Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4332-COM COMOROS STAFF APPRAISAL REPORT OF A FIRST IDA CREDIT TO THE DEVELOPMENT BANK OF THE COMGROS (DBC) May 12, 1983 Eastern Africa Projects Department Industrial Development and Finance Division This document has a resticted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclsed without World Bank authoriation- CURRENCY EQUIVALENTS US$1 CF 360 CF 100 US$ 0.28 ABBREVIATIONS ADB - African Development Bank BCC - Banque Commerciale des Comores BIC - Banque Internationale des Comores CADER - Centre d'Appui au D6veloppement Rural CCCE - Caisse Centrale de Cooperation Economique CEFADER - Centre Federal d'Appui et D6veloppement Rural CREDICOM - Societe de Credit pour le Developpement des Comores DBC - Development Bank of Comoros EDF - European Development Fund EIB - European Investment Bank IDA - International Development Association IEC - Institut d'Emission des Comores ILO - International Labor Office IRAT - Institut de Recherches Agronomiques Tropicales et Cultures Vivrieres KfW - Kreditanstalt fur Wiederaufbau SODEPECHE - Societg de Developpement des Peches aux Comores UNDP - United Nations Development Programme UNIDO - United Nations Industrial Development Organization FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY THE DEVELOPMENT BANK OF THE COMOROS (DBC) STAFF APPRAISAL REPORT Table of Contents Page No. BASIC DATA I. INTRODUCTION 1 II. THE ENVIRONMENT 1 A. The Economic Setting I B. The Productive Sectors 2 C. Financial Sector 6 III. THE INSTITUTION 7 A. Institutional Aspects 7 B. Operations and Finance 10 C. Prospects 11 IV. THE PROJECT 13 A. Objectives 13 B. Description 13 C. Implementation 15 D. Benefits and Risks 16 V. AGREEMENTS TO BE REACHED DURING NEGOTIATIONS 16 This report was prepared by Messrs. Philippe Beuzelin, Tei Mante and Oscar Gonzalez-Hernandez (World Bank/UNIDO Cooperative Programme) on the basis of their visit to the Comoros in November 1982. 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. THE DEVELOPMENT BANK OF THE COMOROS (DBC) STAFF APPRAISAL REPORT List of Annexes Page No. 1. DBC - Operations to 31/10/82 18 2. DBC - Productive Sector Loans 19 3. DBC - Actual and Projected Operations (1982-86) 20 4. DBC - Actual and Projected Income Statements 21 (1982-1986) 5. DBC - Actual and Projected Funds Flow Statements 22 (1982-1986) 6. DBC - Actual and Projected Balance Sheets 23 (1982-1986) 7. DBC - Actual and Projected Financial Ratios 24 (1982-1986) 8. DBC - Actual and Projected Resource Statements 25 (1982-1986) 9. DBC - Estimated Disbursement Schedule for IDA Credit 26 10. DBC - Selected Documents and Data Available in the 27 Project File COMOROS THE DEVELOPMENT BANK OF THE COMOROS (DBC) Basic Data (October 31, 1982) 1. Date of Establishment: August 1981 2. Capital Authorized: CF 300 million consisting of 3,000 shares of CF 100,000 each. Issued: Government of the Comoros CF 150,000,000 Central Bank of the Comoros 50,000,000 European Investment Bank 50,000,000 Caisse Centrale de Cooperation 50,000,000 Economique CF 300,000,000 3. Operations 1982 (as of 10/31) (CF million) Approvals Disbursements Medium-Long term loans No. Amount No. Amount Fishing 1 10.0 - - Agriculture 2 1.8 2 1.8 Agroindustry 1 2.0 1 2.0 Industry 3 24.7 - - Artisans 1 3.5 1 2.6 Transport 1 11.0 - - Housing 8 23.5 4 10.9 Sub-total 17 76.5 8 17.3 Short-term loans Poultry Farming 3 3.0 3 2.7 Agriculture 1 0.3 1 0.2 Artisans 4 4.6 4 3.7 Sub-total 8 7.9 8 6.6 Total 25 84.4 16 23.9 - ii - 4. Financial Condition (CF Million) as of October 31, 1982 Assets Financed by Net Fixed 33 Paid-in Capital 300 Portfolio 25 Grants 22 Cash 281 Liabilities 17 339 339 5. Resource Projections (CF Million) 1982 1983 1984 1985 1986 Commitments Productive Investments 62 166 193 232 243 Housing 33 69 94 103 115 Short-term Credit 6 31 34 40 44 Fixed Assets 40 4 - 2 4 141 270 321 377 406 Resources Equity 300 - - - - Grants 12 23 25 24 26 Operating Surplus 6 8 13 19 30 Loan Collections - 8 35 73 111 318 39 73 116 167 Net Flow 177 (231) (248) (261) (239) Cumulative Flow 177 (54) (302) (563) (802) 6. Resource Gap Financing (CF Million) Cumulative Gap 802 Financed by IDA Credit 637 Rediscounts 165 802 7. Lending Terms Interest Rates: 8% - 12% per annum Commission : 1% on amount of loan Maturities : Short-term - Up to 2 years Medium and Long term - Up to 10 years I. INTRODUCTION 1.01 At the beginning of 1980, the Government of the Comoros, with the assistance of the European Investment Bank, conducted a study to ascertain the feasibility of creating a development bank that would replace the CREDICOM, an existing institution which, due to serious financial difficulties, had discontinued operations. The report, published in mid 1980, concluded that there was a need for such an institution and recommended the creation of a new multisectoral development bank. 1.02 Later that same year, a World Bank mission visited the Comoros to further assess the feasibility of, and measures for the establishment of the development bank. This mission endorsed the conclusions of the feasibility study. It also concluded that even though the size of the country and the relatively limited number of investment opportunities would make the proposed development bank a small institution, it would still benefit from the World Bank financial and technical assistance. 1.03 To prepare for this assistance, a World Bank/UNIDO Cooperative Programme mission visited the Comoros in November 1981, to ascertain investment possibilities in the productive sectors and in November 1982, a mission appraised DBC for this first line of credit. UNIDO has also agreed, as a result of its involvement in the preparation of the project, to provide an expert for one year to help establish within DBC, an SSE Technical Assistance and Promotion Unit. II. THE ENVIRONMENT A. The Economic Setting 2.01 The Comoros, with a population of about 347,000 1/ inhabitants, ranks among the least developed countries of Sub-Saharan Africa. In 1980, GDP in market prices was US$117 million, i.e., around $337 per capita. Between 1970 and 1974 GDP at constant prices rose at a yearly average rate of 5.8%, followed by severe drops of 23% and 22% in 1975 and 1976 due to the withdrawal of French technical and financial assistance following unilateral declaration of independence in 1975, and the installation in the same year of a regime which undertook to implement radical social and economic changes. From 1976 to 1980 GDP rose at an average annual rate of 4.2%. Considering an annual population growth rate of about 2.7%, per capita growth of GDP has been barely positive from 1976 on. Preliminary estimates of real GDP growth for 1981 is around 5%. 2.02 The country's economic performance is hampered by geographic isolation, lack of infrastructure, shortage of skills and serious population pressure. Despite a system of import and export licensing, the Comoros has maintained a relatively open economy in which the ratio of exports and imports to GDP average about 14% and 23% respectively per annum. 