The World Bank Comoros Financial Inclusion and Stability Project (P166193) Environmental and Social Review Summary Concept Stage (ESRS Concept Stage) Public Disclosure Date Prepared/Updated: 05/02/2019 | Report No: ESRSC00504 May 03, 2019 Page 1 of 9 The World Bank Comoros Financial Inclusion and Stability Project (P166193) BASIC INFORMATION A. Basic Project Data Country Region Project ID Parent Project ID (if any) Comoros AFRICA P166193 Project Name Comoros Financial Inclusion and Stability Project Practice Area (Lead) Financing Instrument Estimated Appraisal Date Estimated Board Date Finance, Competitiveness Investment Project and Innovation Financing Borrower(s) Implementing Agency(ies) Ministry of Finance, Banque Centrale des Budget, Economy & Comores Planning Proposed Development Objective(s) Public Disclosure To increase access to and usage of digital payments and other financial services, including for women, while strengthening the institutional capacity and framework to promote financial stability and integrity. Financing (in USD Million) Amount Total Project Cost 15.00 B. Is the project being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF Policy, para. 12? No C. Summary Description of Proposed Project [including overview of Country, Sectoral & Institutional Contexts and Relationship to CPF] This project is designed to support financial sector development that is consistent with inclusive growth. Specifically, the project aims “To increase access to and usage of digital payments and other financial services, including for women, while strengthening the institutional capacity and framework to promote financial stability and integrity” through investments and support to improve payment systems, access to financial services, and institutional capacity of the supervisor to promote financial sector stability and integrity. Component 1 supports investments in an Automated Transfer System (ATS) and a national retail payment switch, along with supporting investments such as connectivity and a core banking system for BCC, to improve payments efficiency, facilitate the digitization of May 03, 2019 Page 2 of 9 The World Bank Comoros Financial Inclusion and Stability Project (P166193) payments, and promote interoperability amongst financial service providers. Component 1 will also help increase access to and usage of financial services (including basic transaction accounts and digital financial services) through supporting financial literacy and bringing together financial sector stakeholders to ensure that the project and its investments, along with the various stakeholders and regulators, are responsive to the sector’s needs. Minor rehabilitation of BCC Data Center emergency room and an emergency site installation of back-up generator on BCC premises could be conducted under this component. Component 2 aims to enhance financial stability and integrity. On stability, the project will finance a supervision application and IT platform for financial surveillance, a resident advisor for supervision, upgrading the public credit registry, and TA to build financial institutions’ knowledge of regulations. On integrity, among others, it will support capacity building on compliance with the AML/CFT framework and supervision, legal reforms to ensure transparency of legal structures and beneficial ownership, and TA for the reinforcement of the financial analysis of suspicious transactions and for the Financial intelligence unit, including training of financial analysts. Component 3 will support project management and consultants to support project implementation. D. Environmental and Social Overview D.1. Project location(s) and salient characteristics relevant to the ES assessment [geographic, environmental, social] The project will be implemented in the three small islands of the Union of the Comoros, which are Ngazidja, Mwali, and Ndzouani. Union of the Comoros is an island nation with an estimated population of 832,347 in 2018, of which half of the population is under the age of 15. Typical of small island states, Comoros faces geographical isolation, is densely populated, and has limited resources, a small domestic market, a narrow export base, and a high dependence on food imports and remittances. In comparison with most African countries, Comoros is relatively homogeneous in Public Disclosure ethno-linguistic and religious terms. Nevertheless, there are significant socio-cultural differences in Comorian society (mainly between the three islands) that constrain national solidarity and reinforce inter-island political and economic competition. The majority of project activities will be conducted at the BCC headquarters in the capital city of Moroni located on the island of Ngazidja. D. 2. Borrower’s Institutional Capacity The Ministry of Finance (MOF) will be the signatory of the IDA Credit, but the Banque Centrale des Comores (BCC) will be the governmental entity responsible for project implementation. The Project Management Unit (PMU) will be the structure already in place at the BCC. The BCC does not have any capacity in Environmental and Social Framework (ESF). Furthermore, a detailed assessment of BCC’s capacity, as a