Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 78745-MNA

PROJECT PAPER

FOR

SMALL RETF GRANT(US$ 600,000 MILLION)

TO THE

CENTRE OF ARAB WOMEN FOR TRAINING AND RESEARCH

FOR AN

ENHANCING MICROFINANCE AMONGST WOMEN AND YOUTH IN MENA PROJECT

July 24, 2013

Finance and Private Sector Development UnitMiddle East and North Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS(Exchange Rate Effective July 23, 2013)

Currency Unit = EG PoundsEGP 1 = US$0.14

US$1 = EGP 7

Currency Unit = DirhamsMAD 1 = US$0.12US$1 = MAD 8.44

Currency Unit = Dinar1TND = U.S. $ 0.60U.S. $1 = 1.66 TND

FISCAL YEAR 2014Egypt

July 1 – June 30

Morocco and TunisiaJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMS

ABA Alexandria Business AssociationAMC Associations de Micro-CréditBAM Bank Al-MaghribBDS Business Development ServicesCAWTAR Center of Arab Women for Training and ResearchCGAP Consultative Group to Assist the PoorCM6 Centre Mohammed VI Pour la Microfinance SolidaireCPS Country Partnership StrategyEAP East Asia and the PacificECA Eastern Europe and Central AsiaED Executive DirectorFM Financial ManagementIBRD International Bank of Reconstruction and DevelopmentIC Individual ConsultantsIDA International Development AssociationIFC International Finance CorporationIFI International Financial InstitutionIMF International Monetary FundISN Interim Strategy NoteLAC Latin America and the CaribbeanJ-PAL Jameel Latif Poverty Action LabLMI Lower Middle IncomeMIX Microfinance Information ExchangeMDTF Multi-Donor Trust FundMENA Middle East North AfricaMENA FPD Middle East North Africa Financial and Private Sector Development UnitM&E Monitoring and EvaluationMFIs Microfinance Institutions

MSMEs Micro, Small, and Medium-Sized EnterprisesOM Operations ManualPDO Project Development ObjectivePIS Project Implementation SchedulePREM Poverty Reduction and Economic ManagementPP Procurement PlanPS Procurement SpecialistTOT Training of TrainersSME Small to Medium-Sized EnterprisesTA Technical AssistanceTF Trust FundWBG World Bank Group

Regional Vice President: Inger AndersenCountry Director: Simon Gray, Hartwig Schafer

Sector Director: Loic ChiquierSector Manager: Simon C. Bell

Task Team Leader: Teymour Abdel Aziz, Peter McConaghy

MIDDLE EAST AND NORTH AFRICAEnhancing Microfinance Amongst Women and Youth in MENA Project

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT.................................................................................................1

A. Regional Context...........................................................................................................1B. Sectoral and Institutional Context.................................................................................2C. Higher Level Objectives to which the Project Contributes...........................................6

II. PROJECT DEVELOPMENT OBJECTIVES................................................................6

A. Project Development Objectives...................................................................................6Project Beneficiaries......................................................................................................7Project Indicators...........................................................................................................7

III. PROJECT DESCRIPTION..............................................................................................8

A. Project Components.......................................................................................................9B. Project Financing.........................................................................................................10

Instrument....................................................................................................................10Project Cost and Financing..........................................................................................10

C. Program Objective and Phases....................................................................................11D. Lessons Learned and Reflected in the Project Design.................................................11

IV. IMPLEMENTATION.....................................................................................................12

A. Institutional and Implementation Arrangements.........................................................12B. Results Monitoring and Evaluation.............................................................................14C. Sustainability...............................................................................................................14

V. KEY RISKS AND MITIGATION MEASURES..........................................................14

A. Risk Ratings Summary Table......................................................................................14B. Overall Risk Rating Explanation.................................................................................15

VI. APPRAISAL SUMMARY..............................................................................................15

A. Technical Assessment..................................................................................................15B. Procurement Assessment.............................................................................................16C. Financial Management Assessment.............................................................................16D. Other Safeguards Policies Triggered...........................................................................17

Annexes

Annex 2: Implementation Arrangements.......................................................................................21Annex 4: Simplified Operational Risk Assessment Framework (ORAF).....................................35Annex 3: Project Budget................................................................................................................38Annex 4: Simplified Operational Risk Assessment Framework (ORAF) ....................................43Annex 5: References and Further Reading....................................................................................46

DATA SHEETMiddle East and North Africa (Morocco, Tunisia, and Egypt)

Enhancing Microfinance Amongst Women and Youth in MENA Project

Small RETF Grant Project Paper.

MENAFinance and Private Sector Development (MNSFP)

.

Basic InformationDate: July 24, 2013 Sectors: Microfinance (100%)

Country Directors: Simon Gray – Tunisia, MoroccoHartwig Schafer - Egypt

Themes: MSME (40%)Financial Consumer Protection and Financial Literacy (30%)Other Financial Sector Development (30%)

Sector Manager/Director: Simon C. Bell/Loic Chiquier EA Category: C - Not Required

Project ID: P144655

Instrument: Investment Project Financing

Team Leader(s): Teymour Abdel AzizPeter McConaghy

.

Recipient Center of Arab Women for Training and Research (CAWTAR)

Executing Agency: Center of Arab Women for Training and Research (CAWTAR)

Contact: Dr. Soukeina Bouraoui Title: Executive Director

Telephone No.: 0021671773511 Email: cawtar@cawtar.org.

Project Implementation Period: Start Date: July 24, 2013 End Date: June 30, 2014

Expected Effectiveness Date: July 24, 2013

Expected Closing Date: December 31, 2014.

Project Financing Data(US$M)[ ] Loan [ x] Grant [ ] Other

[ ] Credit [ ] Guarantee

For Loans/Credits/OthersTotal Project Cost : 0.60 Total Bank Financing : 0.60

Total Cofinancing : Financing Gap :

.

Financing Source Amount(US$M)BORROWER/RECIPIENT

IBRD

IDA: New

IDA: Recommitted

Others (MENA Multi Donor Trust Fund) 0.60

Financing Gap

Total 0.60.

i

Expected Disbursements (in USD Thousand)Fiscal Year 2014 2015

Annual 425,600 174,400

Cumulative 425,600 600,000.

Project Development Objective(s)

The objective of the project is to enhance microfinance access and usage amongst women and youth in Morocco, Tunisia, and Egypt..

Components

Component Name Cost (USD Thousand)

I. Demand-Side Analysis of Access to Finance Constraints Amongst Women and Youth

168,390

II. Develop and Implement Financial Literacy Modules Targeted to Youth and Women

287,400

III.South-South Learning and Training of Key MFIs 66,000

CAWTAR Administrative Fees 78,210.

CompliancePolicyDoes the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ].

Does the project require any exceptions from Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy exception sought from the Board? Yes [ ] No [ X ]

Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ].

Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waters OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X.

Legal CovenantsName Recurrent Due Date Frequency

Description of Covenant

ii

.

Team CompositionBank Staff

Name Title Specialization

Teymour Abdel Aziz (TTL) Economist Financial Sector Development, Financial Inclusion, Microfinance, SME Finance

Peter McConaghy (co-TTL) Analyst (Junior Professional Associate)

Financial Inclusion, Microfinance, Financial Sector Development, SME Finance

Sahar Nasr Lead Economist MSME Finance, Banking Sector Development, Gender and Finance, Financial Infrastructure, Capital Markets Development

Laurent Gonnet Senior Financial Sector Specialist Financial Inclusion, Microfinance, Financial Sector Development, SME Finance

Philippe de Meneval Senior Private Sector Development Specialist

MSME Finance, Banking Sector Development, Trade, Innovation, SME Development

Moez Makhlouf Financial Management Specialist Financial Management Assessment

Slaheddine Ben-Alima Procurement Specialist Procurement

Randa Akeel Senior Economist MSME Finance, Banking Sector Development, Gender and Finance, Financial Infrastructure, Capital Markets Development, Innovation, Venture Capital

Sara al Rowais Private Sector Development Specialist

MSME Finance, Banking Sector Development, Gender and Finance, Financial Infrastructure, Capital Markets Development

Steve Wan Operations Analyst Operations

Non Bank Staff

Name Title Office Phone City

.

Locations

Country First Administrative Division

Location Planned Actual Comments

.

iii

I. STRATEGIC CONTEXT

A. Regional Context

1. Political and social transitions in countries across the Middle East and North Africa (MENA) are placing additional economic pressure on firms and households. Unemployment levels in MENA are above those of all other world regions. At 25 percent, youth unemployment is a particularly pressing public policy issue. In Egypt and Tunisia, unemployment is up about 4 percentage points from before the Arab Spring1. Three out of four working-age women do not participate in the labor force, constituting 80–90 percent of MENA’s inactive workers (see Figure 1).2 Unemployment rates for women aged 15-24 approach 50%, compared to 10-20% for males of the same ages. The lack of quality employment opportunities in the region is reflected in high levels of informality: in no MENA country does the formal private sector employ more than 20 percent of workers. With regards to the macro economy, growing imbalances in oil importers pose serious risks. With the exception of Libya, fiscal deficits have worsened significantly in all the transition economies since 2010, as distortions due to rising expenditures on fuel subsidies and a large public sector have expanded. Current account positions are also deteriorating, with government debt up 4-12 percentage points and international reserves are under pressure.

2. A critical challenge for policymakers is determining how the financial system – and microfinance particularly – can work better for the poor, youth, and small businesses. Countries in the region have large banking systems and some of the highest rates of credit concentration in the world. The top 20 exposures to total equity stand at 242%, reflecting the focus of banks on large enterprises3. Only 8% of total bank loans go to SMEs in MENA, although this figures ranges widely from 24% in Morocco to 2% in the Gulf Cooperation Council (GCC). The lack of access to finance affects primarily younger enterprises that would be able to grow at faster rates and generate more employment opportunities, as well as households looking for housing finance. The main factors limiting access to finance in the region include weak financial infrastructure, little banking competition, and flaws in the institutional and legal framework that hinder the growth of nonbank financial institutions.

3. Micro, Small, and Medium-Sized Enterprises (MSMEs) are particularly important for growth and productivity in the MENA region. MSMEs account for an estimated 20-40% of all private sector employment in MENA and contribute more than 50% of GDP output in the region.4 MSMEs, however, are highly constrained when it comes to accessing credit and equity. The total estimated financing gap for MSMEs in MENA is US$ 320-390 billion. MSMEs suffer from operational inefficiencies that hamper productivity and growth. They are also largely constrained by broader business environment challenges. While reform efforts have been ongoing, MENA countries on average rank 98 out of 185 countries in the 2013 World Bank

1 Data is from: MENA Monitor No. 3. World Bank, 2013; and the International Monetary Fund statistics 2 Opening Doors: Gender Equality and Development in the Middle East and North Africa. MENA Development Report.

