CBM in 2016. CAMBODIA: FINANCIAL SECTOR DEVELOPMENT TA Grant amount: USD 1,442,600 Project duration: September 2015 – December 2017 Context The Ministry of Economy and Finance (MEF) and the National Bank of Cambodia (NBC) have requested the assistance of the WBG to modernize the financial system with the ultimate goal of building a sound, efficient and inclusive financial system to underpin economic growth and poverty reduction in Cambodia. The financial system provides all of its citizens with the opportunity to save, invest, and get credit from financial institutions to cover their consumption needs or meet unexpected expenses. Furthermore, a larger and more dynamic financial system is needed to support the financing needs of economic actors, from micro-entrepreneurs, small and medium enterprises (SMEs) to large corporations and government institutions. Recognizing the importance of these objectives, MEF and NBC have reached out to the WBG for TAs in a number of areas of financial sector development. Project Objective Based on these requests and dialogue with the WBG financial sector team, TA activity plans to support the MEF and NBC in core areas of financial sector modernization and reform have been developed. The beneficiaries of this proposed TA are financial sector policymakers, regulators and market players in Cambodia in their efforts to build a stable, efficient and inclusive financial system to underpin economic growth and 22 poverty reduction. This program is designed to establish the fundamental components for an effective and efficient financial system in Cambodia and for a financial sector that will support economic stability and growth with inclusion goals of the country. Progress The following activities are proposed for this TA.  Pillar 1: Enhancing and maintaining financial stability o Strengthening prudential regulation and supervision in the banking sector o Strengthening capacity for financial crisis prediction and management o Providing feasibility analysis and recommending a staged approach toward development of deposit insurance system o Completing the ongoing efforts to recommend revisions to the banking and central bank legal framework and related prakas o Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT)  Pillar 2: Increasing system efficiency o Supporting the development of a National Payments Strategy (NPS) and providing advice toward reforming the payments system o Supporting NBC efforts to promote a liquid and efficient inter-bank market o Strengthening the accounting and auditing system  Pillar 3: Promoting inclusion and consumer protection o Supporting the deepening and strengthening of non-bank financial institutions through appropriate regulation and building supervisory skills and knowledge o Promote consumer protection framework in financial system 23 GROWING PARTNERSHIPS An important objective of the WBG and MoSF partnership is leveraging the expertize and capacity of Korean intitutions to support EAP country needs and enhance/deepen the delivery of assistance to the client countries. At the end of 2014 the WBG had already signed 4 formal MOUs towards strengthening the partnership. In 2015, 2 additional MOUs have been signed between WBG and Bank of Korea and the Financial Supervisory Services. All these partners are noted in the chart below. In 2015, as part of the Korea Week celebration commemorating 60 years of WBG and Republic of Korea partnership, these partners came together with the WBG and organized 2 working sessions to discuss areas of mutual interest and show their continued support for this partnership. With the staffing of the Seoul Center in the 2nd half of 2015, several other partnerhships have been explored and progress made in connecting these institutions with specific country needs in the EAP region. The table below lists the connections and partnerships made and progress in leveraging these for supporting client countries. 24 PROGRESS ON PARTNERSHIP ACTIVITIES IN 2015 Korean Partner Subject Partnership Countries All The Seoul Center team connected an expert from BOK with our Cambodia team to provide support to the central bank of Cambodia on financial stability, in the format of a workshop and meetings (though discussion started in 2015, the actual technical assistance mission took place in January 2016) The Seoul Centerteam also participated in a BOK-IMF Conference titled “Leverage in Asia” (December 2015) All The Seoul Center team participated in CIFC’s 2nd International Financial Cooperation Forum, where an F&M staff based in Thailand made a presentation The Seoul Center team will also participate in CIFC’s special workshop in March 2016 to explore more concrete collaborative opportunities with FSC and other members All The FSS secondee in F&M (HQ) is working with the team to develop a Basel II toolkit as part of a TA funded by the KTF. This will be followed by a technical mission in Korea to enhance and plan testing for the toolkit prototype Lao The Seoul Center team had discussions with KAMCO on their interest in working with EAP countries and connected them with F&M Lao team based on their priorities Indonesia KoDIT made a presentation at the WBG HQ The Seoul Center team connected KoDIT with F&M Indonesia team through and audio conference call for an introduction and discussion on Indonesia’s credit guarantee scheme; also explored areas for further cooperation KoDIT may also participate in an upcoming workshop in Africa being organized by F&M’s SME Finance team 25 Korean Partner Subject Partnership Countries EAP The Seoul Center team had preliminary discussions with