The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) REPORT NO.: RES50412 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE IMPROVING THE LIVELIHOODS OF MISKITO INDIGENOUS PEOPLES IN LA MOSKITIA PROJECT (P167767) APPROVED ON NOVEMBER 6, 2019 TO THE FUNDACION AYUDA EN ACCION SOCIAL SUSTAINABILITY AND INCLUSION GLOBAL PRACTICE LATIN AMERICA AND CARIBBEAN REGION Regional Vice President: Carlos Felipe Jaramillo Country Director: Michel Kerf Global Director: Louise J. Cord Practice Manager/Manager: Maria Gonzalez de Asis Task Team Leader(s): Norman Russle Howard Taylor, German Nicolas Freire The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) ABBREVIATIONS AND ACRONYMS ACICAFOC Coordinating Association of Indigenous and Community Agroforestry in Central America (Asociación Coordinadora Indígena y Campesina de Agroforestería Comunitaria Centroamericana) AeA Ayuda en Acción Foundation (Fundación Ayuda en Acción) BE Beneficiary Entities E&S Environmental and Social IP Implementation Progress JSDF Japan Social Development Fund NGO Non-governmental organization PDO Project Development Objective PIU Project Implementing Unit The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) BASIC DATA Product Information Project ID Financing Instrument P167767 Investment Project Financing Environmental and Social Risk Classification (ESRC) Substantial Approval Date Current Closing Date 06-Nov-2019 31-Oct-2022 Organizations Borrower Responsible Agency Fundacion Ayuda en Accion Fundacion Ayuda en Accion Financing (in USD Million) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 0 Total Financing 0 Financing Gap 0 DETAILS -NewFin3 Project Development Objective (PDO) Original PDO The development objective is to promote socio-economic productive activities to improve the livelihoods of Miskito indigenous peoples in Selected Territories in Honduras. Specifically, the project would work with Miskito communities seeking to target at least 1,800 Miskito indigenous peoples in the four selected territories. OPS_TABLE_PDO_CURRENTPDO The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) Summary Status of Financing (US$, Millions) Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-B1371 19-Oct-2019 09-Sep-2020 21-Oct-2020 31-Oct-2022 2.72 .37 2.35 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Background 1. The Grant for the “Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia Project” was approved on November 6, 2019. The Grant amount of US$2.72 million supports the promotion of socio-economic productive activities to improve the livelihoods of Miskito Indigenous Peoples in four selected territories in Honduras. The Coordinating Association of Indigenous and Community Agroforestry in Central America (Asociación Coordinadora Indígena y Campesina de Agroforestería Comunitaria Centroamericana, ACICAFOC), the non-governmental organization (NGO) originally selected to implement the Project, did not sign the original Grant Agreement due to concerns about the increasing insecurity in the project area. Consequently, the Bank and the Japan Social Development Fund (JSDF) Program agreed to proceed with a first project restructuring to change the implementing agency. The NGO Fundación Ayuda en Acción (AeA), a Spanish NGO with a Honduran branch, was selected as the new implementing agency. The Letter Agreement between the Bank and AeA was signed on September 9, 2020, became effective on October 21, 2020, and the first disbursement was made on November 9, 2020. This is the first World Bank/JSDF Project to be implemented by AeA. B. Project Status 2. The Project has experienced delays in implementation and disbursements have been largely due to the above- mentioned situation that resulted in the first project restructuring, the COVID-19 situation and the occurrence of the Eta and Iota hurricanes during November 2020, affecting the project area of influence. Despite these delays, the Project has been making significant progress since April 2021 when the Project Implementing Unit (PIU) was fully staffed, and the field activities started in La Moskitia. The PIU accelerated the pace of the Project, identifying subprojects, and implementing capacity building trainings that have resulted in a Satisfactory rating for the Project Development Objective (PDO) and Overall Implementation Progress (IP) in the last Implementation Status and Results Report dated February 7, 2022. The PDO rating will be reassessed during the next supervision mission by July 2022. At present, disbursements amount to US$373,593.92, environmental and social (E&S) standards and performance are rated satisfactory and all, but one legal covenant has been The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) complied with because two positions were not necessary to filled, the communications specialist and the renewable energy specialist. Communications, however, are being managed by the AeA institutional communication specialist, and the renewable energy specialist was not necessary, due to the type of subprojects demanded by the beneficiaries. There are no overdue audit reports. Achievements under the components are as follows: 3. Component 1. Community Investments (US$1.8 million). Community investments represent the core component of the Project with 66 percent of the total grant financing This component supports subprojects for productive activities including fishing, agroforestry and poultry farming and helps beneficiaries walk through the procedures to prepare the subproject proposals and the applications for these subprojects. The PIU’s technical team (promoters and specialists) have focused on the identification and preparation of the subprojects proposals, providing technical assistance to beneficiary entities (BE) to prepare subproject proposals, and started implementation of the first approved subprojects. The key achievements to date are: a) The establishment of a subproject evaluation committee with the participation of key project stakeholders; b) pre-identification of 18 BE that could potentially implement subprojects under the agreed requirements; c) 10 subprojects prepared and submitted to the subproject evaluation committee; d) 8 approved subprojects with a total of US$265,297.27 to be disbursed; and f) 8 BE receiving training in financial management, procurement, and environment and social standards. 