The World Bank Implementation Status & Results Report Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) EUROPE AND CENTRAL ASIA | Croatia | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2021 | Seq No: 4 | ARCHIVED on 20-Sep-2023 | ISR57712 | Implementing Agencies: Croatian Bank for Reconstruction and Development (HBOR), Croatian Bank for Reconstruction and Development (HBOR) Key Dates Key Project Dates Bank Approval Date: 14-May-2021 Effectiveness Date: 29-Nov-2021 Planned Mid Term Review Date: 01-Dec-2023 Actual Mid-Term Review Date: Original Closing Date: 30-Jun-2025 Revised Closing Date: 30-Jun-2025 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The project development objectives are: (i) to support the recovery of private sector exporters from the economic impact of the COVID-19 pandemic, (ii) enhance access to finance for firms in underserved segments and lagging regions, and (iii) to strengthen HBOR's institutional capacity as a development bank. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions The Loan Agreement and the Guarantee Agreement for the HEAL Project have been declared effective as of November 29, 2021.To date, HBOR withdrew 42.62 mil USD (40 mil EUR) or 18% of the available Loan amount. The progress towards achievement of PDO remains satisfactory, with implementation progress moderately satisfactory. Steps towards speeding-up disbursements towards final beneficiaries have been taken, including the use of Loan resources to tackle the economic impact of the war in Ukraine and inflationary pressures Croatian firms are facing. HEAL Project funds became the primary source of funding for HBOR’s specific financing program “CRISIS 2022 Working Capital Program”. The institutional strengthening agenda is progressing faster than planned. HBOR’s role has continued to evolve alongside the government's strategic goals for the country's social and economic development. During the last several years in the environment of prolonged financial and economic crisis in domestic market, HBOR had an important role in supporting entrepreneurs and facilitating their access to finance. 9/20/2023 Page 1 of 8 The World Bank Implementation Status & Results Report Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Moderate Moderate Moderate Macroeconomic Substantial Moderate Moderate Sector Strategies and Policies Moderate Moderate Moderate Technical Design of Project or Program Moderate Moderate Moderate Institutional Capacity for Implementation and Moderate Moderate Moderate Sustainability Fiduciary Moderate Moderate Moderate Environment and Social Moderate Moderate Moderate Stakeholders Low Low Low Other Low Low Low Overall Moderate Moderate Moderate Results PDO Indicators by Objectives / Outcomes Support for recovery and resilience IN01338109 ►Number of exporters receiving sub-loans under the project that remain solvent (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 100.00 90.00 Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 This indicator will measure the continued viability i.e. recovery of private exporters from the economic impact of the COVID-19 pandemic by using the Financial Agency’s (FINA) data by monitoring if a project- Comments: supported exporter was put under enforcement due to unsettled obligations. The FINA records all business entities’ transactions, time deposits and other financial data, and conducts the enforcement of the monetary funds. IN01338110 ►Number of firms financed in underserved segments and lagging regions (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 11.00 75.00 Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 9/20/2023 Page 2 of 8 The World Bank Implementation Status & Results Report Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) Total number of firms financed in underserved segments (women-owned or managed, young firms) and Comments: lagging region IN01338121 ►Increased use of EU funds by HBOR (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 1.10 3.39 3.55 8.00 Date 31-Dec-2019 30-Jun-2022 31-Dec-2022 30-Jun-2025 The indicator will be calculated as a ratio of EU funding (disbursed) as percent of total sources of funding of HBOR. The amount of EU funds will refer to the overall amount where HBOR is the implementing body of both EU funds allocated from the national level and special financial arrangements with EC (i.e centrally Comments: managed EU funds). The total sources of funding are calculated as a sum of: (i) borrowings and debt securities issued, (ii) capital contributed from the budget of the Republic of Croatia, and (iii) EU funding. Intermediate Results Indicators by Components Support for recovery and resilience IN01338122 ►Amount of lending extended to project beneficiaries (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target no less than EUR 200 Value 0.00 0.00 EUR 27.1 million million Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 Comments: Total volume of lending through HBOR to firms under the project. IN01338123 ►Amount of private co-financing mobilized (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 EUR 21.6 million At least 40% Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 Co-financing are sub-loans with documented financing by other financial intermediaries at the time of their Comments: extension. The indicator will measure the ratio of cumulative co-financing and total volume of lending by World Bank. IN01338124 ►Number of financed project beneficiaries (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 31.00 150.00 Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 Comments: Total number of firms that received funding under the Project. 