WorldBank, 20133 Financial Access and Stability: A Road Map to Financial Access in the Middle East and North Africa. The World Bank 2011.4 SMES for Job Creation in the Arab World: SME Access to Financial Services. World Bank, 2012.

1

Doing Business indicators. Significantly more is needed in order to reduce the cost, time, and inefficiencies surrounding doing business.4. Demographic and social structures are placing additional pressure on governments in the region to provide additional economic opportunity. The region faces unprecedented population growth amongst its young people. Two out of three people in the region are under 30 years old and youth make up 1/3 of the working age population. 17 million youth are unemployed. At around 25%, the youth unemployment rate exceeds that of any other region in the world (see figure 1).

Figure 1: MENA Unemployment and Labor Force Participation Statistics

Source: IMF and ILO data 2010

5. The region has made impressive gains in recent decades towards achieving gender parity. From 1970-2013 the average growth rate of key indicators – including female literacy, infant mortality, and life expectancy – exceeded those of most other developing regions. However, almost all MENA countries have female labour force participation rates below the average for lower and middle income (LMI) countries. Only 25% of women participate in the labor force. In many countries in the Region, unemployment rates among young women (15-24) approach 50%, compared to 10-20% for males of the same age. While the MENA region has made significant gains with regards to education and health outcomes over the past two decades, the decline in poverty rates occurred at a slower pace than in other developing country regions, including Eastern Europe and Central Asia (ECA) and East Asian and the Pacific (EAP). In Egypt, Iraq, and Yemen one in four children live below the poverty line5. Given this context, policymakers are looking for development interventions that prioritize more vulnerable groups including youth, women, and children.

B. Sectoral and Institutional Context

6. Evidence demonstrates that microfinance - access and usage of affordable and quality financial services including savings, credit, insurance and money transfer systems - is crucial for low-income households to smooth consumption, manage risks, invest productively, and respond

5 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa. MENA Development Report. Washington: World Bank, 2012.

2

to financial shocks6. Microfinance outreach remains very low in the MENA region compared to other developing country regions. According to Findex data, MENA is well below developing world averages in terms of account penetration (18% vs. 43%). There is a large gender gap in account ownership (23% vs. 13%). In addition to significant access barriers, usage of financial services is very low. 17% of adults report not accessing their accounts in a typical month. There is comparatively little savings behavior in MENA. Only 23% of account holders in MENA use their account to save. Amongst youth, only 1% saved at a formal financial institution in 2011. Lending by microfinance providers reaches only 1.8% of the adult population, half the proportion in South Asia or Latin America and the Caribbean (LAC). By contrast, the number of people living below US$1.25 a day is 13 times larger in South Asia than in MENA. Even in Morocco, the country that has made most progress in developing the industry, microcredit loans barely exceed 1% of total bank credit (in amount) compared to 7% in LAC and 5% in Africa.

7. Low levels of microfinance penetration in MENA region can be attributed to deficient regulation, underdeveloped financial infrastructure, limited product offerings by MFIs, and low levels of financial literacy. Certain MFIs do not have access to credit registries or credit bureaus, and have not been integrated into the formal credit information system. Credit assessment and risk management techniques tend to be outdated, implying that lenders often have to rely on collateral that is expensive to register and may not be readily enforceable. A few countries have introduced legislation that allows for other legal forms of microfinance providers, such as finance companies or banks. Microsavings are offered on a very limited scale in the region and are found only in West Bank & Gaza, Syria, and Yemen, and are only offered by a few institutions. Connected, Islamic financing instruments comprise only a small fraction of microfinance supply. Indonesia, Bangladesh, and Afghanistan (none of which are in MENA) account for 80% of the global outreach of Islamic microfinance. There is a significant shortage of demand-side research that analyzes why the demand, usage, and access to microfinance services remains low.

EGYPT

8. Egypt boasts the largest microfinance market in the Arab world in terms of client outreach, with approximately 901,610 borrowers and 216 million loans outstanding.7 Sanabel – the regional microfinance network for MENA- estimates that as of 2010 the sector was reaching only 8% of total possible market size. While large MFIs continue to grow and boast sounds operations and management practices, the industry has in recent years had difficulty weathering the ongoing economic and political transition in the country. The economic and political transition has exposed operational weaknesses, particularly of smaller MFIs, and caused a deterioration of portfolio quality. The total number of microfinance borrowers is down nearly 30% from 2008 (901,610 versus 1,300,000). Client repayment rates, MFI capacity, and broader country-level macroeconomic challenges are ongoing challenges for the sector, particularly for those providers based in Cairo.

6 See: Bauchet, Jonathan et al. Latest Findings from Randomized Evaluations of Microfinance. Washington: CGAP, December 2011.7 Data from: Microfinance Information Exchange (MIX): www.themix.org/

3

9. A critical challenge for the Egyptian microfinance industry is how to expand product and target market diversification to promote deeper financial inclusion for a broader section of the population. The country’s largest MFIs, including the Alexandria Business Association (ABA), are amongst the most sophisticated in the region. These MFIs generally offer a suite of non-financial services to their clients including financial literacy and business development services (BDS). For example, ABA has expanded from traditional group lending to individual lending, microinsurance, livestock leasing, and is in the process of developing Sharia-compliant products. Technical assistance is required for smaller MFIs to develop programs that diversify their products, improve operational efficiency and sustainability, and expand their geographic outreach. Frontier areas include developing venture capital schemes as increasingly clients are requiring more long-term debt and equity for successful business growth. Promoting gender-inclusive microfinance has been an increasing priority for the Egyptian government, as evidenced by strategic plans developed by the Ministry of International Cooperation. Lead Foundation, an Egyptian microfinance institution dedicated squarely to serving female clients, leads all MFIs with regards to gender-specific microfinance.

MOROCCO

10. Demand from underserved segments of the population has led to the emergence of large microcredit institutions in Morocco. Its sector represents 40% of all microfinance clients across the region, 80% of branches, and 50% of MFI employment, for a share of Arab World population of 10 percent. The four largest MFIs account for 95 percent of the market. The Moroccan microfinance industry experienced a significant crisis in 2007, as non-performing loans began to increase exponentially after four years of unprecedented growth. The microfinance crisis in Morocco was attributed to unsustainable growth which overstretched MFI capacity and exploited institutional weaknesses within the sector. Recently the sector has focused on reducing information asymmetries that led to over-lending and concentration of lending amongst risky clients. The industry developed an information platform which allowed MFIs to identify and reduce the number of over-indebted clients with multiple loans.

11. As part of a broader national strategy for microfinance, the Moroccan parliament passed in 2012 important amendments to the 1999 microcredit law. The new law allows MFIs to provide microcredit through finance companies, a status that can help MFIs access broader sources of funding and expand outreach. Implementing regulations still need to be drafted. The Ministry of Economy and Finance has indicated that forthcoming regulation will impose an interest-rate cap on MFIs. MFIs are currently in discussion on the details of a proposed cap in order to minimize adverse impacts in terms of operational sustainability and outreach on the sector. The Bank-al-Maghrib (the Central Bank – BAM) is taking the lead in developing a coordinated financial inclusion strategy. BAM is also managing the newly established foundation for financial literacy, which aims to strengthen the financial literacy of the country’s population through various programs, including financial literacy in grade schools.

TUNISIA

4

12. Microfinance remains an important development intervention in Tunisia given ongoing economic and political instability that has contributed to unemployment and poverty. The sector is dominated by one MFI (Enda- an international NGO whose micro-credit program started in 1995 that operates under a special government decree) and a government programme under the Banque Tunisienne de Solidarité that relies on state subsidies and has struggled with repayment rates. As of April 2012, Enda had 194,743 active clients with US$72.4 million in loans. Both institutions were covering only an estimated one third of total demand for microfinance services.8 The postal office network – which offers savings accounts to over 3 million clients and has outlets across rural areas - is another key institution that could help boost financial inclusion in the country. While the institution has a strong outreach, it currently operates under heavy government subsidies and requires substantial reform to attain financial and operational sustainability.

13. There have recently been important political, judicial, and regulatory reforms that promote expansion of the Tunisian microfinance sector. In March 2011, microfinance was presented as a primary pillar in the Ministry of Finance’s post revolution economic and social development program. The Ministry of Finance put in place a working group composed of donors, MFIs, government representatives, and outside specialists in order to develop a coordinated strategy for expansion and management of the sector. Banks, the Tunisian postal network, insurance companies, and mobile telephone operators were a part of this dialogue. A new law on microfinance passed in 2012 allows for the creation of new MFIs and allows foreign MFI networks to enter the country. The new law is expected to significantly expand the number of providers as well as the number of clients reached.

Box 1: Microfinance and Gender

Microfinance is considered a successful example of gender-inclusive development. Globally 75% of more than 205 million customers served by MFIs are women, including 82% of the 137.5 million poorest clients (Microcredit Campaign Report 2012). In Morocco 27% of women have an account at a formal financial institution (Findex 2012) while 43% of women have taken a loan (formal or informal) in the past year. Approximately 46% (368,000) of total MFI clients are women in Morocco. Women are viewed as key beneficiaries for MFIs because they are often responsible for the well-being of the family, and thus seen as a conduit for conferring income and consumption smoothing benefits to the greatest number of people. Microfinance also supports females’ economic empowerment because it creates opportunities for business expansion and productive investment at the household level, bypassing many socio-economic barriers that prevent women from participating in the local economy. Qualitative and quantitative studies (e.g. those from Women’s World Banking) have demonstrated the access to microfinance services empowers women through an increased likelihood to own assets (land, houses, etc.), greater control over household assets, and an ability to invest and grow in microbusinesses.

An impact evaluation in Morocco (Duflo et al 2011) estimated the effect of Al Amana opening 60 new branches in sparsely populated rural areas on credit allocation, consumption, and business activity, among others. The main effect of improved access to credit was to expand the scale of existing self-employment activities of households, including both keeping livestock and agricultural activities. The evaluation revealed important limitations to female empowerment in rural areas in Morocco. The studies found that only a small proportion of women borrow in rural areas. Out of those women who borrowed there was little change with regards to bargaining power in the household, decision-making, or mobility between

8 According to estimates providing by Enda staff

5

villages. This impact evaluation highlights the significant economic and social challenges low-income women face even when financial services are extended to them. The impact evaluation brings important insight into these challenges and as a result helps policymakers structure more effective interventions.