4. Component 2. Building the Technical and Organizational Capacity of Eligible Beneficiaries (US$0.65 million). This component will build the capacity of the beneficiaries throughout the life of the project and strengthen the capacity of local communities to develop, implement and sustain their own technical and managerial solutions. The main achievements are: a) the completion of the socialization processes of the Project at all levels and with all the key actors; b) a productive diagnosis carried out identifying initiatives with potential profitability and cultural relevance; c) promotion activities completed for the call of proposals for subprojects through radio and press; d) capacity building activities to BE for preparation of subproject proposals; e) legal advice provided to BE to obtain a legal status; f) four manuals developed: procurement, financial/accounting, social standards and environmental standards; g) creation of a single window for call of proposals to expedite up procedures; and h) technical cooperation agreements signed with National Institute of Professional Development (INFOP), (National Honduran Network for Productive Micro-enterprises (CDE MIPYME) , and the Directorate of Indigenous Peoples and Honduran Afro Descendants (DINAFROH). 5. Component 3. Project Management and Administration, Monitoring and Evaluation, and Knowledge Dissemination (US$0.27 million). This component also includes achievements in the management of social and environmental standards. The most relevant advances are: a) establishment of a grievance mechanism for managing complaints; b) update of the stakeholder engagement plan, based on stakeholder consultations and recommendations; c) free prior and informed consent (FPIC) consultations successfully ongoing; d) workshops held to informed and validate results of the FPIC exercise; e) operational manual and subprojects manual updated to reflect the Project current context; e) the Project baseline was developed to monitor key results indicators; and f) a monitoring and evaluation system established for project management. The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) 6. The implementation progress in the three project components has laid the territorial basis that will allow a successful management of the activities and results. The delays in the Project start-up have not caused any deviation of the Project objectives. C. Rationale for Restructuring 7. The Project started implementation a year later than originally planned, after the first restructuring was approved and the Grant Agreement signed in November 2020. Once the first disbursement was made, AeA established a PIU and started the hiring of the specialists required for the PIU. The process took longer than expected since it was difficult to find qualified candidates for some positions in the Project area. The selection process was done in Tegucigalpa and some candidates that ranked first in the selection processes did not accept the fees offered by AeA or were not available to move to Puerto Lempira where the PIU office is located. It took about four months until April 2021 to have the technical staff in place in the Project area, and almost six months for the selection of the procurement, and financial management specialists. 8. There were other factors that delayed the start-up activities: a) the prolonged consultation process with the indigenous communities crucial for the effective inclusion of the beneficiaries in the Project and the consolidation of the model of subprojects to be implemented by the communities; b) the increase in cases of COVID-19 in the Moskitia that required a great effort from the PIU to interact face-to-face with the communities due to the poor biosecurity measures taken by them; c) governance posed another challenge in view of the changes in the directives of the Territorial Councils (CT) that required restarting the consultation and socialization process, given that the new representatives were not willing to accept the agreements approved by their predecessors, representing a two-month delay and the restructuring of the Subproject Selection Committee; and d) a significant number of BE with potential to implement subprojects are not legally established although they have been operating in the Project area for years, so the Project is providing legal assistance for their formalization, while working out arrangements to give additional fiduciary support to the BE to implement grants. These arrangements are reflected in the updated Project and Subprojects Operational Manual. 