Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD4128 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT IN THE AMOUNT OF SDR 70.9 MILLION (US$100.0 MILLION EQUIVALENT) TO THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA FOR AN ADDITIONAL FINANCING OF THE WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT (WEDP) November 25, 2020 Finance, Competitiveness, and Innovation Global Practice Eastern and Southern 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 October 31, 2020) Currency Unit = Ethiopian Birr (ETB) ETB 37.5 = US$1 SDR 0.708 = US$1 FISCAL YEAR July 8 – July 7 ABBREVIATIONS AND ACRONYMS AF Additional Financing AICS Italian Agency for Development Cooperation CGAP Consultative Group to Assist the Poor COVID-19 Coronavirus Disease 2019 CPF Country Partnership Framework DBE Development Bank of Ethiopia EIB European Investment Bank ESMF Environmental and Social Management Framework FCI Finance, Competitiveness and Innovation FIG Financial Institutions Group FM Financial Management FSSP Financial Sector Strengthening and Access Project FUJCFSA Federal Urban Job Creation and Food Security Agency GDP Gross Domestic Product GIL Gender Innovation Lab GoE Government of Ethiopia GP Global Practice GRM Grievance Redress Mechanism GRS Grievance Redress Service ICR Implementation Completion and Results Report IDA International Development Association IFC International Finance Corporation IFR Interim Financial Report IFWE Innovations in Financing Women Entrepreneurs IMF International Monetary Fund IPF Investment Project Financing M&E Monitoring and Evaluation MFI Microfinance Institution MIS Management Information System MoF Ministry of Finance MSEs Micro and Small Enterprises MSMEs Micro, Small, and Medium Enterprises NBE National Bank of Ethiopia NPMT National Project Management Team OHS Occupational Health and Safety OPCS Operations Policy and Country Services OSS One-Stop Shop PAR Portfolio at Risk PDO Project Development Objective PforR Program-for-Results PFI Participating Financial Institution PMT Project Management Team RFQ Request for Quotation SBDs Standard Bid Documents SMEs Small and Medium Enterprises SPD Standard Procurement Document SRFP Standard Request for Proposal STEP Systematic Tracking of Exchanges in Procurement TA Technical Assistance TVET Technical and Vocational Education and Training UJCFSA Urban Job Creation and Food Security Agency WEDP Women Entrepreneurship Development Project Regional Vice President: Hafez M. H. Ghanem Country Director: Ousmane Dione Regional Director: Asad Alam Practice Manager: Niraj Verma Task Team Leaders: Aly Salman Alibhai, Mengistu Bessir Achew Ethiopia ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING TABLE OF CONTENTS I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING ........................................ 7 II. DESCRIPTION OF ADDITIONAL FINANCING .................................................................... 18 III. KEY RISKS ..................................................................................................................... 25 IV. APPRAISAL SUMMARY .................................................................................................. 25 V. WORLD BANK GRIEVANCE REDRESS .............................................................................. 30 VI. SUMMARY TABLE OF CHANGES .................................................................................... 31 VII. DETAILED CHANGE(S).................................................................................................... 31 VIII. RESULTS FRAMEWORK AND MONITORING ................................................................... 36 ANNEX 1: GIL POLICY BRIEF: COVID-19 IMPACT ON WEDP FIRMS (KEY FINDINGS) ................ 48 ANNEX 2: INNOVATIONS IN FINANCING WOMEN ENTREPRENEURS (IFWE) PROJECT ............ 50 ANNEX 3: FINANCIAL MANAGEMENT ARRANGMENTS ......................................................... 52 ANNEX 4: PROCUREMENT .................................................................................................... 57 ANNEX 5: SCHEMATIC OF KEY PROJECT STAKEHOLDERS ....................................................... 61 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) BASIC INFORMATION – PARENT (Ethiopia Women Entrepreneurship Development Project - P122764) Country Product Line Team Leader(s) Ethiopia IBRD/IDA Aly Salman Alibhai Project ID Financing Instrument Resp CC Req CC Practice Area (Lead) P122764 Investment Project EAEF1 (9552) AECE3 (247) Finance, Competitiveness and Financing Innovation Implementing Agency: Development Bank of Ethiopia (DBE), Federal Urban Job Creation and Food Security Agency (FUJCFSA) ADD_FIN_TBL1 Is this a regionally tagged project? No Bank/IFC Collaboration No Expected Original Environmental Approval Date Closing Date Guarantee Current EA Category Assessment Category Expiration Date 24-May-2012 31-Dec-2021 Financing & Implementation Modalities Parent [ ] Multiphase Programmatic Approach [MPA] [ ] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster [ ] Alternate Procurement Arrangements (APA) [ ] Hands-on, Enhanced Implementation Support (HEIS) Page 1 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Development Objective(s) The project development objective of the WEDP is to increase the earnings and employment of MSEs owned or partly owned by the participating female entrepreneurs in the targeted cities. This will be achieved by: i) tailoring financial instruments to the needs of the participants and ensuring availability of finance; and ii) developing the entrepreneurial and technical skills of the target group and supporting cluster, technology and product development for their businesses. Ratings (from Parent ISR) RATING_DRAFT_ NO Implementation Latest ISR 01-Jun-2018 29-Nov-2018 20-May-2019 01-Nov-2019 20-May-2020 21-Nov-2020 Progress towards achievement of HS HS HS HS HS HS PDO Overall Implementation S S S S S S Progress (IP) Overall Safeguards S S S S S S Rating Overall Risk M M M M M M Financial Management S S S S S S Project Management S S S S S S Procurement MS MS MS MS MS MS Monitoring and Evaluation HS HS HS HS HS HS BASIC INFORMATION – ADDITIONAL FINANCING (ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING - P174874) ADDFIN_TABLE Project ID Project Name Additional Financing Type Urgent Need or Capacity Page 2 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Constraints P174874 ETHIOPIA WOMEN Cost Overrun/Financing Gap Yes ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING Financing instrument Product line Approval Date Investment Project IBRD/IDA 10-Dec-2020 Financing Projected Date of Full Bank/IFC Collaboration Joint Level Disbursement 30-Jun-2024 Yes Complementary or Interdependent project requiring active coordination Is this a regionally tagged project? No Financing & Implementation Modalities Child [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [ ] Small State(s) [✓] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [✓] Responding to Natural or Man-made disaster [ ] Alternate Procurement Arrangements (APA) [ ] Hands-on, Enhanced Implementation Support (HEIS) [ ] Contingent Emergency Response Component (CERC) Disbursement Summary (from Parent ISR) Net Source of Funds Total Disbursed Remaining Balance Disbursed Commitments IBRD % IDA 50.00 47.14 0.60 99 % Grants 5.17 5.17 100 % Page 3 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) PROJECT FINANCING DATA – ADDITIONAL FINANCING (ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING - P174874) PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFi n1 SUMMARY (Total Financing) Proposed Additional Total Proposed Current Financing Financing Financing Total Project Cost 153.30 130.00 283.30 Total Financing 153.30 130.00 283.30 of which IBRD/IDA 50.00 100.00 150.00 Financing Gap 0.00 0.00 0.00 DETAILS - Additional Financing NewFinEnh2 Private Sector Investors/Shareholders Equity Amount Debt Amount IFI Debt 100.00 IDA (Credit/Grant) 100.00 Commercial Debt 30.00 Unguaranteed 30.00 Total 0.00 130.00 Payment/Security Guarantee Total 0.00 IDA Resources (in US$, Millions) Credit Amount Grant Amount Guarantee Amount Total Amount Ethiopia 100.00 0.00 0.00 100.00 National PBA 100.00 0.00 0.00 100.00 Page 4 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Total 100.00 0.00 0.00 100.00 COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [ ✔ ] No Does the project require any other Policy waiver(s)? [ ✔ ] Yes [ ] No Explanation Due to the exceptional circumstance of the COVID-19 crisis and the negative impacts of this crisis on the WEDP businesses, the task team submitted a waiver request for the Environmental and Social Framework; the Environmental and Social Directive for Investment Project Financing; and the Directive on Addressing Risks and Impacts on Disadvantaged or Vulnerable Individuals or Groups. This waiver requested approval to proceed with processing the urgent additional financing under the project's existing safeguards and to extend the preparation of the interim implementation completion and results report by one year. Has the waiver(s) been endorsed or approved by Bank Management? Approved by Management [✔] Endorsed by Management for Board Approval [ ] No [ ] Explanation In line with its COVID-19 Specific Risk Considerations, OPCS approved a waiver on September 21, 2020 of the following safeguards documents: the Environmental and Social Framework; the Environmental and Social Directive for Investment Project Financing; and the Directive on Addressing Risks and Impacts on Disadvantaged or Vulnerable Individuals or Groups. The task team has updated WEDP’s Environmental and Social Management Framework (ESMF) in the light of COVID-19 related risks and will conduct social assessments in all project cities within three months of project effectiveness to ensure a robust and relevant ESMF. INSTITUTIONAL DATA Practice Area (Lead) Finance, Competitiveness and Innovation Contributing Practice Areas Page 5 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks PROJECT TEAM Bank Staff Name Role Specialization Unit Team Leader (ADM Aly Salman Alibhai Senior Operations Officer EEAF2 Responsible) Mengistu Bessir Achew Team Leader Operations Officer EAEF1 Shimelis Woldehawariat Procurement Specialist (ADM Procurement Specialist EAERU Badisso Responsible) Financial Management Girma Habte Weyesa Financial Management EAEG1 Specialist (ADM Responsible) Environmental Specialist (ADM Tamene Tiruneh Matebe Sr. Environmental Specialist SAEE2 Responsible) Abebe Zerihun Yicheneku Team Member Senior Operations Officer AECE3 Charles Andrew Undeland Team Member Senior Country Officer AECET Doina Petrescu Team Member Manager, Operations AECE3 Fawah Ngeniform Akwo Team Member IT/Digital Development IDD01 Gelila Woodeneh Team Member Communications Officer ECRAE Jean O Owino Team Member Finance Officer WFACS Margaret Png Team Member Country Lawyer LEGAM Marius Vismantas Team Member Program Leader EAEDR Markus P. Goldstein Team Member Head, Gender Innovation Lab AFECE Matthewos Shamo Team Member Project Management EAEF1 Humbamo Meron Tadesse Techane Team Member FM Specialist EAEG1 Messeret Marcos Procurement Team AECE3 Niklas Buehren Team Member Economist HGNDR Ousmane Dione Team Member Country Director AECE3 Rachel Dawn Coleman Team Member AFEGI Senidu Fanuel Team Member Private Sector LInkages EAEF1 Page 6 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Shiny Jaison Team Member Operations Assistant EAEF1 Solomon Soroto Tanto Social Specialist Social Development Specialist SAES2 Sreelakshmi Papineni Team Member Analyst - Impact Evaluation AFEGI Stella Chepkorir Team Member Finance Analyst WFACS Toni Johannes Weis Team Member AFEGI Tsedey Asheber Team Member Skills Development Specialist AFEGI Yemsrach Kinfe Edey Team Member Team Assistant AECE3 Yohana Girma Wudneh Team Member Team Assistant AECE3 Extended Team Name Title Organization Location Page 7 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING A. Summary 1. This Project Paper seeks the approval of the Executive Directors for an additional financing (AF) in the amount of US$100 million to the Federal Democratic Republic of Ethiopia for the Women Entrepreneurship Development Project (WEDP) (P174874). The AF is requested to leverage the WEDP’s proven project infrastructure to scale up the provision of financing and business services to viable, women-owned micro and small enterprises (MSEs) that have now been adversely affected by the coronavirus disease 2019 (COVID-19) pandemic. The AF will leverage additional private counterpart financing of approximately US$30 million, in the form of contributions from Ethiopian participating financial institutions (PFIs). As a key part of the World Bank’s crisis response strategy for Ethiopia and its commitment to women’s economic empowerment, the AF seeks to both secure the impressive gains made by the WEDP firms before the pandemic and to realize the potential for renewed employment growth once the crisis abates. The WEDP has an overall PDO rating of Highly Satisfactory as per the Implementation Status and Results Report of November 16, 2020, with all project components being rated Satisfactory or above, and is compliant with all project covenants, including audit and financial reporting requirements. The project’s initial International Development Association (IDA) financing and several rounds of donor co-financing have been almost entirely disbursed. To respond to this urgent financing need to support the WEDP businesses during the crisis, the World Bank has invoked paragraph 12 of the Investment Project Financing (IPF) policy for additional flexibility in processing in cases of urgent need of assistance and obtained permission to continue to use the safeguards policies that were in use when the parent project was prepared (old safeguards). To facilitate the deployment of the AF, a three-year extension of the project until December 31, 2024, is requested. B. Country Context 2. Over the past 15 years, Ethiopia has been among the world’s fastest-growing economies (see figure 1). Real gross domestic product (GDP) growth has averaged around 10 percent per year between 2003/04 and 2018/19, according to World Bank national accounts data, and GDP per capita increased from US$136 to US$857 during the same period. The Government of Ethiopia (GoE) is currently pursuing an ambitious economic vision to turn Ethiopia into an industrialized middle-income country by 2025, and although challenges remain on the path to structural transformation, the sectoral composition of the Ethiopian economy has changed significantly over the years. Agriculture has been replaced by services as the largest contributor to GDP, while industrial value-added has more than doubled over the past five years on the back of a construction boom. Economic growth was accompanied by a substantial reduction in poverty: the percentage of Ethiopians living below the poverty line, as defined by the Government of Ethiopia, dropped from 38.7 percent in 2004/05 to 25.3 percent in 2015/16 according to the national Household Income, Consumption and Expenditure surveys.1 1 In 2015/6, the last time this survey was conducted, the national poverty line was set at ETB7,184 by the Government of Ethiopia. This corresponded to a daily rate of ETB19.7 (US$0.89 in 2016 US dollars). Page 8 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) 3. Under the Homegrown Economic Reform agenda, Ethiopia’s economic policy is shifting from a state-led to a private sector-led approach. In the early 2000s, Ethiopia began to pursue a development agenda based on public infrastructure investment, the promotion of light manufacturing clusters, and policy-directed lending to priority projects. While this approach resulted in sustained GDP growth for more than a decade, growing macroeconomic imbalances led to an increased focus on foreign investment and private sector capacity under the Growth and Transformation Plan II (2015–2020). The momentum for economic reform further increased with the presentation of a new policy framework —dubbed Homegrown Economic Reform—in mid-2019. The cornerstones of the new strategy include the (partial) privatization of state-owned enterprises, measures to reduce the regulatory burden for private enterprises, and a focus on new sectors such as information and communication technology. The new strategy also introduces a set of financial sector reforms, including the modernization of state banks, an end to mandated lending for private banks, and plans to create national stock and bond markets. Figure 1. Ethiopia’s Economic Trajectory Ethiopia: GDP Growth Ethiopia: GDP per capita (annual %) (current US$) 15 1000 10 800 600 5 400 200 0 1990 2000 2010 2020 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 -5 Ethiopia: Poverty Headcount Ratio Ethiopia: Value Added by Sector (% of population) (% of GDP) Less than $3.30/day (2011 PPP) 100% Less than $1.90/day (2011 PPP) 80% 60% 100% 80% 40% 60% 20% 40% 0% 2005 1995 1997 1999 2001 2003 2007 2009 2011 2013 2015 2017 2019 20% 0% 1990 1995 2000 2005 2010 2015 2020 Agriculture Services Industry Other Source: World Development Indicators. Page 9 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) 4. The success of the Homegrown Economic Reform agenda is predicated on the emergence of a strong micro, small, and medium enterprise (MSME) sector that can boost job creation. Sustained GDP growth in recent years has not been matched by similar gains in economic productivity, and formal employment is struggling to accommodate the close to two million youth who enter the job market each year. With 70 percent of formal jobs in developing countries created by small and mid-size firms, according to World Bank estimates, small business owners have a key role to play in expanding employment opportunities.2 ‘Building vibrant and growth-oriented SMEs3’ is therefore one of the pillars of the new National Plan of Action for Job Creation, unveiled in October 2019, which seeks to create 14 million new jobs by 2025. Ethiopia’s first National Entrepreneurship Strategy, presented in August 2019, similarly emphasizes the importance of startups and MSMEs to the realization of employment-led economic transformation. 