KoFIU regarding possible partnership to support capacity development in EAP All The Seoul Center team worked with the LLI team to connect KSD’s CEO for a video interview for a Massive Open Online Course (which is now available online on LLI- WBG website) Lao The Seoul Center team connected KDIC to Lao Central Bank and F&M Lao team through an audio conference call regarding a training program on deposit insurance and analysis of financial institutions (FSS may provide support on Basel II) to be organized soon 26 DETAILS OF NEW FORMAL PARTNERSHIPS IN 2015 BANK OF KOREA (BOK) o MOU signed on February 13, 2015 o The objective is to facilitate actions to foster sound and rigorous financial systems in developing countries and carry out collaborative work on mutually agreed areas, substance and approach, with a level of flexibility. The collaborative areas include: a. Deepening financial inclusion; b. Strengthening financial stability and early warning systems; c. Promoting establishment of and improving start-ups/SMEs; d. Building capital markets; e. Improving monetary policy; and f. Managing foreign debt and exchange risks o The prospective modes of collaboration under this MOU would include: a. Technical assistance on the policy areas listed above to national and sub-national authorities in the East Asia and the Pacific region, as well as other regions, to assess and implement necessary initiatives to advance financial sector and markets which will foster efficient real sector growth. b. Providing technical assistance on the policy areas listed above through education, training, workshops/seminars, and other knowledge transfer activities with an aim to support the joint BOK-WB efforts and capacity building activities directed at various stakeholders. 27 FINANCIAL SUPERVISORY SERVICE (FSS) o MOU signed on February 13, 2015 o The objective is to facilitate actions to foster sound and rigorous financial systems in developing countries and carry out collaborative work on mutually agreed areas, substance and approach, with a level of flexibility. The collaborative areas include: a. Improving banking, securities, mutual fund, non-bank finance and insurance supervision; b. Capital market and banking sector development; c. Microfinance and cooperative finance oversight; and d. Consumer protection and financial education. o The prospective modes of collaboration under this MOU would include: a. Technical assistance on the policy areas listed above to national and sub-national authorities in the East Asia and the Pacific region, as well as other regions, to assess and implement necessary initiatives to advance financial sector and markets which will foster efficient real sector growth. b. Providing technical assistance on the policy areas listed above through education, training, workshops/seminars, and other knowledge transfer activities with an aim to support the joint FSS-World Bank efforts and capacity building activities directed at various stakeholders. 28 KTF PROGRAM WORK PLAN 2016-2017 SUMMARY  Allocation of First phase of KTF (ending CY2017) is expected to be completed very soon given that we have a robust pipeline of projects coming online. Given that these comprehensive programmatic engagements span a period longer than the closing of the First phase and given continued strong demand for support from several client countries as well as interest from Korean institutional partners for a longer term partnership, it would be useful to start looking at a second phase of the KTF at the appropriate time (but sooner rather than later to ensure continuity in support).  For the Second phase, looking at some of the lessons from the success of KTF and developments at other WBG country hubs (especially in Malaysia and Austria), it would be important to consider having a more strategic and global perspective centered on financial systems and stability issues in particular, areas where Korea has done very well over the past few years and has strong institutions and capacity. We believe, this will not only give Korea’s engagement a higher profile internationally and distinguishes the Korea program from others in the region (Malaysia) and elsewhere (Austria), but could also allow for drawing more deeply on technical partners in Korea to share experiences more widely. 29 PIPELINE PROJECTS LAOS: FINANCIAL SECTOR DEV ELOPMENT PROGRAMMATI C APPROACH Grant Amount: USD 550,000-700,000 Project Duration: April 2016 – December 2017 Proposal Timing: March 2016 Context Financial sector development is a key priority in Lao PDR’s development agenda. The financial sector authorities currently lack the capacity to properly supervise financial institutions, and monitor and mitigate systemic risks, which threaten financial and macro-economic stability. The financial system is also not adequately meeting the needs of households, the private sector and government institutions. The recent draft World Bank Systematic Country Diagnostic thus proposes restoring financial sector stability as its highest priority. The Development Objective (DO) of this Programmatic Approach (PA) is to promote the development of a more stable and efficient financial sector. This will be achieved through the provision of technical assistance (TA) and advisory services to enhance the capability of financial sector authorities to: identify and manage risks; modernize payment systems and market infrastructure; and upgrade laws and regulations by bringing them in compliance with key international standards. Given the myriad of issues faced by the authorities, there will also be a small allowance for topical TA to be provided to them on a just-in-time basis. The expected intermediate outcomes are (i) enhanced capacity to monitor and mitigate risks (ii) improved financial infrastructure, (iii) strengthened legal and regulatory framework for the financial sector and improved consistency with international financial sector standards, and (iv) a positive impact on financial sector reforms through timely advice on important topical issues. 