C. Higher Level Objectives to which the Project Contributes

14. Link with World Bank Development Priorities in MENA: Expanding microfinance amongst women and youth supports key World Bank priorities in the MENA region. With average unemployment at 10% and youth unemployment at 23%, MENA has the colossal task of creating 4 million jobs a year over the next decade to get on par with the global average unemployment rate. According to the 2013 MENA region’s flagship report on jobs “Jobs for Shared Prosperity: Time for Action in the Middle East and North Africa”, over 30% of the region’s youth would prefer to work in the public sector. Microfinance provides critical access to finance to expand small businesses, create jobs, and move people at the household level into productive private-sector economic activity. In regards to gender, three out of four working-age women do not participate in the labor force and constitute 80–90 percent of MENA’s inactive population. Microfinance is particularly relevant for female economic empowerment because it creates opportunities for business expansion and productive investment at the household level, by passing many socio-economic barriers that prevent women from participating in the economy. Similarly, microfinance can address financing gaps and help promote a culture of innovation and entrepreneurship amongst youth.

15. The proposed project is congruent with high-level strategy outlined by the World Bank and the governments of Morocco, Tunisia, and Egypt. Pillar one of the Country Partnership Strategy (CPS) for Morocco (FY2010-13) (Report No. 67694-MA), discussed by the World Bank Group’s Board of Executive Directors on January 26, 2010, states that the structural transformation of the Moroccan economy will require a comprehensive and coordinated set of policies in many areas, underpinned by a financial sector that better serves smaller firms and microenterprises. The proposed operation is targeting precisely the financial inclusion of this underserved segment of the Moroccan economy, as well as women. The Interim Strategy Note (ISN) for Tunisia (FY2013-14) (Report No. 67692-TN), discussed by the Board on July 3, 2012, is organized around three pillars: i) laying the foundation for renewed sustainable growth and job creation; ii) promoting social and economic inclusion; and iii) strengthening governance: voice, transparency and accountability. The ISN for Egypt ((FY2013-14) (Report No. 66443-EG), discussed by the Board on June 28, 2012, is based around economic management, jobs, and inclusion. Access to microfinance services promotes growth through providing micro-entrepreneurs capital for productive investment that can lead to employment creation. Microfinance also promotes social and economic inclusion through providing the poor tools to smooth consumption and manage risk. Thus the intervention is squarely in line with the high level objectives of the Moroccan, Tunisian, and Egyptian authorities.

6

II. PROJECT DEVELOPMENT OBJECTIVES

A. Project Development Objectives

16. The objective of the project is to enhance microfinance access and usage amongst women and youth in Morocco, Tunisia, and Egypt. This will be achieved through improving the financial capability9 of women and youth as well as developing tools that enable financial service providers to better serve women and youth segments sustainably. Microfinance access will promote job creation, income generation, and economic inclusion amongst women and youth in Morocco, Tunisia, and Egypt.

Project Beneficiaries

17. The project’s beneficiaries fall into three categories. The activities will first and foremost benefit low-income women and youth in Egypt, Morocco, and Tunisia who do not have access to formal financial services. These beneficiaries will include women and youth microentrepreneurs, those who make their living in the informal sector, and those living in areas (rural or urban) not well served by formal financial institutions. The project will work with those beneficiaries who are potential future clients of financial institutions as well as those who have micro businesses. Second, the project will benefit financial service providers, particularly through South-South learning exchanges and training of key MFIs on topics including financial literacy, building the business case for serving women and youth, and operational efficiency. Third, the project will benefit a broad set of stakeholders involved in the microfinance community of practice in MENA, including regional associations (e.g. Sanabel), central banks, community and civil society organizations, and research institutions. Findings from the demand analysis and financial tool kit will be made public and will be widely disseminated.

18. The project aims to build the infrastructure necessary to advance microfinance access to the region as a whole through developing a network of financial literacy trainers, developing financial literacy tool kits, and producing demand-side knowledge that can significant improve the ability of financial service providers to serve women and youth. Dedicated efforts will be made to make outputs (demand-side analysis and financial literacy tool kit) available to clients and beneficiaries of existing MENA Finance and Private Sector Development (FPD) projects (see paragraph 19 and 34 for more information).

Project Indicators

19. The performance of the project will be assessed against the following indicators that will also serve as project milestones:

Component Project Level Results Indicators

MDTF Outcome Indicators

1. Demand-Side Analysis Demand-side report published % of beneficiaries that

9 Financial capability is the ability to apply knowledge about financial products and services to take effective actions regarding the current and future management of money. It includes the ability to save, borrow, and spend wisely, to generate stable cash flows, and to manage the challenges associated with costly life-cycle event (Staschen and Nelson quoted in New Microfinance Handbook 2013).

7

(binary) Guidance notes published Launch event completed (binary) # of people reached with

dissemination campaign Video produced (binary)

feel demand-side analysis allows them to expand financial access to women and youth through products, services, or related investments10

% of women and youth project beneficiaries with access to financial services (credit, savings, or other)

2. Financial Literacy Modules Total number of women and

youth who have completed financial literacy trainings (with % micro-entrepreneurs)

Total number of women and youth who have completed financial literacy modules via e-learning (% micro-entrepreneurs)

Total # of beneficiaries reached with dissemination campaign

% of beneficiaries reporting having the know-how to make responsible financial choices for themselves and their families; participants may report increased access and usage of financial services

3. South-South Learning and Training of MFIs

Number of MFIs that have participated in knowledge exchange workshops by Setpember 2014 (no. of beneficiaries)

Number of trainers trained within MFIs

Number of changes to operational and strategic policies that enhance efficiency and outreach to women and youth based on knowledge exchanges for participating MFIs

Increase in outstanding loan portoflio targeted to women and youth amongst participating MFIs

10 Will be captured through a rapid response survey via demand-side analysis beneficiaries including financial service providers, donors, investors, governments, clients, and community groups

8

III. PROJECT DESCRIPTION

20. The objective of the grant is to enhance microfinance services amongst women and youth in MENA through: i) completing a demand-side analysis that captures key constraints to accessing and using formal and informal financial services in Egypt, Tunisia, and Morocco; ii) developing and implementing financial literacy modules targeted to youth and women; and iii) improving institutional performance of financial service providers through South-South learning exchanges and training of key MFIs. The proposed activities reinforce and build off existing MSME work done in the region, most notably the Morocco MSME Development Project (Report No. 68550-MA), Egypt Enhancing Access to Finance for Micro and Small Enterprise Project (Report No. 51529-EG), and the Tunisia MSME Development Project (Report No. 62655-TN). This is congruent with the overall objective of the MENA MDTF, which is to provide catalytic donor support to countries in the region and reinforced existing operational projects.

A. Project Components

Component 1: Demand-Side Analysis of Access to Finance Constraints Amongst Women and Youth

21. This component will finance a demand analysis in Egypt, Morocco, and Tunisia consisting of: i) demand-side surveys; ii) focus group discussions; iii) existing household survey analysis; and iv) geographical strata analysis11 that uncovers barriers to accessing and using the formal financial system for women and youth. Currently there has been no comprehensive analytical work done on establishing demand-side constraints to microfinance in the MENA region. Key emphasis will be placed on understanding the financial needs of women and youth and understanding what factors (e.g. geographic, gender, economic cultural) constrain access and usage of formal financial services. Use of informal financial services will also be investigated. This demand analysis will help inform a broader World Bank MENA microfinance strategy.

22. Supply side analyses to date have identified mainly the volume of microfinance activities, key market players (providers, funders, donors) and regulatory issues. Together, the demand and supply knowledge will help inform what interventions are needed to promote access and usage of microfinance services in the marketplace. For example, on the demand side understanding how financial management is interwoven with livelihood strategies (risk management, asset building, responding to emergencies) will help understand how to develop microfinance products suitable to the needs of women and youth. Understanding what delivery channels (branchless banking, loan officers in villages, online banking) are most suitable to women and youth will help develop overall operational strategies for MFIs and other financial service providers. The report will use these findings to suggest needed interventions for governments, donors, providers, and other stakeholders to reach the high proportion of unbanked women and youth in the region. The analysis will also allow for a segmentation of the microfinance market for women and youth across the three countries

11 Geographical Strata Analysis: An analysis of the proximity versus access trends between clients and financial service providers within a particular community

9

Component 2: Develop and Implement Financial Literacy Modules Targeted to Youth and Women

23. Recognizing that financial literacy remains a key impediment to access to financial services, particularly amongst women and youth who often face acute socio-economic challenges, this component seeks to develop and implement a financial education tool kit targeted to low-income, unbanked women and youth in Egypt, Morocco, and Tunisia. The tool kit will be developed for use by MFIs, financial service providers and related NGOs in Egypt, Morocco, and Tunisia. The project will conduct training of trainers (TOTs) across Morocco, Egypt, and Tunisia, thereby enhancing market infrastructure required to support financial literacy in the region. In addition to women and youth associations and participating financial institutions, modules will be disseminated to regulators and government stakeholders. Tool kits topics will include basic numeracy, savings and investment, budgeting, accounting accessing financial service (including branchless banking), and financial products. The project will work with leading MFIs (Enda, ABA), service providers (Centre Mohammed VI in Morocco, Sanabel) and governments to identify beneficiaries. In addition, the team will aim to develop innovative learning tools including the use of videos, pamphlets, and social media outlets as a way to broaden outreach and relevance for women and youth.

Component 3: South-South Learning and Training of Key MFIs

24. This component will enhance the capacity of MFIs to effectively serve women and youth through targeted learning exchanges between MFIs in Egypt, Morocco, and Tunisia, and leading MFIs in MENA. Learning exchanges will focus on operational and strategic investments needed to better serve women and youth with financial services. Learning exchanges will also focus on integrating financial literacy modules into MFI operations, particularly to better serve women and youth clients. A regional workshop on financial literacy will be organized, in close coordination with Sanabel, the regional microfinance network for MENA. The workshop will be an opportunity to disseminate findings of the demand-side survey (Component 1) and to bring together MFIs in the region to participate in peer learning regarding strategies on effectively reaching women and youth. Under this component the project will organize a TOT on the financial literacy modules developed under Component 2. MFIs and service providers across the region will participate in this TOT, in close coordination with Sanabel. The TOT will help add sustainability to the project by equipping industry players with the skills to continue to train key players after project completion.

