FOR OFFICIAL USE ONLY Report No: ICR00005648 IMPLEMENTATION COMPLETION AND RESULTS REPORT IBRD 9104-MX ON A LOAN IN THE AMOUNT OF US$ 1 BILLION TO THE UNITED MEXICAN STATES FOR THE COVID-19 FINANCIAL ACCESS DEVELOPMENT POLICY FINANCING ( P172863 ) May 31, 2022 Finance, Competitiveness And Innovation Global Practice Latin America And Caribbean Region The World Bank COVID-19 Financial Access DPF (P172863) CURRENCY EQUIVALENTS Exchange Rate Effective May 20, 2022 Mexican Peso Currency Unit = (MXN) MXN 19.8657 = US$1 FISCAL YEAR United Mexican States GOVERNMENT FISCAL YEAR January 1 – December 31 Regional Vice President: Carlos Felipe Jaramillo Country Director: Mark Roland Thomas Regional Director: Robert R. Taliercio Practice Manager: Yira J. Mascaro Task Team Leader(s): Eva M. Gutierrez ICR Main Contributor: Federico A. Diaz Kalan The World Bank COVID-19 Financial Access DPF (P172863) ABBREVIATIONS AND ACRONYMS CNBV National Banking and Assets Commission (Comisión Nacional Bancaria y de Valores) CoDi Electronic payment platform - Digital Collection (Cobro Digital) National Council of Civil Registry Officials (Consejo Nacional de Funcionarios del Registro CONAFREC Civil) CONAIF National Financial Inclusion Council (Consejo Nacional de Inclusión Financiera) National Commission for the Defense and Protection of Financial Services Users (Comisión CONDUSEF Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros) COVID-19 Coronavirus Disease 2019 CPF Country Partnership Framework CURP Unique Population Registration Number (Clave Única de Registro de Población) DPF Development Policy Financing DRM Monetary Regulation Deposit (Depósito de Regulación Monetaria) National Survey on Access to Finance for Firms (Encuesta Nacional de Financiamiento de ENAFIN las Empresas) ENEF National Financial Education Strategy (Estragetia Nacional de Inclusión Financiera) ENIF National Financial Inclusion Survey (Encuesta Nacional de Inclusión Financiera) FIGI Financial Inclusion Global Initiative FLAO Ordinary Additional Liquidity Facility (Facilidad de Liquidez Adicional Ordinaria) Housing Fund for Public Sector Employees (Fondo de la Vivienda del Instituto de Seguridad FOVISSSTE y Servicios Sociales de los Trabajadores del Estado) FSAP Financial Sector Assessment Program FY Fiscal Year GDP Gross Domestic Product IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report ID Identification IFC International Finance Corporation IFPE Electronic Payment Funds Institutions (Instituciones de Fondos de Pagos Electrónicos) The World Bank COVID-19 Financial Access DPF (P172863) IMF International Monetary Fund INE National Electoral Institute (Institution Nacional Electoral) INEGI National Geography and Statistics Institute (Instituto Nacional de Estadística y Geografía) National Housing Institute (Instituto del Fondo Nacional de la Vivienda para los INFONAVIT Trabajadores) IPF Investment Project Financing ITF Financial Technology Institutions (Instituciones de Tecnología Financiera) LAC Latin America and the Caribbean MFD Maximizing Finance for Development MIC Middle Income Country MIDE Interactive Museum of Economics MoUs Memorandum of Understanding MSMEs Micro, small and medium enterprises MXN Mexican Peso NDC Nationally Determined Contribution OECD Organization for Economic Co-operation and Development PDO Program Development Objective PNIF National Financial Inclusion Policy (Política Nacional de Inclusión Financiera) National Development Financing Plan (Programa Nacional de Financiamiento del PRONAFIDE Desarrollo) PSIA Poverty and Social Impact Analysis RENAPO National Population Registry (Registro Nacional de Población) SCD Systematic Country Diagnostic SDR Special Drawing Rights SEB Undersecretary of Basic Education SEGOB Ministry of Interior (Secretaría de Gobernación) SEP Ministry of Public Education SHCP Ministry of Finance (Secretaría de Hacienda y Crédito Público) SID National System of Registry and Identity (Sistema Nacional de Registro e Identidad) The World Bank COVID-19 Financial Access DPF (P172863) SIPRES Registration System for Financial Services Providers SME Small and Medium Enterprises SNIP National Service of Personal Identification (National Service of Personal Identification) SPEI Interbank Electronic Payments System (Sistema de Pagos Electrónicos Interbancarios) UBD Development Banking Unit at SHCP UBVA Banking, Securities and Savings Unit at SHCP UPI Unified Payments Interface USD United States Dollar VAT Value Added Tax WB World Bank WBG World Bank Group The World Bank COVID-19 Financial Access DPF (P172863) TABLE OF CONTENTS DATA SHEET .........................................................................................................................1 I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES ............................................... 4 A. Context at Appraisal .................................................................................................... 4 B. Significant Changes During Implementation .................................................................. 8 II. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES.......................................... 8 A. Relevance of prior actions ......................................................................................... 11 B. Achievement of Objectives (Efficacy) .......................................................................... 16 C. Overall Outcome Rating and Justification.................................................................... 24 III. OTHER OUTCOMES AND IMPACTS ............................................................................ 25 A. Poverty, Gender and Social Impacts ........................................................................... 25 B. Environmental, Forests, and Natural Resource Aspects ............................................... 25 C. Institutional Change/Strengthening ............................................................................ 25 D. Other Unintended Outcomes and Impacts .................................................................. 26 IV. BANK PERFORMANCE............................................................................................... 26 V. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES .......................................... 28 VI. LESSONS AND NEXT PHASE ....................................................................................... 28 A. Lessons Learned ........................................................................................................ 28 B. Next Phase ............................................................................................................... 30 ANNEX 1. RESULTS FRAMEWORK ........................................................................................ 31 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES ..... 36 ANNEX 3. BORROWER’S COMMENTS .................................................................................. 39 ANNEX 4. RESULTS CHAIN ................................................................................................... 40 ANNEX 5. BANXICO LIQUIDITY SUPPORT MEASURES ........................................................... 41 ANNEX 6. STATE DEVELOPMENT ENTITIES’ FINANCIAL ACCESS PROGRAMS ......................... 42 ANNEX 7. SUPPORTING DOCUMENTS ................................................................................. 43 The World Bank COVID-19 Financial Access DPF (P172863) . . DATA SHEET BASIC INFORMATION Product Information Project ID Program Name P172863 COVID-19 Financial Access DPF Country Financing Instrument Mexico Development Policy Lending DPF Options Programmatic Regular Deferred Drawdown Option Catastrophic Deferred Drawdown Option No No No Crisis or Post Conflict Sub-National Lending Special Development Policy Lending No No No Organizations Borrower Implementing Agency Ministry of Finance and Public Credit (Secretaría de United Mexican States Hacienda y Crédito Público) Program Development Objective (PDO) Program Development Objective (PDO) Contribute to the government’s efforts to: (i) support liquidity in the financial sector, and (ii) establish instruments for improved financial access. Page 1 of 43 The World Bank COVID-19 Financial Access DPF (P172863) PROGRAM FINANCING DATA (USD) FINANCE_TBL Approved Amount Actual Disbursed World Bank Administered Financing 1,000,000,000 1,000,000,000 IBRD-91040 Total 1,000,000,000 1,000,000,000 KEY DATES Concept Review Decision Review Approval Effectiveness Original Closing Actual Closing 29-Jan-2020 06-Apr-2020 19-May-2020 28-May-2020 31-May-2021 31-May-2021 RATINGS SUMMARY Program Performance Overall Outcome Relevance of Prior Actions Achievement of Objectives (Efficacy) Satisfactory Satisfactory Satisfactory Bank Performance Moderately Satisfactory RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) SECTORS AND THEMES Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR0 TBL Financial Sector 100 0.00 0.80 Banking Institutions 80 0 1 Other Non-bank Financial Institutions 20 0 0 Page 2 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Finance 89 Financial Stability 44 Financial Sector oversight and policy/banking 44 regulation & restructuring Financial Infrastructure and Access 89 Payment & markets infrastructure 33 MSME Finance 33 Financial inclusion 56 Public Sector Management 11 Public Administration 11 Civil Registration and Identification 11 Human Development and Gender 100 Disease Control 100 Pandemic Response 100 Environment and Natural Resource Management 1 Climate change 1 Adaptation 1 ACCOUNTABILITY AND DECISION MAKING Role At Approval At ICR Regional Vice President: J. Humberto Lopez Carlos Felipe Jaramillo Country Director: Pablo Saavedra Mark Roland Thomas Director: Robert R. Taliercio Robert R. Taliercio Practice Manager: Zafer Mustafaoglu Yira J. Mascaro Task Team Leader(s): Patricia Caraballo Eva M. Gutierrez . Page 3 of 43 The World Bank COVID-19 Financial Access DPF (P172863) I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES 1. This Implementation Completion and Results Report (ICR) assesses the results of the COVID-19 Financial Access Development Policy Financing (DPF) to the United Mexican States approved by the World Bank’s Board of Directors on May 19, 2020. This DPF, in the amount of US$1 billion, was aimed to support some elements of the Mexican authorities’ response to the economic and social crisis brought about by the COVID-19 pandemic. This operation supported measures focused on the financial sector that were devised to help in the short-term as part of the relief efforts, including critical support particularly focused on micro, small and medium enterprises (MSMEs) to protect jobs as well as programs to boost household incomes. It also intended to contribute to the foundations of a more resilient economic recovery by introducing reforms that would lead to increased access to the financial system. These prior actions are closely linked to other operations in the country, such as the DPF that supported the implementation of the Fintech Law and the diverse Bank interventions on the Digital ID topic, forming one of the most comprehensive set of reforms underpinning digital transformation of the financial sector. A. Context at Appraisal Context 2. The DPF was prepared in the early stages of the COVID-19 pandemic, in the context of a wide ranging effort by the Mexican authorities to contain its effects, which went beyond the heavy toll in terms of health of the population. Following the public health response, the country authorities promptly introduced a set of monetary, financial, fiscal, economic and social measures to address other disruptive aspects of the pandemic. 