INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No.: ISDSA7213 Public Disclosure Copy Date ISDS Prepared/Updated: 20-Dec-2013 Date ISDS Approved/Disclosed: 07-Oct-2013, 20-Dec-2013 I. BASIC INFORMATION 1. Basic Project Data Country: Colombia Project ID: P145782 Project Name: Third Student Loan Support Project SOP Phase II (P145782) Task Team Janet K. Entwistle Leader: Estimated 08-Oct-2013 Estimated 03-Mar-2014 Appraisal Date: Board Date: Managing Unit: LCSHE Lending Investment Project Financing Instrument: Sector(s): Tertiary education (100%) Theme(s): Education for the knowledge economy (90%), Improving labor markets (10%) Is this project processed under OP 8.50 (Emergency Recovery) or OP No 8.00 (Rapid Response to Crises and Emergencies)? Financing (In USD Million) Total Project Cost: 1915.00 Total Bank Financing: 200.00 Public Disclosure Copy Financing Gap: 0.00 Financing Source Amount Borrower 1715.00 International Bank for Reconstruction and Development 200.00 Total 1915.00 Environmental C - Not Required Category: Is this a Yes Repeater project? 2. Project Development Objective(s) The objective of the Project is to increase student enrollment, graduation and equity in higher education, by: (a) increasing the number of ACCES Student Loans and the ACCES Program’s focus on students from disadvantaged socioeconomic backgrounds and in quality higher education institutions and programs; and (b) enhancing ICETEX’s institutional capacity. 3. Project Description Page 1 of 9 A. Project Components The Project would achieve its development objective through implementation of two components. Public Disclosure Copy Component 1. Student Loans. (Total: US$ 1,903 million; Bank: US$200 million; Government: US $1,703 million estimated). The objective of this component is to increase student enrollment and graduation and improve equity in higher education by increasing the number of new and renewed ACCES student loans provided by ICETEX, and increasingly focusing them on students from socioeconomically disadvantaged backgrounds and quality HEIs and programs. This would also improve the probability of loan repayment, and strengthen ICETEX’s financial soundness. It would finance provision of ACCES Student Loans to eligible students to finance their tuition and subsistence in Eligible HEI to pursue a Pregrado Degree. It would finance loans through ICETEX’s ACCES program for new students pursuing higher education based on the revised allocation method, to be introduced prior to the second semester of the 2014 academic year. Loans would be allocated using the existing method in the first semester of the 2014 academic year. It would also finance loan renewals for students that are continuing their studies. ICETEX would assume the credit risk of the students. Component 2: Institutional Strengthening. (Total: US$12 million; Bank: US$0 million; Government: US$12 million estimated). The objective of this component would be to strengthen ICETEX’s management practices and monitoring of its contracts with HEIs, explore further diversification of financing sources and carry out an impact evaluation in order to enhance ICETEX’s ability to increase student enrollment and graduation and improve equity in higher education. It would have 5 subcomponents. Subcomponent 2.1: Strengthening ICETEX’s loan administration and portfolio management (including loan collection practices) capacity through, inter alia, the development of differentiated Public Disclosure Copy collection strategies based on portfolio risks, and the upgrading of information systems (hardware and software). Subcomponent 2.2: Strengthening ICETEX’s capacity to: (i) monitor HEI Contracts through, inter alia, the use of scorecards and the carrying out of HEI Contracts implementation supervision activities; and (ii) manage the Sustainability Fund. Subcomponent 2.3: Provision of support for ICETEX’s diversification of financial resources through, inter alia, the carrying out of: (i) studies including on alternatives to expand its funding sources and to develop an endowment fund, and on partnerships with the private sector; and (ii) fundraising activities. Sub-component 2.4: The carrying out of: (i) impact evaluations of ICETEX’s student loans, including ACCES Student Loans, on enrollment, graduation, equity and social mobility; and (ii) tracer studies to track employment of HEI graduates that completed their studies and received student loans provided by the Borrower, including ACCES Student Loans. Sub-component 2.5: Provision of support for ICETEX’s overall Project coordination, implementation, and monitoring including, inter alia, the carrying out of audits. Page 2 of 9 B. Project Financing Lending Instrument Public Disclosure Copy At the request of ICETEX, the proposed lending instrument is Investment