project management unit, will be conducted prior to appraisal. Given the expanded scope of the ESF and the client’s unfamiliarity with the new ESF, a capacity building training is planned during project preparation for the Borrowers institutional capacity to implement under the new ESF is weak. Any capacity gaps/ strengthening measures for the implementation of the Environmental and Social Standards will be captured in an Institutional Capacity enhancement plan as part of the Environmental and Social Commitment Plan (ESCP). Under the supervision of the Ministry of Environment, the Directorate General of Environment (DGE) is responsible of environmental legislation and the implementation of regulations relating to environmental and social impact assessments in the Comoros. It is supported by the Inter-Ministerial Committee on the Environment. There is noted enforcement problem with the environmental law and its implementing decree due to the lack of financial and human resources of the department and political will. In addition, national environmental regulations mainly target large investments that are very few and/or non-existent in the country. II. SCREENING OF POTENTIAL ENVIRONMENTAL AND SOCIAL (ES) RISKS AND IMPACTS May 03, 2019 Page 3 of 9 The World Bank Comoros Financial Inclusion and Stability Project (P166193) A. Environmental and Social Risk Classification (ESRC) Low Environmental Risk Rating Low The environmental risk classification for the Project is Low under the World Bank ESF because there is negligible or minimal environmental risks or impacts associated with the project and negligible impacts likely to be generated from the project activities, which are limited to installation of servers, IT equipment and a backup generator that are anticipated to result in minor risks to occupational health and safety. The outputs of the TA activities are not expected to result in environmental impacts. The project will support operations of a data center and emergency site for BCC which will need to be managed for energy efficiency, however resource efficiency risks and impacts are expected to be minimal. Low MoF ESF capacity is not considered as substantial risk factor, considering the nature and scale of the environmental risks of the project. Social Risk Rating Low The social risk classification for the Project is low under the World Bank ESF because the social risks associated with and impacts likely to be generated from the project activities are likely to be minimal or negligible. It is expected that these project activities will have essentially positive social impacts to reduce population vulnerability and security through the improvement of the financial system and services with the sectoral reform in particular to provide access to basic transaction accounts to farmers in order to improve access to capital. In fact, the project will contribute to improve population security in their localities with the payments system in Comoros which is predominated by using of cash across all sectors of society and the economy . Since the project will only support minor rehabilitation and the identified site to installing the backup generator is not occupied by the local population, there are no identified key Public Disclosure social risks related to land access, community health, cultural heritage. One potential risk is the potential exclusion of vulnerable groups from fully participating/benefiting from access to and usage of financial services (under component 1). This will be addressed by incorporating specific measures in the project design. B. Environment and Social Standards (ESSs) that Apply to the Activities Being Considered B.1. General Assessment ESS1 Assessment and Management of Environmental and Social Risks and Impacts Overview of the relevance of the Standard for the Project: Concept stage E&S screening of the project included review of the project concept. The screening has concluded that the project does not involve activities that have significant risk or could generate significant and irreversible environmental or social impacts. The aim of the project is to strengthen the financial sector with reform to update legal and regulatory frameworks and technical assistance with financing of equipment and material. No key environmental and social risks have been identified aside from management of project workers, occupational health and safety and resource efficiency related to installation of a backup generator, servers and IT equipment, and operation of a data center. One of the sub components of the project is to provide access to basic transaction accounts to farmers in order to improve access to capital, provide better instruments for agricultural sector for farmers/improved incomes & reduce reliance on cash. While improving small holder farmers and co-operatives is a key goal of this project, one of the risks is the potential neglect of vulnerable groups like women, people with disabilities, or people in remote areas who may have limited access to land rights but actively participate in agricultural activities. The project will develop specific mechanisms to include vulnerable groups and other landless stakeholders