1 Many of these were launched in the first weeks after the health emergency was declared. The DPF supported measures that were part of this initial response, which sought to provide rapid relief and facilitate the recovery process. Some of the upstream policies supported also would make the support of IFC more effective to commercial banks and Fintechs, in response to the challenges brought by the COVID-19 pandemic. 3. There was an urgent need for liquidity support as the pandemic disrupted the provision of credit to firms and households. At the onset of the crisis, firms and families needed significant liquidity support, especially when facing lockdowns and other social distancing measures implemented at various level of the Mexican Government. Firms suddenly faced a large negative shock to their cash flows and families saw an increase in unemployment rates. The DPF supported actions taken by the authorities to strengthen liquidity in the financial system to boost lending to firms and households in that challenging context. The operation also supported measures aimed at facilitating the functioning of the digital finance ecosystem and electronic payments, as these could serve firms, and particularly MSMEs, to continue their operations in the new environment set by the pandemic. The need to roll out emergency social programs for vulnerable groups during the crisis underscored the need for these to have a form of identification (ID), which a large number of Mexican citizens lacked. The DPF supported policies that provided for the construction of a robust and unique identification system that could help in the implementation of social support transfers. 1 Box 1 lists the measures that had been taken at the time that the DPF was under preparation. A full list of the financial sector measures taken during the crisis can be found at the FCI GP COVID-19 Financial Policy Response Compendium, available at https://www.worldbank.org/en/topic/financialsector/coronavirus Page 4 of 43 The World Bank COVID-19 Financial Access DPF (P172863) 4. For the recovery from the pandemic to be solid and resilient, the authorities needed to take measures geared at alleviating Mexico’s shortcomings in access to finance to MSMEs and individuals. A structural impediment to development identified by the Systematic Country Diagnostic (SCD) 2 was that limited access to finance had hampered private sector growth and household inclusion for decades. According to the Bank of International Settlements, total credit to the private sector at the time of the operation preparation reached only 42 percent of GDP, which compared poorly to the average of 143 percent in emerging markets. 3 Mexican SMEs faced relatively high borrowing costs, which could hamper their ability to recover: the spread in their interest rate relative to large firms stood at 5.9 percentage points (pp), more than doubling the OECD upper middle income countries’ median of 2.6pp. 4 The banking sector is characterized by a high degree of concentration, with the top 5 banks holding 68 percent of the system assets as of January 2020. The country has historically presented larger than average financial access gaps with regards to gender, regional, and urban-rural disparities. These pre-existing issues posed a challenge to a sustainable and resilient recovery, and hence needed to be addressed once the short-term liquidity measures were in place. For this reason, the DPF supported measures to enhance access to finance during the relief period, the recovery, and the medium term. These included the measures that develop digital finance, increase competition in the financial sector through the introduction of Fintechs, narrow access gaps among vulnerable groups and MSMEs, and contribute to the agenda towards the establishment of a unique identity system, which will enable opportunities for further inclusion of large segments of the population. 5. Mexico’s macroeconomic policy framework was deemed adequate when the DPF was approved. Economic growth had come to a stop in 2019 and was expected to present a significant decline in the second quarter 2020 (GDP did contract 18.7 percent against the same quarter in 2019 and, though recovery began in the third quarter 2020, the economy had not yet reached pre-pandemic levels by the end of 2021). The current account deficit narrowed significantly in 2019 due to a contraction of the trade deficit, and it was fully financed by foreign direct investment. Exchange rate flexibility remained the first line of defense against external shocks, as the Mexican peso posted a rapid depreciation against the US dollar at the onset of the pandemic.5 Fiscal consolidation prior to 2019 allowed net public debt to decline 4.2pp to 44.5 percent of GDP between 2016 and 2019. Inflation sat at the official target while the Central Bank lowered the policy rate from 8.25 percent to 6.0 percent between August 2019 and April 2020, having both monetary policy and balance-sheet space to respond to shocks. 6. While central to the COVID-response efforts, the DPF also responded to the Government’s longer- term priorities, as reflected in the World Bank Group’s Country Partnership Framework (CPF) for Mexico for the period FY2020-FY2025 6 and aligned with the National Financial Inclusion Policy (PNIF) and the National Development Financing Plan (PRONAFIDE). 7 The operation had the objective of dealing with the COVID-19 shock and the need for a strong and better recovery, while at the same time, advancing key objectives of the CPF discussed by the Board in February 2020. In particular, the DPF responded directly to Objective 1 of the CPF, “foster financial intermediation and inclusion”. The DPF built on the reforms supported by the Financial Inclusion DPF (P167674) approved in June 2019, and it benefited by the technical work developed under the thematic 2 World Bank. 2018. Mexico - Systematic Country Diagnostic (English). Washington, D.C. 3 Credit to private non-financial sector from all sectors, Bank of International Settlements, total credit statistics. Data for 2019. 4 OECD Financing SMEs and Entrepreneurs 2020. Data for 2018. The median interest rate spread between loans to SMEs and to large firms for all OECD countries was 1.1 percentage points. 5 The Mexican peso promptly appreciated in the second half of 2020. 6 World Bank Group, Country Partnership Framework for the United Mexican States for the Period FY2020-FY2025, Report No. 127429- MX, January 29, 2020. 7 aUnited Mexican States, National Council for Financial Inclusion (CONAIF), 2020-2024 National Financial Inclusion Policy (PNIF), March 11, 2020. Page 5 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Programmatic Approach for Mexico (P163627), the Financial Inclusion Global Initiative (FIGI) program and the findings of the 2016 FSAP. It was complemented by the Strengthening Economic Sustainability DPF (P174150), which was prepared in parallel, to support economic and social response measures. 8 The operation was fully aligned with the WBG Maximizing Finance for Development (MFD) approach, tackling constraints to access to finance through private sector use of Fintech. Financial access was at the top of the Mexican authorities’ agenda, as reflected in the measures implemented as part of the COVID-19 economic relief and recovery efforts (See Box 1). Moreover, the DPF was directly linked to four of the six objectives of the PNIF 2020-2024 launched by the Mexican authorities in March 2020, including: (1) to increase digital payments among the population, businesses, and government; (2) to increase the economic-financial skills of the population; (3) to strengthen access to information tools and financial consumer protection mechanisms; and (6) to favor the financial inclusion of people in vulnerable situations, such as women, migrants, older adults, indigenous people and the rural population. Additionally, the reforms supported by the operation are consistent with the objectives of the PRONAFIDE 2020- 2024: (5) to promote the sustainable development of the financial system in favor of the well-being of the population; and (6) strengthening the financing and planning of development banks and promoting a greater financial inclusion of the target sectors and greater participation of the private sector. 7. The DPF was devised as a stand-alone operation on the basis of the urgency, timing of the reforms it supported, and the flexibility required in the uncertain conditions of the health crisis. At the time of preparation, financial inclusion and access to finance were deemed critical and became an even more urgent priority with the outbreak of the COVID-19 crisis. History in Mexico shows that, given the political and economic context of the country, financial sector reforms have been adopted and implemented in waves. Furthermore, as a higher upper middle income country Mexico use of DPF instrument has been typically countercyclical, to provide budgetary resources at time of heightened uncertainty and market turmoil. A stand-alone DPF provided flexibility for capturing key structural reforms in a complex country context. The DPF supported an integrated package of policy and institutional reform measures that ranged from core legislation to regulation and implementation of regulations in a single operation. It is also important to highlight that this operation was the first COVID-related DPF of the Bank. Last but not least, it should be highlighted that the operation was prepared in a short period of time of 3.7 months from concept in late January 2020 to Board approval in May 2020. In this context, a stand- alone DPF was regarded as the most suitable instrument to achieve the PDO. Box 1: The Mexican authorities’ economic response to the COVID-19 pandemic (as of date of appraisal, April 16, 2020) Monetary/Financial: • Banco de México reduced the monetary policy rate by 100 bp to 6.0 percent (during March and April, 2020). • The foreign exchange commission announced an increase in the maximum amount of Non-Deliverable Forward Exchange program from US$20bn to US$30bn. • A temporary U.S. dollar liquidity arrangement (known as “swap line”) from the U.S. Federal Reserve with Banco de Mexico for an amount of USD 60 billion was established. Banco de México will conduct US dollar auctions among credit institutions. • Banco de México reduced by 50 billion pesos the amount of the Monetary Regulation Deposit (DRM) held by commercial and development banks. Currently, the total DRM amounts to approximately 320 billion pesos. • Banco de Mexico reduced the cost of its Ordinary Additional Liquidity Facility that offers liquidity to 8 Strengthening Economic Sustainability DPF (P174150), approved on January 21, 2021. Page 6 of 43 The World Bank COVID-19 Financial Access DPF (P172863) commercial banks via secured credits or repos. • The National Commission for Banking and Securities (CNBV) issued, on a temporary basis, special accounting criteria for the partial or total deferral of principal and/or