30 Likely Coverage of KTF Assistance Proposal The F&M programmatic approach in Laos is focused on the following pillars and the KTF will support specific activities (details to be provided in KTF proposal) under these pillars. (i) Enhancing Financial Stability (ii) Modernizing Financial Infrastructure (iii) Upgrading the Legal and Regulatory Framework All activities also include elements geared toward medium term institution building and capacity building of relevant authorities, and laying the foundation for a stable, efficient and inclusive financial sector in Lao PDR. VIETNAM: LEVERAGING CAPITAL MARKETS AND NBFIS FOR DEVELOPMENT Grant Amount: USD 450,000-1,000,000 Project Duration: May 2016 – December 2017 Proposal Timing: March 2016 Context Vietnam has achieved remarkable economic performance since the start of its transition in 1986 including rising levels of formal financial intermediation and deepening. However, several challenges remain to be addressed as noted in the 2012 FSAP report. Reinforcing banking sector soundness is critical given its dominance of the financial system in Vietnam, lessons from the global financial crises, recent developments in Vietnam. Capital markets need to develop in parallel to support long term financing especially for critical investments in infrastructure as well as to diversify the financial system structure in line with emerging needs of the economy. The overall objective of this PA will be to support the development of a modern, sound and inclusive financial system for Vietnam. The key pillars of the PA will be (i) Strengthening Financial Sector Soundness and Stability (ii) Enhancing Financial Inclusion and Infrastructure (iii) Leveraging Capital Markets and NBFIs for Growth and Development Knowledge transfer will part of each discrete engagement under the PA and bring in lessons from global experience to strengthen client institutional and reform implementation capacity (especially relating to compliance with international standards). The WBG focus will primarily be in areas of its comparative 31 advantage and efforts will be made to make sure the work is complementary to engagements of other key development partners and donors. Likely Coverage of KTF Assistance Proposal Developing capital markets is not an easy task, as it involves a large number of players and institutions, as well as complex building blocks, to ensure the efficiency and safety of their operations. The key stakeholders in this market include, banks, insurance funds, pension funds, securities market as well as the bond markets. The engagements under this pillar will develop these complementary segments in appropriate sequence to support long term growth and development. Key discrete activities under this engagement will include: • Bond market roadmap implementation and related capacity building • Securities market related institutional capacity development (including corporate governance) • Insurance Supervisory Agency capacity development • Introduction of private pension The KTF will support specific activities (details to be provided in KTF proposal) focusing on Insurance and Pension as follows. The Insurance sector has experienced two-digit growth over the past decade, however represents a small share of Vietnam financial system (4% of GDP in terms of assets). The sector is faced with many challenges both from the access and soundness angles. The recent FSAP recommended that Vietnam --Consider the adoption of risk-based approach across the entire insurance sector --Implement a development plan to strengthen the supervisory framework and ensure the sound growth --Insurance Supervision Agency (ISA) strengthen its financial resources, develop technical capacity and skills and strengthen its information system. --Develop distribution channels and regulations for distribution. The KTF funding is expected to support a comprehensive support program whose core elements are likely to include (i) advisory support for restructuring insurance companies (ii) supporting the strengthening of the regulatory and supervisory framework and bring it closer to Insurance Core Principles (ICP)s, (iii) providing capacity building support for ISA and industry, (iv) supporting market development through product development The pension system in Vietnam currently consists of an old-age, social security pension managed by the Vietnam Social Security Fund (VSS), with assets amounting to around 6.5% of GDP. Despite high contribution rates (24% for social insurance in total) is facing funding challenges over the medium term (the scheme is estimated to run out of funds in the 2030s). The KTF is likely to support  implementation support for law on voluntary pensions with the aim of introducing more attractive pension saving products for SME employees 32  support to develop private pensions market in Vietnam and to ensure the safe and productive investment of all pension assets in the country  assist the Government in implementing legislative reforms in the area of private pensions. PHILIPPINES: FINANCIAL SECTOR DEVELOPMENT AND INCLUSION Grant Amount (approximate): USD 600,000 Project Duration: July 2016 – December 2017 Proposal