5. However, Ethiopia’s small business owners—and female entrepreneurs in particular—have continued to face obstacles that limit their capacity for growth. Access to credit in particular remains a major constraint. While state-owned enterprises increased their share of domestic borrowing four-fold over the past decade, lending to the private sector has remained well below demand. Ethiopia’s ratio of private sector credit-to-GDP stands at just above 12 percent (see figure 2), well below the 22 percent average of Africa’s largest 20 economies. The situation is particularly acute for women entrepreneurs: on average, male-owned firms in Ethiopia have twice the level of invested capital as female-owned firms; even after adjusting for the sector of activity, the capitalization of male-owned firms is about 30 percent higher on average.4 The growth potential of female-owned MSEs is further limited by gender-based constraints in areas such as access to finance, sector choice, and business education. Figure 2. Bank Credit by Sector Ethiopia: Bank credit by sector (% of GDP) 35 30 25 11.0 12.1 9.2 9.4 10.7 20 8.6 8.8 9.2 15 9.6 11.2 9.1 10.4 10 11.8 12.7 12.0 18.7 18.9 19.0 20.0 19.7 11.6 13.2 15.6 17.1 5 11.2 5.6 5.4 6.1 7.6 7.6 8.1 0 2.1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Public and prority sectors Private sector Source: Homegrown Economic Reform (Federal Democratic Republic of Ethiopia 2020). 2 Kumar, Ruchira. 2017. Targeted SME Financing and Employment Effects: What Do We Know and What Could Be Done Differently? Jobs Working Paper No. 3. World Bank, Washington, DC. 3 SMEs = Small and Medium Enterprises. 4 World Bank Group. 2019. Profiting from Parity: Unlocking the Potential of Women's Business in Africa. World Bank, Washington, DC. Page 10 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) 6. The challenges have been amplified by the outbreak of the COVID-19 pandemic. This is seriously threatening Ethiopia’s gains in growth and poverty reduction, with urban areas being affected the most by the resulting economic slowdown. Between April and September 2020, the GoE issued a state of emergency under Article 93 of the constitution. Despite these measures, the spread of COVID-19 continued to increase during this period, and negative economic impacts increased rapidly. More than half of the households surveyed in the July 2020 Living Standards Measurement Study reported that their incomes were either reduced or had totally disappeared. As further detailed in Section D, small businesses—particularly those in female-dominated sectors—have also seen their revenues dwindle as a result of the pandemic. The economic and social impact of COVID-19 in Ethiopia is expected to be significant and prolonged, and authorities are facing an unanticipated financing gap of 1.5 percent of GDP (about US$1.5 billion) in FY21. While Ethiopia’s official COVID-19 death count, which stood at 1,600 on November 19,2020 according to World Health Organization data, remains below the levels of excess deaths seen in other countries, the economic devastation is real. Uncertainty is bound to remain high in the coming months, and authorities do not have enough funding for the warranted expansion of support for otherwise viable businesses and vulnerable households. C. Sector Context 7. Ethiopia’s small business owners are held back by a ‘missing middle’ financing problem that has been exacerbated by the COVID-19 pandemic. Growth-oriented MSEs tend to find themselves in a market segment that is not served adequately by either microfinance institutions (MFIs) or commercial banks.5 MFIs primarily provide loans to informal entrepreneurs, not small business owners, and the amounts they offer—typically capped at around US$1,000—tend to be too small for growing firms that seek to make substantial capital investments. At the same time, small businesses tend to find it difficult to ‘graduate’ from MFIs to commercial banks, which prefer to lend to larger, less risky clients and are reluctant to issue loans below US$50,000. The problem is the same with equity financing: venture capital is still a niche phenomenon in Ethiopia, and the few existing firms typically target investments of US$1 million and above in high-growth industries. As a consequence, 76 percent of Ethiopian MSMEs responding to the 2015 Enterprise Survey identified access to finance as the most serious challenge they faced in establishing a business. This constraint has worsened significantly because of the COVID-19 pandemic, with commercial banks and MFIs alike slashing their lending operations to preserve liquidity (see section D for details). 8. Ethiopia’s MFIs are an important vehicle for financial inclusion in the country. MFIs reach market segments that other financial institutions in Ethiopia do not and play a critical role in provision of credit to underserved borrowers. According to the National Bank of Ethiopia (NBE) estimates from 2019, about five million Ethiopians are MFI clients, compared to 250,000 who have taken loans from commercial banks. About 45 percent of MFI borrowers are women and most of the MFI portfolio is rural and operates through group lending mechanisms, with average loan sizes of about US$300. Expanding financial inclusion in Ethiopia therefore merits engaging the MFI sector. 9. Women entrepreneurs are especially disadvantaged in accessing finance, primarily because they have less access to collateral. According to the World Bank’s 2015 Enterprise Survey for Ethiopia, the number of female managers who use bank financing for investment purposes is smaller than the 5 World Bank. 2017. SME Finance in Ethiopia: Addressing the Missing Middle Challenge . World Bank, Washington, DC. Page 11 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) corresponding figure for both male managers in Ethiopia and female managers in other African countries (see figure 3). Similarly, the ratio of female managers who consider access to finance a key obstacle to growth – about one in two – is much higher than the ratios for both male managers and female managers abroad. Limited access to collateral is crucial in this context, with most financial institutions in Ethiopia only considering land titles and fixed assets—chiefly, buildings—as collateral for business loans. However, unequal access to property rights means that women are much less likely to own and control these assets than their male counterparts. According to a recent study by the Gender Innovation Lab (GIL), women are not only less likely to own land than men but also own plots that are on average 30 percent smaller.6 What is more, only half of those women who do own land have their name on a title deed. In a context of high collateral requirements, this means that a large section of women entrepreneurs is shut out of formal financial markets. Figure 3. Gender Gap in Access to Business Finance Percent of firms identifying access to Percent of firms using banks to finance finance as a major constraint investments 60% 30% 50% 25% 40% 20% 30% 15% 20% 10% 10% 5% 0% 0% Ethiopia Africa Ethiopia Africa Female managers Male managers Female managers Male managers Source: World Bank Enterprise Surveys. 10. In addition to the WEDP, several other World Bank Group financed programs are assisting the Ethiopian Government in removing barriers to financial inclusion for MSEs. With support from the Credit Bureau Program of the International Finance Corporation (IFC) (601522), the NBE has been upgrading its Credit Information Center in recent years, and new regulations were introduced in 2019 to establish a national credit reference bureau. The World Bank’s SME Finance Project (P148447) also supported the development of market infrastructures which are crucial ingredients to foster sustainable financing to SMEs. The project financed hardware and software for the movable collateral registry and this registry went ‘live’ in March 2020. Similarly, the upcoming Financial Sector Strengthening and Access Project (FSSAP) (P171627) (currently in preparation) will support the NBE in updating its regulatory framework, assist with the reform of the Development Bank of Ethiopia (DBE), and help the Commercial Bank of Ethiopia better serve the Ethiopian private sector. In the meantime, however, Ethiopian financial institutions continue to rely heavily on fixed asset collateral to assess creditworthiness. 6 World Bank. 2019. Ethiopia Gender Diagnostic Report: Priorities for Promoting Equity . World Bank, Washington, DC. Page 12 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) D. The Women Entrepreneurship Development Project 11. Launched in 2012, the WEDP provides loans and business training to increase earnings and employment of growth-oriented women entrepreneurs in Ethiopia. As of September 2020, more than 16,000 business owners have been able to access loans (Component 1 – Access to Finance) and more than 22,000 have completed business training (Component 2 - Entrepreneurial Skills and Technology Development). The WEDP is implemented in collaboration with the DBE and the Federal Urban Job Creation and Food Security Agency (FUJCFSA)7 The project’s line of credit is disbursed through 12 participating MFIs, while business training is offered through a network of public and private service providers. Outreach to beneficiaries is ensured by the WEDP city coordinators and the ‘one-stop shop’ (OSS) offices in participating locations. The project currently serves a network of more than 38,000 entrepreneurs in ten major cities and 89 satellite towns across the country. 12. The WEDP was approved in May 2012 and became effective in October 2012. The operation has been restructured three times. The first restructuring (January 2016) made minor adjustments to the project’s results framework and implementation arrangements following findings of the Mid Term Review (MTR). The second restructuring (July 2017) modified the project’s duration and intermediate outcome indicator targets to accommodate US$65.8 million in co-financing from Japan International Cooperation Agency (JICA) and Italian Agency for Development Cooperation (AICS). The third restructuring (December 2019) modified the project’s duration and intermediate outcome indicator targets to accommodate US$34 million in co-financing from the European Investment Bank (EIB). Co-financings from JICA, AICS, and EIB all followed the same model of a parallel loan to the Government of Ethiopia (GoE), with a co- financing agreement signed with the World Bank. The operation has disbursed 98.7% of the IDA allocation, 100% of the JICA allocation, and 100% of the AICS allocation. The EIB allocation is expected to begin disbursement in January 2021. 13. The project has made strong progress since inception and has charted a path for similar initiatives in other countries and regions. The WEDP’s overall rating on progress towards achievement of the PDO is Highly Satisfactory and overall implementation progress is rated Satisfactory as of November 16, 2020, with all project components receiving grades of Satisfactory and above. The project was able to ‘crowd in’ several rounds of co-financing from Canada, Japan, Italy, and the EIB for a total disbursement of US$144 million after disbursing nearly all of its initial US$50 million IDA allocation within the first two years of the five-year operation. Lessons from the WEDP model are informing World Bank initiatives to finance women entrepreneurs in Nigeria, Turkey, Mexico, and Indonesia. The project remains compliant with all loan covenants and requirements for procurement, safeguards, and financial management (FM). 14. By also targeting the ‘missing middle’, i.e. small businesses, that are not served typically by either traditional MFIs or commercial banks, the WEDP has filled a substantial market gap. Project data show that 66 percent of WEDP borrowers never accessed formal finance previously; for repeat borrowers, the average WEDP loan was 870 percent larger than previous loans. At the same time, the WEDP’s portfolio quality across the 12 PFIs has been good, with a portfolio at risk (PAR at ninety days, PAR90) of only 3.1 percent as of March 2020, well below a 5 percent industry benchmark. Participating MFIs also have a clean record of repaying the WEDP funds provided by the DBE fully and on time. Just as importantly, 7 FEMSEDA was restructured and renamed as FUJCFSA in 2018 but the structure of the WEDP NPMT within FEMSEDA was transferred to FUJCFSA so operationally there has been no change. Page 13 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) the WEDP’s line of credit has been successful in crowding in private capital over time, as the participating MFIs are now mobilizing their own financing to issue loans to the WEDP clients. To date, internal funds have amounted to US$40 million, or nearly 30 percent of total WEDP disbursements. 15. The WEDP has also pioneered innovative approaches to both financing and training, which enhance the sustainability of the initiative. The project has introduced new credit technologies to lenders, such as psychometric tests, which can predict the ability of a borrower to repay a loan and reduce the need for collateral. A new mindset-based business training has resulted in profit increases of nearly 30 percent for participating entrepreneurs relative to a control group, according to an impact evaluation, further supporting the sustainability of project interventions8. Through a partnership between the World Bank’s Finance Competitiveness and Innovation (FCI) Global Practice (GP) and the Africa GIL, the WEDP has also generated rigorous evidence for policy makers. To date, four World Bank Policy Research Working Papers and four Policy Briefs have been published based on these data, and external researchers are also citing data generated by the project.9 16. The WEDP clients demonstrated impressive growth before the COVID-19 pandemic, pointing to solid business fundamentals. Through research collaboration with the GIL, the WEDP has generated detailed insights into the performance of participating firms and their response to project interventions. According to GIL data, between 2014 and 2019, the average WEDP client has grown her income in US dollar terms by 67 percent (compared to a Project Development Objective [PDO] target of 50 percent) and employment in her firm by 58 percent (compared to a PDO target of 30). Clients who accessed a loan through a participating MFI have also considerably outperformed firms that did not access external financing, with profits increased by 35 percent and employment by 73 percent compared to a control group over the same period. The most recent data show that the WEDP firms are employing a total of 89,282 workers, of whom 61 percent are female. 17. The progress made by the WEDP in growing Ethiopia’s women-owned businesses is now threatened by the impact of the COVID-19 crisis. The WEDP firms are particularly exposed to the crisis as they are almost exclusively in urban areas, where social distancing policies have been enforced more strictly, and are heavily concentrated in customer-facing sectors such as retail trade or hospitality.10 Data from a representative survey of more than 1,000 WEDP clients in September 2020 show that 98 percent of firms report a negative impact due to COVID-19. About 17 percent of firms were temporarily closed because of COVID-19, while 1 percent had shut down permanently as a result of the pandemic. For the WEDP businesses that remained operational, average weekly sales fell by 50 percent and profits by 80 percent compared to an April 2019 baseline. Because these firms only have limited financial buffers, it is likely that a protracted crisis and continued uncertainty would result in the closing of thousands of WEDP 8 World Bank. 2018. Personal Initiative Training Leads to Remarkable Growth of Women-Owned Small Businesses in Togo. World Bank, Washington, DC. 9 World Bank. 2015. Female Entrepreneurs Who Succeed in Male-Dominate Sectors in Ethiopia. World Bank, Washington, DC.; World Bank. 2016. From Learning to Earning: An Impact Evaluation of the Digital Opportunity Trust Entrepreneurship Training. World Bank, Washington, DC.; World Bank. 2017. Female Enrollment in Male-Dominated Vocational Training Courses: Preferences and Prospects. World Bank, Washington, DC.; World Bank. 2018. Disruptive Finance: Using Psychometrics to Overcome Collateral Constraints in Ethiopia . World Bank, Washington, DC. 10 The majority of the WEDP clients’ businesses are in the trade sector (small grocery shops, clothing shops, and electronics shops), followed by non-trade services (cafes, restaurants, and beauty salons) and small-scale manufacturing. Page 14 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) businesses and jeopardize close to 90,000 jobs created by these firms. While macroeconomic conditions are expected to rebound in the medium term—the International Monetary Fund (IMF) has characterized the impact of the pandemic on Ethiopia’s economy as “large but temporary”11—there is a clear case for providing time-sensitive support to female-owned firms, both to avoid unnecessary closures of viable firms and fuel future growth as the outlook brightens. 