interest payments for up to 4 months, with the possibility of extending it to an additional 2 months, for consumer, housing and commercial credit, for customers whose source of payment is affected by the crisis. Only borrowers that were current in their payments as of February 28th are eligible. • The National Insurance Commission allows temporary regulatory facilities so that the Insurance Institutions can extend the terms for the payment of premiums and include in their policies risks derived from the COVID-19. • The Ministry of Finance (SHCP) is accelerating and ramping up its financial access agenda with focus on establishing instruments for improved access (payment system, Fintechs, unique ID system). Fiscal/social: • Budgetary resources were increased and released in advance for the Health sector to ensure that the Ministry of Health has sufficient resources and does not face red tape, in the purchase of medical supplies and equipment. • The government made an advance payment for a 4-month period for the elderly pensions program (minimum pension program). • A Health Emergency Fund is being set up to request additional resources from Congress, that could reach up to 180 billion pesos (0.7 percent of 2019 GDP). • Procurement processes and payments to suppliers are being accelerated. • Value added tax (VAT) refunds to the private sector will be accelerated. • Resources from a large number of off-budget vehicles have been clawed back and these vehicles have been closed. These resources will be deployed to the budget. • A significant number of additional medical personnel is being hired. • Housing loans to formal workers from the National Housing Institute (Instituto del Fondo Nacional de la Vivienda para los Trabajadores – INFONAVIT) and the Housing Fund for Public Sector Employees (Fondo de la Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado – FOVISSSTE) are being increased. • A new initiative on public-private investments will be launched for the energy sector. Other economic: • Development Banks will make available loans and guarantee facilities to support SME and the most affected sectors of the economy. • Measures have been implemented to ensure business continuity of banking services. Original Program Development Objective(s) (PDO) (as approved) 8. The Program Development Objective (PDO) was to contribute to the government’s efforts to: (i) support liquidity in the financial sector; and (ii) establish instruments for improved financial access. Original Policy Areas/Pillars Supported by the Program (as approved) Page 7 of 43 The World Bank COVID-19 Financial Access DPF (P172863) 9. This stand-alone DPF supported the liquidity buffers of the financial system and promoted greater financial access through a consolidated package of policy and reform actions, which were articulated through two pillars. These were: (i) Supporting liquidity in the financial sector; (ii) Establishing instruments for improved financial access. Pillar 1: Supporting liquidity in the financial sector 10. The DPF supported measures to lower the cost of banks’ access to liquidity facilities and the reduction of the DRM requirements to free up resources for banks to increase their liquidity. This was critical under COVID- 19 when the Mexican financial system faced the prospects of a disruption in their usual sources of funding, which could in turn lead to a contraction in the supply of credit, worsening the impact of the pandemic on economic activity. Pillar 2: Establishing instruments for improved financial access 11. The DPF supported a set of reforms that were outlined in the PNIF which were important for the short- term relief phase and crucial for a solid recovery. Pillar 2 includes interventions that enabled the youth to obtain access to a bank account, while it also supported the inclusion of financial education as part of children and youth’s education in all the country. Payment through a new electronic payment platform was facilitated and novel regulation for Fintechs strengthened transparency. The reforms also advanced women’s access to financial services through the prioritization of women’s targeted access to finance programs and by requiring gender parity in state development banks’ corporate governance. Finally, Pillar 2 supported the verification of identity by third parties through a centralized system, as well as the harmonization of vital information among civil registries, which removed obstacles for access finance of the unserved and contributed towards the creation of a unique system of personal ID. B. Significant Changes During Implementation 12. Operation of civil registries was slowed down as a result of the measures established in federal entities in order to avoid contagion by COVID-19, which delayed the achievement of the development objectives under PA8 and PA9. Though at a moderate pace, work towards the implementation of the reforms continued at the federal level as of April 2020. More generally, the fact that civil registries were not included in the list of essential activities posted by the Ministry of Health determined the suspension of their activities in March. 9 To address this situation, the Ministry of Interior (SEGOB) sent official letters to the governments of the 32 federal entities prompting them to denominate their civil registries as essential activities in the context of the health emergency, together with a series of recommendations for a safe return to the new normality, in order to ensure the continuation of civil registry services. II. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES Table 1. Results Indicators: Achievement of Targets 9 Official Gazette (DOF), “Agreement establishing extraordinary actions to attend to the health emergency generated by the SARS-CoV2 virus”, March 31, 2020. Page 8 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Results Indicators Prior Actions Pillar 1: Supporting liquidity in the financial sector Prior Action 1: The Borrower’s Central Bank has Result Indicator 1: Reduction of the total amount of increased banks’ liquidity by reducing the monetary Monetary Regulation Deposits regulation deposit, as evidenced by Circular 7/2020 Baseline (March 2020): 320 billion MXN published in the Official Gazette on April 1, 2020. Target (August 2020): 15% reduction of the stock of Prior Action 2: The Borrower’s Central Bank has further DRM enabled banks’ access to liquidity facilities by reducing the cost of its ordinary additional liquidity facility, as Current status (August 2020): 270 billion MXN (15.6% evidenced by Circular 4/2020 published in the Official reduction of the stock of DRM) Gazette on April 1, 2020. Pillar 2: Establishing instruments for improved financial access Prior Action 3: The Borrower has enacted the Reform to Result Indicator 2: Number of minors ages 15 to 17 the Credit Institutions Law, published in the Borrower’s that own a bank account under their own name. Official Gazette on March 27, 2020, enabling minors Baseline (March 2020): 0 between 15 and 17 years old, who are wage earners with an active payroll and/or receive social benefit Target (December 2021): 1,200,000 programs to: (i) open bank saving accounts under their own name; and (ii) use and manage the underlying funds Current status (November 2021): 4,439,206 without requiring representation from an adult. Result Indicator 3: Share of female minors in the total number of minors ages 15 to 17 that own a bank account under their own name. Baseline (March 2020): 0% Target (December 2021): 50% Current status (November 2021): 52% Prior Action 4: The Borrower has issued regulations Result Indicator 4: Percentage of licensed Electronic aimed at strengthening transparency practices Payment Funds Institutions (IFPEs) in compliance with applicable to ITFs, as evidenced by CONDUSEF’s general transparency and disclosure rules on contracts. dispositions for Fintech institutions published in the Baseline (March 2020): 0% Borrower’s official Gazette on July 9, 2019. Target (December 2021): 100% Current status (December 2021): 89% Prior Action 5: The Borrower’s Central Bank has issued Result Indicator 5: Number of payments processed regulations to support the implementation of the through the CoDi platform. electronic payment platform (“CoDi”) and provide the Baseline (March 2020): 260,000 legal framework for third-party non-SPEI participants to offer the service of payment request generator, as Page 9 of 43 The World Bank COVID-19 Financial Access DPF (P172863) evidenced by Circulars: (i) No. 11/2019 published in the Target (December 2021): 450,000 Official Gazette on October 1, 2019 and (ii) No.12/2019 Current status (December 2021): 3,606,134 published in the Official Gazette on October 3, 2019. Prior Action 6: The Borrower has enacted the Result Indicator 6: Percentage of women benefiting Amendment to the Credit Institutions Law, published in from state development banks’ financial access the Borrower’s Official Gazette on April 6, 2019, programs. mandating the prioritization of programs and projects Baseline (March 2020): 46% targeting women’s financial needs and gender parity in state development banks’ corporate governance Target (December 2021): 60% structure. Current status (year): 57% 10 (Weighted average: 74%) 11 Prior Action 7: The Borrower has enacted the Education Result Indicator 7: Percentage of schools incorporating Law, published in the Borrower’s Official Gazette on Financial Education in their official curriculum. September 30, 2019 and issued the Training Program Baseline (March 2020): 0% Operational Guidelines, published in the Borrower’s Official Gazette on December 29, 2019 determining that Target (December 2021): 100% financial education be part of the official school curricula from preschool through high school, and that selected Current status (December 2021): 0% primary and secondary public-school educators be trained on the subject to promote financial inclusion. Prior Action 8: The Borrower has established the Result Indicator 8: Number of entities requesting National Service of Personal Identification which will verification services. enable the verification of individuals’ identity to third Baseline (March 2020): 0 parties including financial institutions, as evidenced by article 58 of the Reglamento Interior de la Secretaría de Target (December 2021): 50 Gobernación, published in the Borrower’s Official Gazette on May 31, 2019. Current status (December 2021): 204; of which 68 are financial entities. 12 Result Indicator 9: Number of identification verification enquiries to the National Service of Personal Identification. Baseline (March 2020): 0 Target (December 2021): 300,000/daily 10 Simple average of FND, FIRA, Banjercito. 11 Weighted average of all state development banks for which there is information available (FND, FIRA, Banjercito, NAFIN, BANCOMEXT, SHF). The weighted average for FND, FIRA, Banjercito is 75%. 