1/ With Mayotte, the population of the Comorian archipelago amounts to about 417,000 individuals. -2- B. The Productive Sectors Current Situation and Constraints 2.03 Agriculture is the largest contributor to GDP (between 42 and 47% during 1976-80) and the largest employer (over 80% of the work force). About 40,000 ha. are devoted to the major food crops, mainly rice, tubers, bananas, legumes and maize; a further 30,000 ha. are taken up by coconuts, both a subsistence and an export crop, and 9,000 ha. by the major export crops, vanilla, ylang-ylang and cloves. Crop outputs have increased very slowly (total of slightly over 10%) for the period 1966-80, with the exception of fruits where increases during the same period were more substantial (25-30%). Total exports of agricultural products amounted to CF4.4 billion in 1981, with vanilla accounting for 50% of the total. The importance of copra as an export crop had declined in recent years because of the closure of its traditional market in Madagascar, although it is still a major subsistence crop. 2.04 The performance of agriculture in the Comoros has been well below potential, for both food and export crops. The most important reasons for this are declining soil fertility caused by reduction of fallow periods and cultivation of fragile, steeply sloping soils through increasing population pressure on the land, rudimentary cultivation techniques, lack of improved seed material, inappropriate crop rotation, poor crop husbandry, and widespread rodents and other pests, particularly for coconuts. 2.05 Manufacturing and artisanal activities are at an embryonic stage of development and contributed only 4.8% of GDP in 1980. Then, the sector comprised 125 enterprises, 2/ with a total employment of around 700, engaged in the following activities: bakery, soft drink and carbonated water production, manufacture of wearing apparel, sawmilling, furniture making, printing, soap manufacture, ylang-ylang distillation, jewelry, and handicrafts. All these establishments, with the exception of one ylang-ylang distillery, may be considered as being of small to medium-scale and are evenly dispersed between the islands of Grande Comoros and Anjouan. It is estimated that ylang-ylang distillation and furniture making contribute the most to sector value added. 2.06 This low level of industrialization is explained by the existence of fairly formidable constraints of which the geographical isolation of the country and the small size of its market are probably the most important. Production disruptions are frequent and due mostly to irregular supplies of imported inputs. In addition, the small market makes many manufacturing projects uneconomical. Other constraints include: the lack of capacity of public utility services which results in frequent production disruption to existing industries or creates a barrier for new ones; the lack of term financing and technical assistance in support of project preparation and implementation; and the lack of semi-skilled and skilled manpower. 2.07 The construction sector is one of the fastest growing with its contribution to GDP having risen from 7.3% in 1976 to 9.2% in 1980. A 2/ This information came from an ILO manpower survey which defined the sector to include establishments with a minimum of one employed person. substantial part of this growth comes from increases in public works (mainly roads and buildings), although self construction of private housing, widespread in the Comoros, was also on the increase. In line with this growth, sector employment had reached about 3,200 persons, employed by 39 enterprises. Of these firms, five, locally owned and mainly locally managed, for about 70% of all construction in Comoros, other than self-construction of houses and large-scale infrastructural public works such as the building of harbors, bridges and bituminous roads. The latter are mostly being undertaken by two foreign based companies. 2.08 The most serious constraint to expansion of construction is a paucity and poor range of locally produced construction materials. Local manufacture of building materials has not kept pace with the growth in construction, and piecemeal importation of cement hampers the continuity of most construction projects, from self-construction to large-scale infrastructural programmes. 2.09 The tourism sector in Comoros is still very small. In 1980 the number of non-resident arrivals to the country was 5,000, of which only 1,900 stayed in hotels. Of these about 90% were business and external aid personnel and only 10% real tourists. As should be expected tourist infrastructure is undeveloped. There are currently only 4 hotels with a total of 164 beds meeting international standards. Until recently existing hotel capacity was not a major constraint to the promotion of tourism since occupancy rates were low. The major obstacle was inadequacy of transport connections with the outside world. As this transport situation is now improving, hotel capacity is becoming a constraint. Policies and Issues 2.10 The Government's development strategy is still evolving, and so policies for expanding the productive sectors are not fully in place. Nevertheless, appropriate initiatives have already been taken in agriculture, industry and tourism. In construction however, no policies or special programs are in place. 2.11 In agriculture, self-sufficiency in food production is the Government's highest priority, and this goal has been translated into action as follows: the development of a rural extension network, practically from scratch; the substitution of imported rice by locally produced maize, pidgeon peas and taro, a local tuber; rural works programs including land terracing for erosion control, and rural roads; development of poultry and artisanal fishing. The goal must not be pursued, however, at the expense of export crops, Comoros' sole source of foreign exchange and frequently with a relatively high revenue per hectare. 2.12 Implementation of the first two policies is the responsibility of the Centre Federal d'Appui et Developpement Rural (CEFADER), an institution under the Ministry of Production and Industrial Development, which aims at rural development in general. Created in May 1980 to provide extension services to agriculture, the CEFADER brought under its auspices a number of already existing programmes. It has a number of field affiliates, the Centres d'Appui au Dgveloppement Rural (CADER), which provide extension services to farmers. At present there are five CADERs and it is planned to - 4 - establish two in 1983, three in 1984 and one in 1985 (financing is assured for four). 2.13 The CEFADER/CADER system aims at providing extension services to the rural population. The agricultural sector was the first covered, and other sectors of the economy are likely to be included in the future. Overall technical managerial and administrative advice to the system is provided by FAO. The CADERs offer small credits to farmers to purchase seeds, fito-sanitary equipment and products, hand tools, egg hatches, cattle and chicken feed. This financing was initiated within the framework of an operation to increase maize production, and it is expected to extend it gradually to other products. Overall the CEFADER/CADER system appears adequate and working satisfactorily. 