Project Financing to ensure ICETEX has sufficient cash, at a favorable interest rate, 22.5 year maturity, 6 years grace, and with repayments in local currency linked to each disbursement, to finance student loans offered through the ACCES program. Project Cost and Financing Total Project financing requirements are estimated at US$1,915 million. The Project would be financed as follows: US$200 million through a loan from the Bank, the remaining US$1,715 million by ICETEX. Table 1: Project Cost and Financing Component 1: Student Loans - US$1,903 million, where US$200 million is IBRD Component 2: Institutional Strengthening of ICETEX - US$12 million. C. Series of Project Objective and Phases The Project is Phase II of an ongoing single borrower lending program. The Second Student Loan Support Project APL Phase I, of US$537.3 million, with US$300 million financed by the Bank, was approved by the Board on March 4, 2008 and closed satisfactorily on June 30, 2013. The activities to be financed in Phase II are a natural continuation of those financed in Phase I, thus building on accumulated experience. The Project is expected to close on June 30, 2019. The Program objective of the Series of Projects (SOP) is the same as the PDO of this Project, both of which have been revised based on good practice in formulating a PDO. Public Disclosure Copy D. Lessons Learned and Reflected in the Project Design The Project has been designed taking into consideration and incorporating lessons learned from the Second Student Loan Support Project Phase I (P105164), other similar Bank operations in the region and from other national experiences in the fields of higher education and quality assurance. PDO and indicators. The PDO should be expressed in a way that the objectives are expressed upfront, followed by Project results which are expected to contribute to their achievement. Including PDO indicators in the PDO as a means of achieving Project objectives should be avoided to prevent confusion and clarify aims. PDO indicators should measure progress toward achievement of objectives for the target population, and should be defined in the Results Matrix. When appropriate, it is better to use indicators in absolute numbers rather than rates or percentages which are more difficult to monitor if they depend on census data which is beyond the scope of the Project (i.e. number of students enrolled in tertiary education rather than enrollment rate or number of graduates rather than graduation rates). Under the Project, the three objectives of enrollment, graduation and equity have been clearly spelled out in the PDO and Project indicators in absolute numbers have been chosen carefully to measure each objective. The PDO includes the means through which the Project would contribute to meeting these objectives. A detailed definition of each indicator is in the Results Matrix and is also included in the Operations Manual. Page 3 of 9 Implementation Arrangements. A transfer of responsibility in 2011 for implementing the Second Student Loan Support Project Phase I from a PIU (Project Implementation Unit) to ICETEX improved efficiency and continuity. The absorption of all PIU staff into ICETEX’s operational and Public Disclosure Copy financial units increased ICETEX’s commitment to that project and its sustainability. The institutional arrangements for this Project would be the same; it would continue to be implemented through ICETEX’s existing units rather than through a separate PIU. Financial Terms. The financial terms of the Bank loan under the Second Student Loan Support Project Phase 1 that were developed in close collaboration between the Bank and ICETEX were important to reduce ICETEX’s financial risk: (i) an extended repayment period of 22.5 years plus a 6 year grace period reduced cash flow risk, (ii) loan maturity tied to the timing of Bank disbursements rather than commitments helped ICETEX further manage its cash flow risk; and (iii) conversion to COP (Colombian Pesos) at the time of disbursement minimized exchange rate risk. These financing arrangements are being maintained under the Project. Funds Diversification. Leveraging ICETEX resources with funds from other sources, including municipalities, universities, and/or departments, through alianzas and through the Sustainability Fund has been more successful than raising financing from the private market. Despite ICETEX’s repeated efforts and its good credit rating, the expansion of the funding base through private capital markets has not been as successful. ICETEX has securitized parts of its portfolio through TAEs in the past but government regulation and market conditions have so far prevented bond issuances from being large enough to raise funds inexpensively and efficiently. The Project focuses on ICETEX’s