CREDIT NUMBER 75500-XK Financing Agreement (Early Childhood Education and Care for Kosovo's Human Capital Project) between REPUBLIC OF KOSOVO and INTERNATIONAL DEVELOPMENT ASSOCIATION FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between REPUBLIC OF KOSOVO (“Recipient”) and INTERNATIONAL DEVELOPMENT ASSOCIATION (“Association”). WHEREAS, the Bank supports the Recipient in its commitment to the development objective of the project, as set forth in Schedule 1 of this Agreement (“Project”); and WHEREAS, in furtherance of that development objective, in addition to this Agreement, the International Development Association and the Recipient intend to enter into a grant agreement (“Grant Agreement”) for the purpose of providing a grant in the amount of two million Dollars (USD 2,000,000) to assist the Recipient in financing of the Project, on the terms and conditions set forth in the Grant Agreement. The Recipient and the Association hereby agree as follows: ARTICLE I — GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement. ARTICLE II — FINANCING 2.01. The Association agrees to extend to the Recipient a credit, which is deemed as Concessional Financing for purposes of the General Conditions, in the amount of eighteen million six hundred thousand Euros (EUR 18,600,000), as such amount may be converted from time to time through a Currency Conversion (variously, “Credit” and “Financing”), to assist in financing the project described in Schedule 1 to this Agreement (“Project”). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section III of Schedule 2 to this Agreement. 2.03. The Maximum Commitment Charge Rate is one-half of one percent (1/2 of 1%) per annum on the Unwithdrawn Financing Balance. -2- 2.04. The Service Charge is the greater of: (a) the sum of three-fourths of one percent (3/4 of 1%) per annum plus the Basis Adjustment to the Service Charge; and (b) three-fourths of one percent (3/4 of 1%) per annum; on the Withdrawn Credit Balance, or such rate as may apply following a Currency Conversion. 2.05. The Interest Charge is the greater of: (a) the sum of one and a quarter percent (1.25%) per annum plus the Basis Adjustment to the Interest Charge; and (b) zero percent (0%) per annum, or such rate as may apply following a Currency Conversion; on the Withdrawn Credit Balance. 2.06. The Payment Dates are May 15 and November15 in each year. 2.07. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 3 to this Agreement. 2.08. The Payment Currency is Euro. ARTICLE III — PROJECT 3.01. The Recipient declares its commitment to the objective of the Project. To this end, the Recipient shall carry out the Project through MESTI, with the technical assistance of MOH for Part 2 of the Project, and MFLT for Part 3.3. of the Project, and the participation of UNICEF for Parts 1 and 2 of the Project, as needed; all in accordance with the provisions of Article V of the General Conditions and Schedule 2 to this Agreement. ARTICLE IV — EFFECTIVENESS; TERMINATION 4.01. The Additional Condition of Effectiveness consists of the following, namely that the Recipient, through MESTI, has established the Project Implementation Unit (PIU), in form and substance satisfactory to the Bank. 4.02. The Effectiveness Deadline is the date one hundred and twenty (120) days after the Signature Date. 4.03. For purposes of Section 10.05 (b) of the General Conditions, the date on which the obligations of the Recipient under this Agreement (other than those providing for payment obligations) shall terminate is twenty years (20) after the Signature Date. -3- ARTICLE V — REPRESENTATIVE; ADDRESSES 5.01. The Recipient’s Representative is its Minister of Finance, Labor, and Transfers, who, inter alia, may, on behalf of the Recipient, agree to any revision of the provisions set forth in the Schedules to this Agreement, in accordance with Section 11.02 (b) of the General Conditions. 5.02. For purposes of Section 11.01 of the General Conditions: (a) the Recipient’s address is: Ministry of Finance, Labor and Transfers New Government Building Mother Teresa Street 10000 Pristina Republic of Kosovo; and (b) the Recipient’s Electronic Address is: Facsimile: E-mail: +383-38-213-113 dbnf.mf@rks-gov.net 5.03. For purposes of Section 11.01 of the General Conditions: (a) the Association’s address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Association’s Electronic Address is: Telex: Facsimile: E-mail: 248423 (MCI) 1-202-477-6391 mpaolucci@worldbank.org -4- AGREED as of the Signature Date. REPUBLIC OF KOSOVO By _____________________________________/s1/ Authorized Representative Hekuran Murati Name: __________________________ /n1/ Minister Title: __________________________ /t1/ 28-Jun-2024 Date: __________________________ /d1/ INTERNATIONAL DEVELOPMENT ASSOCIATION By _____________________________________/s2/ Authorized Representative