2.14 In order to develop fishing activities, the Government created in September 1982 a parastatal company, the Societe de Developpement des Pgches aux Comores (SODEPECHE), It aims at developing and motorizing new types of fishing craft, improving fishing techniques and providing landing and cold storage facilities. Financed by the ADB and by equipment grants from the Japanese Government, the project aims at increasing the present catch from 3,000 - 4,000 tons/year to 6,000 tons/year. 2.15 In industry two policy measures have been taken, both aimed at stimulating investment. First, an investment code was adopted in 1980 under which a variety of fiscal incentives can be awarded to industrial as well as non-industrial ventures. The idea of using fiscal incentives to stimulate investment is sound for the Comoros, given the financial obstacles to profitable productive sector investment. Unfortunately, the specific provisions of the current code favor large-scale enterprises, whereas the country would benefit from support to small-scale enterprises. For instance, it provides incentives to projects which either create 100 jobs for Comorians or represent investment amounting to CF150 million and create at least 50 jobs. Furthermore, the code supports a capital and import intensive economic development not in line with the country's resource constraint and potential. The matter was discussed during negotiations and it was agreed that by December 31, 1983 the Government will complete a review of incentives it offers to investment enterprises and that by May 31, 1984 it will take appropriate action to correct the deficiencies of the existing code. The requisite technical assistance to review the present code and determine an appropriate incentive system could be financed from the consultancy services funds under the credit. Second, the creation of the Development Bank (DBC) to identify, promote and provide long term capital to projects is an indication of Government's desire to foster industrial development, and a step in the right direction. 2.16 At the same time as the revision of the investment code there is a need to define a coherent strategy of industrial development. Key issues to be addressed by such a strategy are whether the industrialization effort should be export oriented or concentrate on satisfying the limited domestic market; whether protection will be accorded domestic producers for the domestic market, in what form and at what levels. 2.17 Certain Government policies, if they are not modified, will remain obstacles to the establishment of productive enterprises. For example, with respect to the policy on price control, two local industrial companies have experienced financial difficulties, because prices for their products were too low. Existing price homologation which permits to control prices of imported first necessity goods, particularly food stuff should be maintained. On the other hand, price controls for locally manufactured goods, if not abolished, should ease in order to attract investment. It is however difficult for the Government to address itself to this issue in isolation of the protection policy. Because of the complexity of these issues and the existence of vested interests, changes in industrial policy cannot be decided upon in the short term. The matter was reviewed during negotiations and it was agreed that, no later than May 31, 1984, the Government will formulate, in consultation with the Association, a pricing policy for locally manufactured goods. The technical assistance that may be required to develop such policy would be provided from the consultancy services to be financed under the credit. 2.18 In tourism, a previous ambivalence is slowly giving way to positive policies. Since the major constraint is the undeveloped infrastructure, Government policy initiatives are crucial in this area. The investment code includes tourism projects as eligible for fiscal incentives. More significantly, Government is directly negotiating two separate hotel projects with foreign hotel chains. Both projects involve the management under contract of the hotels by the respective foreign groups, and if implemented, will increase the country's international hotel capacity from the current 164 beds to 502 beds. Prospects 2.19 The overall economic prospects for the Comoros in the foreseable future are modest, given the lack of resources, and the consequent need to depend heavily on concessionary foreign assistance. In the latest Bank economic report on the country (No. 3432-COM dated May 27, 1982) a preliminary growth projection through 1985 indicates that to achieve a modest 1.0% annual growth in GDP per capita (4.5% annual economic growth), the agriculture sector will have to grow by 3.9% per annum; industrial growth will have to accelerate from 4% in 1980 to 8% by 1985; and the rest of the economy must grow by 5% per year. To achieve these growth rates will require substantial investments, with the investment to GDP ratio averaging about 28% over the period. 2.20 These are formidable targets given the constraints, yet useful to illustrate the potential in such an undeveloped economy. In agriculture, increases in crop output, especially of maize, are possible given current low yields. There are also promising opportunities in poultry and fishing. To realize this potential, investments in hand tools, fences and poultry hatches, fishing motors and equipment etc. are needed. In industry, investment opportunities exist both in import substitution activities (sea salt, pozzolanic cement, mechanical and electrical workshops) and in larger-scale export oriented activities (coconut based products such as edible oil and soap and vanilla extract). In construction potential exists for local enterprises to undertake sub-contract work on large projects, and to undertake low cost housing. In tourism, depending on the success in expanding hotel capacity, a number of additional activities centering around tourism could be set up to offer goods and - 6 - services such as artisan shops and restaurants. It will be the challenge of the development bank to promote and finance these investment oossLi'lities, To that effect, it is establishing, with UNIDO's asststaxce, an SSE Technical Assistance and Promotion Unit (para 3.09). C . _inanc4ai Sector c2l2 The Ban1king System in the Comoros consists of: a Central Bank which, in 1981, replaced the Institut d'Emission des Comores (IEC), created irn December 1974 to take over the currency management functions previously performed by the Banque de Madagascar et des Comores; a commercial bank, the Banque Lnernationale des Comores (BIC) which replaced the Banque Commerciale des Comores (BCC); a Development Bank, the Banque de DXveloppem.ent des Comores (DBC), which was created in 1981 and started operations in the first part of 1982. To a large extent it will replace the former Soci6tf de Cr6dit pour le D6veloppement des Comores (CREDICOM) which discontinued operations in 1981. The system is adequate and appropriate to the Comoros' needs. 2.22 Central Bank. IEC, the Currency Board, was established in 1974 with the exclusive right to issue legal tender. It received an initial caDital grant from France of CF250 million after the signature on November 23, 1979 of a monetary co-operation agreement, whereby the Comoros became part of the Franc Zone, the Comorifan Franc having a fixed parity of CF50 to the French Franc. This association ensures full convertibility of local currency, thus facilitating foreign trade. An operation account is kept wi th the Bank of France, through which all foreign transactions are made. Unlimited convertibility is offered for transactions within the Franc Zone, although certain quotas may be drawn up for other currencies. 