Timing: April 2016 Context Philippines financial system is dominated by the banking sector, appears stable and highly liquid. Growth of the banking system and abundant liquidity however are not translating into greater access to financial services. Access to basic financial services for the lower 40% of the population increased from 10% in 2011 to 18% in 2014 but remains low. Lack of access to basic savings, payment and credit services for low income population and MSMEs limits their ability to fully participate in the broader economy, exacerbating inequality and poverty in the Philippines. Lack of effective insurance and retail finance mechanisms also means that financial assistance and risk mitigation for natural disasters can’t be delivered efficiently to the affected populations. ARMM has lowest levels of access to basic financial services in the country. Likely Coverage of KTF Assistance Proposal The overarching objective of the programmatic approach in Philippines is the development of the financial system of the Philippines and increased financial inclusion through (1) the implementation support for the National Strategy for Financial Inclusion and (2) the enhancement of the institutional framework for financial system soundness. The KTF support will be needed to respond to specific client requests to be detailed in formal proposal for KTF. 33 MONGOLIA: FINANCIAL SECTOR DEVELOPMENT Grant Amount: USD 600,000 – 750,000 Project Duration: July 2016 – December 2017 Proposal Timing: April 2016 Context Narrow economic base makes Mongolia highly vulnerable to external shocks: slowdown in China, the main export destination, declining commodity prices and the deteriorating business environment are transmitting to the real economy and to the financial sector.  Exports dropped 36% (y-o-y) during the last 3 months of 2015 amid a deepening minerals market downturn.  External financing conditions keep tightening – benchmark sovereign bond yields soared over 11% in January 2016.  13 commercial banks, 1 development bank, 195 NBFIs, 159 savings and credit cooperatives and 17 insurance companies.  About 95% of financial sector assets are held by banks; banking system is concentrated: top 5 banks account for more than 80% of total assets.  Total assets of banking sector amount to about 90 percent of GDP.  Capital markets remain in early stages of development; the insurance market is small, with a penetration rate of about 0.5 percent of GDP.  First time investment by a foreign bank in the financial sector was allowed only in October 2015.  Banks reportedly well capitalized but the asset quality is deteriorating and banking sector liquidity is hampered by fiscal developments. The F&M program in Mongolia focuses on strengthening financial sector stability; development of capital markets and the non-bank financial sector; improving financial infrastructure and financial literacy; and supporting export diversification.The advisory and analytical work to be structured as a Programmatic Assistance. Likely Coverage of KTF Assistance Proposal The KTF support will be needed to respond to specific client requests (to be detailed in formal proposal for KTF) in the following areas. (i) Financial stability via enhanced regulation/supervision, crisis preparedness, stolen asset recovery (ii) Development of capital markets and the non-bank financial sector (iii) Financial infrastructure and financial literacy / capability (iv) Export finance 34 FOCUS ON PARTNERSHIP AND KNOWLEDGE FOR ENHANCING DELIVERY QUALITY With the operationalization of the Seoul Center (SC) for Financial Sector Development in mid-2015, in the 2016-17 period the SC will be proactively looking to develop a comprehensive partnership, knowledge transfer and knowledge generation program for leveraging the Korean partners’ experience, expertize and institutional capacity. Some of the elements of this program under discussion could include:  Longer-terms engagement and participation of Korean institutions and experts in select KTF programs (e.g. KDIC and possibly FSS long-term training support to the Lao central bank); Systematically pairing Korean institutions with client country work needs  Communication of results of the projects supported with KTF, especially highlighting the value of participation with Korean institutions (e.g. dedicated website, brochures, smart lessons notes, etc.)  KTF and SC – advocacy of value add for client countries and technical teams’ information exchange  Considerations of thematic study tours around key institutions (e.g. multi country workshop around KoDIT and KAMCO expertize)  Global event series (e.g. yearly event on financial stability  moving towards a financial stability and systems hub)  Continued participation and conduct of joint training / workshops  Collaboration with other F&M Hubs to learn and enhance client engagements and Korean institutional knowledge base.  Knowledge generation to curate success of Korean experience including developing research fellow exchange and research program and joint research (both inwards and outwards)  Joint monitoring and evaluation, knowledge sharing, advocacy missions (WBG, MOSF and other key partners as appropriate) A detailed work plan in that regard is under preparation and will be discussed with the MOSF and other partners in March/April 2016. 