B. Project Financing

Instrument

25. The lending instrument is an investment project financing in the amount of US$600,000, which will be financed through the MENA Multi-Donor Trust Fund (MDTF). The grant will be channeled through the Center for Arab Women and Training (CAWTAR), recipient and implementing agency of the grant.

Project Cost and Financing

10

Project Components Project cost Grant Financing % Financing1. Demand-Side Analysis of Access to Finance Constraints Amongst Women and Youth

168,390 168,390 100

2. Development and Implementation of Financial Literacy Modules Targeted to Youth and Women

287,400 287,400 100

3. South-South Learning and Training of Key MFIs

66,000 66,000 100

Total Baseline Costs:Physical ContingenciesPrice Contingencies

CAWTAR Administration Fee

521,790

78,210

521,790

78,209

Total Project CostsInterest During Implementation

Front-End FeesTotal Financing Required

600,000

600,000

600,059

600,000 100%Note: Please see Annex 3 for a budget by component

C. Program Objective and Phases

26. The project will be implemented according to the implementation plan (see section IV) and World Bank supervision and implementation mechanisms.

D. Lessons Learned and Reflected in the Project Design

27. Analytical and Research Work in the Sector: This project is informed by recent research work on the microfinance sector utilizing a variety of approaches, including randomized control trials, financial diary research, qualitative focus groups and analytical studies .12 This research has pointed out limitations in both impact and outreach of microfinance institutions. Impact evaluations have found that while microcredit access is crucial for low-income households to smooth consumption, manage risks, invest productively, and respond to financial shocks, it often as little impact on poverty alleviation.13 Similarly, improved data, for example global Findex data and Finmark Trust Finscope’s surveys, have pointed out that despite exponential growth in the microfinance sector, a significant majority of the world’s poor are not served by formal financial services. For example, recent survey work completed by the Jameel

12 For example, national level FinMark Trust’s FinScope surveys www. finmark .org.za and Global Findex databases www.data. worldbank .org/data-catalog/financial_inclusion ; Also see, see Financial Access Initiative (FAI) http://financialaccess.org/; Abdul Latif Jameel Poverty Action Lab (J-Pal) http://www.povertyactionlab.org/about-j-pal; Innovations for Poverty Action (IPA) http://poverty-action.org/

13 See: Bauchet, Jonathan et al. Latest Findings from Randomized Evaluations of Microfinance. Report. Washington: CGAP, December 2011.

11

Latif Poverty Action Lab (J-PAL) pointed to the fact that only 2.5% of those in Morocco living on less than $2/day borrow from formal credit sources. These research findings have led to two a shift in industry thinking away from enhancing MFIs alone towards a focus on better understanding demand-side constraints and client needs. These findings have also acknowledged the need for effective and appropriate supporting functions such as credit bureaus or payment systems and rules to govern the market for financial services for the poor.

28. The project design has been informed by extensive consultation with leading operational and research experts on global microfinance. Extensive consultations have taken place between MENA FPD and the Consultative Group to Assist the Poor (CGAP) - an independent policy and research center housed at the World Bank in charge of advancing the global financial inclusion agenda through research, learning, and guiding regulation for governments, service providers, donors, and investors. MENA FPD has also liaised with the World Bank FPD Global Financial Inclusion Practice and internally within MENA FPD on program design, particularly with respect to the financial literacy modules proposed here. Similarly, MENA FPD has liaised with microfinance researchers within the Financial and Private Sector Development Unit of the Development Economics Research Group (DECFP).

29. The project’s design has further benefitted from an appraisal mission which i) structured the technical design, partnership and implementation arrangements; ii) conducted an institutional assessment of the CAWTAR (the project’s main implementing agent); and iii) conducted consultations with the microfinance sector in the region via meetings with key government regulators, microfinance institutions (MFIs), and donors. Key lessons learned from these consultations included the: i) need to draw on existing financial literacy modules, however, adapt them for regional linguistic, economic, and sociocultural specificities; ii) need to make the demand-side analysis relevant to financial service providers to inform business decisions and overall operations; iii) need for close coordination with active donors in the region and the international finance corporation (IFC); and iv) need for consistent communication to key market players in the region to avoid duplication of efforts and ensure outputs (financial literacy modules, demand-side surveys) are effectively disseminated accordingly.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

30. This knowledge and technical assistance program will be recipient-executed through the Center of Arab Women for Training and Research (CAWTAR), a not-for-profit organization dedicated to eradicating discrimination against Arab women and reducing gender gaps by promoting research, education, training and advocacy. CAWTAR has extensive experience implementing programs dedicated to female and adolescent girls’ economic empowerment through skills training and education. In the past, it has partnered with the International Finance Corporation (IFC) on promoting female entrepreneurship in MENA as well as with the MENA Poverty Reduction and Economic Management (PREM) unit on gender economic research.

12

31. CAWTAR will partner with regional organizations to leverage skills and resources and ensure activities are targeted to appropriate organizations (MFIs, community groups, etc.) and implemented within appropriate communities of practice. With regards to Component 1 (demand-side research) CAWTAR staff will conduct the demand-side research and will work in cooperation with local NGOs and MFIs across all three countries to identify beneficiaries and conduct research and survey work where necessary. CAWTAR will work with the joint World Bank/IFC financial inclusion practice on structuring the demand-side analysis. The CAWTAR team will incorporate elements from existing well known demand-side surveys including Global Findex, Finscope, and World Bank Access to Finance Surveys. This will be the first multi-country demand side analysis on microfinance in the MENA region. 32. With regards to Component 2 (financial literacy modules), CAWTAR will work closely with leading microfinance service providers and MFIs in the region. CAWTAR will liaise extensively with microfinance opportunities (MFO), a Washington D.C. based NGO who has developed financial literacy toolkits for low-income consumers. CAWTAR will also work with Centre Mohammed VI, a non-profit institution based in Casablanca who specialized in providing training to MFIs and to clients. Another strategic partner will be Mercy Corps Tunisia who is also implementing a program featuring financial literacy modules. CAWTAR will work extensively with other financial service providers (Tunisia: Enda, Postal Bank; Egypt: Lead Foundation, Alexandria Business Association; Morocco: Bank-Al Maghrib and Al-Amana) to identify women and youth beneficiaries to implement the financial literacy modules.

33. Regarding Component 3 (South-South learning exchange and MFI training), CAWTAR will work closely with Sanabel - a non-profit microfinance association responsible for policy guidance and technical assistance provision to MFIs in the MENA region – on developing the training materials and hosting workshops. Sanabel will also play an active role in identifying MFIs for participation in learning exchanges and technical assistance activities. CAWTAR will also partner with Sanabel on organizing a workshop for trainers trained during the project.

34. All projects will be implemented by CAWTAR with close support from MENA FPD. CGAP has agreed to partner with MENA FPD and provide strategic guidance in structuring and implementing this MDTF project. A technical stakeholder consultation committee is being set up to ensure ownership and buy-in of the different market players, to address any issues that may arise, and to ensure timely implementation of the project. CAWTAR will be the primary grant recipient and will reimburse project partners for activities completed, established through memorandums of understandings (MOUs). By acting as the primary grant recipient, CAWTAR will ensure that the focus on gender is mainstreamed throughout the activities completed by project partners.

Coordination of Activities:

35. The project will seek as much as possible to engage existing World Bank projects partners in its activities. The financial literacy modules will be widely disseminated across financial institutions MENA FPD work with within existing active projects, and potentially benefit MENA projects in other sectors, including the Morocco Strengthening Micro-entrepreneurship for Disadvantaged Youth in the Informal Sector (P144134) expected to be approved by end-June 2013. They will be seen as a long-term tool kit housed within MENA FPD for wide

13

dissemination. Significant resources will be dedicated to widely disseminating the demand-side research so that it can inform future interventions in existing and new projects.

36. Financial Literacy and gender empowerment via microfinance is an important priority for donors and researchers alike. As such, throughout project implementation the project team will consult with donors and NGOs active in global financial literacy efforts. These organizations include the Mastercard Foundation, the Gates Foundation, the Aga Khan Foundation, Women's World Banking, Microfinance Opportunities, ACCION, and other industry leaders. This cooperation will ensure we are employing industry leading knowledge and technical tools in implementing project components. Specifically for financial literacy modules, the goal is not to replicate but rather to build on past industry-leading work and tailor it to local contexts in Tunisia, Egypt, and Morocco.

B. Results Monitoring and Evaluation

37. The results framework for the project is centered on the PDO and specifies component-level indicators which will be monitored to evaluate project performance towards the objectives (see Annex 1). CAWTAR has the primary responsibility for results monitoring. CAWTAR will present an M&E report to the World Bank on a quarterly basis.

C. Sustainability

38. Sustainability has been prioritized in the project design. The financial literacy modules will be made widely and available to a broad array of stakeholders, from local NGOs working with women and youth to donors and national government in the region. Budget has been allocated for wide dissemination of these materials through CAWTAR, the World Bank, and other project partners. It is expected these financial literacy modules will be used long after the 18-month implementation period. Similarly, it is expected the modules will be utilized in existing World Bank MENA FPD projects (see paragraph 35). The demand-side research is at the forefront of applied research in the MENA region given there has been little credible work done on the topic to date. The demand-side research will be widely disseminated and it is expected will be widely drawn upon, long after project completion. With regards to the learning exchanges and select training of MFIs, key emphasis will be placed on the TOT for MFI staff in financial literacy topics for women and youth. By equipping MFI staff with the skills to train others in financial literacy, the project is promoting sustainability as trainings can take place within MFIs long into the future.

V. KEY RISKS AND MITIGATION MEASURES

A. Risk Ratings Summary Table

Stakeholder Risk Moderate

Implementing Agency Risk

- Capacity Moderate

- Governance Low

14

Project Risk

- Design Substantial

- Social and Environmental Low

- Program and Donor Low

- Delivery Monitoring and Sustainability Moderate

Overall Implementation Risk Moderate

B. Overall Risk Rating Explanation

39. The overall risk rating is moderate. The institutional expertise and past experience of CAWTAR in successfully managing World Bank and other donor projects, as well as the extensive consultation with project partners have helped in minimizing substantial project and stakeholder risks. The relatively complex design of this regional project increases the risk profile of the project. Effective project management, consistent and timely reporting, and pro-active identification of challenges arising during project implementation are key to ensuring risks are minimized. Close coordination is required between World Bank, CAWTAR, and key project partners.