Massimiliano Paolucci Name: __________________________ /n2/ North Macedoni Country Manager, Kosovo and /t2/ Title: __________________________ 28-Jun-2024 Date: __________________________/d2/ -5- SCHEDULE 1 Project Description The objective of the Project is to improve the quality and equitable access to early childhood education and care services in Kosovo. The Project consists of the following parts: Part 1. Improving the quality of ECEC services 1.1. ECEC regulatory updates and development of the new ECEC quality and monitoring frameworks (a) conducting of a review of the existing ECEC regulatory framework; (b) developing a National ECEC Quality Framework; (c) developing the national ECEC assessment and observation framework and conducting classroom observations and assessments of child outcomes; (d) adapting or developing the child assessment tool that would be aligned with and adapted to national goals; and (e) improving regulations defining the quality of ECEC learning environments, their pedagogical role, and preparing the guidelines and blueprints for ECEC infrastructure expansion/adaptation, as well as development of the equipment standards and requirements for teaching and learning materials in ECEC centers. 1.2 Capacity building of ECEC professionals (a) developing the national ECEC teacher continuous professional development framework based on the existing legal framework and the ECE Curriculum; (b) designing training programs for pre-service and in-service ECEC workers; (c) training, retraining, requalification, and capacity building of ECE teachers, childcare workers, municipal managers and other decision-makers; (d) capacity-building activities, including study visits, information exchanges, and seminars and learning events; (e) Strengthening the teacher training and development capabilities of the MESTI through identifying one existing ECEC facility and equipping it with the necessary tools to integrate training center capabilities, as well as expanding this center with a function of the recycling center for ECEC learning materials; and (f) strengthening MESTI’s financial planning capacity. 1.3. Development and implementation of cross-sectorial ECEC module for the Education Management Information System (EMIS) and improvement of the core EMIS system -6- (a) assessing the physical and institutional requirements of transitioning from the current data management system to an EMIS; (b) purchasing of software and hardware needed to transition to an EMIS that covers all levels of education and ECEC; (c) developing, piloting, and rolling out of an EMIS that adequately responds to the data needs across the education sector; and (d) training, communication, and capacity building on the EMIS for users at all levels of the education sector and relevant agencies involved in ECEC. Part 2. Fostering multi-sectorial integration in ECEC service delivery 2.1 Early stimulation and promoting healthy nutrition. (a) provision of training on stimulation for the first 1,000 days of life to healthcare providers in MFMCs, using training packages developed under Part 1.2.; and (b) (i) development and implementation of a comprehensive communications strategy and campaign materials with approaches to target young mothers; and (ii) Training of healthcare and education providers on the promotion of breastfeeding and healthy nutrition as part of parent interactions in their settings. 2.2. Child monitoring and early childhood intervention program (a) development and institutionalization of an Early Childhood Intervention (ECI) Program and standardization of procedures for early identification and timely referral and data reporting and monitoring; (b) piloting of the ECI Program in Pristina city and up to two rural/vulnerable selected municipalities followed by the for national rollout of the ECI Program; (c) infrastructure investments in MFMCs across the country and procurement of basic medical supplies to allow for implementation of the ECI Program; and (d) training of providers and advocacy for national adoption of the ECI Program. Part 3. Increasing equitable access to ECEC services 3.1. Green and universal repurposing, building, and renovating ECEC facilities. (a) construction of up to eighteen new ECEC Centers in selected municipalities; (b) rehabilitation and/or repurposing/upgrading of existing ECEC spaces and other public spaces for ECEC use, and refurbishments of kitchens to implement new nutrition guidelines; and (c) development and establishment of one new or renovated ECEC Center to include the training center for teacher preparation and a recycling center of supplies for ECEC Centers. -7- 3.2. Equipping of ECEC Centers with new furniture and learning materials Provision of equipment, supplies, and learning materials to accommodate different teaching methodologies and play-based curricula in ECEC Centers. 