who lack financial services but participate in the agricultural sector and seek ways to include them in the May 03, 2019 Page 4 of 9 The World Bank Comoros Financial Inclusion and Stability Project (P166193) project design. The identification and inclusion of vulnerable groups may be carried out particularly through the stakeholder engagement as provided in the stakeholder engagement plan. BCC will prepare a checklist EMP to manage risks related to the installation of the generator and equipment and conduct an energy audit and prepare an energy efficiency plan to address resource efficiency related to the operation of the data center. Areas where reliance on the Borrower’s E&S Framework may be considered: Not applicable ESS10 Stakeholder Engagement and Information Disclosure Stakeholder engagement is a critical tool for social and environmental risk management, project sustainability and success. Project activities require real commitment of different stakeholders. In its component 1.1. the project plans to establish a National Payment Council and a formalized collaboration between the telecom regulator and BCC. Success of such collaboration requires identification of the clear interests of all parties and the implementation of accountability system, as well as the establishment of an effective monitoring mechanism which is often missing in the implementation of previous projects. In consultation with the Bank, the BCC will prepare and implement Stakeholder Engagement Plan (SEP) which involve all identified stakeholder of the project, including most influential stakeholders as well as most vulnerable. The Stakeholder analysis will ensure that groups are classified based on the extent of impacts and their potential effects on the different stakeholder groups. A draft of the SEP will be prepared and disclosed as early as possible and prior to Appraisal. The client will seek stakeholder feedback and opportunities for proposed future engagement, ensuring that all consultations are inclusive and accessible (both in format and location) and through channels that are suitable in the local context. If major changes are made to the SEP, a revised Public Disclosure SEP should be publicly disclosed. The borrower will engage in meaningful consultations with all stakeholders throughout the project life cycle paying particular attention to the inclusion of vulnerable and disadvantaged groups. BCC will provide stakeholders with timely, relevant, understandable and accessible information, and consult with them in a culturally appropriate manner, which is free of manipulation, interference, coercion, discrimination and intimidation. As part of the environmental and social assessment the BCC will maintain, and disclose, a documented record of stakeholder engagement, including a description of the stakeholders consulted, a summary of the feedback received and a brief explanation of how the feedback was taken into account, or the reasons why it was not. Grievance mechanism (GM). The project will develop a project specific GM, proportionate to the potential risks and impacts of the project. The GM will be designed at an early stage and will be formally established. Complaints received and resolved will be reviewed during the implementation support missions. B.2. Specific Risks and Impacts A brief description of the potential environmental and social risks and impacts relevant to the Project. ESS2 Labor and Working Conditions Project workers are expected to include the PIU and its consultants, and contrated workers. The Union of Comoros has a clear legal framework governing the right of all workers (the law of 18 February 1984 which established the Labor Code). This code preserves the worker's essential interests (trade union rights, employment contract, health and safety). The project intends to set up a Project Management Unit while also providing for the recruitment of several consultants to carry out its activities. The project does not, however, provide for construction activities that require the mobilization of significant labor. The recruitment of workers and PIU staff will be guided by national law May 03, 2019 Page 5 of 9 The World Bank Comoros Financial Inclusion and Stability Project (P166193) and procedures that govern civil servants. The Labor Management Procedures (LMP) will set out measures to ensure compliance with the ESF for all project workers. The administration in the Comoros is reputed for recruitments tainted with a system of favoritism, nepotism and conflict of interest. The employment of project workers will be based on the principle of equal opportunity and fair treatment, and non- discrimination with respect to any aspects of the employment relationship, such as recruitment and hiring, compensation (including wages and benefits), working conditions and terms of employment, access to training, job assignment, promotion, termination of employment or retirement, or disciplinary practices. ESS3 Resource Efficiency and Pollution Prevention and Management Relevance of this ESS will be further discussed and assessed during project preparation. The project does not expect to finance any civil works or other activity which