18. In addition to the women-owned firms themselves, MFIs that are disbursing funds from the WEDP line of credit are also struggling. An internal report commissioned by the World Bank found that all MFIs except one reported a significant deterioration in portfolio health, with the average portfolio in arrears (PAR90) rising from 4.2 percent in February to 6.3 percent in August 2020.12 Because a large number of MFI clients are from rural areas that have been largely spared by the pandemic to date, the impact on the MFIs’ WEDP portfolio (which serves urban borrowers with larger loans) is more dramatic still, rising from 2 percent to 5.6 percent over the same period. An earlier study by the Association of Ethiopian MFIs shows similar results.13 These findings also align with GIL’s September 2020 WEDP survey cited earlier, which found that only 40 percent of firms with outstanding loans were able to make their most recent payment on time. Lastly, the challenges facing Ethiopia’s MFIs mirror broader concerns expressed by the Consultative Group to Assist the Poor (CGAP) and industry experts regarding the threat that COVID-19 poses to the global microfinance industry and to smaller MFIs in particular.14 E. Rationale for Additional Financing 19. The AF is necessary to ensure that the WEDP entrepreneurs and MFIs are supported during the crisis, to restart growth after the crisis abates, and expand services to additional cities . The well- documented performance of the WEDP firms before the crisis indicates that the stress they currently experience is because of a temporary external shock rather than factors that would undermine their viability more fundamentally, such as a lack of market demand or business acumen. Similarly, participating MFIs have proven their ability to profitably on-lend liquidity at market rates and repay funds on time. However, with IDA funds and parallel loans almost depleted, the project does not have adequate resources to assist firms and MFIs in weathering the COVID-19-related downturn and position themselves for renewed growth in the aftermath. 20. The WEDP’s infrastructure remains an excellent platform to respond effectively and sustainably to the emergency that Ethiopia’s women entrepreneurs are facing. While the COVID-19 crisis requires a change of focus from prior support extended through the WEDP, the existing project structures can be leveraged for a series of rapid and targeted interventions that can provide emergency relief to enable viable firms to stay afloat. This is particularly true for the WEDP line of credit managed by the DBE and accessed by 12 participating MFIs. At the same time, the WEDP’s network of more than 38,000 women- owned firms as well as strong relationships with the GoE and its implementing agencies—including local 11 Federal Democratic Republic of Ethiopia, IMF Country Report No 20/150, May 2020. 12 Getachew Mekonnin. 2020. The Impact of COVID-19 on the Portfolio Performance of Ethiopian MFIs. August 2020. Internal study commissioned by the WEDP task team, unpublished. 13 Association of Ethiopia Microfinance Institutions. 2020. Effects of COVID-19 Induced Crisis on Ethiopian MFIs and their Clients. Not published. 14 CGAP. 2020. Is there a Liquidity Crisis Among MFIs, and if so, Where? https://www.cgap.org/blog/there-liquidity- crisis-among-mfis-and-if-so-where. Page 15 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) OSSs in local administrations to sign up new firms and market WEDP products and services—can help scale up services and introduce new innovations in finance and training. 21. In addition to leveraging the existing project infrastructure, the proposed AF draws on strong local ownership and commitment to the WEDP operation. The 12 Ethiopian MFIs participating in the WEDP have made significant financial contributions to the operation, having lent nearly US$40 million from their own funds to the WEDP clients over the past five years, comprising nearly 30 percent of total WEDP disbursements. Considering the liquidity constraints faced by Ethiopia’s MFI sector, this financing is a strong indicator of the MFIs’ perceptions of the viability of the WEDP portfolio. The AF will leverage this strong ownership and includes an expected allocation of counterpart financing of approximately US$30 million, in the form of contributions from Ethiopian PFIs. 22. Additional financing is the preferred modality for refinancing the WEDP and positioning it as a crisis response mechanism in the current context. Based on the strong results of the WEDP, discussions about a second project phase—including an expansion to additional cities—were already under way with the GoE before the COVID-19 crisis. The impact of the COVID-19 pandemic is now lending additional urgency to a project extension. Preparing a new IPF operation, as initially envisioned, would take significantly longer, and the opportunity to rescue firms at this critical juncture would almost certainly be missed. With a focus on both emergency response and national scaling, the GoE has therefore requested approval of this AF and is committed to successful scale-up of project activities. 23. For this AF, the World Bank has invoked Paragraph 12 of the IPF Policy for additional flexibilities in processing in cases of urgent need of assistance and obtained permission to continue to use the safeguards policies that were in use when the parent project was prepared (old safeguards). Due to the exceptional circumstance of the COVID-19 crisis and the negative impacts of this crisis on the WEDP businesses, the World Bank has invoked Paragraph 12 of the IPF Policy to use condensed procedures for processing in the case of urgent need of assistance due to a natural or man-made disaster or conflict. These flexibilities in project preparation, allow the World Bank to process the AF with a condensed process to expedite the flow of necessary financing to ensure that the WEDP entrepreneurs and MFIs are supported during the crisis and are able to restart growth after the crisis abates. Additionally, in line with its COVID-19-specific risk considerations, the World Bank Operations Policy and Country Services (OPCS) Vice Presidency approved a waiver of the following on September 21, 2020: the Environmental and Social Framework; the Environmental and Social Directive for Investment Project Financing; and the Directive on Addressing Risks and Impacts on Disadvantaged or Vulnerable Individuals or Groups. As part of the waiver process, the WEDP’s Environmental and Social Management Framework (ESMF) was updated in the light of COVID-19-related risks. The project will complete social assessments in the existing and new project cities to examine conditions of social inclusion and discrimination. Upon completion of the social assessments, the WEDP ESMF will be updated again within three months of project effectiveness. 24. To accommodate the AF, an extension of the project until December 31, 2024 was requested. The additional three years will be necessary to provide financing during the yet-uncertain COVID-19 recovery phase, as well as to oversee successful scale-up of the project to additional locations. The extension will take the total project duration beyond ten years (2012–2024). A one-year extension for preparation of the interim Implementation Completion and Results Report (ICR) was also granted by OPCS. This is in line with the June 2020 OPCS guidance on allowing a one-year deferral of interim ICRs in Page 16 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) the case of COVID-19 safeguards waivers.15 A project lessons report was recently published, reflecting on key lessons learned and impacts from the WEDP activities since inception, as preparation for the ICR.16 F. Relevance to Country Partnership Framework 25. The World Bank Group Country Partnership Framework (CPF) for Ethiopia for FY 2018–2022 strives to assist Ethiopia in forging a more inclusive and sustainable growth path. 17 The CPF focuses on three thematic pillars: (i) promoting structural and economic transformation through increased productivity, both in the rural and urban economies; (ii) increasing social inclusion and resilience, including trough the promotion of greater gender equality; and (iii) improving institutional accountability and confronting corruption. As part of the focus on private sector-led growth, the CPF also seeks to support the emergence of a vibrant private sector, including through a deeper engagement by IFC and Multilateral Investment Guarantee Agency. 26. The CPF remains valid, but adjustments have been made to meet the challenges posed by COVID-19. Its focus areas and objectives continue to provide a platform for implementing the World Bank Group’s global approach to addressing the pandemic’s impact. Support is being provided across four pillars, consistent with the overall World Bank Group approach:18 (a) Saving Lives; (b) Protecting Poor and Vulnerable People; (c) Ensuring Sustainable Business Growth and Job Creation; and (d) Strengthening Policies, Institutions, and Investments. The World Bank Group’s support under these pillars is geared to three expected stages of crisis response: • Relief: Emergency assistance to confront the immediate threat to public health, as well as short-term economic, financial, and social impacts • Restructuring: Strengthening health systems, restoring human capital and pursuing economic reforms and debt resolution, and recapitalization of firms and financial institutions • Resilient recovery: Exploiting new opportunities for more inclusive, resilient, and sustainable longer-term development. 27. The World Bank’s engagement in Ethiopia aims to provide a rapid response to COVID-19 while ensuring that recent poverty reduction gains are not lost, and longer-term development impact is supported through expanded jobs creation and transformational structural reforms. The World Bank Group in Ethiopia is applying the corporate approach to helping countries address the COVID-19 15 Management Waiver for Exceptional Use of Additional Financing to Scale-up Ongoing IPFs Governed by Safeguards Policies https://worldbankgroup.sharepoint.com/sites/wbunits/opcs/SitePages/Detail.aspx/News/mode=view?_Id=625&Si teURL=/sites/wbunits/opcs. 16 World Bank Group. 2020. Designing a Credit Facility for Women Entrepreneurs: Lessons from the Ethiopia Women Entrepreneurship Development Project. Washington, DC: World Bank Group. http://documents.worldbank.org/curated/en/340011593541910224/Designing-a-Credit-Facility-for-Women- Entrepreneurs-Lessons-from-the-Ethiopia-Women-Entrepreneurship-Development-Project. 17 World Bank Group. 2017. Ethiopia Country Partnership Framework 2018–2022, Report No. 119576-ET. 18 World Bank Group. 2020. Saving Lives, Scaling-up Impact and Getting Back on Track: The World Bank Group COVID-19 Crisis Response Approach Paper. Page 17 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) challenge—relief, restructuring, and resilient recovery. Relief is being supported by emergency response and longer-term health systems support as well as maintaining strong social protection programs in rural and urban areas to mitigate the social and economic impacts of the crisis. Restructuring is to be pursued through support for business environment improvements, including for the financial sector; enhanced infrastructure financing and debt management; and strong human capital focus. Finally, resilient recovery—building back better—will be achieved through continued work on safety nets, a national agriculture program, and support for rapid expansion of access to power and renewable energy and improved connectivity both in transport and telecommunication. Most importantly, reforms for growth and competitiveness will have a central role in recovery, including for an improved financial sector, and better business climate. 28. The World Bank portfolio has been retrofitted and adapted to the evolving COVID-19 context. In the health sector, the Ethiopia COVID-19 Emergency Response Project (P173750) (under the Multiphase Programmatic Approach) and the Ethiopia Health Millennium Development Goal Program-for-Results (PforR) operation (P160108) are supporting the health sector’s contribution to the national COVID-19 response. To ensure a comprehensive approach to supporting Ethiopia’s health system during the pandemic, alongside the COVID-19-specific investments supported by the Multiphase Programmatic Approach subproject, the health PforR is financing critical inputs to the national response, such as personal protective equipment for frontline health workers. Social protection programs are being fast- tracked and their financing increased, with the Urban Productive Safety Net and Jobs Project (P169943) and the upcoming Strengthening Adaptive Safety Net Project (P172479) supporting cash transfers, food aid, public works, start-up grants, and labor market integration of youth, together totaling US$900 million. To cushion the negative impacts on poor and vulnerable people, these two operations will be delivered in early FY21. AF for the education sector, totaling US$200 million in FY21, is also aligned with the learning challenges during COVID-19, thus complementing the efforts initiated to accelerate the digital agenda through the Ethiopia digital foundation project. Support for small businesses and accelerating jobs creation is being fast-tracked through emergency AFs for the Women Entrepreneurship Development Project (P122764) and the SME Finance Project (P148447). Additionally, the implementation pace is being increased for projects supporting industrial parks, while projects in the water and urban sectors were retrofitted to be COVID-19 responsive. Employment and development in the agriculture and rural areas is also being pursued through AF of the Second Agriculture Growth Project (P168074) and the Second Ethiopia Resilient Landscapes and Livelihoods Project (P174385), both totaling US$150 million in FY21. In addition, comprehensive rural roads, irrigation, and agriculture national programs are being planned for FY22. 29. The proposed AF for the WEDP is aligned with both the CPF and the COVID-19 response adjustments, contributing directly to the restructuring and recovery phases of the crisis response. Pillar 3 of the World Bank Group’s response to COVID-19 seeks to support the private sector in weathering the current crisis, rebuilding businesses in a resilient way, and preserving the employment of workers. Given the hardship experienced by women-owned MSEs to date and the continued uncertainty in the coming months, scaling up the WEDP operations is essential to ensure the survival of thousands of commercially viable firms. Funds disbursed through the short-term rescue facility will provide a lifeline to firms struggling to meet their obligations as borrowers, while additional growth funding disbursed through the WEDP line of credit will fuel investment once the crisis has abated. A new focus on digital finance and learning products under Components 1 and 2 will also contribute to more resilient delivery channels. Credit market infrastructure will also be leveraged to support improved appraisal and delivery of financial Page 18 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) services. Given its relevance for the COVID-19 response, the project received a COVID-19 waiver to continue with its existing safeguards framework and accelerate project deployment. Beyond its role as a COVID-19 urgent response mechanism, the project also remains consistent with Objective 1.1 of the CPF, which focuses on improving access to finance for MSEs, particularly for women-owned firms. 30. The WEDP AF contributes to several policy commitments of the IDA19 Gender and Development and Jobs and Economic Transformation Special Themes. Activities under the WEDP directly contribute to IDA19’s objective to target gaps in economic opportunity and will deepen the implementation of the World Bank Group Gender Strategy in Ethiopia. The WEDP AF will work to remove constraints for more and better jobs for women by financing digital skills development and increasing opportunities for innovative financial services that are designed to address the particular constraints facing women entrepreneurs. 31. The WEDP will work in partnership with the IFC to build digital capacities of select PFIs to better serve clients. The World Bank will work closely with IFC’s Financial Institutions Group (FIG) to improve the digital and data analytics capacities of select PFIs. This collaboration will contribute to improving the ability of the PFIs to introduce and improve digital products and processes to reach more clients and better target clients with appropriate financial products. It will also allow for expanded access to finance through improved credit scoring processes utilizing additional data sources. This work will serve as business development exposure for the IFC Advisory to build additional project pipelines in the Ethiopian financial market. The project will also coordinate, where possible, with relevant World Bank operations such as the SME Finance Project, the Urban Productive Safety Net Project, and the Competitiveness and Job Creation Project (P143302). II. DESCRIPTION OF ADDITIONAL FINANCING 32. Activities supported by the AF will build on the WEDP’s current project objective and activities while introducing a new emphasis on COVID-19 response. The project description, PDOs, project components, and implementation arrangements will remain materially the same. The WEDP will continue to support women-owned MSEs in the 10 major cities where project infrastructure currently exists. The AF activities will expand the reach of the existing WEDP services and adapt them to the current crisis situation but without changing their nature or ultimate objective. The WEDP activities are not expected to have significant environmental or social risks or impacts. While the operation will retain the existing ESMF, key elements of the ESMF, such as expanding the existing grievance mechanism complaint hotline to firm employees, bolstering occupational health and safety (OHS) requirements in participating enterprises, and improving consumer protection disclosures for borrowers will be updated upon completion of social assessments within three months of project effectiveness. The project will also continuously monitor the COVID-19 situation in Ethiopia to adapt operations if and when realities change. 