3.3. Support for the participation of Vulnerable Children in the Voucher Program Design and implementation of the Voucher Program. Part 4. Project management and monitoring and evaluation. Technical assistance and operational support to PIU for Project management, monitoring and evaluation and, including inter alia, for: (a) design and implementation of an impact evaluation study relying on the observations and assessment supported under Part 1.1 of the Project; (b) verification of PBC Targets; and (c) carrying out of outreach and communication activities to raise awareness to families on the ECEC benefits. -8- SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional and Other Arrangements. 1. The Recipient, through MESTI, shall establish, and thereafter operate and maintain, at all times during Project implementation, a PIU with functions and responsibilities satisfactory to the Association, as set forth in the POM, including, inter alia, providing support for coordination, procurement, financial management, and reporting and monitoring of the Project, including translation services, with resources and staffing (with qualifications, experience and under terms of reference) satisfactory to the Association. 2. The Recipient, through MESTI, shall ensure that the PIU is at all times during Project implementation adequately staffed with professionals necessary to fulfill its functions, including, inter alia: (a) a Project coordinator; (b) a procurement specialist; (c) a financial management specialist; (d) an environmental and social specialist; (e) a monitoring and evaluation specialist; (f) an education specialist for Part 1; (g) a health/ECEC specialist for Part 2; (h) a chief engineer for Part 3; and (i) a Voucher Program coordinator, if needed, as further described in the Project Operations Manual. 3. No later than two (2) months after Effective Date, the Borrower, through MESTI, shall establish, and thereafter operate and maintain, throughout Project implementation, a steering committee (the “Steering Committee”) with functions, resources and composition acceptable to the Bank, as further detailed in the Project Operations Manual, which shall be responsible for Project oversight, strategic guidance, coordination and monitoring. B. Third Party Implementation Agency To facilitate the implementation of Part 1 and 2 of the Project, as needed, the Recipient, through MESTI, shall enter into, and thereafter maintain, throughout implementation of the Project, an agreement with UNICEF under a Standard Form of Agreement, under terms and conditions satisfactory to the Association. C. Project Operations Manual 1. The Recipient, through MESTI, shall: -9- (a) not later than two (2) months after Effective Date, develop and adopt the Project Operations Manual (“POM”), in form and substance satisfactory of the Association; and (b) carry out the Project in accordance with the Project Operations Manual (“POM”) containing, inter alia: (i) detailed guidelines and procedures for the implementation of the Project, including with respect to the establishment of the PIU, its structure, functions, and responsibilities; Project administration and coordination; monitoring and evaluation; financial management; procurement and accounting procedures; and environmental and social standards; (ii) corruption and fraud mitigation measures; (iii) a grievance redress mechanism; (iv) Personal Data collection and processing in accordance with good international practice; (v) criteria for selecting the municipalities and ECEC facilities for purposes of Part 3.1. and 3.2. of the Project; (vi) criteria for selecting Childcare Service Providers for purposes of Part 3.3 of the Project; (vii) PBC targets and Verification Protocols; and (viii) other arrangements and procedures. (c) Except as the Association shall otherwise agree, the Recipient, through MESTI, shall not assign, amend, abrogate, or waive, or otherwise fail to enforce the POM or any of its provisions thereof. In case of any inconsistencies between the POM and the provisions of this Agreement, the provisions of this Agreement shall prevail. D. Environmental and Social Standards. 1. The Recipient, through MESTI, shall ensure that the Project is carried out in accordance with the Environmental and Social Standards, in a manner acceptable to the Association. 2. Without limitation upon paragraph 1 above, the Recipient, through MESTI, shall ensure that the Project is implemented in accordance with the Environmental and Social Commitment Plan (“ESCP”), in a manner acceptable to the Association. To this end, the Recipient, through MESTI, shall ensure that: (a) the measures and actions specified in the ESCP are implemented with due diligence and efficiency, as provided in the ESCP; (b) sufficient funds are available to cover the costs of implementing the ESCP; (c) policies and procedures are maintained, and qualified and experienced staff in adequate numbers are retained to implement the ESCP, as provided in the ESCP; and -10- (d) the ESCP, or any provision thereof, is not amended, repealed, suspended or waived, except as the Association shall otherwise agree in writing, as specified in the ESCP, and ensure that the revised ESCP is disclosed promptly thereafter. 