2.23 Up to 1981, IEC's main activity was the rediscounting of commercial bills, treasury bonds and medium-term loan guarantee bills. It had relatively little influence over the level and distribution of credit in the country. Furthermore, it had no legal authority to formulate, or control monetary and credit policies. In 1981, the Government decided to convert IEC into a Central Bank, with power to regulate interest rates charged by financial institutions and to determine the country's monetary and credit policies, According to the statutes of the Central Bank and the Franc Zone reguLiations , the Deputy Director of the Bank is a French official who also carries out technical assistance on currency management and the handling of monetary issues. 2.24 As of September 30, 1982, the Central Bank had a credit balance with the French Treasury amounting to CF1.8 billion as compared to CF0.7 billion in December 1980 and CFO.2 billion in December 1979. Its assets totalled about CF5.0 billion of which CF1.9 billion in short-term and CFO.1 billion in medium-term financing. 2.25 Commercial Bank. The Banque Internationale des Comores (BIC) was established in February 1982 to replace the Banque Commerciale des Comores (BCC), a joint venture of the Banque de Madagascar et des Comores, which ceased operations on January 31, 1982, because of bankruptcy and is now being liquidated, - 7 - 2.26 BIC has a share capital of CF300 million distributed as follows: Banque Internationale pour l'Afrique Occidentale (BIAO): 51%; Comorian State: 34%; local private shareholders: 15% 3/. As of September 30, 1982, BIC had extended loans totalling about CF3.1 billion in short-term financing and overdrafts. Its management does not intend to participate in medium-term financing of investment projects. As of September 30, 1982, BIC's assets amounted to CF6.0 billion. 2.27 Inflation. Inflation in the Comoros, as measured by the GDP deflator, was 10% by 1980, 4/ having declined from 15% in 1978 and 1979. It is projected to remain at 10% per annum through 1985. f 2.28 Interest Rates. The Central Bank presently charges a rediscount rate of 7.5% for medium term funds and 6% for short term funds. BIC, the commercial bank, charges, on its short-term loans, rates which range from 13% for short-term financing of export crops and 16-19% for its normal domestic trade financing and overdrafts. These lending rates are high, compared to inflation, and have been authorized by the Central Bank to permit the new commercial bank to obtain a substantial spread in its formative years to compensate for its small portfolio. It is expected that the rates will be lowered in future. The Development Bank of Comoros (BDC) charges rates ranging between 9 and 12% on its medium and long-term loans, depending on the risk and the sector of activity. Although the BDC also needs a substantial spread in its formative years, Government believes that long term interest rates should be kept low to encourage investment. Given the low risk and high profits associated with the sort of import-export trade that the commercial bank finances, compared to the investments that BDC finances, the higher rates for commercial loans are justified. As already noted, these rates are expected to decline in future. 2.29 The deposit rate is 6% per annum and is therefore negative in real terms at the current inflation rate. It should be noted however that the most important factor influencing the level of the deposit rate is not inflation, but the rates in France which, at present, vary between 8 and 12%. The rate should be set so as to avoid substantial transfers of deposits to France, given the free convertibility between the Comorian and French francs and to encourage saving mobilization. During negotiations, this matter was discussed with the Government and agreement was reached that deposit rates will be such that they will attract and retain deposits. III. THE INSTITUTION A. Institutional Aspect Background and Objectives 3.01 The Development Bank of the Comoros (DBC), was created by an Act of Parliament in August 1981, to promote the economic development of the country through provision of equity capital and financing for directly productive investments in a wide variety of sectors: agriculture, 3/ Each private shareholder may not have more than 1%. 4/ The latest year for which data are available. - 8 - industry, tourism, transport and services. DBG is also authorized to make loans, within a 30% limit of its annual approvals, for the construction or the improvement of private houses. The maturity of DBC's loans range from one to ten years. Ownership and Board 3.02 DBC has a share capital of CF300 million which is fully subscribed and paid-in. The shareholders are the State of Comoros (50%), the Central Bank of Comoros, the European Investment Bank and Caisse Centrale de Cooperation Economique (about 16.6% each). DBC's Board of Directors which is chaired by the Director General of the Planning Directorate comprises six members, three of whom represent the Government, one each the Central Bank, Caisse Centrale and the European Investment Bank. The Caisse Centrale's local representative attends the Board meetings for that institution. DBC's Board members are active, dynamic and play an active role in the management of the institution. The Board meets about every other month to discuss policy matters and approve loans. Management, Organization and Staffing 3.03 DBC is managed by an expatriate general manager seconded by the Caisse Centrale, and a Comorian deputy, both of whom are dynamic and competent. They have successfully started the institution, identified bankable projects and are actively promoting investment ideas. The Comorian deputy is expected to assume the general manager's position by the end of 1983, with the assistance of an expatriate adviser, likely to be provided by Caisse Centrale which will also finance the cost of the position for one year. The need for further technical assistance to DBC's management will be reviewed by IDA at the end of this period. 3.04 DBC is a small institution with a total staff of ten, of whom three are professionals. Management intends to recruit, during 1983, two additional professionals. The institution has two departments, one for loans and the other for administration. The Loan Department is responsible for the review of loan applications, forecasting volume of operations, making disbursements and collections. The Administration Department handles all matters related to the staffing and financing of the institution. DBC's management is establishing an SSE Technical Assistance and Promotion Unit that will help promoters to prepare and implement investment projects. UNIDO has agreed to finance an expert for one year for the Unit and the proposed IDA credit would finance this position for an additional two years. DBC's staff is still somewhat inexperienced but highly motivated. Operating Policies 3.05 DBC's investment and financial policies, developed with IDA's assistance and reflected in its Policy Statement and Rules of Procedures are generally adequate. These policies specify, in particular, that DBC's total exposure in a single enterprise shall not exceed 30% of its equity (i.e. about US$260,000 equivalent) and that the institution shall not assume the exchange risk on its foreign borrowings. However: - 9 - (a) the policy