35 MONITORING AND EVALUATION Monitoring and evaluation are the processes that tell you whether you are achieving the intended results and help you also identify and take corrective actions where needed. Monitoring and evaluation both assess achievements, but their emphases differ: Monitoring is generally an ongoing process of information collection primarily for program management. It tends to focus on activities. Evaluation takes a wider and longer-term view of the entire program and involves less frequent programmatic reviews. It tends to concern itself with outcomes. The three basic steps in the M&E process are listed in the chart below. Each step is important and requires targeted attention. Eight of the KTF funded projects have been recently completed. There is a clear program which has been supported and data has been collated at different levels. However, given the policy and capacity development nature of the engagements, though it is easy to list outputs, measuring and evaluating intermediate and final outcomes and impact can be done only over a longer time horizon. Three Basic Steps in the M&E Process 36 A M&E framework requires focusing on key measurable indicators, be it qualitative or quantitative. Going forward with the 4 projects approved in 2015, we are able to have this discussion during the early stages of development and will be developing an appropriate framework. For the 8 projects already completed we have to, in a way, retrofit a reasonable framework so that we are able to continue to measure outcome and impact in the coming year(s). Causal Causal Chain Linking Inputs to Impact for a Knowledge Sharing Program As a first step it is important to develop a Causal Chain linking inputs to expected impacts. The chart provides an example of such a chain and its different elements for the case of a Knowledge Sharing Program. For the 12 projects supported with KTF, we have prepared a similar chain which is included as Annex 1. As the next step, monitoring indicators need to be established and related data compiled for processing, analysis and synthesis. The Finance and Markets Global Practice has recently developed a set of commonly used indicators though an exercise of reviewing several past projects and with feedback form technical specialists in financial sector as well as M&E and results framework development (Annex 2). Over the next 2-3 months, an appropriate M&E framework will be developed for each of these projects in consultation with the clients and project teams and with feedback from MoSF. 37 ANNEX 1. RESULT CHAIN OF KTF-FUNDED PROJECTS Completed projects PROJECT PROCESS / ACTIVTIES OUTPUTS INTERMEDIATE OUTCOMES OUTCOMES 1) Design a demand-side questionnaire, according to CBRC’s needs, to understand Chinese financial 1) Demand-side survey database on Financial 1) Enhance the CBRC’s capacity to better understand consumers’ consuming behavior and attitude towards Consumer Protection and Financial Literacy financial consumers’ needs; 2) Enhance CBRC staff’s Better protection of the interests of financial services and trainings; 2) Select a consulting China - Financial System; 2) Report on Strengtheing Financial ability to design questionnaires based on financial consumers; promoting firm to conduct a household survey across China; 3) Consumer Protection Consumer Protection in China: A Demand-Side international standards and adapting to the Chinese financial access and competition; and Participate in and monitor the training of enumerators & Financial Literacy Assessment ; 3) Report on Institutional and needs; 3) Enhance the authorities’ capacity to set up maintaining a healthy financial market and translation of English questionnaires; 4) Produce a Legal Framework for consumer Protection in an effective Financial Consumer Protection and conducive to social stability as a whole reporting outline based on the survey results; 5) Financial Services Financial Literacy System Design legal framework for consumer protection in financial services 1) Capacity building process for the OIC to strengthen 1) Technical assistance to strengthen and Thailand - Solvency the RBS and RBC framework for the insurance improve the solvency capital regime for 1) Strengthen the supervisory capacity and tools of Modernized solvency regimes that Modernization and industry; 2) Conduct assessment of the current state insurers in the areas of RBC, ALM, ERM, and the OIC; 2) Assist the OIC to improve RBS and better reflect and measure the risks Risk Based Capital of the capacity of the OIC, the current RBS legal stress testing mechanisms; 2) Training on dynamic solvency regimes (RBC) for the insurance that insurers are exposed to Project framework and data availability, and quality in the OIC actual on-site examinations for one life- and industry and in the insurance industry one non-life insurer 1) Develop representative samples for household surveys; 2) Translate survey instruments into major 1) Baseline data survey on financial capabity local languages; 3) Train survey interviewers; 4) condition in PNG; 2) Project Steering 1) Increase PNG Central Bank’s understanding on Papua New Guinea Deploy regional survey; 5) Collect data and analyze; 6) Committee to provide guidance and final Better policy development planning on financial inclusion (microfinance & SME finance) (PNG) Financial Disseminate final analysis report; 7) Set up Project decision on the project implementation; 3) financial inclusion (microfinance & SME issues; 2) Increase PNG Central Bank’s capacity to Competency Survey Steering Commitee to provide guidance and final Stakeholder workshops and regular Steering finance) issues implement a financial inclusion study decision on the project implementation; 8) Conduct Committee meetings to monitor project stakeholder workshops and meetings to monitor implementation project implementation 1) Analyze the status