3. In case of any inconsistencies between the ESCP and the provisions of this Agreement, the provisions of this Agreement shall prevail. 4. The Recipient shall, through MESTI, ensure that: (a) all measures necessary are taken to collect, compile, and furnish to the Association through regular reports, with the frequency specified in the ESCP, and promptly in a separate report or reports, if so requested by the Association, information on the status of compliance with the ESCP and the environmental and social instruments referred to therein, all such reports in form and substance acceptable to the Association, setting out, inter alia: (i) the status of implementation of the ESCP; (ii) conditions, if any, which interfere or threaten to interfere with the implementation of the ESCP; and (iii) corrective and preventive measures taken or required to be taken to address such conditions; and (b) the Association is promptly notified of any incident or accident related to or having an impact on the Project which has, or is likely to have, a significant adverse effect on the environment, the affected communities, the public or workers, in accordance with the ESCP, the environmental and social instruments referenced therein and the Environmental and Social Standards. 5. The Recipient shall, through MESTI, establish, publicize, maintain and operate an accessible grievance mechanism, to receive and facilitate resolution of concerns and grievances of Project-affected people, and take all measures necessary and appropriate to resolve, or facilitate the resolution of, such concerns and grievances, in a manner acceptable to the Association. 6. The Recipient shall, through MESTI, ensure that all bidding documents and contracts for civil works under the Project include the obligation of contractors, subcontractors and supervising entities to: (a) comply with the relevant aspects of ESCP and the environmental and social instruments referred to therein; and (b) adopt and enforce codes of conduct that should be provided to and signed by all workers, detailing measures to address environmental, social, health and safety risks, and the risks of sexual exploitation and abuse, sexual harassment and violence against children, all as applicable to such civil works commissioned or carried out pursuant to said contracts. -11- Section II. Project Monitoring, Reporting and Evaluation The Recipient shall furnish to the Association each Project Report not later than one (1) month after the end of each calendar semester, covering the calendar semester. Section III. Withdrawal of the Proceeds of the Financing A. General Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Recipient may withdraw the proceeds of the Financing to finance Eligible Expenditures in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table: Percentage of Amount of the Financing Expenditures to be Allocated Financed Category (expressed in EUR) (inclusive of Taxes) (1) Goods, works, non-consulting services, and consulting services, Training and Operating Costs for 100% 18,600,000 the Project (except for Part 3.3) TOTAL AMOUNT 18,600,000 B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made for payments made prior to the Signature Date. 2. The Closing Date is June 30, 2029. -12- SCHEDULE 3 Repayment Schedule Principal Amount of the Credit Date Payment Due repayable (expressed as a percentage)* On each May 15 and November 15: commencing May 15, 2029 to and including 1.65% November 15, 2048 commencing May 15, 2049 to and including 3.40% November 15, 2053 * The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3.05 (b) of the General Conditions. -13- APPENDIX Section I. Definitions 1. “Anti-Corruption Guidelines” means, for purposes of paragraph 5 of the Appendix to the General Conditions, the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 2. “Basis Adjustment to the Interest Charge” means the Association’s standard basis adjustment to the Interest Charge for credits in the currency of denomination of the Credit, in effect at 12:01 a.m. Washington, D.C. time, on the date on which the Credit is approved by the Executive Directors of the Association, and expressed either as a positive or negative percentage per annum. 3. “Basis Adjustment to the Service Charge” means the Association’s standard basis adjustment to the Service Charge for credits in the currency of denomination of the Credit, in effect at 12:01 a.m. Washington, D.C. time, on the date on which the Credit is approved by the Executive Directors of the Association, and expressed as a percentage per annum. 