use or production of chemical products, or development and emissions of hazardous and non-hazardous chemical pollutants in the solid, liquid, or gaseous phases, nuisance odors, noise, vibration, radiation, electromagnetic energy, and the creation of potential visual impacts. To manage resource efficiency risks and impacts, BCC will conduct an energy audit and prepare and implement an energy efficiency plan for operation of the data center. (cf ESS1) ESS4 Community Health and Safety The relevance of this ESS will be further discussed and assessed during project preparation. The project is not expected to have activity which will have potential risks for community health and safety. Public Disclosure ESS5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement The relevance of this ESS will be further discussed and assessed during project preparation. At this stage, the project does not have any components that require the construction of physical assets or associated land acquisition or resettlement, either temporary or permanent. ESS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources This standard is not currently relevant to the project. The project will not finance activities which could impact forests or other natural resources. ESS7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities This standard is not relevant. Based on information available at concept stage, there are no groups that meet the ESF criteria for Indigenous Peoples/Sub-Saharan Historically Underserved Traditional Local Communities in the project area of influence. ESS8 Cultural Heritage May 03, 2019 Page 6 of 9 The World Bank Comoros Financial Inclusion and Stability Project (P166193) The relevance of this ESS will be further discussed and assessed during project preparation. At this stage, since there will not be any civil works, there insufficient information to understand if there are any potential risks or impact of the project on cultural heritage. ESS9 Financial Intermediaries At this stage there are no sufficient information related to financial intermediaries in the project. Relevance of this ESS will be further discussed and assessed during project preparation. C. Legal Operational Policies that Apply OP 7.50 Projects on International Waterways No OP 7.60 Projects in Disputed Areas No III. WORLD BANK ENVIRONMENTAL AND SOCIAL DUE DILIGENCE A. Is a common approach being considered? No Financing Partners Public Disclosure At this stage of project preparation, the financing arrangements does not include other partners. Should this change as preparation progresses the ESRS will be updated at appraisal stage. B. Proposed Measures, Actions and Timing (Borrower’s commitments) Actions to be completed prior to Bank Board Approval: Actions to be completed prior to Bank Board Approval: - Designation of focal point on safeguard for the project; - Preparation, consultation and disclosure of Environmental and Social Commitment Plan (ESCP) - Preparation, consultation and disclosure of Stakeholder Engagement Plan (SEP) including Project Grievance mechanism (GM) - Preparation, consultation and disclosure of Labor Management Procedures Possible issues to be addressed in the Borrower Environmental and Social Commitment Plan (ESCP): The Project Management Unit (PMU) at the Banque Centrale des Comores BCC is relatively unfamiliar with the new ESF and has limited capacity in its implementation. Therefore , a capacity building training / strengthening measures for the implementation of the Environmental and Social Standards will be captured in an Institutional Capacity enhancement plan as part of the ESCP. Other activities to be addressed would possibly include: - Checklist EMP prior to any installation activity - Conducting energy audit on data center and preparation and implementation of energy efficiency plan May 03, 2019 Page 7 of 9 The World Bank Comoros Financial Inclusion and Stability Project (P166193) - Update and implementation of Stakeholder Engagement Plan (SEP) - Establishment of, update and implementation of GRM - Conduct of periodic (annual) Beneficiaries' Feedbacks on the project - Implementation of Labor Management Plan C. Timing Tentative target date for preparing the Appraisal Stage ESRS 12-Jun-2019 IV. CONTACT POINTS World Bank Contact: Paul-Jean Feno Title: Senior Environmental Specialist Telephone No: 5339+6003 / Email: pfeno@worldbank.org Contact: Andrianjaka Rado Razafimandimby Title: Social Development Specialist Telephone No: 5339+6092 Email: arazafimandimby@worldbank.org Contact: Mario Rizzolio Title: Consultant Public Disclosure Telephone No: Email: mrizzolio@worldbank.org Borrower/Client/Recipient Borrower: Ministry of Finance, Budget, Economy & Planning Implementing Agency(ies) Implementing Agency: Banque Centrale des Comores V. FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects VI. APPROVAL Task Team Leader(s): Safeguards Advisor ESSA Nathalie S. Munzberg (SAESSA) Cleared on 01-May-2019 at 15:46:59 May 03, 2019 Page 8 of 9 The World Bank Comoros Financial Inclusion and Stability Project (P166193) Practice Manager Douglas Pearce (PMGR) Concurred on 02-May-2019 at 20:06:15 Public Disclosure May 03, 2019 Page 9 of 9