12 The Program Document (PD) presents prior action 8 and clarifies that the result indicator 8 refers to “all entities, including financial institutions.” See footnote 32 of the PD (Report No: PGD158). According to CNBV, there are 50 Commercial Banks, 16 Development Banks and Promotion Entities, 42 Regulated Multiple purpose financial companies (SOFOM E.R.) and 82 Credit Unions, among other financial institutions operating in Mexico. The number of financial entities fully supervised by CNBV was 2,227 as of December 2020. Page 10 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Current status (December 2021): 6,300,000/daily Prior Action 9: The Borrower has enabled mechanisms Result Indicator 10: Number of states that have rolled to exchange data between civil registries related to out the ID Service to record vital events in a individual’s identity and its verification through standardized manner and percentage of population adequate technological infrastructure and standardized that they are covering. operating rules in civil registries at the state level, Baseline (March 2020): 6 states, 18% of population including the binding of the legal identity with biometric covered data, as evidenced by the twenty-nine (29) Coordination Agreements signed with states of the Borrower. Target (December 2021): 25 states, 65% of population covered Current status (December 2021): 24 states, 72% of population covered A. Relevance of prior actions Rating: Satisfactory 13. A Satisfactory rating is assigned, based on the relevance of the PDO, the package of prior actions and its alignment with Mexico’s short term needs and long term development priorities. Both parts of the PDO were adequately stated, the first one focusing on a possible transmission channel of the COVID-19 crisis to the bank credit to the private sector, and the second one setting a well-defined objective of establishing instruments that would contribute to the longer term objective of improved financial access. The prior actions of the program were well aligned with the PDO, which combined the urgent need to provide rapid liquidity relief to the financial system in order to mitigate the spillover of pandemic crisis over the credit channel, with other measures aimed at the setting groundwork for increased access and usage of financial services by the population both during the pandemic and in the recovery phase. Similar measures of liquidity support to the financial system in order to mitigate the impact on access to finance have been implemented in other COVID-response DPFs in countries such as Colombia (P174118), Uruguay (P172796) and Peru (P174440). The financial access measures supported critical areas such as key infrastructure for financial services, protection for user of fintech services, provision of financial education in schools and measures targeting excluded populations such as young adults and women. Several prior actions are directly linked to objectives set by the PRONAFIDE, the PNIF, which in turn articulates the goal of the Government to achieve social inclusion and broad-based economic growth, as well as the CPF. Prior Action 1: The Borrower’s Central Bank has increased banks’ liquidity by reducing the monetary regulation deposit, as evidenced by Circular 7/2020 published in the Official Gazette on April 1, 2020. 14. The reduction in DRM was one of the key measures implemented by the monetary authority to provide liquidity to banks to support credit in the face of the COVID-19 pandemic. Banxico requires commercial and development banks to keep part of its assets in DRM, an interest-yielding long-term deposit at the Central Bank. While DRM are similar to legal deposit requirements set by other central banks, DRM are not set as a share of the banks’ liabilities but fixed at a certain level by Banxico depending on the liquidity it would like to withdraw from the market. 13 The DPF supported the introduction in April 2020 of Circular 7/2020 to provide for bank lending 13 DRM is prorated among individual banks based on their liabilities. Page 11 of 43 The World Bank COVID-19 Financial Access DPF (P172863) operations through a reduction in the total amount of DRM. The measure supplied liquidity to banks at the critical juncture of COVID-19, when cash flow disruptions of borrowers and an increased preference for cash by depositors could tighten liquidity conditions for banks and hence impact their ability to provide credit. At the time of preparation of the operation, FX and fixed income markets showed signs of stress. Moreover, the new Circular established that banks would have to submit a report to the Central Bank describing how the resources freed up by the DRM decrease were employed and account for the evolution of the outstanding credit provided to the private sector between April and August 2020, which would in turn determine the new level of DRM requirement for that institution. Banks whose individual share of the total increase in credit to the private sector between April and August 2020 was below their share of DRM reduction received within their segment (development or commercial) would be required to increase their DRM proportionately. This ensured that, while the liquidity of banks was reinforced to stave off the effects of the pandemic, these institutions were also encouraged to continue to provide credit to firms and households. In terms of magnitude, the MXN 50 billion decrease in DRM was equivalent to one percent of the stock of commercial bank credit to the non-financial private sector at end March 2020. Prior Action 2: The Borrower’s Central Bank has further enabled banks’ access to liquidity facilities by reducing the cost of its ordinary additional liquidity facility, as evidenced by Circular 4/2020 published in the Official Gazette on April 1, 2020. 15. Lowering the cost of short-term funding available to banks through the Ordinary Additional Liquidity Facility (FLAO) was part of the measures implemented by Banxico to provide more financing alternatives to banks in order to preserve financial stability in Mexico. The FLAO was set up by Banxico during the Global Financial Crisis in 2008 as an additional liquidity window via secured credits or repos with a cost of 2 to 2.2 times the target policy rate. The measure supported by the DPF lowered the cost of the referred credits and repos to 1.1 times Banxico’s target policy rate. Additionally, the monetary authority added an Electronic Service Module to receive applications, which facilitated the operation of the facility during the COVID-19 crisis. As in the case of PA1, liquidity provision by Banxico was a critical element of the authorities COVID-19 response to ensure an adequate functioning of financial markets. Prior Action 3: The Borrower has enacted the Reform to the Credit Institutions Law, published in the Borrower’s Official Gazette on March 27, 2020, enabling minors between 15 and 17 years old, who are wage earners with an active payroll and/or receive social benefit programs to: (i) open bank saving accounts under their own name; and (ii) use and manage the underlying funds without requiring representation from an adult. 16. Enabling the youth to open a bank account in their name would facilitate their access to social program transfers and promote their incorporation into the formal workforce, opening the way for further financial inclusion of this vulnerable group. Until the introduction of the reforms supported by the DPF, people under 18 years of age were not allowed to have an account under their own name, but only through the representation of their parents or legal guardians and, even in those cases, they were not allowed to execute transactions on their own. This posed a burden to the economic and financial inclusion of the almost 7 million Mexicans aged 15 to 17, who were legally part of the work force of the country. There were 1.4 million individuals in this age group who had a formal job but were excluded from having an account at a financial institution to receive their salaries, which effectively limited their employment options. Furthermore, there were over 3.4 million people aged 15-17 that were eligible to receive transfers under government social programs. In the context of the COVID-19 health crisis, financial inclusion of vulnerable groups such as youth and women was critical, given that they may effectively become excluded from government support in times of lockdowns and social distancing. Page 12 of 43 The World Bank COVID-19 Financial Access DPF (P172863) The reform supported by the DPF removes this barrier by allowing the youth to legally own and manage a bank account under their own name. The new regulation sets some limitations for the accounts for the youth (15-17 years old), as these may only receive electronic transfers from government social programs and wage payments from employers, while cash deposits or transfers would not be allowed. It is also forbidden to obtain loans that would be collected via these accounts. 14 Financial inclusion of the youth and especially women was expected to contribute to the resilience and empowering of this vulnerable segment of society. Moreover, financial inclusion of the youth is expected to have a lasting effect, given the positive impact of good financial habits formed at an early age on living standards throughout the life of individuals. In that sense, one of the lines of action of the National Financial Education Strategy (ENEF) 15 aims at the creation and dissemination of financial products that generate positive savings habits in children and teenagers. This also points to the articulation of PA3 and PA7, as financial education was critical for the reforms supported by the DPF to achieve its medium term objectives. Prior Action 4: The Borrower has issued regulations aimed at strengthening transparency practices applicable to Instituciones de Technologia Financiera (ITFs), as evidenced by CONDUSEF’s general dispositions for Fintech institutions published in the Borrower’s official Gazette on July 9, 2019. 17. Increased transparency from ITFs was expected to strengthen the financial consumer protection framework and foster trust in the financial system that could lead to higher financial intermediation and inclusion. Fintech firms were in a position to provide services that were much needed in the initial stages of the pandemic, such as digital payments, deposits, crowdfunding lending and investments, and facilitate financial intermediation in the recovery phase. Fintechs can provide access to financial services to underserved vulnerable populations, which heightens consumer protection concerns. The Fintech Law already contains general financial consumer protection provisions, though it also mandates the National Commission for the Defense and Protection of Financial Services Users (CONDUSEF) to issue secondary regulation on transparency for ITFs. The DPF supported the regulation issued by CONDUSEF that introduced general guidelines and provisions to regulate contracts, transparency of information provided in statements, and proper disclosure of fees and charges, among others. The regulation had specific requirements for digital payment Fintechs (Instituciones de Fondos de Pagos Electronicos, IFPEs). It also regulated advertisement and sales practices of all ITFs and included specific requirement for lending ITFs to disclose the total annual cost of credit to consumers. These regulations fomented a better understanding of financial products and fostered market competition by facilitating product comparison by consumers. Prior Action 5: The Borrower’s Central Bank has issued regulations to support the implementation of the electronic payment platform (“CoDi”) and provide the legal framework for third-party non-SPEI participants to offer the service of payment request generator, as evidenced by Circulars: (i) No. 11/2019 published in the Official Gazette on October 1, 2019 and (ii) No.12/2019 published in the Official Gazette on October 3, 2019. 