33. Within the scope of the existing project components, the AF proposes three adaptations of the WEDP activities to respond to the impacts of COVID-19. First, the project will introduce a COVID-19 ‘rescue facility’ as well as a window for uncollateralized growth capital under Component 1: Access to Finance. Leveraging the WEDP line of credit, the rescue facility will compensate the PFIs to restructure qualifying loans in their existing WEDP portfolio and extend new credit on concessional terms to the WEDP borrowers. In addition, the PFIs will be able to access a dedicated on-lending window, ‘innovative finance Page 19 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) facility’ if they use financial innovations—such as data-driven credit scoring, revenue-based financing and the new movable collateral registry—to provide growth capital to firms unable to surmount traditional collateral constraints. Moreover, the project will expand its PFIs to include private commercial banks. This will allow growth-oriented women entrepreneurs who have larger financing needs to be served by banks. 34. Second, the project will introduce new e-learning options under Component 2: Entrepreneurial Skills and Technology Development. Demand for business training tends to increase during economic downturns, yet the COVID-19 pandemic has made classroom-based learning unviable for the foreseeable future. Through a collaboration with the Innovations in Financing Women Entrepreneurs (IFWE) Project (P171245) based at the Africa GIL, the project has been developing or adapting several new e-learning initiatives for the Ethiopian market. These innovations include an app-based ‘mini-MBA’ program built around a mobile-first pedagogy, a phone-based training for retail entrepreneurs, a mobile mentoring platform involving the Ethiopian diaspora, training on digital finance and digital literacy, support for MSEs to access e-commerce platforms and digital sales channels, and the delivery of a traditional entrepreneurship curriculum through broadcast media (TV and radio) and online. 35. Third, the project will scale up service delivery to additional cities. An expansion of the WEDP to additional cities has been requested by the GoE and by Ethiopia’s House of People’s Representatives. While a full national scale-up of the project is not feasible at present, the project has explored and monitored options for expansion over the past year and found conditions promising in several cities. Additional locations may be added based on local demand and the presence of a reliable project infrastructure. The project will provide support to training providers and PFIs in the new cities, and WEDP services will be introduced gradually as local conditions allow. 36. The PDO and its indicators remain unchanged under the AF, but several intermediate results indicators have been added to cover added activities under AF. To measure the impact of the rescue facility, a new indicator will measure the number of borrowers reached with flexible financing terms. To measure the impact of the innovative finance facility, a new indicator will measure the number of borrowers accessing the innovative finance facility. To monitor the crisis management TA provided to the PFIs, a new indicator will measure the number of PFIs supported with technical assistance on crisis management. To monitor the digital training provision, a new indicator will measure the number of beneficiaries participating in digital training. Finally, to measure citizen engagement, a new indicator will measure completion of a citizen engagement survey that will be completed by project mid-term. Taken together, these new indicators will allow the project to monitor additional activities included under the AF. 37. The results framework has also been updated based on knowledge of the status of indicators measuring active project activities. The indicator on establishing an entrepreneurship training program was completed under the parent project and year of completion is reflected in the AF results framework. The indicators on number of active loans and percentage of project supported institutions reporting on number of active loans have been deleted. These indicators were capturing number of loans disbursed and not active loans and therefore were duplicating data with indicator 1.1. Under the AF, the monitoring focus will be on total number of loans disbursed under 1a, 1c and 1d, rather than active loans to ensure that quality reporting is received on the entire loan portfolio. The indicator on volume of bank supported institutional development – SME has been marked with the year of completion. This indicator was measuring expenditures on the technical assistance Subcomponent 1b. Since this Subcomponent is Page 20 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) externally funded and expenditures are difficult to track, a more meaningful indicator capturing the number of PFIs supported with technical assistance will be reported on instead, as described in the preceding paragraph. 38. In addition to the US$100 million AF for the WEDP, the project will leverage a number of partnerships that increase its impact. These collaborations are: • Financing from PFIs’ own funds (US$30 million): the estimated funds mobilized by the PFIs themselves to issue new loans to WEDP borrowers. • TA to PFIs from the EIB (US$1.9 million): grant financing to support WEDP PFIs on crisis management and portfolio restructuring. • Innovation fund from Global Affairs Canada (GAC) (US$12.5 million): grant financing to pilot, evaluate, and scale up innovative financial products and business development services for WEDP firms. • Business development services from AICS (US$1 million): grant financing for business training and networking for WEDP firms. • TA from the IFC’s: technical assistance on digital finance provided to select PFIs in coordination with the WEDP project 39. The project will retain the same component structure under the AF. Components 1 and 2 will continue to provide eligible firms with access to finance and business development services, respectively. Component 3 will cover project management, including the long-standing research collaboration with the World Bank’s Africa GIL. The details of each component are outlined in the following paragraphs. Component 1: Access to Finance (US$95 million) 40. Additional funding for the WEDP’s line of credit is crucial for mitigating the COVID-19-induced liquidity crunch faced by both WEDP firms and MFIs. The August 2020 study of participating MFIs, cited in paragraph 17, has shown that while most institutions have retained sufficient liquidity to meet regulatory requirements, they have done so by severely cutting down on new credit. Disbursements of new WEDP loans shrank by more than 70 percent between March and June 2020, while the overall amount of loans issued by the MFIs contracted by close to 20 percent during the same period. Meanwhile, the September 2020 wave of the WEDP firm survey showed that demand for new loans remains high, with 64 percent of business owners expressing a need for additional capital at this time. Without outside capital, this demand will go largely unmet as Ethiopian financial institutions are likely to remain risk averse during this time of protracted uncertainty. 41. Building on the existing WEDP line of credit model, the project will extend funds to the DBE, which will serve as a wholesaler to the PFIs (both MFIs and commercial banks) with a capacity and appetite to lend to women entrepreneurs. The network of 12 MFIs participating in the first phase of the WEDP will be expanded to private commercial banks and additional MFIs. This will help the project ensure coverage of the additional cities and serve women entrepreneurs who are ‘graduating’ from MFI loans. Page 21 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) The project’s credit facility agreement clearly defines targeted MSEs and these beneficiary eligibility criteria will be maintained for commercial banks that join the project, to ensure that the target group of beneficiaries remains the same and avoid a shift to medium-size or large-size firms. The PFIs will be selected based on a set of eligibility criteria, including but not limited to number of borrowers, geographical coverage, and compliance with prudential norms. Portfolio quality indicators—which were exceptionally healthy before COVID-19—will be temporarily relaxed to reflect the current crisis and readjusted once it abates. To lower borrowing costs for eligible firms, the Ministry of Finance and DBE are considering a reduction in DBE’s on-lending interest rate. This change will be reflected in the amended subsidiary financing agreement between the Ministry of Finance (MoF) and DBE. 42. Component 1 will continue to rely on the PFIs to select creditworthy firms and make allocation decisions. Most of the PFIs have been with the WEDP for several years and have gained substantial experience in lending to women entrepreneurs and understanding the risk profile of this market segment. Through a collaboration with the EIB, all PFIs (including new PFIs) will receive technical assistance to ensure they are well equipped to make informed credit decisions. Because the impact of the COVID-19 crisis varies significantly across regions and subsectors, as well as across individual firms, local PFI staff are best positioned to assess the creditworthiness of different borrowers. They are also able to understand how financing needs have changed because of COVID-19, for example, whether they should offer smaller, shorter-term working capital loans, whether a borrower is at risk of overextending themselves, and what degree of growth orientation can be expected at this time. Moreover, the incentive for on-lending to viable women entrepreneurs is also built in the design of the credit line: PFIs share risks and rewards as the credit risk from the loan is borne by the respective financial institution. 43. Component 1 will comprise four subcomponents. 44. Subcomponent 1a – established credit facility (US$80 million equivalent) - The majority of the AF will be used to replenish the WEDP’s line of credit under Subcomponent 1a. Funds from the line of credit will be on-lent to the WEDP borrowers, with the PFIs tailoring the WEDP loans to the needs of growth-oriented women entrepreneurs at this time. Average loan sizes are expected to be around US$9,000 and maturities are expected to range from 24 months to 48 months. The credit line will target only viable MSEs—‘zombie’ firms which failed to repay loans even before COVID-19 will be excluded from new financing as will financing for sectors where solvency (rather than liquidity) concerns dominate. Experience with the credit line to date shows that there is high demand from the PFIs to lend these funds at commercial market rates, and this demand is expected to rebound once the COVID crisis has abated. 45. Subcomponent 1b – technical assistance to PFIs (US$1.9 million – EIB financing) - Through a US$1.9 million grant from the EIB, TA will be provided to support both MFIs and commercial banks on COVID-19-related portfolio restructuring, as well as on compliance with new consumer protection rules issued by the NBE. Target areas will include restructuring the WEDP loans, assessing the repayment capacity and existing debt load of borrowers, and tailoring credit products to specific clients, as well as stress testing and liquidity management. This work will draw on the CGAP’s new handbook on COVID-19 crisis management for MFIs. The World Bank will also coordinate with IFC’s FIG to provide TA to select PFIs focused on building the PFIs’ digital capacities and improving their ability to work with alternative data to improve credit scoring processes and expand access to finance for the WEDP clients. The project will assess the performance of the PFIs and the line of credit after six months to take stock of impact to date and adjust to a changing environment, if necessary. Page 22 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) 46. Subcomponent 1c – rescue facility (US$5 million)- This new subcomponent 1c, rescue facility, will incentivize PFIs to provide increased flexibility to viable WEDP firms adversely affected by the economic downturn. The PFIs will be able to access grant financing from this facility to restructure existing WEDP loans, for example, by offering a temporary payment holiday, increasing the repayment period, or recalibrating the interest rate. Funds from the rescue facility will be used to cover operational expenses; foregone incomes; and other costs associated with repayment deferrals, reduced interest rates, and loan tenure extensions to ensure that the serving WEDP loans remain profitable for the PFIs. The existing loans offering special terms factoring in COVID-19 impacts on clients, may also be considered. Further funds from Subcomponent 1c may also be used for compensating the DBE for on-lending to the PFIs at more flexible and concessional terms. No additional liquidity for loans will be provided through this window. The rescue facility will be phased out once the immediate crisis has abated (as measured by indicators such as the PFI’s portfolio in arrears and business closures) or when its funds have been depleted. 47. Subcomponent 1d – innovative finance facility (US$10 million)- This new subcomponent 1d, innovative finance facility, will focus on providing innovative growth capital to high-potential but financially excluded firms. Because lack of collateral is a key constraint for many women-owned firms ready to expand their operations, funds from Subcomponent 1d will be delivered through innovative financial products which draw on fintech and digital innovation to reduce or circumvent the need for traditional fixed asset collateral. Examples which have been piloted, or are about to be piloted, by the PFIs in the WEDP network include psychometric credit scoring, point of sale-based cashflow monitoring, revenue-based financing, and the use of movable collateral. In addition to providing capital to growing firms that are ineligible for commercial loan financing, access to the window will provide an incentive for the PFIs to explore an underserved market and introduce new digital innovations into their operational model. The conditions for accessing Subcomponent 1d will be defined in the WEDP’s updated credit facility agreement. To facilitate the introduction of innovative financial products, the World Bank will provide assistance to PFIs through the Innovations in Financing Women Entrepreneurs (IFWE) innovation fund (see Annex 2). Component 2: Entrepreneurial Skills and Technology Development (US$3 million equivalent) 48. Component 2 will support the delivery of ancillary business trainings and business development services to women-owned enterprises. As such, it complements the provision of access to finance with support in developing skills, behaviors, and links. The focus of this component will be on imparting a set of technical and mindset-oriented skills that can help women grow their firms. Particular focus will be on digital delivery of business development services and introducing the WEDP clients to the digital economy, so that firms can safely and flexibly access the support and assistance they need during the COVID-19 pandemic. In addition, the project will continue to leverage its existing network of public and private service providers. Funding for the component will be supplemented with donor support from GAC (training pilots under the IFWE Project, US$6 million) and AICS (training for the WEDP firms, US$1 million). 49. Training provided under Component 2 will combine technical and mindset-oriented skills. A key limitation of the existing modes of mainstream business training is the sole emphasis on technical skills transfer. Evidence seems to suggest that teaching entrepreneurs skills such as accounting, marketing, and writing a business plan—fundamental tenets of traditional business training—have little impact on Page 23 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) actually improving business practices, and even less on fueling growth.19 Emerging evidence, however, and impact evaluation evidence from the first phase of the WEDP, points to promising new methods of designing and delivering business training, with some specific insights on how best to support women- owned firms.20 Promising pathways in business training include psychologically oriented entrepreneurship training, which focuses on development of an entrepreneurial mindset; heuristics-based training, which emphasizes rules of thumb and behavioral nudges; and couples-based training, which involves both entrepreneurs and their spouses to ensure enabling intra-household dynamics. 