VI. APPRAISAL SUMMARY

40. An institutional, procurement, and financial management assessment of CAWTAR was undertaken during project appraisal:

Institutional, Financial Management and Procurement Assessment:14

A. Technical Assessment

41. CAWTAR has been identified as the most qualified executing agency because of a) its level of expertise in promoting economic participation amongst women in MENA, b) its regional programmatic focus, and c) its ongoing relationship and past engagement with the World Bank and other international donors. CAWTAR has deep regional knowledge in reducing gender gaps through research, education, training, and advocacy. It is the only organization in the region that uses a region-wide (not country) platform to reducing gender disparities. As such, it has strong partners and affiliates with NGOs in Egypt, Morocco, and Tunisia that will be of value during project implementation. CAWTAR expressed strong interest in executing this proposal as it aligns closely with the organization’s core mission and areas of expertise. Furthermore, CAWTAR has a good working relationship with the World Bank MENA region. It has worked with the Bank extensively on past projects, for example on its Gender Economic Research and Policy Analysis (GERPA) program (with MENA PREM). CAWTAR has experience with managing projects funded by bilateral and multilateral sources (World Bank, GEF, UE, and several countries). Their portfolio comprises several projects amounting US$ 3 million equivalent.

14 Please see Annex 3 for a full Financial Management and Procurement Assessment

15

42. The project team has assessed the capacity of CAWTAR staff to implement the project. A program team will be setup consisting of 1 full time project manager to manage the day to day implementation of the project. This project team will be supported by the Executive Director (ED) who reports to a Board of Directors, assisted by a Technical Committee. Core CAWTAR staff will assist in project implementation on a part time basis as needed. The team will also be supported by the institutions’ two full time staff dedicated to administrative and financial management.

B. Procurement Assessment

43. The procurement assessment found that CAWTAR has the capacity to meet procurements and associated procurement requirements. The administrative and financial management unit has extensive experience with project management and has in the past effectively applied procedures in terms of financial management and procurement to comply with the specific procedures of the financing institutions. With regards to monitoring and control system, it is expected the overall responsibility will fall on the Executive Director of CAWTAR, while the actual day-to-day monitoring would fall on the project management with involvement of relevant departments.

44. In terms of controls, the CAWTAR has a Manual of Procedures and has a Controller (under contract) who is in charge of checking the compliance with procedures – whether proper to CAWTAR or required by the financing institutions. In addition, they have a yearly audit is carried out by an independent auditor. It is expected CAWTAR will have the ability to meet the World Bank’s reporting requirements and produce adequate reporting on the procurement processing as well as the contract management.

45. The procurement assessment concluded the risk assessment pertaining to procurement is moderate following completion in June 2013 of the following recommendations:

Activity StatusCarry out a training to brief and update the staff, to be involved in project, on the Bank procedures for the main procurement ones (shopping and selection of consultant individuals/firms) expected to be used in the project implementation before its start.

Completed

Ask the executing agency to finalize the detailed action plan with the costing of the project and the project Procurement Plan (using simplified recipient-executed trust fund grant template).

Completed

Have a short section in the Operations Manual, describing in a clear manner the adequate procedures to follow for the implementation of the

Draft Completed

16

project.

Confirm that the Executive Director (ED) – with assistance from the Project Coordinator – is the person/staff responsible for the reporting as well as to define clearly the content of the report.

Confirmed

C. Financial Management Assessment

46. The CAWTAR Administrative and Financial Units are well structured and have previous experience in managing projects financed by the World Bank and other donors. The FM assessment judges the FM risk to be low. This Unit will be responsible for maintaining a financial management system acceptable to the Bank, fulfilling the World Bank procedures with respect to disbursements and financial monitoring. CAWTAR has had significant previous experience with World Bank operations. The total amount of the Grants under management since 2006 was US$4.3 million. In addition, CAWTAR is managing many other projects financed by international donors. For example, CAWTAR is managing US$3 million financed by leading donor including the Ford Foundation, GIZ, Oxfam, and others.

47. The Administrative and Financial Unit has an internal auditor, who checks all the payment orders before their submission to the Executive Director for signature. The financed project-related transactions will be subject to his regular reviews. The internal control system set within the CAWTAR guarantees the separation of the functions through several levels of independent controls: (i) formal organizational structure, which clearly separates specific functions from independent control mechanisms; (ii) the authorization by the Chief Administrative and Financial Unit, the internal auditor and the Executive Director, who is the signatory of all payment orders. This internal control system has been deemed satisfactory by the Bank.

48. Some project activities will be implemented in the three targeted countries by consultants, but all the FM and disbursement procedures will be centralized in Tunis by CAWTAR. This may result in coordination problems, implementing actions and reporting delays. To mitigate this risk, close CAWTAR support to consultants is needed at the project stages of implementation. Given the set of measures that will be taken to reduce exposure level, to manage and to reduce identified risks and weaknesses, the financial management residual risk is deemed low.

D. Other Safeguards Policies Triggered

49. Social and environmental safeguard policies are not triggered, and the social impacts of this project are expected to be positive. The nature of most of the activities will be procurement of services and other intangibles, with possible small scale goods or equipment which are not anticipated to have any major irreversible environmental impacts.

17

Annex 1: Results Framework and Monitoring

Enhancing Microfinance Amongst Women and Youth in MENA Project

Project Development Objective (PDO): The objective of the project is to enhance microfinance access and usage amongst women and youth in Morocco, Tunisia, and Egypt.

Component MDTF Outputs

Project Level Results Indicators (within 18 month implementation period) Outcomes the MDTF Project Contributed to15

Indicator Baseline Target Indicator Baseline Target

1. Demand-Side Analysis

Demand-Side Analysis Completed: guidance notes, strategy guidelines, and videos synthesizing results of demand-side analysis produced

Launch event successfully organized and completed

Dissemination campaign completed via video, web and social media tools

Demand-Side Report Published (binary)

0 Yes/No

% of beneficiaries that feel demand-side analysis allows them to expand financial access to women and youth through products, services, or related investments16

0

60% of stakeholders report having a better understanding of constraints to financial access facing women and youth in MENA region and can structure appropriate interventions to scale up microfinance outreach because of demand analysis completed

Quick Notes Published (#)

/ 3

Launch Event Completed (binary)

0 Yes/No

# of people reached with dissemination campaign (web and social media) (#)

0 5,000% of women and youth project beneficiaries with access to financial services (credit, savings, or other)17

3.3% (women); 2% (youth)

5% increase amongst women; 5% increase in amongst youth

Video Produced (binary) / Yes

15 All outcomes target indicators will be measured by CAWTAR no later than two months after project closing; Results will also be captured in quarterly reports to the World Bank16 Will be captured through a rapid response survey via demand-side analysis beneficiaries including financial service providers, donors, investors, governments, clients, and community groups17 Can be captured through rapid response survey of financial literacy beneficiaries and through relying on data from global findex and the G20 global partnership for financial inclusion data portal

18

2. Financial Literacy Modules

Financial literacy modules18 developed/adapted. Topics covered include basic numeracy, savings and investment, budgeting, accounting, accessing financial services (including branchless banking), and financial products.

Financial literacy delivered to low-income women and youth in Egypt and on pilot scale in Morocco and Tunisia19

Financial literacy modules disseminated to widespread audience through innovative social media channels

Total number of women and youth who have completed classrooms-based financial literacy trainings (% micro-entrepreneurs)

0

200 women and youth in Egypt (40%)

200 women and youth in Morocco (40%)

200 women and youth in Tunisia (40%)

% of beneficiaries reporting having the know-how to make responsible financial choices for themselves and their families; participants may report increased access and usage of financial services

Baseline20 5% increase

Total number of women and youth who have completed financial literacy modules via e-learning (% micro-entrepreneurs)

0

500 in Egypt (40%)

200 in Morocco (40%)

200 in Tunisia (40%)

Total # of beneficiaries reached with dissemination campaign

0 7000

18 Modules (class room or interactive) that enhance knowledge and understanding of financial concepts, and the skills, motivation and instill the confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts19 Participants across all three countries who own businesses will be tracked in baseline surveys as to provide assessment of business supported by the project 20 Will be captured through a rapid response survey of financial literacy module participants

19

3. South-South Learning and Training of Key MFIs:

Facilitate knowledge exchange workshops between MFIs in MENA Region

Completed training of trainers on financial literacy topics for youth and women

Number of MFIs that have participated in knowledge exchange workshops by Setpember 2014 (no. of beneficiaries)

0

3 MFIs from Egypt

3 MFIs from Morocco

3 MFIs from Tunisia

Number of changes to operational and strategic policies that enhance efficiency and outreach to women and youth based on knowledge exchanges for participating MFIs

0 1 per participating MFI

Number of trainers trained within MFIs and other participating financial institutions

0 120 Increase in outstanding loan portoflio targeted to women and youth for participating MFIs

0

5% increase in loans to women

5% increase in loans to youth

Number of training of trainers (TOT) sessions held

0 5

20

Annex 2: Implementation Arrangements

Enhancing Microfinance Amongst Women and Youth in MENA Project

Project Institutional and Implementation Arrangements

1. The project is proposed to be implemented by CAWTAR, which is both the recipient and implementing agency. CAWTAR will be responsible for management, direction and oversight, financial management, and procurement.

2. CAWTAR has been identified CAWTAR has been identified as the most qualified executing agency because of a) its level of expertise in promoting economic development amongst women in MENA, b) regional focus, and c) its ongoing relationship and past engagement with the World Bank and other international donors. The role of CAWTAR as an implementing agency has been fully appraised by the project team during the appraisal mission in March 2013. CAWTAR will create a project team for implementation of the project consisting of one full time staff (already identified). The project manager will be responsible for the day-to-day implementation of the project. The project manager will be supported by staff from other departments who will work on the project part-time. CAWTAR’s Executive Director will assume final responsibility of the project.

Project administration mechanisms

3. CAWTAR will sign the grant agreement and receive the World Bank grant from the MENA MDTF. Execution and implementation of all project activities will be done by CAWTAR, in close cooperation with project partners, including Sanabel (Component 3), MFIs including Enda, the Lead Foundation, and the Alexandria Business Association (ABA), and the Centre Mohammed VI in Morocco. CAWTAR has ultimate responsibility for the implementation of the project and exercises oversight function including approval of the project implementation plan, operations manual, work plan, budget, and oversight of fiduciary implementation and progress towards implementation and results.