18. The refinement of the regulatory framework underlying CoDi was expected to increase the number of potential participants, promote the usage of the system, and support increased competition in the retail payments market. The measures built on the establishment of the digital payment platform CoDi by Banco de Mexico in 2019, which was supported by the financial inclusion DPF (P167674). In a context of limited acceptance 14 Banxico was instructed to establish the characteristics regarding the level of transactionality, limitations, requirements, terms and conditions of the new accounts. Subsequently, Banxico issued Circulars 23/2020 y 24/2020. Also, public institutions in charge of the execution of public transfer programs that benefit teenagers (starting at 15 years of age) were required to provide quarterly reports to CNBV. 15 Line of action 2.4, Estrategia Nacional de Educación Financiera (ENEF), Comité de Educación Financiera (CEF), 2017. Page 13 of 43 The World Bank COVID-19 Financial Access DPF (P172863) of electronic payments 16 and very low number of transactions completed through digital payments, 17 CoDi provided an alternative new payment method that could be operated from any smartphone and relied on readily available technologies (QR codes, Near Field Communication and instant messaging), which made it accessible to the majority of the population in an easy, safe, and cost-effective manner. CoDi uses the interbank electronic payment system (Sistema de Pagos Electrónicos Interbancarios; SPEI) to transfer funds from one bank account to another, leveraging on the reliability and low cost per transaction of this well-established infrastructure. The reforms supported by PA5 fostered competition for merchant payments or person-to-business (P2B) payments, which are key for the establishment of CoDi and for it to contribute to the objective of greater financial inclusion. The new regulations enabled any person or firm with an account at a SPEI participant 18 to generate a “request to pay” message that is sent to the mobile of the payer for their acceptance, which then authorizes the transfer of funds in SPEI (until then, the only way to make a transaction in CoDi was based on the generation and reading of a QR code). After the innovation, users had the alternative of using a QR code (through a smartphone) or text message (through any cell phone). This allowed CoDi to expand its scope of potential user, especially among lower income individuals who may not have a smartphone. Moreover, the new regulations allowed third parties (that is, non-SPEI participants) to take part in the issuance and processing of “request to pay” messages, increasing the range of participants and potentially leading to products improvements. The adjustments introduced by the reforms were expected to support the continued increase in usage of the CoDi platform, which in turn would drive an increase in cashless transactions by MSMEs and households as competition in the P2B payment market is strengthened. The increased use electronic payments as a substitute for cash has been proven to increase transparency, reduce corruption, and limit physical exposure, which could contribute to lower contagion rates in the context of the COVID-19 health crisis. Prior Action 6: The Borrower has enacted the Amendment to the Credit Institutions Law, published in the Borrower’s Official Gazette on April 6, 2019, mandating the prioritization of programs and projects targeting women’s financial needs and gender parity in state development banks’ corporate governance structure. 19. Prioritization of products and programs targeting women’s financial needs by public entities, as well as shifting towards gender parity in the boards of state development banks, was expected to contribute to financial inclusion of women, laying the grounds for a stronger post-COVID economic recovery. The need for higher female participation in the workforce and for increased access to finance of women was especially acute in Mexico. Their financial and economic inclusion was not only central to the economic growth prospects of the country, but it was expected to make women more resilient to unexpected economic shocks and thus less likely to fall into poverty. Access to financial services was anticipated to enhance the contribution of female-owned businesses to economic growth, as well as empowering women and reducing the vulnerability of their households. Evidence also linked access to financial inclusion of women to the presence of women in leadership roles. 19 The DPF supported the Reform to the Credit Institutions Law, including an article that mandated state development banks and Federal Government Trusts supporting financial activities to prioritize products and programs targeting women’s financial needs, in particular programs related to savings, credit and consumer protection. The reformed law also required independent directors in state development banks´ boards to be evenly comprised by men and women, which would be achieved progressively by filling vacancies on the board with independent directors who represent the gender minority. 16 In Mexico, only 35 percent of merchants accept electronic payments (ENAFIN 2019). 17 According to ENIF 2018, 95 percent of transactions under 500 pesos and 87 percent above that figure use cash. 18 Circular 12/2019 limits the application to SPEI participants with at least three thousand accounts. 19 World Bank, 2018.Women’s Financial Inclusion and the Law. Page 14 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Prior Action 7: The Borrower has enacted the Education Law, published in the Borrower’s Official Gazette on September 30, 2019 and issued the Training Program Operational Guidelines, published in the Borrower’s Official Gazette on December 29, 2019 determining that financial education be part of the official school curricula from preschool through high school, and that selected primary and secondary public-school educators be trained on the subject to promote financial inclusion. 20. The introduction of financial education to the official school curricula was expected to develop greater financial knowledge, providing the tools for the population to approach the financial sector as financially capable consumers. Developing financial literacy is crucial for a healthy growth in the demand for financial products, which in turn is essential for higher financial inclusion and increased economic opportunities. According to a study by the World Bank, Mexicans exhibited relatively lower financial well-being and capability. 20 The analysis also showed that public sector federal-level financial education initiatives presented inconsistencies in terms of population coverage, content and delivery channels. This was especially salient for the 24 million children and youth being educated at a public system that lacked a comprehensive financial education program. The DPF supported an article of the General Education Law that mandated the inclusion of financial education content in the official school curricula for students from preschool to high school. The governance structure was supported by the fact that financial education was one of the objectives of the PNIF 2020-2024, which also set specific actions to support financial education among school-aged children and youth, including training for educators on financial-economic content. Furthermore, financial education was incorporated to the operational guidelines for training programs targeting primary and secondary educators from public schools with a large number of students with low academic achievement results and in regions with high rates of poverty, violence or indigenous population. Prior Action 8: The Borrower has established the National Service of Personal Identification which will enable the verification of individuals’ identity to third parties including financial institutions, as evidenced by article 58 of the Reglamento Interior de la Secretaría de Gobernación, published in the Borrower’s Official Gazette on May 31, 2019. 21. The newly established National Service of Personal Identification (SNIP) was expected to be used by financial institutions for the verification of individuals’ identity, enabling efficiency gains and improving effectiveness of ID verification processes, potentially lowering end-customer costs and facilitating financial access to new clients. Mexico lacked a robust unified ID system that keeps track of the legal identity of all individuals in the country, having several government agencies issuing identification credentials with little coordination between them. This had given rise to ID overlapping, fraud, and an estimated 3.7 million deprived of a legal ID. 21 This institutional deficiency had hindered access to financial services, to social program transfers and to different opportunities in general for key vulnerable groups. Addressing the exclusion of this population segment became more urgent as the COVID-19 pandemic struck and immediate Government support was crucial for their livelihood. The reform supported by the DPF enabled the SEGOB to establish the SNIP, which would streamline access to verification services by all sorts of financial institutions (including ITFs and other non-bank institutions), as part of a broader policy and institutional reform agenda to create a unique system of personal ID in the country. SNIP was expected to reduce the cost associated with onboarding new clients and promote financial access of the unbanked. It was articulated with the Credit Institutions Law, which established that the requirements for customer due diligence by financial institutions should be taken from an official document. Furthermore, CNBV issued regulation requiring the use of the Unique Population Registration Number (CURP). 20 World Bank (2018) “Improving Financial Education Delivery in Mexico: A Financial Education Report and Roadmap.” 21 Identification for Development (ID4D) 2018 dataset Page 15 of 43 The World Bank COVID-19 Financial Access DPF (P172863) This terminated the practice of validating some data attributes included in the credential provided by the client against the voter database maintained by the Instituto Nacional Electoral (INE). The INE ID system only covered individuals who have actively enrolled to vote. Importantly, this validation practice had exhibited weaknesses in terms of mitigation of fraud and identity theft. Also, the use of the SNIP would facilitate ID validation by other financial institutions beyond banks, as the previous system relied on a bilateral memorandum of understanding signed between the private sector Bank Association and INE. Third parties would be allowed to use the SNIP to validate identities, given that the individual in question gave her consent. The use of CURP for verification services raised data protection and privacy concerns. In that regard, a privacy impact assessment was carried out with WB support to provide a roadmap including recommendations with options and best practices. That document presented a detailed and systematic description of the expected personal data processing including the lifecycle of personal data from collection to access and distribution to third parties. Prior Action 9: The Borrower has enabled mechanisms to exchange data between civil registries related to individual’s identity and its verification through adequate technological infrastructure and standardized operating rules in civil registries at the state level, including the binding of the legal identity with biometric data, as evidenced by the twenty-nine (29) Coordination Agreements signed with states of the Borrower. 