statement indicates that normally the institution will not finance the totality of the cost of a project, although specific limits are spelled out in DBC's Rule of Procedures. Agreement was reached during negotiations that a normal limit of 80% of total project costs including working capital, will be spelled out in DBC's Policy Statement; (b) there is no reference in DBC's Policy Statement to its debts to equity ratio limit of 4:1 which is acceptable. This limit, however, is mentioned in its Rules of Procedures. Agreement was reached during negotations that this limit will be incorporated into DBC's Policy Statement; (c) DBC's Policy Statement does not contain explicit project selection criteria. During negotiations it was agreed that DBC would include a new clause in its policy statement spelling out such criteria. These amendments of DBC's Policy Statement which were discussed and agreed upon during negotiations will be a condition of effectiveness of the IDA credit. Procedures 3.06 DBC's Rules of Procedures contain specific guidelines for some aspects of DBC's operations. In addition, DBC's management has prepared a number of internal notes indicating the procedure to be followed on such matters as the processing of loans, disbursements, signing of loan agreements, etc. These notes will be incorporated into an operational manual. 3.07 Appraisal and Supervision. Until now, in preparing project appraisals, DBC's staff has used a checklist of items to be analyzed in these reports. These appraisals are of good quality. DBC's management intends to prepare in coming months a document providing more detailed guidelines to the staff for project appraisal ane supervision. 3.08 Procurement and Disbursement. DBC requires project promoters to obtain quotations from a number of suppliers, from amongst whom, the promoter, with DBC's assistance selects the most advantageous. DBC disburses against presentation of invoices or relevant documentation, after the promoter has paid his share of the investment. DBC's procedures for procurement and disbursements are adequate. 3.09 Project Promotion. In view of the relatively limited range of investment opportunities in the country, promotion activities will be essential to permit DBC to fulfill its role. Since DBC started operations in 1982, its management has played a very active role in that area and has succeeded in promoting projects. To further these activities, DBC is establishing, with assistance from UNIDO, an SSE Technical Assistance and Promotion Unit, the main purpose of which will be to identify promising - 10 - project ideas in the various productive sectors, to work with potential promoters in developing bankable propositions and finally to provide technical assistance in the implementation of projects as well as technical assistance to existing DBC clients. It is expected that this Unit will be fully operational by the middle of 1983. Interest Rates 3.10 DBC is authorized by the Central Bank to charge interest rates of 9 to 12% on loans for productive investments and 9 to 14% for housing loans, depending on cost of the resources used to finance a particular operation and the guarantees provided by the borrower. In practice, however, most loans granted so far have carried interest rates of 9-10%. Furthermore, DBC charges its clients a 1% commitment fee on the total amount of the loans, starting on the date of signature of loan documents and an additional 1% fee, one year after signature, on the undisbursed balance of the loan. Audit 3.11 DBC's accounts will be audited according to generally accepted principles by an auditor of international reputation acceptable to the Association, which is still to be selected. DBC's management will submit to IDA's approval a list of auditors that would be invited to make proposals. The first audit will cover the 15 months period ending December 31, 1982. During negotiations, agreement was reached with DBC that future audited accounts will be submitted to IDA within 6 months after the end of each fiscal year. B. Operations and Finance 3.12 Operations: DBC approved its first loan in May 1982, and had approved 25 loans for a total of CF 84.4 million by the end of October 1982 (annex 1). Of these, 17 were medium and long-term loans for CF 76.5 million, and 8 were short-term loans 5/ for CF 7.9 million. CF 23.9 million (about 28%) of these loans had been disbursed. 3.13 Although still small, DBC's operations to date already reflect the multisectoral character of the institution. The 17 long-term loans include 8 loans for residential housing, 3 for industrial enterprises, 2 for agricultural enterprises and 1 each in fishing, agroindustry, artisanal activities, and transport. The short-term loans have been mainly for artisans and poultry farming. The size of its loans have been small, with 21 out of the 25 loans below CF 5 million. The largest loan to date was a CF 12 million loan to SOCOTRA, a construction and building materials enterprise. This compares with DBC's exposure limit of about CF 94 million (30% of its equity base) to a single enterprise. 3.14 DBC's total lending of CF 60.9 million for productive activities have contributed to the financing of an estimated CF 136.3 million of 5/ Short-term loans have a maximum maturity of 2 years and have been for small investments. - 11 - investments (45% of financing) in 17 projects (annex 2). Based on its appraisal data, these projects would generate 91 jobs at a fairly low average investment per job of $4,160. The agricultural and agroindustrial projects have the lowest investment per job ratio ($2,570 average) whilst fishing and poultry farming had the highest ($5,789 average). Almost all the projects financed are oriented towards domestic consumption. The value added as a proportion of the value of output range from a low of 29% for the agroindustry project to a high of 93% for the agricultural projects. The average for the group is 45% (annex 2). 3.15 Finance: DBC's first fiscal year ended on December 31, 1982, and * its first accounts for the 15 months to that period are still under preparation. Provisional accounts through October 1982 indicate a small net income before provisions and depreciation of CF 0.4 million. DBC does not however expect to make a profit during its first year, when its main source of income would be interest earned from short-term investment of its paid-in capital (annex 4). 3.16 As should be expected from the pace of disbursements (para. 3.12) the size of its portfolio as of October 1982 was small (CF 25 million). So far, DBC's paid-in capital of CF 300 million has been adequate to finance its operations and expenses and still leave a substantial cash surplus for short-term investment. C. Prospects 3.17 Projected Operations: Annex 3 shows projected operations for DBC for 1982 through 1986. These projections are subject to a high degree of variation because DBC is a new institution with no track record; it will be operating in an environment which has proved unattractive to date for significant productive investments; and its own project development and promotion capabilities will largely determine how much it can lend in the key productive sectors. Bearing these factors in mind, the projections assume that DBC could double its approvals in 1983 when it is more established, and then increase approvals thereafter at 10% per annum in nominal terms. (No growth in real terms). Its total commitments through 1986 would be CF 1,463 million. These projections are more conservative than DBC's own estimates 6/ but take into account DBC's existing pipeline of projects, most of which are in the industrial sector (production of shoes, paints, clothings, mattresses, cookingwares). 