4. “Category” means a category set forth in the table in Section III.A of Schedule 2 to this Agreement. 5. “Environmental and Social Commitment Plan” or “ESCP” means the environmental and social commitment plan for the Project, dated April 11, 2024, as the same may be amended from time to time in accordance with the provisions thereof, which sets out the material measures and actions that the Recipient shall carry out or cause to be carried out to address the potential environmental and social risks and impacts of the Project, including the timeframes of the actions and measures, institutional, staffing, training, monitoring and reporting arrangements, and any environmental and social instruments to be prepared thereunder. 6. “Environmental and Social Standards” or “ESSs” means, collectively: (i) “Environmental and Social Standard 1: Assessment and Management of Environmental and Social Risks and Impacts”; (ii) “Environmental and Social Standard 2: Labor and Working Conditions”; (iii) “Environmental and Social Standard 3: Resource Efficiency and Pollution Prevention and Management”; (iv) “Environmental and Social Standard 4: Community Health and Safety”; (v) “Environmental and Social Standard 5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement”; (vi) “Environmental and Social Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources”; (vii) “Environmental and Social Standard 7: Indigenous Peoples/Sub- Saharan African Historically Underserved Traditional Local Communities”; (viii) “Environmental and Social Standard 8: Cultural Heritage”; (ix) “Environmental -14- and Social Standard 9: Financial Intermediaries”; and (x) “Environmental and Social Standard 10: Stakeholder Engagement and Information Disclosure”; effective on October 1, 2018, as published by the Association. 7. “Childcare Service Providers” means any private, public-private, and/or community-based center that provides full-day childcare services and which is licensed by MESTI, and eligible to participate in the Voucher Program according to the criteria defined by MESTI. 8. “ECE Curriculum” means the National Curriculum for Early Childhood Education. 9. “ECEC” means Early Childhood Education and Care and includes education services for children from 0 to 6 years old. 10. “ECEC Centers” means any of the following type of childcare: center-based public, public-private, and community-based centers that are built, repurposed using unutilized facilities, expanded in existing ECEC spaces, and/or renovated for improved provision of the ECEC services. 11. “ECI Program” means an Early Childhood Intervention Program designed to support children from birth to 3 years old and up to 6 years of age who are at risk of or have developmental challenges or delays. 12. “Education Management Information System” or “EMIS” means the digital platform accumulating the administrative data of the education system on students, teachers, institutions, implemented programs, assessment results, and other data defined by the MESTI allowing to generate reports and analytics for statistics and policy making purposes. 13. “General Conditions” means the “International Development Association General Conditions for IDA Financing, Investment Project Financing”, dated December 14, 2018 (Last revised on July 15, 2023). 14. “Grant” means the estimated amount referred to in the preamble of this Agreement, or such final grant amount reflected in the Grant Agreement formally executed by the World Bank and the Republic of Kosovo. 15. “Grant Agreement” means the grant agreement between the Recipient and the World Bank for the Project of the same date as this Agreement, as such grant agreement may be amended from time-to-time; “Grant Agreement” includes all appendices, schedules and agreements supplemental to the Grant Agreement. -15- 16. “Main Family Medicine Centers” or “MFMCs” means the centers in the Recipient’s municipalities providing primary healthcare and early diagnostic services to population, including families with children. 17. “MESTI” means the Recipient’s Ministry of Education, Science, Technology, and Innovation, or any successor thereto. 18. “MFLT” means the Recipient’s Ministry of Finance, Labor and Transfers, or any successor thereto. 19. “MOH” means the Recipient’s Ministry of Health, or any successor thereto. 20. “National ECEC Quality Framework” means the framework defining the elements of the quality such as: (i) ECEC quality standards and quality assurance, including school reporting and accountability, (ii) requirements to ECEC learning environments and teaching and learning materials, (iii) teachers’ and caregivers’ professional standards, and (iv) standards for health and nutrition services and child monitoring; the National ECEC Quality Framework shall also define minimum standards of structural and process quality that need to be ensured by the providers of services, to be developed based on existing regulations, the existing ECE Curriculum, and international best practices for a quality ECEC system. 