of regional financial integration 1) Report on the ASEAN Financial Integration; Increasing integration across the capital markets and in the ten ASEAN member countries, focusing on 2) Presentation of key findings to ASEAN banking systems of the ten ASEAN member countries 1) Sustained economic growth and banking and capital markets; 2) Engage in policy member countries; 3) Discussion of future TA  1) More ASEAN banks operating across borders poverty reduction through the dialogue with senior policy makers in ASEAN to discuss East Asia Regional needs particularly for low income countries and providing services to new customers, particularly expansion of investment and financing current gaps and challenges that prevent further Financial Integration (Laos, Myanmar, Cambodia, and Vietnam); 4) low income households and SMEs; 2) New initiatives under the ASEAN agenda for financial financial integration and examine existing regional Participation in specialized working groups in to enable countries to raise debt in neighboring integration; 2) More financial inclusion initiatives; 3) Discuss with stakeholders (ASEAN, ADB, ASEAN including SME FInance, Financial countries and expand funding sources for for low income households and SMEs APEC) as well as a broad range of international Inclusion, and Capital Market Development developmental activities development partners 38 Ongoing projects PROJECT PROCESS / ACTIVITIES OUTPUTS INTERMEDIATE OUTCOMES OUTCOMES Capacity building of the Mongolian capital 1) Report on Mongolia clearing and settlement; 2) markets and regulatory authorities to improve Drafts for Capital Market Strategy & 1) Mongolian authorities have strategy and implementation efficiency and effectiveness, including: 1) Implementation Plan, 7 Investment Fund Law plan that prioritizes and sequences the development Develop a Capital Markets Strategy and regulations, RBS Strategy, draft Intermediaries Mongolia Capital initiatives for the securities and capital markets; 2) Implementation plan; 2) Develop implementing Inspection Procedures and Manual, Mongolia has robust and deep capital Markets Strengthen supervisory and enforcement effectiveness of regulations following the effectivation of the Inspection/Audit workbook to support the markets with effective supervisory and Development the FRC; 3) Improve the efficiency of the supervisory and Securities Markets Law and Investment Funds inspection process and criteria for enforcement regulatory frameworks in place Technical Assistance regulatory framework for the securities market; and (4) Law; 3) Develop a RBS framework and provide under the Securities Markets Law; 3) Dissemination Enhance capacity of FRC, MSE and MOF and contribute to training to regulatory authorities; 4) Produce workshop for the Capital Market Strategy; 4) institutional development of the FRC inspection and enforcement manuals and Training on all new implementing regulations for working papers FRC, MOF and MSE staff 1) Help PBOC draft China’s national framework 1) Increase awareness of the importance of establishing a for evaluating the effectiveness of education system of financial consumer protection and literacy in programs; 2) Advocate the importance of 1) Framework of methodology for evaluating the A National Strategy on Consumer China - Evaluation China; 2) Strengthen the capacity of PBOC to develop a establishing a system of financial consumer effectiveness of financial education programs; 2) Financial Education (NSFE) that can System for Consumer system for evaluating the effectiveness of the NSFE and protection and literacy in China at the workshop Financial Capability Questionnaires; 3) Training contribute to better provision of Financial Education design China's framework of financial education; 3) held by PBOC in Shanghai and less developed workshops financial education in China Stimulate public debate on financial consumer protection regions; 3) Assist PBOC to develop financial and financial education capability questionnaires Some of the ASEAN countries: 1) Have a report that identifies and analyzes the proceeds of crime in the country Self-assessment of the countries using the and the key vulnerabilities of law enforcement agencies to Improved effectiveness to detect illicit National Risk Assessment Tool developed by the investigate and prosecute financial crime; 2) Officially adopt financial flows, investigate and World Bank; assistance to authorities of the National Risk Risk assessment reports, training on evaluation concrete time bound action plan endorsed by the prosecute financial crimes such as requesting authorities of the CLMV and ASEAN Assessment ASEAN methodology best practice government through appropriate processes; and 3) Key corruption, tax evasion, and fraud member states. Such assistance will cover experts from the judicial, law enforcement, financial legislative drafting, capacity building activities regulators and senior policy makers are trained on how to and policy advice identify the money laundering and terrorism financing risks and vulnerabilities Achieve a higher level of compliance Basel Pillar 2 with international standards on capital Development of a supervisory toolkit and testing Supervisory toolkit (Basel Pillar 2 toolkit) for the Help banking supervisors improve the effectiveness of Basel Implementation in parallel with discussions with use of banking supervisors II implementation adequacy Toolkit 1) Pillar 1: Modernizing Financial System 1) Development of CBM-Net and related 1) A more safe, secure and reliable payment system is in 1) Increased percentage of adults with Myanmar – Scaling Infrastructure; 2) Pillar 2: Financial Institution environment; 2) Recommendations for strategies place and operational New Credit Reporting System access to financial services; 2) Improved Up Financial Services Reform and Development; 3) Pillar 3: Digital for state-owned banks; 3) Recommendation for established and operational; 2) Transformation of SOBs financial infrastructure and payments for the Poor Financial Services and Expanading Depth of The CBM and MOF to finalize the Financial Sector into financially-sustainable institutions, with appropriate system; 3) Improved capacity of 39 Financial System; 4) Pillar 4: Legal and Development Strategy; 4) Seminar for CBM and MOF performance monitoring, and improved policy financial institutions to provide efficient Regulatory Framework Reform MOF on upgrading legal and regulatory framework framework and coordination for overall financial sector access to financial services; 4) for CPFL and design of implementation roadmap; 5) development; 3) Government framework for FCPFL Strengthened legal and regulatory Recommendations on how to amend and upgrade strengthened, and innovative financial products developed framework for the financial sector and key laws and regulations; 6) Training for the for the underserved; 4) Strengthened legal, regulatory and improved consistency with international supervisory staff on off-site and on-sight supervisory framework as indicated by increased standards supervision, etc. compliance with international standards and practices 1) Strengthen financial supervisory 1) Financial corrective action framework; 2) 1) Stronger prudential regulation for the banking sector; 2) capacity and improve the enabling Training on risk-based and consolidated Stronger capacity for financial crisis prediction; 3) Stronger environment for financial services in supervision; 3) Financial crisis management capacity for financial crisis management; 4) Increase Cambodia; 2) Reduce the transaction 1) Pillar 1: Enhancing and Maintaining Financial framework; 4) Regulatory framework for deposit Cambodia: Financial awareness of potential benefits and risks involved in costs of finance services by improving Stability; 2) Pillar 2: Increasing System Efficiency; insurance; 5) Amendments of NBC Law; 6) Sector Development developing a deposit insurance system for Cambodia; 5) financial infrastructure; 3) Strengthen 3) Pillar 3: Promoting Inclusion and Consumer Stakeholder strategy-setting to develop a NPS; 7) TA Improved Legal framework and prakas improved for bank and non-bank financial markets; 4) Protection Assessment report of financial infrastructure and banking and central bank; 6) AML/CFT system strengthened Reform the payments system and inter- needs; 8) International good practice guidance on in line with recommendations of 2016 National Risk bank market that will reduce the cost of insurance and microfinance; 9) Consumer Assessment financial intermediation and improve protection framework, etc. market efficiency 40 ANNEX 2. F&M ’S COMMONLY USED INDICATORS FOR MONITORING AND EVALUATION Global Solutions Team 1: Financial Systems and Markets Global Solutions Team 2: Financial Infrastructure and Access Global Solutions Team 3: Finance for Development Financial Sector Oversight and Policy/Banking Regulation and Credit Infrastructures; Payment and Market Infrastructures and Responsible Financial Disaster Risk Finance, Agriculture Finance, Infrastructure Restructuring; Financial Sector Integrity; Capital Markets Regulation and Access; SME Finance Finance, Housing Finance Deepening/Insurance, Pensions and Investment Funds COMMON TO ALL GSTs: Number of recommended laws/regulations/amendments/codes enacted or government policies adopted COMMON TO ALL GSTs: Number of international principles, good practices and standards approved COMMON TO ALL GSTs: Number of laws, etc. proposet to Cabinet for approval COMMON TO ALL GSTs: Number of reforms undertaken by clients in response to reports completed, TA & capacity building events. COMMON TO ALL GSTs: Number of clients complying with relevant international standards Financial Sector Oversight and Policy/Banking Regulation and Consumer Protection: Disaster Risk Finance: Restructuring: Number of specific improvements to legal, regulatory, Number of recommendations of FSAP/ROSCs implemented Number of internal/external dispute resolution mechanisms introduced * technical, and institutional aspects of risk market infrastructure. Number of national and sub-national governments Number of financial supervisory agencies with contingency plans Number of market conduct/transparency or facilitation platforms developed ENABLING ENVIRONMENT with new or enhanced national disaster risk financing strategies Financial Crime: Financial Infrastructure: Volume/proceeds recovered from investigations Number of financial infrastructure reforms Number of sanctions imposed for non-compliance with Improved payment systems AML/corruption prevention mechanism Number of financial prosecutions/investigations Score on Strength of Credit Rights Index Improved compliance with relevant international standards Score on Credit Information Depth Index Number of institutions that are affiliated with international Score on Streghth of Insolvency Framework Index networks (Egmont, FSRBs, Focal Points) Capital Markets: Access/Usage for Financial Services: Number of countries that adopted capital markets strategies Number of countries that adopted financial inclusion strategies Number of countries that adopted CG strategies Number of strategies or comprehensive financial inclusion plans