4. When appropriate, CAWTAR will sign subsidiary memorandum of understandings (MOUs) with project partners to implement activities. For example, CAWTAR will sign a subsidiary agreement with Sanabel to complete knowledge exchanges between MFIs and training of trainers (TOT) workshops (Component 3). Any subsidiary agreements will set forth all the terms and conditions under which CAWTAR is reimbursing project partners, in line with World Bank approval.

5. The grant agreement between the WB and CAWTAR details CAWTAR’s obligations as the project implementing entity. It includes references to governance, procurement, reporting and safeguard rules. It will also refer to the operations manual (OM) which includes the detailed eligibility criteria, project implementation, and management.

21

6. Prior to grant signing, CAWTAR produced a detailed budget, procurement plan, and project implementation schedule, in consultation with Bank staff. These were cleared by the World Bank staff

Financial Management, Disbursements and Procurement

7. Financial Management and Disbursement Arrangements

Simplified Financial Management Assessment ReportData Sheet and Risk Assessment

Enhancing Financial Inclusion for Women and Youth in MENA- Technical Assistance and Knowledge Transfer

Grant Recipient’s Name: CAWTAR Grant No. TF015010

A. Information to be provided by the task team leader and/or the recipient or gathered by the FMS1. Name and contact information of the

recipient organization(s): Center of Arab Woman for Training and Research (CAWTAR).

CAWTAR was created to provide the region with a center of research and studies relating to gender and the status of women, of advocacy for the improvement of women’s status and of data collection, indicators and statistics.

2. CAWTAR was created on March 7, 1993.3. CAWTAR has had previous experiences

with World Bank operations. The total amount of the Grants since 2006 is $4.3 million. CAWTAR manages many other projects financed by international donors. For the fiscal year 2013, CAWTAR is managing $3 million financed by: Ford Foundation, GIZ, UNFPA-ASPRO, OFID, OXFAM, Mercy Corps, IPPF, OSF, AGFUND, Islamic Bank, The Saudi Fund for Development, FAO.

Development Grant and Facility Window 1;

Sustainable advancement of Gender Equality in the MENA region - The SAGE MENA Initiative - 2006 - 2012.

The total amount of the Grants since 2006 is $4.3 million.

An FM supervision mission was conducted on October 2011 and concluded that the project maintains Satisfactory FM arrangements. The assessment also conducted an SOE review with no major findings. Based on this FM supervision mission undertaken on October 2011, the ISR rating of this project is Satisfactory (S).

4. Amount of the proposed grant (US Dollars)

USD 600,000

5. Are there sub-grants for the operation? What are the amounts involved for sub-grants?

No

6. Information about financial management (FM) arrangements for the operation:

CAWTAR has an Administrative and Financial Unit which will be responsible

22

for maintaining a financial management system acceptable to the Bank.

Does the recipient organization have a FM or Operating Manual that describes the internal control system and FM operational procedures?

YES

What accounting system is used, including whether it is a computerized accounting system or a manual accounting system?

CAWTAR is using a computerized accounting system which conforms to the Tunisian accounting standards. Its specification allows for budgeting and disbursement of the proposed project.

What is the staffing arrangement of the organization in accounting, auditing, and reporting? Does the implementing entity have a qualified accountant on its staff?

The Administrative and Financial Unit is composed of 7 staff. All of them are university graduates and have worked in CAWTAR between 1 to 12 years. This Unit is organized as follows:

Chief of the Unit: 12 years’ experience.

4 accountants: between 1 and 6 years’ experience.

1 financial: 1 year experience. 1 internal audit for the unit: 12

years’ experience.

The Bank project needs the reinforcement of the unit team by a part-time accountant.

Disbursement Arrangements The proceeds of the CAWTAR Grant will be disbursed in accordance with the World Bank guidelines and will be used to finance project activities through the disbursement procedures currently in use: i.e. withdrawal application for direct payment, for special commitments and/or reimbursement accompanied by appropriate supporting documentation or using Statement of Expenditures (SOEs) for amounts less than predefined thresholds for each expenditure category, in accordance with the procedures described in the Disbursement Letter and the World Bank's disbursement manual. Following World Bank standard disbursement procedures, disbursements will end four months after the project closure date.

To ensure that funds are readily available for project implementation, the CAWTAR will open, maintain, and operate one

23

designated account (DA) at a commercial Bank in Tunis. It will finance the activities of the project.

The authorized ceiling of DA would be US$ 100,000 covering an estimated four months of eligible expenditures financed by the grant. The CAWTAR will be responsible for submitting replenishment requests on a monthly basis, accompanied by appropriate supporting documentation for expenditures made and reconciled bank statements.

Does the implementing entity have in place basic arrangements able to support flow of funds, and timely accountability of funds?

YES

Does the implementing entity keep adequate records of financial transactions, including funds received and paid, and of the balances of funds held?

YES

How often does the implementing entity produce interim financial reports?

The IFR will be prepared every semester and transmitted to the Bank 45 days after the end of each semester.

The IFR for the actions implemented by CAWTAR should include data on financial position. The reports will include: (i) statement on sources and uses of funds for the reporting period, and with a cumulative figures including a statement on project balances of accounts; (ii) a statement on use of funds by component and expenditure category; (iii) reconciliation statement of designated account, and (iv) budget analysis indicating execution forecasts and discrepancies.

Are the annual financial statements audited by an external audit firm?

YES

B. Risk Rating Summary and Mitigation Measures (to be completed by the FMS)Use the following table for FM risk assessment:

Risks Risk Rating

Risk Mitigating Measures Residual Risk RatingInherent Risk

Country Level Low Entity Level Low Grant Level

Moderate Low

24

Overall Inherent RiskControl Risk

Budgeting Low Accounting Low Internal Control Low

Funds Flow Low Financial Reporting Low Auditing Low

Overall Control Risk LowOverall FM Risk LOW LOW

Strengths. The CAWTAR Administrative and Financial Unit is well structured and has previous experience in managing projects implemented through the World Bank financing and many other donors. This Unit will be responsible for maintaining a financial management system acceptable to the Bank, fulfilling the World Bank procedures with respect to disbursements and financial monitoring.

The Administrative and Financial Unit has an internal auditor, who checks all the payment orders before their submission to the Executive Director for signature. The financed project-related transactions will be subject to his regular reviews. The internal control system set within the CAWTAR guarantees the separation of the functions through several levels of independent controls: (i) formal organizational structure, which clearly separates specific functions from independent control mechanisms; (ii) the authorization by the Chief Administrative and Financial Unit, the internal auditor and the Executive Director, who is the signatory of all payment orders. This internal control system has been deemed satisfactory by the Bank.

Weaknesses. Some project actions will be implemented in three countries (Tunisia, Morocco and Egypt) by consultants, but all the FM and disbursement procedures will be centralized in Tunis by CAWTAR. This may result in coordination problems, implementing actions and reporting delays.

To mitigate this risk, close CAWTAR support to consultants is needed at the project stages of implementation.

Conclusions and Action Plan. Given the set of measures that will be taken to reduce exposure level, to manage and to reduce identified risks and weaknesses, the financial management residual risk at this stage is deemed low.

C. FM Arrangements and Conclusion by the FM Specialist

The evaluation confirmed that the Project will be implemented by CAWTAR, and will use the existing skills and human resources within this AGENCY. The project expenditures will be part of its budget.

25

The CAWTAR will open, maintain, and operate one designated account (DA) at a commercial Bank in Tunis. It will finance the activities of the project.

The proceeds of the CAWTAR Grant will be disbursed in accordance with the World Bank guidelines (direct payment, reimbursement accompanied by appropriate supporting documentation or using Statement of Expenditures (SOEs) for amounts less than predefined thresholds for each expenditure category), in accordance with the procedures described in the Disbursement Letter and the World Bank's disbursement manual.

The Project’s financial statements, including the reconciliation of the designated account (DA) will be audited annually by an auditor, acceptable to the Bank, in accordance with internationally accepted auditing standards and terms of reference (TORs) prepared by the CAWTAR and cleared by the Bank before the engagement of the auditor. The audit will cover all project aspects, all operations implemented under the CAWTAR and sources and uses of funds. It will also relate to financial operations and internal control, and financial management system.

The auditor will produce: a) an annual audit report including his opinion on the project annual financial statements, and b) a report on internal control weaknesses checked while performing his task. The reports will be addressed to the Bank within six months starting from closing date of each fiscal year subject to the audit.

The frequency and scope of World Bank supervision missions will be adapted to the needs of the project. Supervision missions will take place every six months, but may be more frequent, if needed.

8. Procurement

Capacity of the Implementing Agency

9. Organization . The CAWTAR is a specialized inter-governmental agency, with membership from 22 countries spanning both developed and developing countries. The agency resources come from contributions of the member countries and grants from bilateral and multilateral sources. It is headed by an Executive Director (ED) who reports to a Board of Directors, assisted by a Technical committee. The center has an Administrative and Financial (AFA) Affairs Department. CAWTAR has experience with managing projects funded by bilateral and multilateral sources (World Bank, GEF, UE, and several countries). Their portfolio comprises several projects amounting several million US$ equivalent. It is recommended to have a short operations manual with detailed job description of the functions of the ED and the designated Project Manager, with clear indication of his responsibilities and relations with the other structures/departments of the agency, to be involved in the project implementation.

26

10. Facilities and Staffing and Professional Experience . The Administrative and Financial Department Affairs has two staff in charge of financial management and purchases respectively. They have sufficient space in equipped and furnished offices to accommodate the staff. They also have experience with project management. They are used to apply the procedures, in terms of financial management and procurement, to comply with the specific procedures of the financing institutions. It is recommended to carry out a training to brief and update the staff, to be involved in project, on the Bank procedures for the main procurement ones (Shopping and Selection of Consultants Individuals/Firms) expected to be used in the project implementation before its start.

11. Record Keeping and Filing System . The records were found properly kept in folders with indication of the contract processing stages.

12. Procurement Planning . The Administrative and Financial Department together with Project Manager should be responsible for preparing the budget during project preparation. A detailed program of activities, costing, and procurement plan was produced with CAWTAR staff in early June 2013, using the simplified format for small grants. Procurement will be limited to shopping for services (for workshop and meetings venues) and selection of consultants (Individual and Firms). The procurement Plan will become part of the financing agreement annexes.