50. A new emphasis under Component 2 will be on digital training, which offers a more flexible and COVID-19-resilient approach than classroom-based training. Female business owners typically face higher childcare and household demands, restricting their ability to attend traditional forms of training. As a result, training providers are increasingly exploring digital tools that are cost-effective, facilitate flexible learning, and have the potential to overcome these constraints and improve the performance of women-owned MSEs. Working with the IFWE Project, the WEDP will pilot and evaluate the impact of new digital training technologies and approaches to generate a cutting-edge knowledge base on how best to design and implement digital support services for women entrepreneurs. In addition to leveraging digital delivery channels, the component will also introduce new materials that prepare women-owned firms for the digital economy. This includes training modules on digital literacy, accessing e-commerce platforms, introducing digital payment options, and so on. 51. The WEDP’s clients are interested in and are able to access digital training options. While digital training approaches are still at a nascent stage in Ethiopia, there is evidence of growing demand from WEDP entrepreneurs. Since June 2020, the WEDP National Project Management Team (NPMT) has collected data across the ten project cities on interest and capability to participate in digital training through the WEDP. Data collected include interest in participating in digital training, phone ownership and model, and access to internet connection. On average, over the past four months, about 70 percent of clients interviewed stated that they were interested in digital learning approaches. A representative survey of WEDP entrepreneurs across Ethiopia deployed by the World Bank in June 2020 showed that approximately 58 percent of WEDP clients own smartphones, 41 percent own feature phones, and 1 percent do not own a phone. WEDP clients reported primarily using their phones for calls, messaging applications, and social media applications. Availability of an internet connection varied across the project cities with the strongest internet connectivity rates in Addis Ababa, Hawassa, and Adama. The World Bank and NPMT will therefore offer several digital training options (through text, phone call, and application) that can be accessed by beneficiaries given their different technology and connectivity contexts. 52. Training delivery will leverage the existing public and private sector delivery models in Ethiopia, while introducing promising new approaches to training and business services. Implementation partners will be coordinated centrally by the NPMT and will include technical and vocational education and training (TVET) training colleges as well as local nongovernmental organizations and private service providers. In light of the COVID-19 crisis, a key focus will be on leveraging the extensive digital database of nearly 40,000 WEDP clients to explore modalities for the delivery of digital business training delivered to clients’ 19 McKenzie, D. and Woodruff, C. 2014. “What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?” The World Bank Research Observer 29 (1): 48–82. 20 Alibhai, S., N. Buehren, M. Frese, M. Goldstein, S. Papineni, and K. Wolf. 2019. “Full Esteem Ahead? Mindset - oriented Business Training in Ethiopia.” Policy Research Working Paper 8892, World Bank. Page 24 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) mobile phones, through apps for smartphones as well as SMS messaging and interactive voice recording technologies for feature phones. Component 3: Project Management, Advocacy and Outreach, Monitoring and Evaluation, and Impact Evaluation (US$2 million equivalent) 53. The final component will support overall project management and coordination. This includes outreach to potential women entrepreneurs, registration of participating entrepreneurs in an online management information system (MIS), delivery of services and client follow-up, and formation of links between financial and nonfinancial service providers. These activities will be overseen by the NPMT, housed in FUJCFSA. A Project Management Team (PMT), housed in the DBE, will manage the line of credit component of the project. For a schematic of key stakeholders and their roles in project implementation, see annex 5. 54. The project will also continue its longstanding research partnership with the World Bank’s Africa GIL. The WEDP’s ongoing collaboration with the GIL’s IFWE Project, a US$12.5 million trust fund from Global Affairs Canada, supports the introduction of innovative pilots with the potential to advance women’s economic empowerment, accompanied by rigorous impact evaluations. The partnership through the IFWE trust fund has generated several of the new training approaches and financial products delivered through Component 1 (psychometric credit scoring and micro-equity investments) and Component 2 (financial heuristics and entrepreneurship e-learning). The WEDP will continue to leverage its project infrastructure to facilitate new IFWE pilots and will selectively scale up those products and services that prove beneficial to the WEDP firms. At least three impact evaluations are expected to take place during the AF period. To maintain a dialogue between the two programs, the GIL staff working on the IFWE Project will continue to provide cross-support for the WEDP. For additional information on the IFWE Project and partnership with the GIL researchers on impact evaluation activities, see annex 2. AF Budget 55. The total amount of the proposed AF is US$100 million. This budget is allocated across the three project components, as shown in table 1. Table 1. Component Costs Component Subcomponent Amount (US$, millions) 1. Access to Finance 1a. established credit facility 80 1b. technical assistance to PFIs External financing 1c. rescue facility 5 1d. innovative finance facility 10 Sub-total Component 1 95 2. Entrepreneurial Skills and Technology n.a. 3 Development 3. Project Management, Advocacy and n.a. 2 Outreach, Monitoring and Evaluation, and Impact Evaluation Total amount 100 Page 25 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) III. KEY RISKS 56. The overall risks of project implementation are Moderate and manageable with mitigation and monitoring mechanisms in place. Implementation of activities under the AF will build on the effective project structures and implementing partners of the WEDP to mitigate risks and achieve project targets. The WEDP AF activities will not involve new or modified activities expected to have significant environmental or social risks or impacts or raise the current safeguard category of the overall project. Risk mitigation measures have been further strengthened and updated the project ESMF to ensure that the project fully addresses COVID-19-specific risks. The updated ESMF was disclosed on November 17, 2020. Table 2. Key Risks and Mitigation Measures Political and Governance Risks: High The GoE has demonstrated strong political commitment to support entrepreneurship and job creation policies and programs. However, conflict across the country has resulted in incidents of social unrest, which are likely to continue as the presidential election has been postponed due to COVID-19. As of November 2020, armed conflict in the northern state of Tigray also threatens operations in the region. There is a risk that incidents of political and social unrest could affect project implementation. To mitigate this risk, the World Bank will work closely with the NPMT to monitor the situation on the ground and take appropriate risk management measures. Macroeconomic Risk: Substantial The state-led development model has delivered strong growth and substantial poverty reduction in Ethiopia, but large economic imbalances have emerged in recent years. Large public investment has been financed by tapping external financing, keeping government consumption low, and deploying heterodox mechanisms such as controlled interest rates and financial repression. However, these policies have resulted in enlarging economic imbalances. This macroeconomic imbalance has been compounded by the COVID-19 pandemic as the public health measures to contain the pandemic have led to a severe disruption of economic life in Ethiopia. Businesses are facing declines in customers and disruptions in their supply chains. Additionally, financial institutions are facing repayment and funding challenges. This AF will support a rescue finance window to provide emergency finance to viable entrepreneurs to enable them to stay afloat and restart economic growth after the crisis abates. During a time of economic instability, this rescue facility will provide the much-needed liquidity to the financial sector and MSEs. However, there is a risk that the rescue facility may not be implemented quickly enough or may not be effective in achieving its objective and firms may not be able to grow their earnings or employment due to the impacts of COVID-19 on their businesses. To mitigate this risk, the World Bank is working closely with the WEDP NPMT and development partners to monitor firm and financial institution challenges and design an effective financial response. IV. APPRAISAL SUMMARY 57. The AF activities have been appraised for economic and technical viability. Implementation and institutional arrangements will not change from the existing arrangements under the parent project. No new fiduciary or procurement arrangements are needed. Finally, no changes in the project’s safeguard category are envisioned, and no new safeguard policies are triggered. However, the project will further strengthen the existing ESMF and Environmental and Social Management System, including leveraging the public grievance management system, to better serve target communities. Page 26 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) A. Economic and Financial (if applicable) Analysis 58. The project is expected to generate more than US$15 million in additional profits for the participating firms during the AF period. While it is difficult to estimate the exact figures given the unprecedented nature of the COVID-19 crisis, the project performance to date provides an approximation. Assuming the average size of a WEDP loan will remain at US$9,300 and the average loan tenor at 36 months, the line of credit will support an additional 9,100 loans. Factoring in the revolution of funds and the mobilization of the MFIs’ own liquidity (currently 30 percent of total loans) brings this figure just above 15,000. Based on estimates from the WEDP impact evaluation, firms supported through the WEDP loans on average outgrew those not supported by around 6.1 percent annually. Assuming that average firm profits will be 50 percent below the 2019 baseline and return to pre-crisis levels the following year implies that the project will generate additional profits of more than US$15 million by the end of 2024. Historic data from the WEDP also indicate that profit growth rates were relatively higher for start-up firms compared to the already existing firms, which suggests that in a postcrisis recovery phase of significant start-up activity the above projections are likely to be conservative. Results from the WEDP impact evaluation also show that teaching the right mix of skills can boost entrepreneurial profits of around 30 percent among the WEDP clients. 59. The project is also expected to enable the participating firms to generate more than 20,000 additional jobs, in addition to protecting the close to 90,000 jobs previously created by the WEDP firms. The project will support MSMEs that are the driving engine behind job creation in Ethiopia. Women- owned firms that accessed a WEDP loan added 73 percent more employees during a five-year period compared to firms with no WEDP loans. Because the WEDP clients typically had between two and three employees at the beginning of the program, it was estimated that the project will create more than 20,000 jobs apart from forward and backward links with large firms and suppliers, which further creates additional jobs and enhances the economic impact. In addition, the TA provided to the project MFIs will have an immediate impact on the institutions’ capacity to serve their clients more efficiently. The long- term impact of the project is expected to be significantly higher: assuming constant profit and employment growth rates over ten years (and no additional growth thereafter), the project will underwrite more than US$50 million and more than 80,000 new jobs. Ultimately, this will benefit the MSE sector as whole and growth-oriented women entrepreneurs in particular. B. Technical 60. For these AF activities, the Ethiopian MoF will delegate project implementation to the DBE and FUJCFSA. The World Bank credit proceeds will be transferred directly to the implementing agencies in line with the provisions of the Subsidiary Agreement to be signed between the M0F and the respective institutions. To ensure continuity from the WEDP, the AF will use existing structures and institutions which have proved to be successful in implementing the project. There are two existing project management units which coordinate and oversee implementation. The WEDP PMT, which is housed in the DBE, will maintain direct responsibility for managing Subcomponent 1a (established credit facility), Subcomponent 1c (rescue facility), and Subcomponent 1d (innovative finance facility). The NPMT, which is housed in FUJCFSA, will maintain its mandate of overall project coordination and will have direct responsibility for Component 1b (technical assistance to PFIs), Component 2 (Entrepreneurial Skills and Technology Development) and Component 3 (Project Management, Advocacy and Outreach, Monitoring and Page 27 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Evaluation, and Impact Evaluation 21). The role of FUJCFSA at the MoUDC&C is to oversee the overall implementation of the project including the coordination of participating agencies at all levels of administration. FUJCFSA is responsible for the preparation and approval of annual workplans and budgets for Components 1b, 2 and 3 and for receiving and integrating reports from DBE on Components 1a, 1c and 1d into the Project annual workplans and budgets. Moreover, a high-level coordination secretariat comprising senior personnel from the Ministry of Urban Housing and Construction, Job Creation Agency, FUJCFSA, DBE, NBE, and other relevant line ministries and agencies has been established to oversee all technical and operational aspects of the project. 61. Capacity of the DBE. The DBE has a successful track record of managing credit lines. The existing PMT, which is housed in the DBE, has developed and proven adequate capacity to manage the WEDP and other credit lines such as the SME Finance Project. The PMT will be supplemented with additional capacity, as needed, to manage the new project. Specifically, a safeguards specialist and an M&E specialist will be added to the team to ensure compliance with the World Bank’s updated safeguard procedures and increased demands for timely and updated loan data. 62. Capacity of FUJCFSA. FUJCFSA has proven its ability to act as the implementing agency for the WEDP and has the necessary capacity to coordinate implementation of the new program phase. The NPMT is adequately staffed with a project coordinator and experts in finance, procurement, information technology, communication, and other support staff. During the AF, the NPMT will deploy an environmental and social expert who will coordinate with the DBE safeguards staff and will oversee the overall safeguards (ESMF) implementation, monitoring, and reporting. The NPMT has been operating an MIS that collects, organizes, and maintains information in a centralized database, and this practice will continue under the WEDP AF. The NPMT coordinates closely with city MSE development offices, MFIs, TVET colleges, and private training providers across the WEDP implementing cities to ensure smooth implementation of the project. C. Financial Management 63. The FM and disbursement arrangements under the WEDP will continue unchanged for the AF activities. The project will continue to follow the Government’s channel 2 fund flow mechanism22. Both implementing agencies (DBE and FUJCFSA) have experience operating FM frameworks for World Bank operations. Under the WEDP, these agencies set up an FM system to ensure that funds were used only for the project’s intended purposes and disbursed in an efficient and economical way. They provided accurate, reliable, and timely financial reports and ensured that project assets were used within applicable safeguards. The WEDP supervision reports concluded that the WEDP FM system provides satisfactory assurance that project resources are being used for intended purposes. The FM arrangements, including compliance with legal covenants related to FM, are satisfactory, and there are no outstanding audit reports. Detailed FM arrangements along with the FM action plan are described under annex 3. 21 M&E = Monitoring and Evaluation. 22 Channel 2 refers to a funding structure under the Ministry of Finance whereby funds are provided to the implementing agency of the project based on a subsidiary financing agreement to be signed between Ministry of Finance and the respective implementing agency. The fund is managed and reported by the implementing agency. Page 28 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) D. Procurement 64. Procurement under the proposed WEDP AF will be carried out in accordance with the World Bank’s Procurement Regulations for IPF Borrowers ‘Procurement in Investment Project Financing: Goods, Works, Non-Consulting, and Consulting Services’, dated July 1, 2016, revised November 2017 and August 2018, and the provisions stipulated in the Financing Agreement and shall be subject to the World Bank’s Anti-Corruption Guidelines, dated October 15, 2006, and revised in January 2011 and as of July 1, 2016. The project will use the Systematic Tracking of Exchanges in Procurement (STEP) to plan, process, record and track procurement transactions. The WEDP NPMT, implementing agency of the AF, will use standard procurement documents (SPDs) issued by the World Bank to be used by borrowers for IPF- financed projects as well as standard bid evaluation forms for procurement of goods, works, and non- consulting contracts, which are to be procured through open international competitive bid. Implementing agencies shall also use the World Bank’s Standard Request for Proposals (SRFPs), sample format for Request for Specific Procurement Notices and Request for Expression of Interest, and the sample form of evaluation report for selection of consultants. 