22. The achievement of common rules among all civil registries in the country was expected to improve interoperability, efficiency, and the institutional capacity of the national identification registry, an instrument urgently needed in the face of the health, economic and social crisis. In the context of a federal state, civil registration is regulated by the Civil Codes of the 32 states. Each of the 2,460 municipalities is in charge of establishing civil registration records of its residents, which are then compiled and stored at the state level. Though RENAPO was the coordinator of the National Council of Civil Registry Officials (CONAFREC), there were no mechanisms in place to systematically compile data related to births, vital events, and deaths at the national level. States differed in terms of operational rules, processes and procedures, so merging the dissimilar data outputs into the National Population Registry was not seamless. The DPF supported the signature by SEGOB of Coordination Agreements with the authorities of 29 (out of 32) federal entities, with the objective of harmonizing operations to improve the efficiency and accuracy of the National Population Registry data collection procedure. As in the case of PA8, the reform was part of a broader agenda to create a unique system of personal ID in the country. The agreements would: lead to the adoption of the CURP in all registries; provide standard security measures; upgrade and modernize systems and registry services; promote cooperation agreements between municipal authorities for the usage of the CURP; set standard formats for enrolment and certification of vital status as approved by CONAFREC; enable the deployment of the technological infrastructure for the automated update of vital records and exchange of information between the registries and SEGOB; and promote outreach efforts to vulnerable people. Additionally, the new framework was expected to facilitate the inclusion of civil registries as biometric enrollment agencies, which was part of the improvements to CURP planned by SEGOB. B. Achievement of Objectives (Efficacy) Rating: Satisfactory The program achieved Satisfactory progress to meet the development objective. The Banxico reduction in DRMs contributed to prevent a contraction in nominal commercial bank credit in Mexico (by the end of 2021, commercial bank credit to the private sector had expanded 3.4 percent against pre-pandemic levels). Furthermore, the banking system did not experience liquidity stress so that the new facility remained unused. On the financial inclusion front, the reforms supported increased use of digital financial services. According to new Page 16 of 43 The World Bank COVID-19 Financial Access DPF (P172863) FINDEX data 12 percent of adults in Mexico used digital payments for the first time during COVID-19, raising the total figure to 28 percent of the adult population. Nevertheless, there is much scope for improving uptake of digital payments as only 41 percent of individuals prefer them to cash, well below levels in other Latin American countries. 22 The Annual Financial Inclusion Outlook prepared by CNBV showed a positive evolution of the main PNIF indicators in 2020, including the number of accounts in banks and other financial institutions (13,932 per 10,000 people; up 7.4 percent relative to 2018), the number of transactions and electronic transfers per capita per year (43.9; up 19.6 percent relative to 2018), the share of municipalities with at least one access point (77.6 percent; up 1.2pp vs 2018), usage of comparison services provided by financial authorities (75.7 per 10,000 people; up 61.1 percent vs 2018), and gender gap in the number of accounts in banks and other financial institutions (went from +1.3pp in 2018 to -2.7pp in 2020). 23 While it is difficult to claim attribution as other factors affected those outcomes, the supported reports certainly contributed to the achievement of those goals. The reform that enabled the youth to open a bank account in their name saw an upsurge in the number of account holders in a gender balanced manner. CONDUSEF is currently supervising the adherence to transparency guidelines and requirements by almost all IPFEs. CoDi continued to grow, in part supported by the reform that increased the number of potential participants. The number of women benefiting from state development banks’ financial access programs increased more than tenfold driven by the provision of microcredits. There is evidence that the financial sector is now relying on CURP for identification verification instead of the less robust voter database, while the progress in terms of Coordination Agreements signed between the central government and the federal entities is another important step towards the establishment of a unique system of personal ID that will enable further financial inclusion. Finally, financial education contents have not yet been incorporated to the official curriculum of schools, as the procedures required for its implementation are significantly lengthier than the timeframe of the DPF. The results indicators (RIs) were relevant and well aligned with the expected development outcomes albeit there were opportunities for improvement, particularly regarding the thresholds for the RIs. Relevance, Measurability of RIs, and Appropriateness of Targets 23. The results framework was relevant albeit some indicators offered opportunities for design improvement. Articulation between Prior Actions, Results Indicators (RIs), and the PDO was appropriately based on a sound theory of change. Figure 1 in Annex 4 presents the results chain of the operation. Nonetheless, there were three indicators which could have benefited from further refinement: the indicators on women participation in state development banks’ financial access programs (RI6) was defined as a simple average state development entities, as opposed to a weighted average, which masks achievements in the number of women served. 24 The use of a simple average was solely explained by data limitations at the time of the DPF preparation. Moreover, the baseline for RI6 included one institution (FOCIR), which did not support lending to individuals. 25 The second indicator which could have been better defined definition referred to the number of entities requesting verification services (RI8), which had a footnote in the Program Document clarifying that it referred to “all entities, including financial institutions”. For this indicator to suited to the development objective of the operation, a narrower definition focused on financial institutions would have been more appropriate. Third, the incorporation 22 Findex Note 2020/1 - Digital payments adoption during COVID-19: New data from the pandemic's first year. World Bank. October 2021. 23 Panorama Anual de Inclusión Financiera, CNBV, October 2021. 24 Result indicator 6 was defined as the simple average of percentage of women participating in state development banks’ financial access programs for the following state Development Banks with available Information at the moment of the DPF preparation: FND, FIRA, FOCIR, Banjercito. The institutions not included were: Banobras, Nafin, Bancomext, SHF, Banco del Bienestar. 25 FOCIR is oriented to provide capital to firms in the agricultural sector and gender classification is not as straightforward as in the case of personal loans. Page 17 of 43 The World Bank COVID-19 Financial Access DPF (P172863) of financial education in schools (RI7) was well aligned with the PDO, though its results chain required further intermediate efforts in order to achieve the ultimate outcome. As for other RIs, such as the change in DRM outstanding (RI1), adherence to transparency and disclosure rules by IFPEs (RI4), are directly attributable to the requirements established by the different regulators, while also providing solid data to assess their contribution to the PDO. However, as noted, RI7 was unachievable during the operation implementation period and another indicator should have been chosen. The continued growth in the number of payments made using the CoDi platform (RI5) is closely linked to the improvements introduced by Banxico to foster further usage of the system and support increased competition in the retail payments market. The number of minors aged 15-17 that own a bank account under their own name, as well as the female participation in this group (RI2, RI3), was made possible by the Reform to the Credit Institutions Law, which introduced this age group to the banking system and empowered them to make financial decisions on their own. The RIs on the number of identification verification enquiries to the SNIP, federal entities that have rolled out the new standardized ID Service to record vital events and share of population that they are covering (RI9, RI10) are associated to the strengthening of personal ID validation in Mexico, which contributes to addressing an important impediment for vulnerable groups to access to finance as well as other economic opportunities. 24. Measurability of the RIs. The indicators were clearly measurable. The definition, calculation, and data sources were clear for most RIs, though for one of the indicators (RI6) it was not the case. Few of the indicators were publicly available online, as in the case of the outstanding DRM (RI1) and the number of payments made using CoDi (RI5), both of which were available on the Banxico webpage. On the other hand, the majority of the indicators required the support of the Mexican authorities. The indicator on women participation in state development banks’ financial access programs (RI6) was based on data from the Development Banking Unit (UBD) at SHCP which was under construction at the moment of the DPF preparation. As of the writing of this ICR, UBD is able to track the gender distribution of financial access programs in six state development entities that provide loans to individuals directly or on-lending through other financial intermediaries. For indicators on new bank accounts for individuals aged 15-17 (RI2, RI3), the two possible sources of data considered at the time of DPF preparation were: an expansion of the National Financial Inclusion Survey (ENIF) to cover that age group in the 2021 round; or administrative data on government program recipients with accounts. At the time of preparation of this ICR, the information provided by Banxico relied on reports submitted by five banks to the CNBV. The indicator on IFPEs in compliance with transparency and disclosure rules (RI4) was expected to be collected by CONDUSEF. The indicator on schools incorporating Financial Education in their curriculum (RI7) was to be provided by SHCP. RENAPO was to provide the last three indicators, which were associated to the strengthening of personal ID validation in Mexico (RI8, RI9, RI10). Annex 1 presents the data source of each RI in their relevant footnote. 