9. Considering all the delays mentioned above compounded by the impact of the Eta and Iota hurricanes that affected the effective operation of the Project, an extension of the Grant Closing Date is deemed necessary for the Project to achieve the sustainability of the Project’s development results and objectives. The Miskitos are the most vulnerable indigenous population in Honduras, living in a remote location under severe security constraints. The COVID-19 pandemic has affected their sources of income significantly, and this Project gives them an opportunity to improve their livelihoods and establish a model that can be replicated by other donors. The PDO remains relevant to the priorities of Honduras and the Bank and is achievable with the closing date extension, and the performance of the Recipient remains satisfactory. II. DESCRIPTION OF PROPOSED CHANGES 10. The main changes proposed are: a) a Closing Date extension of 16 months from October 31, 2022, to February 28, 2024; b) an adjustment of the results framework to modify the description of the first PDO indicator and adjust the end date of all indicators to reflect the extension; c) a minor adjustment to the components costs; and d) a revision of the The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) disbursement estimates. These changes will imply a change in the implementation schedule and strategy as it is proposed in the action plan submitted by AeA. 11. Results Framework. The description of the first PDO indicator ’Number of beneficaries that increase their income by 20%’ was modified to read “This measures the number of beneficiaries where the average percentage income of the beneficiaries increased by 20 percent, either through the sale of products or through the increase of the value of the production achieved during the implementation of the subprojects.” 12. Component Costs. An adjustment was made to the original budget approved by the JSDF program, respecting the JSDF ceilings to the consultants and operating costs expenditure categories, and the allocation to the Project administration component, which resulted in a slight change to Component 2 and 3 costs. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ Project's Development Objectives ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Number of beneficaries that increase their income by 20%. Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 1000.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 At least 50 percent are female Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 0.00 500.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Number of beneficiaries that reduce their costs of production by 20%. Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 1000.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 At least 50 percent are female Unit of Measure: Number Indicator Type: Custom Breakdown The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) Baseline Actual (Current) End Target Action Value 0.00 0.00 500.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Percentage of beneficiaries reporting at least 20 percent increase in productivity in their economic activities Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 60.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Number of direct beneficiaries Unit of Measure: Amount(USD) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 1800.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Female beneficiaries Unit of Measure: Amount(USD) Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 0.00 900.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Intermediate Indicators IO_IND_TABLE Percentage of groups of beneficiaries applying lower cost technology Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 60.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Percentage of groups of beneficiaries that implement the business plan. The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 60.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Percentage of groups of beneficiaries using good practices Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 60.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Percentage of beneficiaries from the community investments Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 35.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Implemented monitoring system Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 100.00 100.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Number of external evaluations satisfactorily completed Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 2.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Percentage of resolved claims received Unit of Measure: Percentage Indicator Type: Custom The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) Baseline Actual (Current) End Target Action Value 0.00 0.00 70.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 Percentage of implementation of the Annual Operations Plan. Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 46.00 85.00 Revised Date 01-Mar-2019 21-Jan-2022 28-Feb-2024 OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Community Investments 1800000.00 No Change Community Investments 1800000.00 Building the Technical and Building the Technical and Organizational Capacity of 653200.00 Revised Organizational Capacity of 681645.24 Eligible Beneficiaries Eligible Beneficiaries Project Management and Project Management and Administration, M&E, and 269000.00 Revised Administration, M&E, and 240554.76 Knowledge Dissemination Knowledge Dissemination 2,722,200.0 TOTAL 2,722,200.00 0 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-B1371 Effective 31-Oct-2022 28-Feb-2024 28-Jun-2024 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates The World Bank Improving the Livelihoods of Miskito Indigenous Peoples in La Moskitia (P167767) Yes Expected Disbursements (In US$) Fiscal Year Annual Cumulative 2020 0.00 0.00 2021 0.00 0.00 2022 0.00 0.00 2023 0.00 0.00 2024 1,000,000.00 1,000,000.00