strategy to increase the number of alianzas and the size of the Sustainability Fund, and explore further other funding sources such as public private partnerships, or donations from previous ICETEX recipients through the Friends and Beneficiaries of ICETEX Fund (ABI, Fondo Amigos Beneficiarios de ICETEX). Portfolio Risk. The strengthening of the risk administration system of the implementing agency has been critical to ICETEX achieving internationally recognized credit ratings. Since 2008, the Public Disclosure Copy continuous improvement of ICETEX’s risk management system allowed it to achieve a series of high quality credit accreditations and ratings (ISO [International Organization for Standardization] 9001 in 2008, NTCGP [Norma Técnica Calidad Gestión Pública] 1000 in 2009 and Triple-A credit rating from Fitch Colombia in 2011). Nonetheless, as access of students from socioeconomically disadvantaged backgrounds to ICETEX student loans increases, portfolio risk is also increasing. ICETEX’s management of portfolio risk thus should be further strengthened through additional measures to lower the risk of nonrepayment. The student allocation model, under development for introduction in May 2014, would contribute to ICETEX’s risk reduction strategy by introducing for the first time the risk of nonrepayment as one factor in credit allocation, in accordance with international best practices in financial institutions. Improving HEI Quality. Collaboration between the MEN’s Vice Ministry for Higher Education and ICETEX is critical to increasing the number of accredited HEIs. The CAN, under MEN’s Vice- ministry of Higher Education, sets accreditation standards and works directly with HEIs to develop and implement improvement plans critical to accreditation. ICETEX’s contracts with HEIs provide an opportunity for ICETEX to also influence HEI quality that could lead to accreditation, if coordinated with MEN’s Vice-ministry for Higher Education. Under the Project, ICETEX would develop and systematically monitor through scorecards, with input from the Vice-ministry of Higher Education (VES, Viceministerio de Educación Superior), key variables critical to put HEIs on a path to accreditation, such as the dropout rate, and the number of accredited programs in a given HEI. Page 4 of 9 The student loan allocation formula would continue to be ICETEX’s primary tool for directing student loans to students in accredited institutions, those providing an incentive to HEIs to embark on a path to accreditation. Public Disclosure Copy 4. Project location and salient physical characteristics relevant to the safeguard analysis (if known) Colombia is a large and diverse country, home to many ethnic and indigenous groups. According to the latest report by DANE (National Statistics Department), there were 87 indigenous groups in Colombia as of 2005, comprising 3.3% of the total Colombian population. Afro-Colombians make up around 10.3% of the population. The average age for the indigenous and Afro-Colombian population is lower than the national average; the distribution is especially skewed towards the bottom of the pyramid, thus making the indigenous and Afro-Colombian school and college-aged cohorts larger relative to the rest of the age groups. The school attendance levels for these two groups are much lower than the national average: In 2005, whereas nationwide school attendance for 2-17 year olds was 77.8%, the figure was 58.8% and 77.1% for indigenous peoples and Afro-Colombians respectively. Attendance is equally low for 18-24 year olds, with only 16.9% of the indigenous population and 27.1% of Afro-Colombians currently attending school or higher education institutions, compared to 27.1% nationwide. 5. Environmental and Social Safeguards Specialists Carlos Alberto Molina Prieto (LCSSO) 6. Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ No This policy is not triggered as the nature and BP 4.01 scope of the Project activities are not expected to generate adverse environmental impacts. Natural Habitats OP/BP 4.04 No This policy is not triggered since no impact is expected on natural habitats. Public Disclosure Copy Forests OP/BP 4.36 No This policy is not triggered given that the Project will not finance activities that affect forests. Pest Management OP 4.09 No This policy is not triggered because the Project will not finance the purchase or use of pesticides. Physical Cultural Resources OP/ No The policy is not triggered because there are no BP 4.11 Project activities that will impact the quality or management of physical cultural resources as defined under the policy. Indigenous Peoples OP/BP 4.10 Yes The policy is triggered because indigenous peoples (and Afro-Colombians, Roma and victims of violence) are present in the Project area and could benefit