25. Appropriateness of targets. While four targets were set at reasonable levels, three targets were overly cautious and three were hampered by the definition of their respective RI. The following targets were overly cautious: - The target for the number of minors that own a bank account (RI2; 1,200,000 individuals). It was estimated that 3.4 million individuals aged 15-17 years old were eligible for the program, however the target considered only potential beneficiaries of a new scholarship program that would be disbursed to bank accounts. In the end, the coverage of the new scholarship program was much greater than expected, explaining the indicator evolution. - Number of payments processed through the CoDi platform (RI5; 450,000). As in the case of the Mexico Financial Inclusion DPF (P167674), which supported the legal establishment of CoDi, the target for the number of payments made using the platform was set at a conservative level. This was acknowledged in the Program Document and in CPF FY2020-25, which stated that the platform was expected to reach 25 million users and Page 18 of 43 The World Bank COVID-19 Financial Access DPF (P172863) 40 million transactions in the medium term. Nonetheless, the government made a case for conservative targets for end-2021 due to the long-standing challenges associated with the use of electronic payments as well as the performance of CoDi in its first year of operations, which suggested that the platform may need additional time to become widely adopted. - Number of ID verification enquiries to the SNIP (RI9; 300,000 per day). The target was set in the expectation that the National Population Registry (RENAPO, part of SEGOB), would be able to fully implement the National System of Registry and Identity (SID) in addition to the launching of the SNIP. 26 The expectation of a more complex system (in particular, due to the expected incorporation of biometric data) led to a lower target than it would have otherwise been set in case only SNIP was implemented (optimistic projections at the time of project preparation could reach up to one million enquiries per day). Also, three targets were impaired by the definition of the RI: - Percentage of women benefiting from state development banks’ financial access programs (RI6; 60 percent). The target was overly ambitious given how the indicator was defined: a simple average of four banks, one of them being the bank of the army whose customers are largely male. - Percentage of schools incorporating Financial Education in their official curriculum (RI7; 100 percent). The target was not realistically achievable by the time of operation closing given the procedures involved in the implementation of the prior action. However as previously noted, the problem in this case was not so much the threshold as the RI itself as even a threshold of 1 percent would have been too ambitious. - Number of entities requesting verification services (RI8, 50 entities). The target was set at a level that was consistent with the number of banks in Mexico, 27 but below the universe of different entities that could make use of the verification services provided by RENAPO. Had the target been set as number of financial institutions, it would have been appropriate. The targets for the reduction of DRM (RI1; 15 percent decrease), share of female minors that own a bank account (RI3; 50 percent), share of licensed IFPEs in compliance with transparency requirements (RI4; 100 percent) and number of states that have rolled out the ID Service (RI10; 25 states, 65% of population covered) were adequate. These considerations were accounted for in the assessment of the efficacy of the reforms. Efficacy of Prior Actions RI1: Reduction of the total amount of DRMs 26. The liquidity of banks was reinforced by the reduction in DRM in April 2020, while cheaper FLAO short-term financing signaled the commitment of the monetary authority to financial stability. The target of a 15 percent reduction of the stock of DRM was achieved in April 2020 when Circular 7/2020 came into effect, ordering a MXN 50 billion reduction in DRM outstanding to approximately MXN 270 billion. As of February 2022, the stock of DRM outstanding remains at almost MXN 270 billion. Measuring the efficacy of PA1 is complex because there is no counterfactual to know what would have happened in the absence of a reduction of DRM. When the measure was introduced, it freed up the equivalent of one percent of the total domestic commercial bank credit outstanding to the non-financial private sector. Despite the reduction in DRM, domestic commercial 26 The SID project included initiatives to increment the operational capacity of civil registries across the country through an update of their human and technological resources, with the incorporation of biometric data to the identification process, as well as the expansion of coverage to vulnerable populations. As of the date of this ICR, the use of biometric data had not yet been incorporated to the ID consultation to CURP, so the simpler nature of the enquiries has facilitated the accommodation of a much larger number of them. 27 See footnote 12. Page 19 of 43 The World Bank COVID-19 Financial Access DPF (P172863) bank credit outstanding fell in the first year since the onset of the pandemic crisis (down 7.5 percent in the first quarter of 2021). Nonetheless, Banxico reported that, despite the adverse conditions prevailing between April and August 2020, there were some institutions that increased their credit to the private sector based on the reduction in DRM and other liquidity-enhancement measures (a brief summary of these is presented in Annex 5). As for PA2, credit institutions did not use FLAO despite the reduction in the cost of financing through to this liquidity window. While not fully used, the array of measures implemented by Banxico in the face of COVID-19 represented a statement of its willingness to provide liquidity, strengthen credit channels and promoted an orderly behavior of financial markets. Importantly, no commercial bank in Mexico underwent a liquidity crunch as a result of the pandemic crisis. Given this, RI1 is fully achieved. RI2 & RI3: Number of minors that own a bank account; Share of female minors that own a bank account 27. The Reform to the Credit Institutions Law, coupled with the launch of a large public transfer program to high school students aged 15-17 and the introduction of new products by commercial banks resulted in over 4.3 million minors becoming legal owners of a bank account, with almost half of them being female. The target was to achieve 1,200,000 minors aged between 15 and 17 owning a bank account under their own name, out of which 50 percent would be women. The launch of the “Benito Juárez Universal Scholarship for Higher Secondary Education”, a Federal Government transfer program aimed at students in public high schools, was pivotal towards reaching a high number of individuals. The program was full implemented through the "Youth Welfare Card”, a level two account that was initially issued by a single financial institution and is currently available at five entities. 28 Level 2 accounts have relatively low requisites to be opened (the person only needs to provide limited information about herself, and it is not necessary to go to the branch to open the account) and allow monthly deposits up to 3,000 UDIS (approximately MXN 21,500). While this type of account has limitations relative to level 3 and level 4 accounts, it represents an entry point that will allow its users to familiarize with the formal banking systems, empowering them and facilitating their access to other types of financial services. In December 2021 there were 4,439,206 individuals aged 15-17 who were the legal owners of a bank account, with 2,308,387 (52 percent) being female, surpassing the original estimated number of program eligible individuals by one million. It should be noted that while the reform had a very significant impact, there is still space for more minors to open a bank account in the future, especially among those who already have a job. The combination of the legislation reform, new regulation, a large public program and commercial banks’ participation determined the achievement of the objectives of PA2. Given this, RI2 is fully achieved. Moreover, RI3 was also fully achieved. RI4: Percentage of licensed IFPEs in compliance with transparency and disclosure rules on contracts 28. All the IFPEs approved to operate have filed in CONDUSEF’s Registration System for Financial Services Providers (SIPRES), and the majority is fully compliant with the new transparency guidelines and requirements. The decision to approve the operations of ITFs (both IFPEs and Crowdfunding Institutions) relies on an interinstitutional committee composed of SCHP, Banxico and CNBV. Once the approval of an IFPE is published in the official gazette, the entity is required to register their corporate information with CONDUSEF. Some of this documentation must be presented in physical form, which has delayed the verification process in COVID-19 times. Once the IFPEs are active in SIPRES, CONDUSEF would periodically monitor that they comply with the regulation including reviews of the advertisements and sales practices in the IFPEs websites. As of December 2021, there were nine IFPEs that were approved to operate under the Fintech Law, 29 with eight of them having 28 The “Tarjeta Bienestar Joven” was initially offered only at one commercial bank. As of December 2022, other four banks have started offering similar products, though virtually all accounts of this type have been opened at the first entity. 29 The number of authorized IFPEs does not include those firm receiving conditional approval under the Eighth Transitory Provision of the Page 20 of 43 The World Bank COVID-19 Financial Access DPF (P172863) fulfilled all their obligations with CONDUSEF. The remaining IFPE, which got its approval in March 2021, presented the supervisor with inaccurate information which had not been rectified by the time of writing this ICR. The target for RI4 was set at 100 percent of licensed IFPEs being in compliance with transparency and disclosure rules on contracts. Given that RI4 reached 89 percent, it is mostly achieved. RI5: Number of payments processed through the CoDi platform 29. The implementation of CoDi continued to drive an increase in cashless transactions, which was bolstered by growing participation of different entities and public efforts to boost public awareness of the new system. The target was to achieve 450,000 transactions by December 2021. The number of users with access to the platform has been on an upward trend, with validated accounts increasing from 2.4 million to 12.3 million between March 2020 and December 2021. While the initial rollout of the platform was partially hampered by the strict lockdowns implemented in the early months of the COVID-19 pandemic, several initiatives have contributed to the growing establishment of CoDi. In 2020, Mexican authorities strengthened the communication campaign on CoDi, using different channels that included digital media, billboards in public areas at the national level, as well as commercials on radio and television. General acceptance was boosted by large commercial chains, utility companies and public entities adopting CoDi. For example, the Integrated Mobility Card (used for Metro and Metrobus in Mexico City) can be recharged and mortgage payments to INFONAVIT can be made through CoDi. Moreover, one of the credit institutions with the largest participation in CoDi contributed with a public dissemination campaign that consisted of supporting businesses throughout the procedure to be able to accept payments with CoDi. Between December 2020 and May 2021 smaller firms received advise at their local bank branch on how to make and receive low-amount payments via CoDi, which had a visible impact in the number of transactions over that period and contributed to cementing the usage of CoDi among smaller firms. Additionally, 18 third-party developers have been certified as of February 2022 to provide applications so that SMEs can accept payments with CoDi. In terms of security, the platform was robust as it relied on the infrastructure of SPEI, though it also depended on the commercial banks’ apps to validate the user identity by means of passwords or biometric data. An additional validation means was added in March 2021, when banks were required to track and keep real- time geolocation records of the mobile devises used for bank transactions. 