13. Monitoring/Control Systems . The overall responsibility would fall on the Executive Director of CAWTAR, while the actual day-to-day monitoring would fall on the Project manager (Chef de Projet) with the involvement of the relevant Departments. In terms of controls, the CAWTAR has a Manual of Procedures and has a Controller (under contract) who is in charge of checking the compliance with procedures – whether proper to CAWTAR or required by the financing institutions. In addition, they have a yearly audit is carried out by an independent auditor. That is why it is recommended to have a short section in the Operations Manual, describing in a clear manner the adequate procedures to follow for the implementation of the project. A draft of this manual was developed in early June 2013.

14. Capacity to meet Bank’s Reporting Requirements . It is expected that the Executing Agency will have the capacity to meet this requirement and produce adequate reporting on the procurement processing as well as the contract management. To ensure that this is done properly, it is recommended to confirm that the ED – with assistance from by the Project Coordinator is the person/staff responsible for the reporting as well as to define clearly the content of the report. This was confirmed during a World Bank implementation support mission in June 2013.

27

15. Conclusion: The assessed executing agency, CAWTAR, would have the capacity to carry out and manage the procurement under this financing, provided that the recommended actions are taken before effectiveness, specifically the development of the procurement plan and implementation manual.

16. Risk Assessment: Given the current procurement capacity of the implementing agencies the project can be rated as “Moderate” (M), providing the recommendations are implemented.

17. Action Plan to Build up Procurement Capacity in Implementing Agencies

The capacity building in procurement procedures at the outset of the project is critical. The staff to be involved in procurement will attend, at the beginning of the project, the launch to be acquainted with applicable Bank procedures and particularly keep close contacts with the Bank procurement staff assigned for the project.

The project will produce a draft Procurement Plan to be reviewed with assistance of World Bank PS staff in Tunis.

An operations manual will be prepared in consultation with the Bank and it will be discussed at the initial stages of project implementation at Project launch.

Activity Status21

Carry out a training to brief and update the staff, to be involved in project, on the Bank procedures for the main procurement ones (shopping and selection of consultants individuals/firms) expected to be used in the project implementation before its start.

Completed during implementation support mission the week of June 7

Ask the executing agency to finalize the detailed action plan with the costing of the project and draft the project Procurement Plan (using simplified format).

Completed during implementation support mission the week of June 7

Have a short section in the Project Operations Manual, describing in a clear manner the adequate

Draft Completed during implementation support mission the week of June 7

21 A detailed explanation of project actions are included in the implementation support mission aide memoire from June 2013

28

procedures to follow for the implementation of the project.

Confirm that the ED – with assistance from by the Project Coordinator is the person/staff responsible for the reporting as well as to define clearly the content of the report.

Confirmed during implementation support mission the week of June 7

18. Prior Review Thresholds by the Bank

Goods and Non Consulting Services: First Shopping contract; and First Direct Contracting if any during the course of the project.

Consulting Services: First contracts with individual consultant irrespective of the value and

all contracts with individuals estimated to cost USD 50, 000 and more; First contract with consultant firm irrespective of the value and all

contracts estimated to cost USD 100, 000 and more; Training/study tour agenda and location(s), list of participants

and estimated budget.

All other contracts will be subject to post review.

19. Procurement Procedures Procurement will be carried out in accordance with the ‘Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants’ known as the ‘2011 Anti-Corruption Guidelines’, and the ‘Guidelines: Procurement under IBRD Loans and IDA Credits’ published by the Bank in January 2011 and the ‘Guidelines: Selection and Employment of Consultants by World Bank Borrowers,’ dated January 2011, the Financing Agreement and the Procurement Plan approved by the Bank. The procurement plan clarifies adequate procurement mechanisms and modalities.

20. Environmental and Social (including safeguards): Social and environmental safeguard policies are not triggered, and the social impacts of this project are expected to be positive. The nature of most of the activities will be procurement of services and other intangibles, with possible small scale goods or equipment which are not anticipated to have any major irreversible environmental impacts.

21. Monitoring & Evaluation: CAWTAR is responsible for all monitoring and evaluation, as outlined by the results framework based on the agreed upon schedule as will be outlined by the PIM. Data for M&E will be produced by CAWTAR based on questionnaires, rapid surveys, and

29

general tracking on volumes and timing of outputs. For example follow up surveys will be conducted on beneficiaries of the demand-side research (Component 1) and the financial literacy modules (component 2) in order to accumulate MDTF outcome results indicators targets. The M&E framework also draws on existing financial inclusion databases, including the Global Findex Database (World Bank). CAWTAR has a $40,000 budget for M&E for the project. Additional information about timing and reporting format to fulfill M&E requirements will be outlined in the PIM.

30

Annex 3: Project Budget and Procurement Category (as of June 19, 2013)22

1.Demand Side

Analysis

Activities

Activity Amount Activity Description Type of Procurement

Procurement Category Details/Assumptions

1.1 Diagnostic / Background Analysis $10,000

Desk work to analyze existing data sources on financial inclusion amongst women and youth in MENA; Goal is to establish a baseline and produce a report;

CS IC (Prior 1) 25 days @ $400/day; 33 days @ $300/day

1.2 Focus Group Discussions $25,390

5 days of focus groups in each country: Focus groups will provide qualitative data on the barriers to accessing the formal financial system for women and youth; information on financial management behavior patterns, as well as broader income generating strategies, will also be included; Focus group in each country will be dedicated to understanding needs surrounding financial education

OP

Shopping (workshop, travel for participants, Per Diem. Lodging, etc.)

4 focus group session of one hour per day; $10,000 per country, $2,000 per day in operating costs

1.3 Consultants: Focus Group

Facilitators/ Case Study Investigators

$18,000

1 facilitator to conduct focus groups; Facilitators will also be responsible for organizing and submitting data from focus group discussions; They will also be responsible for identifying and writing up case studies

CS IC

20 days per country (5 days preparation, 5 days in country, 5 days data analysis, 5 days write up); $300/day * 20 days = 6,000 * 3 countries = 18,000;

1.4 Focus Group Assistant/Document

Editing$5,000 Translation, administrative, and operational support

services during focus groups CS IC

1.5 Demand-Side Survey Data

Accumulation$35,000

Survey estimating financial needs, constraints, opportunities amongst women and youth in Morocco, Egypt, and Tunisia; Carrying out demand-side survey by three individual consultants

CS IC

45 days per country (10 days instrument preparation, 10 days in country, 10 days data analysis and cleaning; 5 days write up and dissemination; 5 days travel; 45*$250/day= $11,250*3 = $33,750

1.6 Analyze Demand-side Survey and $25,000 Consultants to prepare report on demand-side surveys

outcome CS IC 40 day contracts for two consultants to write up results

22 CS = Consulting Services; IC = Individual Consultant; CQ = Consultant Qualification; OP = Operating Costs; DC= Direct Contracting; Prior indicates prior approval from the Bank is required

31

Focus Group Results

of demand-side survey, focus groups, existing household analysis, and diagnostic information

1.7 Various Consultant Services $10,000

Consultants to respond to project needs as they arise over the course of implementation; consultants could complete analytical/research work, operational support, translation work, or producing dissemination materials

CS IC

1.8 Monitoring, Evaluation, and

Information System$15,000

Development of an Monitoring and Evaluation Information System (MIS) to capture data and tracking of project participants as they move from focus group discussion to completing financial literacy modules

CS IC

1.9 CAWTAR Consultant Fees $20,000 Consultant fees to cover project development needs during

implementation (one semester contract remuneration) CS IC

Based on historical analysis of CAWTAR project manager salaries (see annex 2)

1.10 CAWTAR Consultant Travel $5,000 Travel Fees OP OC

TOTAL $168,390

Activities

Activity Amount Description Expenditure Category Procurement Category

Details/Assumptions

2.Financial Literacy Modules

2.1 Curriculum Development/Adaptation

Adaptation$15,000

Includes adaptation of existing training kits and elaboration of e-learning modules. E-learning modules may include CD-ROMs, online learning, audio-video materials, etc. Material development will be informed by focus group discussion as well as the diagnostic to be completed (section 1.1)

CS IC 33 day contract at $300/day

32

2.2 Development of e-learning and other media $30,000

Development of e-learning modules and innovative delivery channels through which to deliver financial literacy material

CSFirm; Consultant Qualification (CQ) (Prior 2)

2.3 Participant Selection and Knowledge Baseline Assessment

(pre-test)$10,000

Elaboration of tools to segment and identify participants as well as asses participants' skill level (pre training test)

CS ICCovers segmentation strategy and selection of participants

2.4 Curriculum Implementation

2.41 Training of Trainers in Tunisia $39,200 Organizing 2 TOTs in Tunisia CS IC

2.42 Curriculum Implementation in Tunisia $25,200 Organizing 6 face to face workshops (2

days each; 30 participants) in Tunisia Training

Shopping (rental of rooms, travel, per diem) (Prior 3)

2.43 Trainer Fees in Tunisia $10,000 Fees to provide financial education sessions to beneficiaries CS IC

2.44 Training of Trainers in Egypt $10,000 Organizing 1 TOT in Egypt  CS IC

2.45 Curriculum Implementation in Egypt $28,000 Organizing 6 face to face workshops (2

days each; 30 participants) in Egypt TrainingShopping (rental of rooms, travel, per diem)

2.46 Trainer Fees in Egypt $10,000 Fees to provide financial education sessions to beneficiaries CS IC

2.47 Curriculum Implementation in Morocco $28,000 Organizing 6 face to face workshops (2

days each; 30 participants) in Morocco TrainingShopping (rental of rooms, travel, per diem)

2.48 Trainer Fees in Morocco $8,000 Fees to provide financial education sessions to beneficiaries CS IC

33

2.49 Training of Trainer Fees in Morocco $10,000 Fees to provide financial education

sessions to beneficiaries CS IC

2.5 Curriculum Dissemination $25,000

Editing and distribution of teaching materials: includes booklets, pamphlets, social media campaign, short videos, etc. Goal is to disseminate knowledge related to financial education sessions Goods or NCS

Shopping (Prior 4)

2.6 CAWTAR Consultant Fees $20,000

Consultant fees to cover project development needs during implementation (one semester contract remuneration)

CS IC

Based on historical analysis of CAWTAR project manager salaries (see annex 2)