3.18 Whilst it is expected that demand for housing loans from DBC will be strong, it is DBC's policy to restrict its annual approvals for housing to 30% of its total approvals. Its cumulative approvals and commitments for housing will therefore not exceed 30% of its total approvals and commitments during the period. The balance of 70% will go to productive investments according to the following distribution; 50% for industry, 12% for artisanal activities and 9% for agriculture. These productive sector commitments are expected to be 80% in the form of long-term loans, 14% in the form of short-term loans and 6% in equity. 6/ DBC's own estimates of its cumulative commitments for 1982 to 1986 is CF 1,990 million. - 12 - 3419 Resource Requirements: To fund the CF 1,463 million of projected commitments through 1986, the following financing plan is envisaged. Capital CF 300 million Grants 110 Operating Surplus 76 Loan Collections 175 Rediscounting 93 IDA Credit 709 1,463 The grants represent expected collections from the portfolio of the defunct CREDICOM. The rediscounting from the Central Bank represents 55% of the current maximum of CF 300 million the Central Bank has set for medium-term rediscounts. Therefore, even if its internal cash generation from operations, its collection from the CREDICOM portfolio, and the repayments from its borrowers turn out to be only 50% of what is currently projected, DBC could fill in most of the gap with additional rediscounts from the Central Bank. DBC will therefore not face any additional resource constraints over the next five years (annex 8). It should be noted however that the IDA resources will not be available for short-term and housing loans, and that DBC will have to tailor its commitments in these areas to fit in with its other resources. 3.20 Financial Prospects: Annexes 4 to 7 show financial projections and ratios for DBC. Even with substantial interest free resources in the form of capital and grants, an effective spread on its borrowed funds of about 6.5% over the period, and cost free technical assistance for key expatriate staff, DBC's projected profitability is modest. Starting with no profits in 1982, the situation is expected to improve gradually to a return on its average equity of about 4.9% by 1986. DBC's profitability will be most sensitive to provisions and write-offs in respect of bad loans, which on a cumulative basis, have been projected at 2% of the portfolio. This rather modest profit potential is not surprising given the relatively small size of DBC's portfolio. DBC's shareholders were however aware of this possibility when they invested, and would be satisfied if DBC is able, in its initial years of operations, to meet its expenses, and generate adequate cash flows to service its debts without recourse to further equity injections and subsidies. 3.21 In view of its initial reliance on its equity resources to finance operations, DBC's drawdown of its borrowings will not start till 1984. As a result its debt equity ratio will stay well within its mandatory limit of 4:1. 3.22 On the whole, barring major loan losses and laxness in following up and collecting its debts, DBC would develop into a financially viable and creditworthy institution. - 13 - IV. THE PROJECT A. Objectives 4.01 The main objective of the project is to assist in developing productive activities in the Comoros by providing financial resources and technical assistance to help establish and strengthen the newly created development bank. Institution building is therefore a key element of the project. 4.02 The line of credit would be used to finance new projects and also the expansion, modernization or rehabilitation of existing enterprises in all productive sectors. B. Description 4.03 The proposed project would have the following components: (a) Investment Financing. US$2.0 million would be used by DBC to finance loans and equity investments in small and medium-scale enterprises in industry, agriculture, agro-industry, fisheries, construction activities, tourism, transport, artisan activities, and services connected with production. This amount would represent about 70% of DBC's projected commitments for projects in these sectors through 1986 and about 40% of its total resource requirements during the period. (b) Technical Assistance to DBC. US$0.3 million would be used to provide DBC with technical assistance in the key areas listed below. Such assistance is required to help establish DBC as a well managed and effective institution. (i) SSE Project Promotion and Technical Assistance to Entrepreneurs. US$110,000 would be used to finance 12 man-months of an SSE specialist who would be located in the SSE Technical Assistance and Promotion Unit to be established in DBC. The IDA credit would finance the salary, benefits, housing and travel expenditures of the specialist. * UNIDO will be financing this expert for one year starting at the beginning of 1983. (ii) Training of DBC's Staff. US$30,000 would be used to finance the training of DBC's staff, particularly in project appraisal and supervision, at other experienced development banks and relevant training institutions. This should allow most of DBC's small - 14 - professional staff to benefit from training programs during the period covered by the IDA credit. (iii) Consultancy Services and Technical Assistance. US$40,000 would be used to finance consultancy services to conduct feasibility studies for projects selected by DBC in productive sectors with emphasis on industry, agro-industry and tourism. This would also include consultancy services for review of the Investment Code (para. 2.15). Consultants selected to carry out these feasibility studies would be chosen by DBC after consultation with IDA. DBC would submit for approval the objectives of each study, its detailed terms of reference and a short list of consultants envisaged to carry it out with a detailed explanation of their expertise in the particular field of study. If requested, IDA will be prepared to assist in identifying qualified consultants. An additional US$120,000 would be included in the credit to finance possible future technical assistance to DBC's management (para 3.03). Proposed Credit to DBC 4.04 The US$2.0 million line of credit to DBC would finance the eligible cost in foreign exchange and local currency of fixed capital investments of medium and small projects approved by DBC in the following sectors: industry, agriculture, agro-industry, fisheries, construction, tourism, transport, artisan activities, services connected with production. Terms and Conditions 4.05 Financing Component. This component (US$2.0 million) would carry the following terms and conditions: (a) On-lending Rate to DBC. To provide DBC with a spread which allows it to meet its operating expenses, realize an adequate profit and build up provisions against portfolio risk, the IDA credit would be onlent by the Government to DBC at a rate which would be 6 percentage points below the rate charged on the subloans financed with the IDA