from improved targeting systems for higher education financing. A social assessment analyzed the performance of the existing IPP and the program in reaching indigenous peoples, Afro-Colombians, Roma and victims of violence and identified measures Page 5 of 9 to improve access and graduation for these groups. Public Disclosure Copy Based on the social assessment, an IPP was prepared (La Educación Superior en Colombia en Población de Grupos Étnicos y Víctimas y Plan de Acciones Afirmativas), which focused on further strengthening ICETEX’s capacity to successfully tailor to the needs of indigenous, Afro-Colombian and Roma students as well as victims of violence. The IPP was consulted with relevant national indigenous, Afro-Colombian, Roma, and victims’ organizations and was revised to incorporate their feedback and recommendations accordingly and in line with the Project’s scope. The draft IPP, satisfactory to the Bank, was disclosed on ICETEX’s website and the Bank’s website on October 7, 2013 prior to appraisal. Once the feedback and recommendations from the consultations were incorporated, a final IPP (La Educación Superior en Colombia en Población de Grupos Étnicos y Víctimas y Plan de Acciones Afirmativas) was disclosed on ICETEX’s website and the Bank’s website on December 20, 2013. Involuntary Resettlement OP/BP No This policy is not triggered because the Project Public Disclosure Copy 4.12 activities will not require the involuntary taking of land that would result in the impacts covered under OP 4.12. Safety of Dams OP/BP 4.37 No The policy is not triggered because the Project will not support the construction or rehabilitation of dams nor will it support investments which rely on the operation of existing dams. Projects on International No The policy is not triggered since the Project will Waterways OP/BP 7.50 not affect any international waterways as defined under the policy. Projects in Disputed Areas OP/BP No The policy is not triggered because the Project 7.60 will not affect disputed areas as defined under the policy. II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts: Page 6 of 9 The Project aims to break down barriers to access to tertiary education, including to ethnic groups. Whereas the probability of negative impacts is considered low, the following issues should be kept in mind during implementation : (i) the risk of creation of false expectations or misinformation Public Disclosure Copy among these minorities of the scope and timing of benefits that they will receive from the Project, and in particular from the Indigenous Peoples Plan, (ii) the risk that activities adopted by the Universities within the IPP are considered marginal, and fail to address the systematic barriers to access, retention, and pertinence of higher education for Indigenous peoples. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: From a social safeguards perspective the only potential long term indirect impact related to the Project would be if the increased access and opportunities for indigenous peoples, Afro- Colombians, Roma and victims of violence to study in Universities were to result in a human resource drain from Indigenous territories and a cumulative and gradual loss of cultural identity. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. Not relevant. 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. ICETEX prepared a Social Assessment and an IPP (La Educación Superior en Colombia en Población de Grupos Étnicos y Víctimas y Plan de Acciones Afirmativas). The Social Assessment provides an overview of the indigenous, Afro-Colombian, Roma and victim populations,including the main challenges each group faces. The Plan draws on the lessons learned from the Second Student Loan Support Project APL Phase I and from the best practices to increase access, retention and graduation of indigenous, Afro-Colombian, Roma and victim populations of five universities. ICETEX would promote that HEIs design and implement a specific strategic affirmative action plan for indigenous peoples, Afro-Colombians, Roma and victims of violence, with a special emphasis on reducing dropout rates for these populations. ICETEX would also promote the Public Disclosure Copy creation of a Retention Committee for each HEI that focuses on the specific needs and problems of its indigenous, Afro-Colombian, Roma and victim population, and that is in charge of designing strategies to improve access for these minorities. To share knowledge, ICETEX would also review and compile lessons learned to draft a guiding document with best practices to disseminate among HEIs. ICETEX has a strong track record of success and has shown ample capacity to design and implement differentiated strategies for minorities. ICETEX has funds specifically for student loans for ethnic