2.7 CAWTAR Consultant Travel $5,000 Travel to supervise implementation of financial literacy modules

OP OC

2.8 M&E $14,000

Management of M&E data on participants of training (socio-graphic and behavioral change); will track data to be inputted in the MEIS CS IC

TOTAL $287,400

Activities

Activity Amount Activity Description Type of Procurement Procurement Category

3. Build Capacity

of Financial Service

Providers through

Knowledge Exchanges

and

3.1 Participation of trainers to Sanabel Conference $15,000

Participation of 10 trainers to Sanabel Workshops (10 from each country) and Training of Trainers (TOT)

OC (hotel, travel, per diem) DC

3.2 TOT Workshop $5,000 Workshop on TOT best practices to be held at Sanabel conference

OC (hotel, travel, per diem) DC

3.3 Launch Event $8,000 Present findings of demand-side survey and associated assessments OC (hotel, travel, per

diem) DC

34

Training of Key MFIs

3.4 Knowledge Exchange Material Design/Production $5,000 Design and writing of dissemination

materials

NCS Shopping

3.5 Knowledge Exchange Material Production $8,000

Editing and distribution of dissemination materials: booklet or pamphlets NCS Shopping

3.6 CAWTAR Consultant Fees $20,000

Consultant fees to cover project development needs during implementation (one semester contract remuneration)

CS IC

Based on historical analysis of CAWTAR project manager salaries (see annex 2)

3.7 CAWTAR Consultant Travel $5,000

Part-time consultant to be in charge of managing M&E data on participants of training (socio-graphic and behavioral change); will track data to be inputted in the MEIS

OP OC

Total $66,000

Total Expenditure

Component Demand Analysis

Financial Literacy Modules

Strengthen

Financial Service Providers via

Knowledge ExchangesTOTAL

Cost $168,390 $287,400 $66,000 $521,790

CAWTAR Administrative

Fee$78,210

Total Cost $600,000

35

Annex 4: Simplified Operational Risk Assessment Framework (ORAF)Project Stakeholder Risks Rating Moderate

Description:

(i) Coordination, effective communication, and delivery of outputs is made difficult by the number of stakeholders involved in this TA operation; There is a risk that key stakeholders, including MFIs, service operators (Centre Mohammed VI), and local NGOs may have different interests making effective delivery of the project more difficult.

Risk Management: Effective preparation and strong management from the project management unit can help identify and address interest capture and infighting amongst the large number of project partners. During project preparation CAWTAR will complete a mapping of key project stakeholders and follow up with analysis of partnerships and expected outputs. This will be captured in CAWTAR project records. Constant communication throughout project implementation with partners and CAWTAR staff can help minimize interest capture amongst key stakeholders. Strong oversight from Bank staff is needed to ensure this risk is minimized. Being proactive in solving problems that arise and anticipating institutional challenges will also help minimize this risk.

Resp: Executing Agency and Bank Due Date: June 1, 2013 Status: In progressImplementing Agency Risks (including fiduciary)

Capacity Rating: ModerateDescription: (i) While having a strong track record of implementing past Bank project in Tunisia and Morocco, CAWTAR has less experience in Egypt. There is a risk CAWTAR will have difficulty implementing project activities in Egypt, particularly given the financial literacy modules are focused in Egypt.

Risk Management: Strong partnership agreements with Egyptian stakeholders, most notably Alexandria Business Association, Lead Foundation, and Sanabel can help minimize this risk. Similarly, a mission completed by CAWTAR to Egypt during project preparation will help ensure CAWTAR acquires the market and institutional knowledge necessary to complete a project in Egypt.

Resp: Executing Agency Due Date: June 1, 2013 Status: In Progress

(ii) While CAWTAR is a regional leader on women’s and youth economic and social participation, it has little direct experience with microfinance

Risk Management: Strong coordination and partnerships, and effective communication and project management can help minimize the risk related to CAWTAR’s lack of direct microfinance experience. It is expected that key partners will help inform knowledge gaps. Similarly, close contact between MENA FPD staff and CAWTAR will help address information gaps. It is expected MENA FPD to provide a workshop on the MENA microfinance landscape during project preparation.

Resp: Executing Agency and Bank Due Date: June 1, 2013 Status: CompletedGovernance Rating: Low

Description: (i) There is a risk governing the project may be complex given the regional focus and multiple project partners; the project structure may make complete transparency more difficult.

Risk Management: The Bank will detail with CAWTAR reporting and disclosure requirements necessary to ensure conflicts of interests are minimized. The FM and procurement assessment completed during project appraisal found an overall risk of low and moderate (respectively). CAWTAR staff has completed Bank procurement training and have been briefed on reporting and accountability procedures required. Strong management and oversight from the Bank can help minimize any potential governance risks.Resp: World Bank and Executing Agency Due Date: June 1, 2013 Status: Completed

36

Project RisksDesign Rating: Substantial

Description: The project may not be implemented successfully given geographic complexity (e.g. three countries), institutional complexity (e.g. CMU clearances, partnerships), and the relatively short implementation period (18 months)

Risk Management: This risk can be mitigated through effective project management; this begins with producing a comprehensive project implementation schedule/manual that clearly outlines partnership arrangements, deliverables schedules, reporting, budgeting, and operational policies within the project management unit. Similarly, this risk can be managed on the Bank side through consistent oversight and technical assistance to CAWTAR throughout the project lifecycle. While the project design is complex, effective management and being proactive by both the Bank and CAWTAR can help minimize this risk while maximizing the overall developmental impact.

Resp: Executing Agency and Bank Due Date: June 1, 2013 Status: CompletedSocial & Environmental Rating: Low

Description: Targeting the poor: project components, particularly the financial literacy modules, may not target the unbanked poor but rather target beneficiaries who could possibly access financial services and who are good future microfinance clients; activities may not fully account for specific access and usage challenges facing the poor

Risk Management: Dedicated resources will be placed into selecting beneficiaries that are low-income and are not served by formal financial institutions for both component 1 (demand-side survey) and component 2 (financial literacy module); When possible CAWTAR will identify beneficiaries through local NGOs and will consult with a broad set of stakeholders to ensure the low income non-banked are adequately represented.

Resp: Executing Agency Due Date: September 2013 Status: In ProgressProgram & Donor Rating: Low

Description : Donor Coordination, Commitment, and Integrating into Existing Work: A number of donors supporting the microfinance sector in MENA region are engaged in similar capacity building work; risk of duplication

Risk Management: Microfinance is an increasingly important donor priority in Morocco, Tunisia, and Egypt given the low levels of financial inclusion in the MENA region. While donors are increasingly focused on financial literacy and incorporating vulnerable communities such as women and youth, risk of duplication is low given the high levels of need. For example, in Tunisia there exists almost no market for financial literacy; as such significant efforts from multiple donors are needed to address gaps. There also has been no comprehensive demand-side analysis of financial access constraints completed in the MENA region. Thus the risk of duplication for Component 1 of the project is almost non-existent. The risk of duplication has been mitigated by extensive donor collaboration during project preparation between CAWTAR and active donors.

Resp: Executing Agency Due Date: June 1, 2014 Status: CompletedDelivery Monitoring Sustainability Rating: Moderate

Description: The project may not be sustainable given its short implementation period and relatively large number of activities for the given budget.

Risk Management: CAWTAR will prioritize sustainability in the project through a) making project output materials (financial literacy modules, demand-side assessment documents) widely available to diverse stakeholders. This will aim improve sustainability by ensuring stakeholders can draw on these materials after the project has been completed. The Training of trainers (TOT) under component 1 and 3 will help reinforce sustainability by providing MFIs the capacity to further train staff in financial literacy issues and associated operational challenges. The focus on e-learning and widely disseminating project

37

outputs can also enhance sustainability to increasing outreach and leaving an online infrastructure for project information and outputs to be passed through.

Resp: CAWTAR Due Date: December 31, 2014 Status: Not yet DueOverall Risk Rating: Moderate

Comments: The overall risk rating is moderate. The institutional expertise and past experience of CAWTAR in successfully managing World Bank and other donor projects, as well as the extensive consultation with project partners have helped in minimizing substantial project and stakeholder risks. Effective project management, consistent and timely reporting, and pro-active identification of challenges arising during project implementation are the key to ensuring risks are minimized. Close coordination is required between World Bank and CAWTAR staff, particularly given the regional complexity associated with this project.

38

Annex 5: References and Further Reading

Benhassine, Najy. From Privilege to Competition: Unlocking Private-Led Growth in the Middle East and North Africa Region. Washington: World Bank, 2009.

Gatti, Roberta, Matteo Morgandi, Rebekka Grun, Stefanie Brodmann, Diego Angel-Urdinola,

Juan Manuel Moreno, Daniela Marotta, Marc Schiffbauer, and Elizabeth M. Lorenzo. Jobs for Shared Prosperity: Time for Action in the Middle East and North Africa. Washington: World Bank, 2013.

Global Findex Database. http://econ.worldbank.org/globalfindex. Lanchovichina, Elena, and Lili Mottaghi. MENA: Economic Pressures Mount. MENA Monitor

No. 3. Washington: World Bank MENA Chief Economist's Office, 2013. Ledgerwood, Joanna, Julie Earne, and Candace Nelson. The New Microfinance Handbook: A

Financial Market System Perspective. Washington: World Bank, 2013. Nasr, Sahar, and Douglas Pearce. SMES for Job Creation in the Arab World: SME Access to

Financial Services. Washington: World Bank, 2012. Opening Doors: Gender Equality and Development in the Middle East and North Africa. MENA

Development Report. Washington: World Bank, 2013

Rocha, Roberto R., Zsofia Arvai, and Subika Farazi. Financial Access and Stability. Washington: World Bank Publications, 2011.

Silva, Joana, Victoria Levin, and Matteo Morgandi. Inclusion and Resilience: The Way Forward

for Social Safety Nets in the Middle East and North Africa. MENA Development Report. Washington: World Bank, 2012.

Stein, Peter, Tony Goland, and Robert Schiff. Two Trillion and Counting: Assessing the Credit

Gap for Micro, Small, and Medium-Sized Enterprises in the Developing World. Washington: International Finance Corporation & McKinsey and Company, 2010.

"Strengthening the Microfinance Sector with Objective Data and Analysis." MIX Market.

Accessed April 25, 2013. http://www.mixmarket.org/.

Select Websites for Data Sources:

Microfinance Information Exchange (MIX): www.themix.org/

Global Financial Inclusion Database: www.worldbank.org/globalfindex

39