resources. This relatively wide margin is considered necessary to permit DBC cover its start-up cost and compensate for the limited size of its portfolio (para. 3.20). The on-lending rate by Government to DBC, would be at 5%. Furthermore, because of DBC's still fragile financial position, Government would be requested to support all of the IDA - 15 - 0.5% commitment fee. These matters were discussed and agreed upon during negotiations. (b) On-lending Rate by DBC. DBC would charge 11% to its IDA financed clients. In view of the inflation expectation of 10% through 1985, this would provide a marginally positive rate. The rate which DBC would charge its clients for loans made with the IDA resources, would be reviewed annually until the credit is fully committed, by the Association, the Government and DBC to ensure that the latter is not less than the local rate of inflation. (c) Foreign Exchange Risk. Because, DBC's clients will be mostly small enterprises, Government would assume the foreign exchange risk without charging a fee neither to DBC nor to its clients. This was agreed upon during negotiations. (d) Free Limit. IDA would review the first five subprojects that DBC will submit to ensure that the appraisal reports are of good quality. Subsequently the free limit for projects in all sectors should be US$75,000 and the aggregate free limit US$1.0 million. This limit would permit IDA to review most of the projects likely to be submitted by DBC. (e) Economic Analysis of Sub-projects. For subprojects above the free limit, DBC would be required to provide a comprehensive economic analysis and to calculate an economic rate of return. (f) Amortization Schedule. In view of the expected small sizes of the IDA financed sub-loans DBC would repay the Government according to a fixed amortization schedule of 10 years with a four-year grace period. 4.06 Technical Assistance Component. In view of DBC's still fragile financial condition, the Government would pass on this component (US$0.3 million) to DBC as a grant. C. Implementation 4.07 Reporting Requirements. DBC would be required to submit quarterly reports which would include financial statements, resource position, statement of arrears and notes on sub-projects encountering serious operational difficulties. DBC would also be required to submit annual audit report in accordance with IDA guidelines for audits of DFCs, prepared by qualified auditors approved by IDA along with DBC's annual report. 4.08 Procurement. Procurement for the sub-projects financed under the credit would be in accordance with DBC's procurement practice (para. 3.08). Consultants to be employed under the project would be retained on terms and conditions acceptable to the Association. - 16 - 4.09 Disbursements. The proceeds of the proposed first credit would finance 100% of the total costs of goods and services excluding taxes, 100% of technical assistance. Disbursements would be fully documented. However, after a certain number of claims have been submitted, IDA will review its disbursement procedures and could allow DBC to claim reimbursement against a certified statement of expenditure, the supporting documentation being retained by DBC for inspection by Project supervision missions. 4.10 As DBC is a new institution, operating in an environment different from most Bank Group financed DFCs, neither the Bank-wide nor the Region-wide sectoral disbursement profiles for the IDF Sector were relevant and projected disbursements in Annex 9 are based on DBC's forecast of operations. The credit is expected to be fully disbursed by December 31, 1988. D. Benefits and Risks 4.11 The Development Bank of Comoros is a newly created institution which has a significant role to perform in order to stimulate the development of productive sectors. By providing financing and technical assistance to this institution, IDA would contribute to achieving such objective while developing and strengthening DBC as a sound and viable institution. On the basis of DBC's typical project financing so far, the line of credit is expected to finance investments totalling US$4.0 million equivalent and to create about 500 jobs at an average cost of US$8,000. 4.12 The risks associated with the project are that because of the numerous constraints of the Comorian environment (distance from sources of supply and from markets, high transport cost of imported inputs, narrowness of domestic market) the number of investment projects, particularly in manufacturing, would be limited. Furthermore, DBC's viability and effectiveness will depend to a large extent on the quality of its management and of its limited professional staff, particularly on its ability to play a strong promotional role. As local talents are very scarce, the project includes a large technical assistance component which is justified. The project success will depend largely on the quality of technical assistance staff and services. This aspect of the project will be closely monitored. V. AGREEMENTS REACHED DURING NEGOTIATIONS 5.01 This report recommends an IDA credit of US$2.3 million on the terms and conditions specified in paragraphs 4.04 and 4.05. 5.02 During negotiations, agreements were reached on the following: (a) with Government and DBC that: (i) DBC's interest rates and charges will be reviewed annually (para. 4.04(b)); - 17 - (b) with Government that: (i) Deposit rates will be such that they will attract and retain deposits (para. 2.29); (ii) revision of the Investment Code will be completed by May 31, 1984 (para. 2.15); (iii) it will on-lend the financing component of the IDA line of credit (US$2.0 million) to DBC at a rate which will be 6 percentage points below the rate charged by DBC on the IDA financed sub-loans; and that it will support all of the IDA 0.5% commitment fee on this component (para. 4.04(a)); (iv) it will pass on to DBC as a grant the technical assistance component (US$0.3 million) of the line of credit (para. 4.06); (v) it will assume the foreign exchange risk on the total amount of the line of credit and will not charge a fee neither to DBC nor to DBC's clients for assuming this risk (para. 4.04(c)); (c) with DBC that: (i) it will specify in its Policy Statement that its assistance to individual projects shall normally be no more than 80% of total project costs (para. 3.05(a)); (ii) it will incorporate in its Policy Statement a 4:1 limit for its debt to equity ratio (para 3.05(b)); (iii) it will submit to IDA its audited accounts within six months after the end of each * fiscal years (para. 3.11); (iv) it will on-lend the proceeds of the IDA credit at a rate which initially shall be at 11% (para. 4.04(b)); (v) it will provide a comprehensive economic analysis and will calculate an economic rate of return for all subprojects above the free limit (para. 4.04 (e)); (vi) it will submit to IDA quarterly financial and operational reports (para. 4.07). 