65. Procurement under the proposed WEDP AF shall be carried out by the NPMT in FUJCFSA. All procurement activities under components 2 and 3 of the project, are limited to low-value capacity- building procurement of goods and services, which include procurement of information technology equipment, vehicles, office furniture, and communication materials, as well as the selection of consultants, including project staff and project financial audit, shall be carried out by the NPMT of the WEDP in FUJCFSA. The DBE is also the implementing agency of the project for the on-lending of resources to MFIs or women entrepreneurs who are beneficiaries of the AF. However, in accordance with paragraph 2.2 of the Procurement Regulations, World Bank procurement procedures do not apply to the procurement of goods, works, non-consulting services, and consulting services financed by the World Bank through loans made by eligible financial intermediaries to private borrowers. The NPMT of FUJCFSA prepared the Project Procurement Strategy for Development, which forms the basis for a Procurement Plan for the first 18 months of the proposed project and also provides the basis for the procurement methods. The Procurement Plan will be updated by the project annually or as required, to reflect the actual project implementation needs and improvements in institutional capacity. 66. The procurement risk assessment has indicated that the NPMT at FUJCFSA has been able to maintain one procurement staff who can handle the procurement of goods and services required under the project with a limited level of efficiency and effectiveness. The procurement activities at the NPMT are carried out in accordance with agreed procedures of the World Bank though there are some challenges due to capacity constraints. In general, the NPMT has reasonable capacity to carry out the procurement activities of the proposed WEDP AF provided that the proposed risk mitigation measures are implemented. Particularly because the procurement activities under the project are limited and these are low-value procurement activities, the procurement risk is not high. However, there are gaps in the availability of resources and in undertaking procurement planning, procurement processing including procurement document preparation, bid/proposal evaluation, contract awards, and record keeping. Overall, the procurement risk rating for the proposed AF is Substantial. Page 29 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) E. Social (including Safeguards) 67. The WEDP AF activities are not likely to generate significant negative social impacts because the project does not involve activities that have a high potential for harming people. Like the parent project, the AF will trigger the World Bank operational policy on Environmental Assessment (OP 4.01). And based on the nature and scope of the Environmental and Social risks and impacts associated with the proposed interventions, the anticipated AF level of activity will also maintain the environmental assessment (EA) category “B”. The WEDP has a GRM to track and address identified issues. Under the AF, the WEDP GRM will be strengthened and expanded to better serve communities by leveraging the existing public grievance management system within three months of project effectiveness. This public GRM will be more accessible to local communities, subproject workers, and other stakeholders to allow for a clear communication channel for any individual or group of people who believe that they may have been adversely affected by the activities of the WEDP businesses. 68. At the request of the GoE, program support will be extended to additional cities to reach an even greater number of beneficiaries. A social assessment on issues of social discrimination and inclusion will be conducted in both existing and new project cities and rapid social assessments will be conducted for each of the new project cities within three months of project effectiveness. The safeguard assessments related to activities that would be financed with the AF will take into account risks and approaches in place at the time of preparation, tailored to operating in the COVID-19 context, including risks and mitigation measures applicable to sexual exploitation and abuse and sexual harassment or gender-based violence, occupational health and safety , labor, social inclusion, local conflicts, and stakeholder engagement.23 Additionally, results from a series of representative surveys of the WEDP clients (three waves as of September 2020) to track the impact of COVID-19 on the WEDP businesses and an assessment carried out in July–August 2020 on how MFIs participating in the DBE’s line of credit have been affected by and are reacting to the disruptions caused by COVID-19 have informed project planning and refinement of the risk mitigation strategy. The WEDP ESMF was updated in November 2020 to reflect COVID-19 related risks and will be updated again with the results of the social assessments within three months of project effectiveness. F. Environment (including Safeguards) 69. Due to the nature of the WEDP, the anticipated environmental risks and impacts of the AF activities are not likely to be significant. The project does not involve activities that have a high potential for harming the environment. The potential impacts that could be generated from the proposed project activities are expected to be temporary, reversible, low in magnitude, and site specific. 70. The parent project has supported capacity building in environmental risk management, including institutionalizing of screening subprojects for their environmental impacts, and implementing mitigating measures as appropriate. The WEDP has robust OHS procedures in place. The project conducts biannual awareness trainings on the ESMF and OHS for MFIs and entrepreneurship training providers. To directly reach the clients with relevant guidance, the WEDP project designed a module on the ESMF with 23 The project at this point will not proceed in any area which would require the application of OP 4.10. If that would be the case, a further restructuring of the project would be necessary. Should a project expansion to additional cities be decided at a future date, similar assessments will be conducted in these cities. Page 30 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) a focus on OHS that is included in the WEDP entrepreneurship training for clients and has been delivered to over 21,000 entrepreneurs. 71. The World Bank is incorporating climate change considerations in project activities where applicable. WEDP has incorporated training on components of climate change adaptation and/or mitigation in business trainings for clients. Topics covered in this environmental protection module include Ethiopia’s environmental legal framework, types and impacts of pollutants and how to assess and prevent environmental risks in business. In addition, training is provided to the PFIs to ensure they are considering environmental risks at the institution and client level. Currently the WEDP line of credit supports a segment of enterprises dedicated to reducing, capturing or sequestering Green House Gas (GHG) emissions. For instance, WEDP businesses are represented in sub-sectors such as seedling growth, modern animal husbandry, bee keeping and production of animal feed. However, the existing client registration database does not capture details that are necessary to provide a clear picture of the span of enterprises supporting climate change mitigation opportunities. Under AF, WEDP will explore including an expanded list of indicators in the client registration database to track MSE activities that contribute to the climate co-benefits agenda. Additionally, to further strengthen the environmental screening of subprojects, the NPMT will consult the regional Environment, Forest, and Climate Change Commission on the project’s existing screening processes and involve them in training and monitoring visits to ensure sustainable management of environmental risks and impacts in project activities. G. Citizen Engagement 72. The project will incorporate a citizen engagement mechanism to enhance voice and participation. A beneficiaries’ survey will be carried out at project mid-term and the feedback will be integrated into the project interventions to close the feedback loop. A citizen engagement survey will be provided to a sub-set of beneficiaries and designed to assess overall satisfaction of services (including ease of access, quality, process, disclosure, responsiveness of needs, etc.). The results of the survey will be analyzed and assessed in a report, which will also contain proposed recommendations for project adjustments informed by citizen feedback. The survey results and the report will be shared by the project implementation unit and financial institutions and will inform the overall project implementation. V. WORLD BANK GRIEVANCE REDRESS 73. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. Page 31 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) VI. SUMMARY TABLE OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Legal Covenants ✔ Implementing Agency ✔ Project's Development Objectives ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ VII. DETAILED CHANGE(S) COMPONENTS Current Component Name Current Cost Action Proposed Component Proposed Cost (US$, (US$, millions) Name millions) Component 1: Access to 108.20 Revised Component 1: Access to 270.70 Microfinance Microfinance Component 2: 6.10 Revised Component 2: 9.10 Entrepreneurial skills, Entrepreneurial skills, Technology and Cluster Technology and Cluster Page 32 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Development. Development. Component 3: Project 1.50 Revised Component 3: Project 3.50 Management, Advocacy and Management, Advocacy Outreach, Monitoring and Outreach, Evaluation and Impact Monitoring Evaluation Evaluation. and Impact Evaluation. TOTAL 115.80 283.30 LOAN CLOSING DATE(S) Ln/Cr/Tf Status Original Closing Current Proposed Proposed Deadline Closing(s) Closing for Withdrawal Applications IDA-51120 Effective 31-Dec-2017 31-Dec-2021 31-Dec-2024 30-Apr-2025 TF-16392 Closed 31-Dec-2017 31-Dec-2017 31-May-2018 30-Sep-2018 Expected Disbursements (in US$) DISBURSTBL Fiscal Year Annual Cumulative 2012 0.00 0.00 2013 1,806,800.00 1,806,800.00 2014 4,301,500.00 6,108,300.00 2015 5,982,300.00 12,090,600.00 2016 7,278,900.00 19,369,500.00 2017 8,944,100.00 28,313,600.00 2018 9,854,900.00 38,168,500.00 2019 10,117,900.00 48,286,400.00 2020 9,329,300.00 57,615,700.00 2021 10,504,100.00 68,119,800.00 2022 10,596,200.00 78,716,000.00 2023 10,520,100.00 89,236,100.00 2024 10,763,900.00 100,000,000.00 Page 33 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Latest ISR Rating Current Rating Political and Governance ⚫ High ⚫ High Macroeconomic ⚫ Substantial ⚫ Substantial Sector Strategies and Policies ⚫ Moderate ⚫ Moderate Technical Design of Project or Program ⚫ Low ⚫ Moderate Institutional Capacity for Implementation and ⚫ Moderate ⚫ Moderate Sustainability Fiduciary ⚫ Moderate ⚫ Moderate Environment and Social ⚫ Moderate ⚫ Moderate Stakeholders ⚫ Moderate ⚫ Moderate Other ⚫ Low ⚫ Low Overall ⚫ Moderate ⚫ Moderate LEGAL COVENANTS1 LEGAL COVENANTS – Ethiopia Women Entrepreneurship Development Project (P122764) Loan/Credit/TF LEGAL TBL1 Description Status Action IDA-51120 Finance Agreement :Progress Report | Complied with No Change Description :The Recipient shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 4.08 of the General Conditions and on the basis of indicators acceptable to the Association. Each Project Report shall cover the period of one calendar semester, and shall be furnished to the Association within two months after the end of the period covered | Frequency :Yearly IDA-51120 Finance Agreement :Mid-Term Review | Complied with No Change Description :Without limitation upon the provisions of paragraph 1 of this Sub- Section A, The Recipient shall cause DBE and FeMSEDA to carry outa comprehensive mid-term Project review under terms of reference satisfactory to the Association, and shall cause DBE and Page 34 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) FeMSEDA toprepare and furnish to the Association for its review a mid-term Project progress report a month prior to the MTR Mission by the Assoc. | Due Date :15-Jun-2015 IDA-51120 Finance Agreement :Financial Complied with No Change management system | Description :The Recipient shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 4.09 of the General Conditions. | Due Date :19-May-2014 IDA-51120 Finance Agreement :Unaudited Financial Complied with No Change Reports | Description :Without limitation on the provisions of Part A of this Section, the Recipient shall prepare and furnish to the Association not later than one month after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association. | Due Date :15-May-2014 IDA-51120 Finance Agreement :Audit of the Complied with No Change Financial Statements | Description :The Recipient shall have its Financial Statements audited in accordance with the provisions of Section 4.09 (b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Recipient, commencing with the fiscal year in which the first withdrawal was made under the PPA. Shall be furnished to the Association not later than six months after. | Frequency :Yearly IDA-51120 Finance Agreement: Social assessments Not yet due New and update of project ESMF I Description: Completion of the rapid social assessment of new cities and the social assessment of social discrimination and inclusion and update of the ESMF, within three months of effectiveness. I Page 35 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Due Date: Within three months of effectiveness IDA-51120 Finance Agreement: Operations Manual Not yet due New and Implementation Manual Update I Description: Update of the WEDP Credit Facility Operations Manual and Project Implementation Manual (PIM), within three months of effectiveness. I Due Date: Within three months of effectiveness LEGAL COVENANTS2 LEGAL COVENANTS – ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Sections and Description OPS_LEGAL_CONVENANT_CHILD_NODATA No information available Conditions Type Description Disbursement Under Category (2) with respect to any Sub-credits for Sub-projects under Parts 1(a) and 1(d) of the Project to be implemented in the Additional Financing Cities, unless and until the ESMF has been updated by the Recipient and approved by the Association in accordance with Section IV.1 of this Schedule 2 Type Description Effectiveness The Additional Condition of Effectiveness consists of the following, namely, the Subsidiary Financing Agreement has been entered into between the Recipient and DBE. Page 36 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) VIII. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: Ethiopia ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING Project Development Objective(s) The project development objective of the WEDP is to increase the earnings and employment of MSEs owned or partly owned by the participating female entrepreneurs in the targeted cities. This will be achieved by: i) tailoring financial instruments to the needs of the participants and ensuring availability of finance; and ii) developing the entrepreneurial and technical skills of the target group and supporting cluster, technology and product development for their businesses. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_ PD O Indicator Name PBC Baseline End Target To increase the earnings and employment of MSEs owned or partly owned by female entrepreneurs Average numbers of full-time and part-time employees (paid and unpaid) per MSE (Number) 2.95 3.40 Action: This indicator has been Revised Number of hours of worked for the Micro and Small Enterprise 275.00 316.00 (MSE) per week (paid and unpaid) (Hours) Action: This indicator has been Revised Yearly average business earnings (Amount(USD)) 4,053.00 5,066.00 Oct 16, 2020 Page 37 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) RESULT_FRAME_TBL_ PD O Indicator Name PBC Baseline End Target Action: This indicator has been Revised PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Component 1: Access to Microfinance Direct project beneficiaries (Microfinance) (Number) 16,181.00 18,000.00 20,000.00 22,000.00 24,000.00 Action: This indicator has been Revised Intermediate Number of One Stop Shops (OSS), Microfinance Institutions (MFI) and Technical Vocational Education and 76.00 76.00 83.00 90.00 90.00 Training (TVET) colleges reporting according to the WEDP Monitoring and Evaluation ( (Number) Action: This indicator has been Revised Data collection and 49 OSSs+12 PFIs+11 53 OSSs + 12 PFIs + 57 OSSs + 14 PFIs + 61 OSSs + 16 PFIs + 61 OSSs + 16 PFIs + 13 reporting (Text) TVET 11 TVET 12 TVET 13 TVET TVET Action: This indicator has been Revised November 25, 2020 Page 38 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Number of PFIs that have adopted and implemented institution development 12.00 12.00 14.00 16.00 16.00 plans and project-related credit technologies (Number) Action: This indicator has been Revised Portfolio at Risk - SME (Percentage) 6.00 5.30 5.00 4.60 4.30 Action: This indicator has been Revised Percentage of project- supported institutions that are reporting on this 100.00 100.00 100.00 100.00 100.00 indicator (Percentage) Action: This indicator has been Revised Percentage of loan officers trained by Project 20.00 20.00 20.00 20.00 20.00 (Percentage) Action: This indicator has been Revised No of active loan accounts - SME (Number) 0.00 2,000.00 3,000.00 4,000.00 4,000.00 4,000.00 10,000.00 Action: This indicator has been Marked for Deletion Percentage of project- supported institutions that are reporting on this 0.00 100.00 100.00 100.00 100.00 100.00 100.00 indicator (Percentage) November 25, 2020 Page 39 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Marked for Deletion Volume of Bank Support: Institutional Development - 0.00 1,000,000.00 2,000,000.00 3,000,000.00 3,000,000.00 3,000,000.00 3,600,000.00 SME (Amount(USD)) Action: This indicator has been Revised Volume of Bank Support: Lines of Credit - 144,011,000.00 151,200,000.00 182,700,000.00 214,200,000.00 245,700,000.00 Microfinance (Amount(USD)) Action: This indicator has been Revised Number of project beneficiaries accessing the innovative finance facility 0.00 250.00 500.00 750.00 1,000.00 (Number) Action: This indicator is New Number of PFIs supported with technical assistance on 0.00 12.00 14.00 16.00 16.00 crisis management practices (Number) Action: This indicator is New Number of borrowers reached with flexible 0.00 1,000.00 1,500.00 1,500.00 1,500.00 financing terms (Number) Action: This indicator is New November 25, 2020 Page 40 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Component 2: Entrepreneurial skills, Technology and Cluster Development. Establish a Women Entrepreneurship Development Training 0.00 3.00 6.00 6.00 6.00 6.00 11.00 Program with fully operative modules (Number) Action: This indicator has been Revised Fully staffed, trained and well-functioning OSS 53.00 55.00 60.00 65.00 65.00 (Number) Action: This indicator has been Revised Percentage of trainees passing the institutional end-of-training competency 80.00 80.00 80.00 80.00 80.00 test at the TVET colleges (Percentage) Action: This indicator has been Revised Direct project beneficiaries (In-Person Training) 22,158.00 24,000.00 27,000.00 29,000.00 32,000.00 (Number) Action: This indicator has been Revised Female beneficiaries 100.00 100.00 100.00 100.00 100.00 (Percentage) November 25, 2020 Page 41 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Revised Increase in General Business Knowledge 67.00 70.00 75.00 79.00 79.00 (Percentage) Action: This indicator has been Revised Direct project beneficiaries 0.00 3,000.00 6,000.00 9,000.00 12,000.00 (Digital Training) (Number) Action: This indicator is New Citizen Engagement Survey (Yes/No) No No No Yes Yes Action: This indicator is New IO Table SPACE Monitoring & Evaluation Plan: PDO Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Average numbers of full-time and part- WB; OSS Yearly Number of full-time and Baseline / (Mid-term) / time employees (paid and unpaid) per FUJCFSA Monitoring part-time employees Endline; Yearly MSE Report Number of hours worked Number of hours of worked for the Micro for the MSE per week/ World Impact Baseline / (Mid-term) / and Small Enterprise (MSE) per week Equivalent measure at Bank Evaluation Endline (paid and unpaid) baseline November 25, 2020 Page 42 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Estimated business profit during last or a typical World Impact Baseline / (Mid-term) / Yearly average business earnings month/Equivalent measure Bank Evaluation Endline at baseline ME PDO Table SPACE Monitoring & Evaluation Plan: Intermediate Results Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection training data collection/ quarterly PIU reporting WEDP PIU Direct project beneficiaries (Microfinance) WEDP MIS Intermediate Number of One Stop Shops (OSS), Microfinance Institutions (MFI) and Adequate and timely Technical Vocational Education and FUJCFSA Monitoring reporting on the indicators Annual Training (TVET) colleges reporting Report of the M&E system according to the WEDP Monitoring and Evaluation ( Impact evaluation World Impact Baseline / (Mid-term) / Data collection and reporting deliverables Bank Evaluation Endline Number of PFIs that have adopted and implemented institution development PFIs and PFIs and PMT Cumulative number of PFIs Semi-Annual plans and project-related credit PMT Reports technologies Portfolio at Risk = Outstanding (or not yet repaid) balance of all loans PFIs and PFIs and PMT Portfolio at Risk - SME where payment is late by > Semi-Annual PMT Reports 90 days / Gross outstanding loan portfolio. Report the Portfolio at Risk November 25, 2020 Page 43 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) (PAR) for the PFI's entire SME portfolio. Do not report on the PAR for just the Bank-funded portion. Loans that have been rescheduled or renegotiated should also be included in the numerator of the PAR. Weight each institution's PAR by its oustanding SME portfolio to calculate the average PAR for the project. The optional "breakdown" tab can be used to report by institution. Percentage of project-supported PFI reporting Annually Annual report PMT/DBE institutions that are reporting on this to DBE indicator Percentage of loan officers trained by Cumulative number of PFIs and PFIs and PMT Semi-Annual Project trained loan officers PMT Reports PFIs and PFIs and PMT No of active loan accounts -SME Semi-Annual PMT Reports Percentage of project-supported institutions that are reporting on this indicator Institutional development financing relates to Volume of Bank Support: Institutional PFIs and PFIs and PMT capacity building at Semi-Annual Development - SME PMT Reports institutions including technical assistance, November 25, 2020 Page 44 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) training, fixed assets etc. Report the cumulative amounts disbursed as of most recent date available. If a split by micro and SME is not available or possible, please use 50% for each as proxy. A line of credit is classified "microfinance" if supporting subloans: a) Have an average outstanding balance (gross loan portfolio ÷ number of active borrowers) < 300% of the latest per capita GNI, OR b) Less than $1,000. EITHER circumstance triggers classification as Volume of Bank Support: Lines of Credit - microfinance. Lines of PFIs and PFIs and PMT Semi-Annual Microfinance credit and other funding PMT Reports for retail Microfinance sub- loans by Participating Financial Institutions or Community-Managed Loan Funds. Report the cumulative amounts disbursed as of most recent date available. If a split by micro and SME is not available or possible, please use 50% for each as November 25, 2020 Page 45 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) proxy. PFI reporting Number of project beneficiaries accessing Quarterly PFI reporting DBE PMT to DBE the innovative finance facility Component Number of PFIs supported with technical Annual 1b reporting Reporting on TA to PFIs FUJCFSA assistance on crisis management practices to FUJCFSA PFI reporting to DBE and Quarterly reporting from Number of borrowers reached with DBE reporting DBE and FUJCFSA PFIs and DBE flexible financing terms to FUJCFSA and WIC Training Program developed for women Establish a Women Entrepreneurship entrepreneurs: with Monitoring Development Training Program with fully curricula, training material, TVET Annual Report operative modules trained teachers and delivering the courses according to demand. OSS staff present at full- time basis, training program completed, Fully staffed, trained and well-functioning delivering the basic WEDP Monitoring FeMSEDA Annual OSS services. At least 70% Report WEDP members rating OSS services as satisfactory or better Percentage of trainees passing the Percentage of trainees Monitoring TVET Annual institutional end-of-training competency passing competency test Report November 25, 2020 Page 46 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) test at the TVET colleges measured by TVET / Equivalent measure at baseline Direct beneficiaries are people or groups who directly derive benefits from an intervention (i.e., children who benefit from an immunization program; families that have a new piped water connection). Please note that this training data indicator requires quarterly reporting on Direct project beneficiaries (In-Person Quarterly collection by FUJCFSA supplemental information. training beneficiaries Training) TVETs Supplemental Value: Female beneficiaries (percentage). Based on the assessment and definition of direct project beneficiaries, specify what proportion of the direct project beneficiaries are female. This indicator is calculated as a percentage. Based on the assessment and definition of direct project beneficiaries, Female beneficiaries specify what percentage of the beneficiaries are female. Average general business World Impact Baseline / (Mid-term) / Increase in General Business Knowledge knowledge index / Bank Evaluation Endline November 25, 2020 Page 47 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Equivalent measure at baseline IFWE pilot and impact survey and M&E data Direct project beneficiaries (Digital Quarterly World Bank and FUJCFSA evaluation from IFWE pilots Training) data A citizen engagement survey will be provided to a sub-set of beneficiaries and designed to assess overall satisfaction of services (including ease of access, quality, process, disclosure, responsiveness of needs, Annual survey World Bank and FUJCFSA Citizen Engagement Survey etc). The results of the survey will be analyzed and assessed in a report, which will also contain proposed recommendations for project adjustments informed by citizen feedback. ME IO Table SPACE November 25, 2020 Page 48 of 62 The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) ANNEX 1: GIL POLICY BRIEF: COVID-19 IMPACT ON WEDP FIRMS (KEY FINDINGS) Page 49 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) To download the full policy brief, go to https://openknowledge.worldbank.org/handle/10986/34540. Page 50 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) ANNEX 2: INNOVATIONS IN FINANCING WOMEN ENTREPRENEURS (IFWE) PROJECT 1. The IFWE is a five-year project to pilot, scale up, and evaluate new approaches to empowering Ethiopia’s women entrepreneurs. Building on the Africa GIL’s research on the constraints faced by women- owned firms and a strong track record of introducing innovative pilots and evaluations in World Bank operations in Ethiopia, the IFWE acts as a catalyst for evidence-based innovation by designing interventions that provide women entrepreneurs with the knowledge, tools, and confidence to succeed and by deploying technical and financial innovation to overcome collateral constraints. The project also carries out rigorous research to measure the impact of these innovations and inform evidence-based policies to empower women entrepreneurs. Funding for the IFWE Project comes from Global Affairs Canada. 2. The IFWE consists of three components. • Component 1: Business Services and Skills. This focuses on interventions that test new forms of training delivery, help women enter new business sectors, or provide them with access to mentoring and consulting services. • Component 2: New Financing Mechanisms. This will deliver experimental products to address the gender investment gap and overcome collateral constraints. • Component 3: Evidence for Better Policies. This focuses on measuring the impact of pilot interventions on women-owned firms’ earnings, using randomized controlled trial methodologies to carry out at least three impact evaluations. 3. Most interventions and research studies are carried out in collaboration with the WEDP. By 2024, IFWE seeks to reach at least 25,000 women-owned firms in Ethiopia. Table 2.1. Select Pilot Interventions (October 2020) S. No. Interventions 1. Psychometric Credit Scoring. Collaboration with the fintech Lenddo and two Ethiopian MFIs 2. Microequity. Tools under development by IFWE, to be implemented with Ethiopian MFIs 3. Phone-based financial heuristics training. In collaboration with ideas42, a non-profit design and consulting firm 4. Entrepreneurship edutainment. Shark Tank-style show in collaboration with impact investor RENEW 5. MicroMentor. Mobile-based mentoring platform for Somali speakers, in collaboration with Mercy Corps 6. App-based entrepreneurship learning. Procurement of implementing partner in progress 7. Couples-based personal initiative training. In collaboration with the Digital Opportunity Trust 8. Enterprise Management Software. Mobile application developed with World Bank Information Technology Solutions Innovation Lab 9. E-commerce access. Training for businesses joining e-commerce platforms, procurement ongoing Page 51 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Figure 2.1. IFWE Approach Page 52 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) ANNEX 3: FINANCIAL MANAGEMENT ARRANGMENTS Executive Summary 1. An FM assessment has been carried out for the AF based on IPF policies and procedures. Regular FM implementation support rating during implementation has shown improvement of the project’s FM risk rating of Substantial during appraisal to Medium risk rating, as of the last Implementation Status and Results Report in November 2020. The project implementation arrangements will remain materially the same and will continue to support women-owned MSEs in the ten major cities where a project infrastructure currently exists, with more cities to be added. The AF activities will expand the reach but not the nature of existing WEDP services. In light of this, the project assessment is updated with existing performance for the AF. The proposed FM action plan is presented in the FM action plan. 2. The FM arrangements for the project will continue to follow the Government’s channel 2 fund flow mechanism, where funds from the World Bank flow directly to the implementing agencies—DBE and FUJCFSA—using the existing separate account opened for the parent project. The DBE’s disbursement will be changed to a report-based disbursement method with submission of interim financial report (IFR) with two quarters expenditure forecast to ensure availability of adequate resources for implementation. FUJCFSA will continue to use transaction-based disbursement, with the submission of statement of expenditures and replenishment of project accounts accordingly and submission of IFRs quarterly within 45 days of the quarter end. The project will continue to have an independent auditor’s report every year, to be submitted to the World Bank by the entities within six months of the year end. FM Arrangement 3. Budgeting. Both entities, DBE and FUJCFSA, will continue to follow the Government’s budgeting process and cycle to prepare and approve budget. The DBE will continue to prepare an annual work plan and budget for Component 1 (Access to Finance). FUJCFSA will continue to prepare a consolidated annual work plan and budget for Component 2 (Entrepreneurial Skills and Technology Development) and Component 3 (Project Management, Advocacy and Outreach, Monitoring and Evaluation, and Impact Evaluation) ). Both entities will continue to obtain the necessary approval from the World Bank and MoF following the Government’s budget calendar. The approved budget will be finally approved by the MoF and will form part of the entities’ annual budget to be approved by the board for the DBE and proclaimed by the parliament for FUJCFSA, as is done currently. The implementing entities’ system enables tracking of expenditure against budget. Budgets are regularly monitored by the entities and reported quarterly through the IFRs. The budget utilization of FUJCFSA under the original IPF is modest, with utilization of 74 percent for EFY12. The tracking and regular comparison of actual against approved budget allocation for MFIs at the DBE should be strengthened. 4. Accounting systems, policies, and procedures. The implementing entities for this project will use the Government’s accounting policies and procedures, which are modified to meet the project’s need in the current WEDP FM manual. This will be amended to capture and reflect the minimum requirements for implementation of Subcomponent 1b. Peachtree Accounting will be used at FUJCFSA and the DBE internal bank system will continue to be used for the project accounting and reporting. These institutions would continue to maintain accounting books and records and prepare financial reports in line with the provisions of the FM manual. At a minimum, the existing number of accountants at the institutions should Page 53 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) be maintained. With the number of cities increasing, at FUJCFSA, depending on the burden, additional accountants could be assigned/recruited. The AF is considering expanding the reach with additional participating MFIs and commercial banks. An FM assessment will be conducted on the new entrants before resources are released. Each of these implementing additional entities will assign at least one focal person for accounting, reporting, and auditing purposes. 5. Internal control and internal audit. The Government’s internal control procedures will continue to apply. All the implementing entities have adequate internal control systems in place to be used for this project. However, some internal control weaknesses such as weak advance follow-up and liquidation were consistently noted in the IFR reported by FUJCFSA and will need to improve. The internal control procedures of the Government and DBE should be strictly followed, internal audit units will regularly review the project accounts, and corrective measures must be taken on time on all audit report findings. The internal audits function at both entities will continue to include this project in their annual work plan and provide the necessary review and support to the project. This will strengthen internal control of the DBE and FUJCFSA. 