9/20/2023 Page 3 of 8 The World Bank Implementation Status & Results Report Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) IN01338125 ►Number of exporting firms financed (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target At least 50% of Value 0.00 0.00 25.00 supported firms Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 Comments: Number of exporting firms financed under Project. IN01338126 ►Number of women-owned or managed firms under the Project (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 7.00 At least 20% Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 Comments: Number of women-owned or managed firms financed under Project. IN01338127 ►Number of jobs supported by the Project (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 3,498.00 25,000.00 Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 Comments: Jobs (employment) in the firms supported by the Project. IN01338128 ►Citizen engagement: Firms that report project financing reflected their needs (%) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 90.00 Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 Comments: A mid-term beneficiary feedback survey will measure the satisfaction of the project beneficiaries IN01338129 ►PFIs compliance with prudential regulations (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value Yes Yes Yes Yes Date 31-Dec-2020 01-Dec-2022 01-Dec-2022 30-Jun-2025 Comments: Compliance with prudential regulations monitors financial performance of PFIs. By decision of the HBOR Management Board no.: 1100-51-15/2022 of December 1, 2022, the report of the Financial Institutions Analysis and Economic Research Directorate "Annual assessment of banks 2021" was taken into account, and the new internal ratings of banks are applied from the date of adoption of the decision. 4 PFIs (Croatia banka d.d., Imex banka d.d., Banka Kovanica d.d., Samoborska banka d.d.) have not been 9/20/2023 Page 4 of 8 The World Bank Implementation Status & Results Report Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) compliant with prudential regulations according to the report. These four PFIs are not included in the implementation of the HEAL Project. IN01338130 ►NPL ratio under the Project (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target not more than industry average as defined by Value 0.00 0.00 0.00 corporate sector NPLs (data source: CNB) Date 31-May-2021 30-Dec-2022 31-Aug-2023 30-Jun-2025 Percentage of NPLs in Project sub-loan portfolio should be below industry average. NPLs defined as per Comments: CNB definition. IN01338131 ►HBOR's total gross loans (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target At least 10% increase Value HRK 5.77 billion HRK 3.80 billion HRK 6.40 billion of total gross loans compared to 2019 Date 31-Dec-2019 30-Jun-2022 31-Dec-2022 30-Jun-2025 Total gross loans in the HBOR's balance sheet - total credit activity. Comments: As of end-2022, total credit activity amounted HRK 6.4 billion. IN01338132 ►HBOR's net interest income (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target preservation of Value HRK 353.0 million HRK 248.8 million HRK 469.5 million positive financial result Date 31-Dec-2019 30-Jun-2022 31-Dec-2022 30-Jun-2025 Net interest income (category in Income Statement, Bank level) Comments: At the end of 2022 net interest income amounted HRK 469.5 million. IN01338133 ►HBOR's return on equity (excluding subsidies) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target at least equal to Value 1.50 6.90 1.80 inflation Date 31-Dec-2019 30-Jun-2022 31-Dec-2022 30-Jun-2025 Return on equity (excluding subsidies) to ensure sustainability. The target ROE (excluding subsidies) should be is at least equal to inflation (to preserve value of capital) Comments: ROE at the end of 2022 stood at 1.8% (same as at the end of 2021). Performance-Based Conditions 9/20/2023 Page 5 of 8 The World Bank Implementation Status & Results Report Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) IN01338134 ►PBC 1 PBC 1.1. The Borrower has adopted its credit rating methodologies and credit scoring for private entrepreneurs (Text, Intermediate Outcome, 24,210,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) Year 4 Value 0.00 N/A N/A - Date -- 30-Dec-2022 31-Aug-2023 -- IN01338135 ►PBC 2 PBC 1.2. The Borrower has adopted technical specifications for the new IT core banking system (Text, Process, 12,105,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) Year 4 Value 0.00 N/A N/A - Date -- 30-Dec-2022 31-Aug-2023 -- IN01338136 ►PBC 3 PBC 2.1. The Borrower has adopted the Implementation Act on OECD's recommendations in the area of export financing (Text, Intermediate Outcome, 12,105,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) Year 4 Value 0.00 N/A N/A - Date -- 30-Dec-2022 31-Aug-2023 -- IN01338137 ►PBC 4 PBC 2.2. The Borrower has adopted the measures to redesign its policies and procedures for addressing environmental, social and climate aspects of all financed projects (Text, Intermediate Outcome, 24,210,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) Year 4 Value 0.00 N/A N/A - Date -- 30-Dec-2022 31-Aug-2023 -- IN01338138 9/20/2023 Page 6 of 8 The World Bank Implementation Status & Results Report Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) ►PBC 5 PBC 3.1. The Borrower has submitted the completed questionnaires for each applicable pillar to the European Commission for their review and onwards processing (Text, Output, 24,210,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) Year 4 Value 0.00 N/A N/A - Date -- 30-Dec-2022 31-Aug-2023 -- Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P172024 IBRD-92330 Effective USD 242.10 242.10 0.00 42.62 193.68 18% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P172024 IBRD-92330 Effective 14-May-2021 07-Jun-2021 29-Nov-2021 30-Jun-2025 30-Jun-2025 Cumulative Disbursements 9/20/2023 Page 7 of 8 The World Bank Implementation Status & Results Report Helping Enterprises Access Liquidity in the Republic of Croatia (P172024) Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 9/20/2023 Page 8 of 8