5.03 Condition of effectiveness of the IDA credit will be that DBC will have amended its Policy Statement (para. 3.05(a), (b) and (c)). - 18 - Annex 1 DEVELOPMENT BANK OF THE COMOROS (DBC) Operations to 31/10/82 CF Million A. SUMMARY Approvals Disbursements Medium-Long term loans No. Amount No. Amount Fishing 1 10.0 - - ) Agriculture 2 1.8 2 1.8 Agroindustry 1 2.0 1 2.0 Industry 3 24.7 - - Artisans 1 3.5 1 2.6 Transport 1 11.0 - - Housing 8 23.5 4 10.9 Sub-total 17 76.5 8 17.3 Short-term loans Poultry Farming 3 3.0 3 2.7 Agriculture 1 0.3 1 0.2 Artisans 4 4.6 4 3.7 Sub-total 8 7.9 8 6.6 Total 25 84.4 16 23.9 B. ANALYSIS Size of Loans No. % Amount % Up to FC 5 million 21 84 43.0 51 5.01 - 10 million 2 8 18.4 22 10.01 - 15 million 2 8 23.0 27 Total 25 100 84.4 100 Maturity Up to 2 years 8 32 7.9 9 2.1 - 5 years 10 40 53.8 64 5.1 - 10 years 7 28 22.7 27 Total 25 100 84.4 100 Interest Rate 9% 8 32 23.5 28 10% 17 68 60.9 72 Total 25 100 84.4 100 EAPID May 1983 DEVELOPMENT BANK OF THE COMOROS (DBC) Productive Sector Loans Selected Economic Indicators CF million $ CF mil. CF mil. Value No. of Total Investment Value of Value Added Output Sector Loans Investment Employment Cost/Job Output Added Output % Investment Fishing 1 40.0 22 5,050 54.0 38.0 70 1.4 Poultry Farming 3 4.7 2 6,528 8.7 3.6 41 1.9 Agriculture 3 3.8 4 2,639 4.6 4.3 93 1.2 Agroindustry 1 5.4 6 2,500 7.0 2.0 29 1.3 Industry 3 54.7 36 4,221 129.3 43.7 34 2.4 Artisans 5 11.2 11 2,828 26.8 10.2 38 2.4 Transport 1 16.5 10 4,583 9.6 5.3 55 0.6 17 136.3 91 4,160 240.0 107.1 45 1.8 EAPID May 1983 - 20 - Annex 3 DEVELOPMENT BANK OF THE COMOROS (DBC) Actual and Projected Operations CF Million Actual Projected- Approvals 1982 1983 1984 1985 1986 Medium & Long-Term Productive sectors 82 180 198 218 240 Housing 40 88 97 106 117 Sub-total 122 268 295 324 357 Short-Term 8 32 36 40 44 Total Loans 130 300 331 364 401 Equity - 20 20 20 20 Total Approvals 130 320 351 384 421 Commitments Medium & Long-Term Productive sectors 62 146 173 212 223 Housing 33 69 94 103 115 Sub-total 95 215 267 313 338 Short-Term 6 31 34 40 44 Total Loans 101 246 301 353 382 Equity - 20 20 20 20 Total Commitments 101 266 321 373 402 Disbursements Medium & Long-Term Productive sectors 25 75 146 182 211 Housing 20 54 84 100 111 Sub-total 45 129 230 282 322 Short-Term 5 26 33 39 43 Total Loans 50 155 263 321 365 Equity - - 20 20 20 Total Disbursements 50 155 293 341 385 Collections Productive sectors - - 8 26 48 Housing - - 4 13 25 Short-term loans - 8 23 34 38 Total Collections - 8 23 34 38 EAPID May 1983 - 21 - Annex 4 DEVELOPMENT BANK OF THE COMOROS (DBC) Actual and Projected Income Statements CF Million Actual Projected through INCOME 31/10/82 1982 1983 1984 1985 1986 Loan interest 1.0 1.0 12.0 31.2 54.9 83.2 Commission 0.5 1.0 2.0 3.0 4.0 4.0 Short-term investment income 7.6 10.0 9.0 3.0 0.8 0.8 Managed fund income - 12.0 12.0 10.0 6.0 4.0 9.1 24.0 35.0 47.2 65.7 92.0 EXPENSES Interest charges - - - 3.6 12.9 24.1 Salaries 7.2 11.0 18.0 20.0 22.0 24.0 Administrative expenses 2.5 6.0 8.0 9.0 10.0 11.0 Depreciation - 4.0 4.0 3.0 3.0 4.0 Other - 1.0 1.0 2.0 2.0 3.0 8.7 22.0 31.0 37.6 49.9 66.1 Income (loss) before provisions 0.4 2.0 4.0 9.6 15.8 25.9 Provisions - 2.0 3.0 4.0 5.0 5.0 Net income (loss) 0.4 - 1.0 5.6 10.8 20.9 _~ ~ - = EAPID May 1983 - 22 - Annex 5 DEVELOPMENT BANK OF THE COMOROS (DBC) Actual and Projected Funds Flow Statements CF Million Actual Projected_ INFLOWS 1982 1983 1984 1985 1986 Net income, depreciation and provisions 6 8 13 19 30 Loan collections - 8 35 73 111 Rediscounts - 64 57 44 IDA - - 79 172 174 Grants 12 23 25 24 26 Equity 300 - - - - 318 39 216 345 385 OUTFLOWS Disbursements Medium and Long-term productive loans 25 75 146 182 211 Housing loans 20 54 84 100 111 Short-term loans 5 26 33 39 43 Equity - - 20 20 20 Debt Retirement - - - - - Fixed Assets 40 4 - 2 4 90 159 283 343 389 Net Flow 228 (120) (67) 2 (4) Cumulative Flow 228 108 41 43 39 EAPID May 1983 - 23 - Annex 6 DEVELOPMENT BANK OF THE COMOROS (DBC) Actual and Projected Balance Sheets CF Million Actual Projected 1982 1983 1984 1985 1986 ASSETS Net Current Assets 228 108 41 43 39 Portfolio Medium and Long-term productive loans 25 100 238 394 557 Less provisions 2 4 7 11 15 23 96 231 383 542 Short-term loans 5 23 33 38 43 Less provisions - 1 2 3 4 5 22 31 35 39 Housing loans 20 74 154 241 327 Equity - - 20 40 60 Total portfolio 48 192 436 699 968 Net Fixed Assets 36 36 33 32 32 TOTAL ASSETS 3.12 336 510 774 1,039 Managed Funds 424 401 376 352 326 LIABILITIES & EQUITY Long-Term Debt Rediscounts - - 64 121 165 IDA - _ 79 251 425 Total Debt - - 143 372 590 Equity Paid in capital 300 300 300 300 300 Grants 12 35 60 84 110 Retained earnings - 1 7 18 39 Total Equity 312 336 367 402 449 TOTAL LIABILITIES & EQUITY 312 336 510 774 1,039 Managed Funds 424 401 376 352 326 EAPID May 1983 DEVELOPMENT BANK OF THE COMOROS (DBC) Actual and Projected Financial Ratios Actual Projected 1982 1983 1984 1985 1986 Gross income/Average total assets 15.4 10.8 11.1 10.2 10.1 Non-Financial expenses/Average total assets 14.1 9.6 8.0 5.8 4.6 Financial expenses/Average total assets - - 0.08 2.0 2.7 Net income/Average total assets 0.03 1.3 1.7 2.3 Net income/Average equity - 0.03 1.6 2.8 4.9 Interest & commission/Average loan Portfolio 8.3 11.7 11.3 10.9 11.1 Interest charges/Average long-term debt - - 5.0 5.0 5.0 Long-term debt/Equity - - 0.4 0.9 1.3 Provisions/Loan Portfolio 4.2 2.5 2.2 2.1 2.1 EAPID May 1983 (D 40~~~~~~~~~~~~~~~~~~~~~~~~~~ - 25 - Annex 8 DEVELOPMENT BANK OF THE COMOROS (DBC) Actual and Projected Resource Statements CF Million Actual Projected 1982 1983 1984 1985 1986 COMMITMENTS A. Production Investments Medium & Long-term loans 62 146 173 212 223 Equity - 20 20 20 20 62 166 193 232 243 Less loan collections - - 8 26 48 Net commitments 62 166 185 206 195 B. Housing & Short-Term Loans Housing 33 69 94 103 115 Short-term loans 6 31 34 40 44 39 100 128 143 159 Less loan collections - 8 27 47 63 Net commitments 39 92 101 96 96 C. Fixed Assets 40 4 - 2 4 Total non-production commitments 79 96 101 98 100 FINANCING Equity 300 - - - Grants 12 23 25 24 26 Operating Surplus 6 8 13 19 30 318 31 38 43 356 Less net non-production commitments 79 96 101 98 100 _ 239 (65) (63) (55) (44) Less net production commitments 62 166 185 206 195 Overall surplus/(Gap) 177 (231) (248) (261) (239) Proposed Gap Financing Surplus brought forward - 177 - - - IDA credit - 54 214 234 207 Rediscounts - - 34 27 32 Overall financing - 231 248 261 239 EAPID May 1983 THE DEVELOPMENT BANK OF THE COMOROS (DBC) Estimated Disbursements Schedule Cumulative US$ 000 Cumulative % Investment Technical Investment Technical Financing Assistance Total Financing Assistance Total FY 84 Second Semester 100.0 35.0 135.0 5.6 7.1 6.0 FY 85 First Semester 220.0 100.0 320.0 12.2 21.4 14.8 Second Semester 470.0 130.0 600.0 26.1 35.7 28.8 FY 86 First Semester 720.0 250.0 970.0 40.0 50.0 42.8 Second Semester 970.0 320.0 1,290.0 53.9 64.3 56.8 FY 87 First Semester 1,220.0 390.0 1,610.0 67.8 78.6 70.8 Second Semester 1,400.0 460.0 1,860.0 83.3 92.8 82.0 FY 88 First Semester 1,600.0 500.0 2,100.0 88.8 100.0 92.0 Second Semester 1,700.0 - 2,200.0 94.4 - 96.0 FY 89 First Semester 1,800.0 - 2,300.0 100.0 - 100.0 x EAPID May 1983 - 27 - Annex 10 DEVELOPMENT BANK OF THE COMOROS (DBC) Selected Documents and Data Available in the Project File 1. Etude de Factibilite de la Creation d'une Banque de Developpement aux Comores by A. Hovine, Consultant, July 1980. 2. Institut d'Emission des Comores - Rapport Annuel 1979, 1980. 3. Survey of Selected Economic Sectors in the Federal and Islamic Republic of the Comoros - World Bank/UNIDO Cooperative Programme December 1982. 4 Etude de Potentialite d'Artisanat aux Comores - Agence de Cooperation Culturelle et Technique - 1982. 5. Law No. 80-9 establishing the Investment Code - June 1980. EAPID May 1983