6. Fund flow. The project will continue to use the already opened Designated Accounts at the NBE. Funds from the designated US dollar accounts will be further transferred into Ethiopian birr accounts already opened by the implementing entities, to be used for payment for goods and services. Disbursement to the DBE will be made quarterly to cover cash requirements for the next six months based on the forecasts in the IFRs. FUJCFSA will continue to draw down IDA allocation by replenishing its fund with statement of expenditure-based disbursements. Funds will flow to the city-level urban job creation and food security agencies (UJCFSAs) in the form of advance and documentation will be retained at FUJCFSA. The project will have the option of using advance, direct payment, special commitment, and replenishment methods of disbursement. The details of the documents required and procedures will be indicated in the disbursement letter for the project. Fund flow arrangements for the project are shown in figure 3.1. Page 54 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Figure 3.1 Fund Flow Arrangement IDA Original and AF FUJCFSA DBE US dollar-Designated Account at NBE US dollar-Designated Account at NBE FUJCFSA FUJCFSA Ethiopian birr Account at NBE Ethiopian birr Account at NBE Cities UJCFSAs and training MFIs/Commercial Banks institutions MSEs 7. Expenditure recognition for Component 1. As in the original project, expenditure for Subcomponent 1a will continue to be recognized when the loan is provided to the final beneficiaries. The AF has introduced a new subcomponent, Subcomponent 1c, related to rescue facility to be provided to the PFIs. The facility/incentive to be provided to the PFIs will be in three areas: (a) interest rate reduction, (b) repayment deferrals, and (c) loan tenure extension. The current operations manual will be updated to include this subcomponent and will show the selection process of the PFIs, identification of particular loans, the calculation for the allocations, and the approval and related mechanisms. Each PFI will get resources for one or more of the interventions based on the list of loans to final beneficiaries, which have been restructured to accommodate for lower interest rates, repayment deferrals, and extensions. The PFIs will report back with the detailed loan reference against which the incentive has been applied. Once the loans are restructured and reported back, the expenditure will be recorded for this component. Any resource that is not used for a restructured loan will be refunded to the main implementing entity which provides financing to the PFIs. 8. Financial reporting. Both the DBE and FUJCFSA will continue to prepare quarterly unaudited IFRs, which will be submitted to the World Bank within 45 days of the end of the quarter. The reporting template has been revised to properly reflect the new components introduced in the AF. All lower-level implementing entities will submit their reports to these entities, which will be responsible for Page 55 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) consolidation and submission to the World Bank. So far, all reports have been submitted on time in acceptable quality. One financial report will be used for both the original IPF and the AF. 9. External audit. The project annual audit will continue to be carried out and submitted to the World Bank within six months of end of fiscal year, in accordance with the International Standards of Auditing issued by the International Federation of Accountants. The proposed mechanisms for following audit findings in the original project will continue to apply. The audit terms of reference for the project has been amended to incorporate the new components. In accordance with the World Bank’s policies, the Borrower must disclose the audited financial statements in a manner acceptable to the World Bank; following the World Bank’s formal receipt of these statements from the borrower, the World Bank makes them available to the public in accordance with its Policy on Access to Information. The audit reports of the project, by both FUJCFSA and the DBE, for FY19, were submitted to the World Bank within the deadline. The auditors have issued unqualified (clean) audit reports on the financial statements of both entities. The auditors also did not note any internal control weaknesses in their reports. The DBE has disclosed the audit report on the World Bank’s website. FUJCFSA has not yet publicly disclosed the audit report, which needs to be addressed. Table 3.1. FM Action Plan No. Action Date Due By Responsible Body 1 Budget FUJCFSA • Finalize budget preparation early before beginning of • GoE budget calendar and DBE budget year. • Track budget availability as each transaction occurs. • Budget control is Provide variance analysis with explanation regularly during project along with reporting. implementation 2 Accounting FUJCFSA • Maintain current level of accountants until project • Ongoing and DBE closure. • Assign project accountants at new participating • One month after MFIs/commercial banks. effectiveness 3 Internal Control FUJCFSA • Ensure the involvement of internal audit units to • During and DBE increase their engagement in providing the required implementation service. • Conduct FM implementation and support to the lower-level implementations. 4 Reporting FUJCFSA • Submit quality IFRs to the World Bank within 45 days • Quarterly and DBE from end of the relevant quarter in an agreed format. 6 External audit FUJCFSA • Submit annual audited financial statements, audit • Within 6 months after and DBE report, and management letter. end of year • Submit Government’s response to the findings in the • Within one month of annual audit report to the World Bank and an action submission of audit plan for any follow-up actions including the status report to the World thereon. Bank Page 56 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) No. Action Date Due By Responsible Body • Prepare status report of action taken on audit findings. • Two months after • Disclose audit reports to the public in accordance with submission of audit the World Bank’s Policy on Access to Information. report to the World Bank • Annually. Page 57 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) ANNEX 4: PROCUREMENT 1. Procurement under the proposed WEDP AF will be carried out in accordance with the World Bank’s Procurement Regulations for IPF Borrowers ‘Procurement in Investment Project Financing: Goods, Works, Non-Consulting, and Consulting Services,’ dated July 1, 2016, revised November 2017 and August 2018, and the provisions stipulated in the Financing Agreement and shall be subject to the World Bank’s Anti-Corruption Guidelines, dated October 15, 2006, revised in January 2011 and as of July 1, 2016. The project will use STEP to plan, process, record, and track procurement transactions. 2. The WEDP NPMT, implementing agency of the AF, will use SPDs issued by the World Bank to be used by borrowers for IPF-financed projects as well as standard bid evaluation forms for procurement of goods, works, and non-consulting contracts, which are to be procured through open international competitive bid. The implementing agencies shall also use the World Bank’s SRFPs, sample format for request for Specific Procurement Notices and Request for Expression of Interest, and the sample form of evaluation report for selection of consultants. 3. When approaching the national market, as agreed in the Procurement Plan, the country’s own procurement procedures and SPDs may be used, subject to the requirements provided in section 5 paragraph 5.4 of the Procurement Regulations for IPF Borrowers (July 1, 2016, revised November 2017 and August 2018). Other national procurement arrangements (other than national open competitive procurement) that may be applied by the borrower (such as Limited/Restricted Competitive Bidding, Request for Quotation [RFQ]/local bidding, and direct contracting) shall be consistent with the World Bank’s core procurement principles and ensure that the World Bank’s Anti-Corruption Guidelines and Sanctions Framework and contractual remedies set out in its Legal Agreement apply. 4. Procurement under the proposed WEDP AF shall be carried out by the NPMT in FUJCFSA. All procurement activities of the project that are limited to low-value capacity-building procurement of goods and services, which include procurement of information technology equipment, vehicles, office furniture, and communication materials, as well as the selection of consultants, including project staff and project financial audit, shall be carried out by the NPMT of the WEDP in FUJCFSA. The DBE is also the implementing agency of the project for the on-lending of resources to microfinance institutes or women entrepreneurs who are beneficiaries of the AF. However, in accordance with paragraph 2.2 of the Procurement Regulations, World Bank procurement procedures do not apply to the procurement of goods, works, non- consulting services, and consulting services financed by the World Bank through loans made by eligible financial intermediaries to private borrowers. 5. To understand the procurement environment under which the WEDP AF is to operate a project procurement risk assessment of the implementing agency, FUJCFSA/WEDP NPMT, was carried out. The assessment reviewed the organizational structure for implementing the proposed WEDP AF and the staff responsible for procurement in the implementing agency. The assessment also looked into the legal aspects and procurement practices, procurement cycle management, organization and functions, record keeping, planning, and the procurement environment. The procurement system of the WEDP implementing agency is assessed as to the extent to which the planning, bidding, evaluation, contract award, and contract administration arrangements and practices provide a reasonable assurance that the project will achieve the intended results through its procurement processes and procedures. In addition, Page 58 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) the procurement system assessment also considers how FUJCFSA/NPMT handles the risks of fraud and corruption, including by providing a complaint mechanism, and how such risks are managed and/or mitigated. 6. The procurement risk assessment has indicated that the NPMT at FUJCFSA has been able to maintain one procurement staff who can handle the procurement of goods and services required under the project with a limited level of efficiency and effectiveness. Maintaining procurement staff was a challenge due to a high level of staff turnover, which is attributed mainly due to an unconducive procurement environment. The procurement activities at the NPMT are carried out in accordance with agreed procedures of the World Bank though there are some challenges due to capacity constraints and the procurement environment in FUJCFSA. Government proclamations and directives provide the basis for the procurement policy framework, regulations, and procedures for all procurement activities to be carried out at FUJCFSA. Most procurement and related staff are considered to be familiar with the procurement manual of the WEDP. 7. Regardless of the progress in some of the procurement risk areas, particularly in the area of organization and staffing, there are still some challenges in some of the procurement risk areas. The procurement staff at the NPMT have limited capacity. The procurement staff do not have basic training in management of procurement of goods, equipment, and services under World Bank-financed projects and are not familiar with the New Procurement Framework and the Procurement Regulations. Although there is a procurement staff at the NPMT, the Procurement Directorate of FUJCFSA is responsible for carrying out the procurement activities of the project, which results in delays and, at times, retendering of procurement activities. The role of the procurement staff at the NPMT is limited to the preparation of purchase requests. Such an arrangement, apart from leading to a high level of staff turnover, has entailed challenges in procurement documentation and a delay in the procurement process. 8. Procurement Plans are prepared and approved in STEP by the NPMT of the WEDP. However, the processed procurement activities are not uploaded in STEP upon completion of each step in the processing of procurement activities. Procurement record keeping is not in good shape in the NPMT of the WEDP. Complete procurement documents are not available for some procurement activities under the project. As a result, carrying out post procurement reviews or procurement audits is a major challenge in the WEDP. 9. In general, there is reasonable capacity to carry out the procurement activities in the NPMT of the proposed WEDP AF provided that the risk mitigation measures detailed in table 4.1 are implemented. Particularly, because the procurement activities under the project are limited and these are low-value procurement activities, the procurement risk is not considered to be high. However, there are also gaps in the availability of resources and in undertaking procurement planning, procurement processing including procurement documents preparation, bids/proposals evaluation, contract awards, and record keeping. Moreover, the COVID-19 pandemic and the disruption it has caused in the production and supply chain of goods and services may escalate the procurement risk under the WEDP AF. Overall, the procurement risk rating for the proposed AF is Substantial. 10. The identified procurement risks and proposed mitigation measures are provided in table 4.1. Page 59 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) Table 4.1. Summary of Findings and Actions (Risk Mitigation Matrix) No Issue/Risk Risk Level Mitigation Measures Responsible Body Time Frame 1 Limited level of Substantial • Provide basic NPMT/FUJCFSA/Wo During project proficiency of the procurement training in rld Bank implementation existing procurement procurement staff management of goods and equipment and selection of consultants at the Ethiopian Management Institute or in a regional procurement training institute. 2. Procurement staff Substantial • Procurement staff and NPMT/FUJCFSA/Wo During project and staff related to related staff such as rld Bank implementation procurement not Procurement Endorsing familiar with the Committee members, World Bank’s New evaluation committee Procurement members, and internal Framework and the auditors to be provided Procurement training in the World Regulations Bank’s Procurement Regulations 3. Procurement of the Substantial • Procurement to be FUJCFSA/NPMT During project project is carried carried out inhouse at implementation out at the the NPMT and approval Procurement to be made by the Directorate of the Procurement Endorsing UJCFSA Committee of FUJCFSA 4 High level of Substantial • Create a conducive FUJCFSA/NPMT During project procurement staff work environment to implementation turnover under the allow procurement staff project at the NPMT to carry out procurement activities in accordance with agreed procedures. 5 Low quality and Substantial • Create capacity on the World During project incomplete use of standard bid Bank/FUJCFSA/NP implementation procurement documents (SBDs) MT documents/RFQs/c /RFQs/contract ontract agreements agreements with the objective of producing and issuing quality SBDs/RFQs/SRFPs and contracts. Page 60 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) No Issue/Risk Risk Level Mitigation Measures Responsible Body Time Frame 6 Inadequate Substantial • Maintain complete FUJCFSA/NPMT During project procurement record procurement records in implementation management a safe and secure place system without exposure to unauthorized personnel. • Establish record retrieving system. 7. Procurement Plans Substantial • Capacity building to be FUJCFSA/NPMT/Wo During project not updated carried out based on the rld Bank implementation regularly, processed requirements of procurement Procurement documents not Plans/STEP uploaded in STEP and not used for monitoring purposes 11. The NPMT of FUJCFSA has prepared the Project Procurement Strategy for Development, which forms the basis for a Procurement Plan for the first 18 months of the proposed project and also provides the basis for the procurement methods. This plan is reviewed and cleared by the World Bank and will be available at the NPMT of FUJCFSA. It will also be available in the project’s database and on the World Bank’s external website before project effectiveness. The Procurement Plan will be updated by the project annually or as required, to reflect the actual project implementation needs and improvements in institutional capacity. 12. Procurement oversight. World Bank oversight of procurement will be done through implementation support missions carried out every six months and prior review of contracts based on thresholds for the project. Oversight of procurement activities shall also be made through annual post procurement review of the project, which is done at the end of each fiscal year by a World Bank staff/consultant. Mandatory thresholds for prior review for the proposed AF based on procurement risk levels of the project are provided in table 4.2 below. Based on the risk level of the WEDP AF, procurement above the applicable thresholds as provided in the table shall be subject to prior review. Table 4.2. Thresholds for Procurement Approaches and Methods (US$, millions) Category Prior Open Open RFQ Short List of National Review International National Consultants Consulting Engineering Services and Construction Supervision Works ≥10.0 ≥7.0 <7.0 ≤0.2 n.a. n.a. Goods, IT, and non- ≥2 ≥1.0 <1.0 ≤0.1 n.a. n.a. consulting services Consultants (Firms) ≥1.0 n.a. n.a. n.a. 0.2 0.3 Individual ≥0.2 n.a. n.a. n.a. n.a. n.a. Consultants Page 61 of 62 ` The World Bank ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT ADDITIONAL FINANCING (P174874) ANNEX 5: SCHEMATIC OF KEY PROJECT STAKEHOLDERS NPMT World Bank Group Component 1: Component 2: Research, Innovation, and TA Access to Finance Business Development Innovation Services DBE FUJCFSA GIL: IFWE Project and implementing partners (Lenddo, Ideas42, etc.) Training providers: Public TVET colleges, PFIs: MFIs and commercial nongovernmental TA from IFC FIG banks organization, IFWE pilot partners TA funded by the EiB OSSs in local administrative offices WEDP clients: Women-owned micro and small firms in project cities Page 62 of 62 `