developed Number of countries that adopted NBFI strategies SME Finance: Number of countries that adopted risk policies Volume of Bank Funding: Enabling Environment - Microfinance (US$) Volume of Bank Funding: Enabling Environment - SME (US$) 41 INSTITUTIONAL STRENGTHENING Capital Markets: SME Finance: Disaster Risk Finance: Number of new licenses or certifications issued to operate in the Volume of Bank Funding: Institutional Development - Microfinance (US$) Number of people trained on disaster risk finance securities markets Number of knowledge products on DRFI to support Cost of securities issuance Volume of Bank Funding: Institutional Development - SME (US$) high-level policy dialogue Number of national and sub-national governments Number of days to settle transactions Financial Infrastructure: with disaster risk finance analytical tools to support informed decision making Number of national and sub-national governments Number of total settlements Time to resolve a financial dispute with new or enhanced operational plans for implementing DRFP Number of failed settlements Corporate governance composite score Level of Intermediation: Access/Usage for Financial Services: Disaster Risk Finance: Number of beneficiaries of enhanced disaster risk % of adults with an account at a formal financial institution % of adults with a transactions account financing strategies Number of branches per 100,000 adults % of adults with an account at a formal financial institution GIIF: Insurance/Pensions: Number of branches per 100,000 adults Number of insurance policies outstanding (individuals) Number of life insurance policies % adults with a loan from a formal financial institution in the past year Number of insurance policies outstanding (firms) REACH Number of non-life insurance policies Number of accounts linked to mobile banking systems Number of insurance clients (individuals) Number of adults with access to pensions Number of deposit accounts Number of insurance clients (firms) Average total cost of sending $200 (or equivalent LCU, adjusted for inflation) in a Number of active micro-insurance accounts Housing Finance: corridor (% of amount sent) Number of mortgage loans to low/middle-income Percentage of active micro-insurance accounts held by women Number of e-money accounts for mobile payments groups Capital Markets: SME Finance: Number of investors Number of Loans Outstanding (Microfinance) Number of transactions launched Number of Loans Outstanding (SME Finance) Percentage of outstanding loans to women (Microfinance) 42 Percentage of outstanding loans to women (SME Finance) % of SMEs with an account at a formal financial institution % of SMEs with an outstanding loan/line of credit Number of MSMEs reached through market platforms Number of active micro-savings accounts Percentage of active micro-savings accounts held by women Number of SMEs with access to capital markets Number of Loans Outstanding (Start-ups) Financial Literacy : Financial Behavior: Source of emergency funding Financial Knowledge: Financial knowledge score Financial Infrastructure: Number of retail cashless transactions per capita Number of micro-enterprises that have received loans secured with movable property Number of SMEs that have received loans secured with movable property Number of inquiries received by credit reporting service provider (CRSP) i.e Credit Bureau, Public Registry Financial Sector Stability: SME Finance: Housing Finance: Banking CAR Volume of Bank Funding: Lines of Credit - Microfinance (US$) Mortgage debt/GDP GROWTH Number of years (avg.) since last financial crisis Volume of Bank Funding: Lines of Credit - SME (US$) Mortgage interest rates Financial Sector Efficiency: Outstanding Microfinance Loan Portfolio (US$) Average term of mortgages Banking spread Outstanding SME Loan Portfolio (US$) Value of mortgage loans to low/middle-income groups 43 Banking overhead Outstanding Loan Portfolio (Start-ups) (US$) Disaster Risk Finance: Amount of pre-planned and programmed financial Capital Market Stability: SME Finance - Portfolio Quality: resources available for natural disasters in individual countries. Number of loans, projects, programs incorporating pre- Average tenor of government bonds Portfolio at Risk - Microfinance (%) planned financial mechanisms that can be activated immediately Number following of private a disaster sector-led financial operations or Capital Market Growth: Portfolio at Risk - SME (%) programs Total amount of risk capital provided by the private Turnover ratio Loans at Risk - Microfinance (%) sector Stock market concentration ratio Annual Loan Loss Rate - Microfinance (%) GIIF: Value of equity financing raised/facilitated SME Finance - Financial Sustainability: Value of insurance policies issued to SMEs Value of bond financing raised/facilitated Return on Assets/Equity (%) Value of insurance policies issued to individuals Capital Market Deepening: Adjusted Return on Assets/Equity (%) Insurance policy renewal rate Equity market capitalization/GDP Financial Self-Sufficiency (%) Non- government bonds/GDP Total trading value Insurance/Pensions: Insurance market concentration Insurance penetration Total amount of risk capital provided by the private sector Tier 1 and/or potential SDG Tier 2 and other MOU Corporate strategic area (other than Tier 2), e.g. gender CSI or IDG3 G20 Financial Inclusion Indicators Universal Financial Access (UFA) * This indicator is used by both Consumer Protection and Debt Resolution & Business Exit projects. 44 Source: WBG, Organizational Knowledge Sharing: To improve effectiveness and knowledge sharing. 45