21. “Operating Costs” means reasonable incremental expenses directly incurred on account of the implementation, management, and monitoring of the Project by the Recipient; such costs may include, as relevant, and as the Association may agree, Project audits, office supplies, office rental, vehicle rental, office and equipment maintenance and repair, communications, translation and interpretation (not covered under Training), publication fees, ownership of intellectual property rights, PIU staff salaries (but excluding consultants’ services and salaries of officials of the Recipient’s civil service); and other miscellaneous expenses directly associated with the Project and agreed between the Association and the Recipient. Such Operating Costs shall not include expenses financed by IDA under other projects or financed by other financiers. 22. “PBC Targets” means the targets defined under Schedule 3 of the Grant Agreement. 23. “Performance-based Condition” or “PBC” means the condition set out in the table in Schedule 3 to the Grant Agreement for the purposes of Part 3.3 of the Project. 24. “Personal Data” means any information relating to an identified or identifiable individual. An identifiable individual is one who can be identified by reasonable means, directly or indirectly, by reference to an attribute or combination of attributes within the data, or combination of the data with other available information. Attributes that can be used to identify an identifiable individual -16- include, but are not limited to, name, identification number, location data, online identifier, metadata and factors specific to the physical (including biometric data), physiological, genetic, mental, economic, cultural or social identity of an individual. 25. “PIU” means the project implementation unit established and maintained by the Recipient within MESTI in accordance with Section I.A.1 of Schedule 2 to this Agreement. 26. “Project Operations Manual” or “POM” means the manual, acceptable to the Bank, referred to in Section I.C of Schedule 2 to this Agreement, as the same may be amended from time to time with the prior written agreement of the Association. 27. “Procurement Regulations” means, for purposes of paragraph 85 of the Appendix to the General Conditions, the “World Bank Procurement Regulations for IPF Recipients”, dated September 2023. 28. “Signature Date” means the later of the two dates on which the Recipient and the Association signed this Agreement and such definition applies to all references to “the date of the Financing Agreement” in the General Conditions. 29. “Steering Committee” means the Steering Committee referred to in Section I.A.3 of Schedule 2 of this Agreement, with functions, resources and composition acceptable to the Bank. 30. “TEACH ECE” means the instrument of the classroom observation that provides the rating of the ECE service quality on a 5-point scale. 31. “Training” means the reasonable expenditures associated with training under the Project, including study tours, training courses, seminars, workshops and other training activities, not included under service providers’ contracts, including costs of training materials, space and equipment rental, travel, accommodation and per diem costs of trainees and trainers, trainers’ fees, and other training related miscellaneous costs. 32. “UNICEF” means United Nations Children’s Fund a specialized agency of the United Nations (a body established and operating pursuant to the Charter of the United Nations signed on June 26, 1945 and entered into effect on October 24, 1945), with which the Recipient shall enter into the Standard Output Agreement as set out in Section I.B of Schedule 2 of this Agreement. 33. “Verification Protocols” means the Recipient’s protocols, which form part of the Project Operations Manual, setting forth the basis and methodology for verification of the achievement of PBC targets, as the same may be modified from time to time with the prior written agreement of the Bank. -17- 34. “Voucher Program” means a program to be established by the Recipient to provide vouchers for selected Childcare Service Providers to deliver demand-driven childcare services to Vulnerable Children. 35. “Voucher Payments” means a payment made or to be made by MESTI to selected Childcare Service Providers under the Voucher Program to cover enrollment and transportation costs in childcare programs. 36. “Vulnerable Children” means children from poor families receiving social assistance, children from Roma Ashkali and Egyptian communities, and children with disabilities.