groups and victims: The Fondo Álvaro Ulcué Chocué, established in 1990, is financed by the Government and funds student loans for the indigenous population, whereas the Fondo de Comunidades Negras focuses on Afro-Colombians. Additionally, the Fondo de Reparación para el Acceso, Permanencia y Graduación en Educación Superior para la Población Víctima del Conflicto Armado targets victims of violence. Demand for loans from these funds has increased in recent years, but the supply of loans depends on Government funding, which may fluctuate from year to year; although the regularity of Government transfers has improved since 2010, ICETEX has chosen to focus on increasing access for minorities through the ACCES credit line, as a way to decrease variance in loan allocation and allow for loan growth to follow the increase in demand. Through ACCES, the percentage of student loans allocated to Afro-Colombians have jumped by 143% from 2009 to 2012, and loans given to indigenous peoples have increased by 102%. Page 7 of 9 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. In regards to consultation, the social assessment and IPP (La Educación Superior en Colombia en Public Disclosure Copy Población de Grupos Étnicos y Víctimas y Plan de Acciones Afirmativas) have been finalized based on inputs from a workshop with 15 indigenous, Afro-Colombian and Roma national and local organizations, 4 Afro-Colombian and indigenous members of the legislature, university officials from 3 universities, indigenous students from 3 universities, and government representatives from 6 institutions. A total of 35 stakeholders participated. The following organizations were represented: i) Indigenous: Organización Nacional Indígena de Colombia, Organización de los Pueblos Indígenas de la Amazonía Colombiana, Autoridades Indígenas de Colombia, Confederación Indígena Tayrona, Cabildo Nasa, Yanacona, Pijao; ii) Afro-Colombian: Cimarrón, CNOA, Afrodés, Amuafroc, Asociación de Mujeres Indígenas y Campesinas del Chocó, Asociación Multiétnica para la Mujer Colombiana and Somos Afro; iii) Roma: ProRom; iv) Indigenous and Afro-Colombian members of the Senate, Chamber of Deputies and Afro- Colombian Congressional Caucus; v) Universities: U. Nacional Abierta y a Distancia, U. Externado, and U.T. del Chocó; Indigenous and Afro-Colombian student representatives from the following universities: U. Distrital, U. Pedagógica, U. de los Andes; vi) Government institutions: Ministry of the Interior, Vice-Ministry of Higher Education, Presidential Program for Strategies Targeting Afro-Colombian, Black, Palenquera and Raizal Populations, Presidential Program for Strategies Targeting Indigenous Peoples, Department of Quibdó and Department of Chocó. B. Disclosure Requirements Indigenous Peoples Development Plan/Framework Date of receipt by the Bank 18-Dec-2013 Date of submission to InfoShop 20-Dec-2013 "In country" Disclosure Colombia 20-Dec-2013 Public Disclosure Copy Comments: The draft IPP, satisfactory to the Bank, was disclosed on ICETEX’s website and the Bank’s website on October 7, 2013 prior to appraisal. Once the feedback and recommendations from the consultations were incorporated, a final IPP (La Educación Superior en Colombia en Población de Grupos Étnicos y Víctimas y Plan de Acciones Afirmativas) was disclosed on ICETEX’s website and the Bank’s website on December 20, 2013. If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: C. Compliance Monitoring Indicators at the Corporate Level OP/BP 4.10 - Indigenous Peoples Has a separate Indigenous Peoples Plan/Planning Framework Yes [ ] No [ ] NA [ ] (as appropriate) been prepared in consultation with affected Indigenous Peoples? If yes, then did the Regional unit responsible for safeguards or Yes [ ] No [ ] NA [ ] Sector Manager review the plan? Page 8 of 9 If the whole project is designed to benefit IP, has the design Yes [ ] No [ ] NA [ ] been reviewed and approved by the Regional Social Public Disclosure Copy Development Unit or Sector Manager? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the Yes [ ] No [ ] NA [ ] World Bank's Infoshop? Have relevant documents been disclosed in-country in a public Yes [ ] No [ ] NA [ ] place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional Yes [ ] No [ ] NA [ ] responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included Yes [ ] No [ ] NA [ ] in the project cost? Does the Monitoring and Evaluation system of the project Yes [ ] No [ ] NA [ ] include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed Yes [ ] No [ ] NA [ ] with the borrower and the same been adequately reflected in the project legal documents? III. APPROVALS Task Team Leader: Name: Janet K. Entwistle Approved By Public Disclosure Copy Sector Manager: Name: Barbara Bruns (SM) Date: 20-Dec-2013 Page 9 of 9