30. The target number of transactions processed through CoDi was surpassed, totaling more than 3.6 million by December 2021. 30 Though the target was conservative (see paragraph 25), performance was highly satisfactory. Different indicators provide further evidence of the achievement of the expected outcome. The average number of daily transactions more than tripled from 2,265 in March 2020 to 7,093 in December 2021. The number of accounts with at least one payment made also increased steadily since the launch of the system, reaching 769,734 in December 2021. On the other hand, the number of accounts with at least one payment received totaled 616,361. Considering that the supplemental information confirms the positive performance by RI5, it is fully achieved. RI6: Percentage of women benefiting from state development banks’ financial access programs 31. There was an increase both in the absolute number and in the share of women benefiting from state development banks’ financial access programs. Out of the total number of individuals accessing to credit through such programs, the share of women increased from 69.5 percent to 74.1 percent in the six state development Fintech Law. 30 While the performance of CoDi has been successful, it is nonetheless used in a small fraction on the transactions carried out each year in Mexico. For example, 741 million payments were made with debit cards at retail stores in Mexico in 2021. Page 21 of 43 The World Bank COVID-19 Financial Access DPF (P172863) entities for which UBD has information (see Table 3 in Annex 6). This was achieved despite only two of the six institutions presenting a rise in female participation. The target was to achieve a female share of 60 percent, compared to a baseline of 46 percent. As explained in paragraphs 23, 24 and 25, both the indicator definition and the baseline calculation limited the ability of the RI to assess the efficacy of the PA. The collection of gender disaggregated data by UBD is one of the positive outcomes of the prioritization of programs targeting women, which contributed to the assessment presented here. If the indicator was calculated for December 2021 in the original terms (that is, a simple average of the FIRA, FND and Banjercito) it would yield a value of 57 percent. On the other hand, a simple average of the aforementioned six institutions would post a marginal increase from 46.9 to 47.4 percent and a weighted average would post an increase from 69.5 to 74.1 percent, as mentioned above. Importantly, the number of women that have benefited from financial access programs has increased considerably. Starting from a total of slightly more than 1,760,000 in March 2020, the number of female beneficiaries increased 33 percent to over 2,340,000 in December 2021. The main driver for the change were the Trusts Instituted in Relation to Agriculture (FIRA). FIRA catered to over 2,000,000 women in December 2021, up from 1,300,000 in March 2020. This performance was mostly explained by the expansion of FIRA’s productive microcredit program, which reached almost 1,850,000 women receiving loans. 31 Considering the improvement in the collection of gender disaggregated data, the absolute increase in women benefited by financial access programs, the overall change in the gender balance between women and men, and despite the weaknesses of the RI, the development objective has been accomplished. Hence, RI6 is fully achieved. RI7: Percentage of schools incorporating Financial Education in their official curricula 32. The integration of financial and economic education contents in the basic education (preschool, primary, secondary) curricula has not yet been implemented, though there is a group of agencies working in a coordinated manner towards that goal. This reform was one of the key elements of the New Mexican School educational model laid out in the 2019 Education Law. Unfortunately, the pressing needs of the pandemic slowed down the efforts by the Ministry of Public Education (SEP) to develop new curricula as the priority was set on shifting the education system to remote operation and later coordinating the return of students to the classrooms. In this context, five entities worked collaboratively towards the operationalization of the reform supported by the DPF: UBVA (SHCP), the Undersecretary of Basic Education (SEB) of the SEP, CONDUSEF, the Interactive Museum of Economics (MIDE) and the Monitoring, Development and Research Group of the Financial Education Committee (GSDI-CEF, in charge of monitoring the implementation of ENEF). Based on a request by SEP, in December 2021 the UBVA presented the petition to the CEF to incorporate financial education elements in the new curricula. As a result, a series of meetings were held with members of the GSDI and a working group including SHCP, CONDUSEF, SEB and MIDE was set up. As a result, MIDE incorporated 39 competencies at the primary level and 65 at the secondary level, including their didactic orientations. In the first quarter of 2022, SEP conducted a series of consultations to experts, pedagogues, and other stakeholders, who provided adjustments suggestions. According to the UBVA, the new curricula are expected to be published in the official gazette in July 2022. Moreover, there are several critical additional steps pending for the operational incorporation into the curriculum of schools. These include the development of a strategy for teacher training, preparation of documents for trainers, review and development of materials that can be incorporated into textbooks, inclusion of measurements of financial competencies in national evaluations in order to be able to compare the status and progress within the country. As a result, this reform is not expected to become operational before August 2023. RI7 has not been achieved. 31 The rest of FIRA’s programs were so-called traditional credit support (mainly the National Guarantee Fund for the Agricultural, Forestry, Fishing and Rural Sectors -FONAGA-), which backed credit to over 173,000 women in December 2021. Page 22 of 43 The World Bank COVID-19 Financial Access DPF (P172863) RI8 & RI9: Entities requesting verification services; Enquiries to the SNIP 33. CURP is establishing itself as a common ID for individuals in various transactions with the financial sector, as well as public sector agencies and others. The progress achieved by the SNIP is a material contribution towards the broader agenda to establish a unique system of personal ID in Mexico. The targets were to achieve 50 entities requesting verification services and 300,000 identification verification enquiries per day to the SNIP by December 2021. The use of the CURP database through SNIP instead of the voter database to validate the identity of clients has increased the level of assurance of banks, while it has allowed non-bank financial institutions and other third parties to access to the system, promoting its interoperability. 32 The use of a single database by a relevant number of public and private mitigates some of the issues arising from a highly fragmented ID system. Not only is CURP more reliable and less prone to fraud and identity theft than the INE database previously used by banks, but RENAPO has taken significant step to improve its quality by cross checking information on births, vital events and deaths with data from civil registries across the country. The establishment of CURP for ID verification in the financial sector lowers barriers to entry both for new clients as well as for non-bank institutions such as IFPEs, which is conducive to greater financial access for the unbanked and increased competition for the benefit of the consumer. According to data provided by RENAPO, 204 entities have signed an agreement to access to verification services as of December 2021. Out of these 204, there are 68 financial entities, including banks and other non-bank lenders. The rest of the entities include the public administration (81), educational establishments (31), other private sector entities (18), the judiciary (5) and an autonomous entity, which also speaks of the breadth of CURP use. As highlighted in paragraph 25, a narrower definition of the indicator would have been better aligned with the target of 50 entities. Even if the indicator was adjusted to only consider financial institutions, the number of such participating entities may be considered a success, as it exceeded the sum of commercial and development banks operating in the country.33 Thus, RI8 is fully achieved. Moreover, enquiries to the SNIP totaled 6,300,000 per day, exceeding both the target and projections made at the time of operation preparation without the assumption of biometric data use, and so RI9 is fully achieved. 34 RI10: Number of states that have rolled out the ID Service to record vital events in a standardized manner and percentage of population that they are covering 34. The signature of Coordination Agreements between SEGOB and the authorities of federal entities has enabled the roll out of an ID Service to record vital events in a standardized manner, improving the efficiency and accuracy of the National Population Registry. The targets were to have 25 states (from a baseline of 6) having rolled out the standardized ID Service by December 2021, with 65 percent of the population (from a baseline of 18 percent) to be covered by it. The rollout of the new ID service required RENAPO to work with the authorities of each of the federal entities to address the material differences in operational rules, processes and procedures related to the collection and compilation of information on births, vital events, and deaths. Moreover, systems and registry services were modernized, which enabled some financial institutions to use facial recognition for further ID verification and in the future is expected to provide a platform for full use of biometric data. The agreements also provided an instrument to ensure that the procedures agreed in the context of CONAFREC were applied consistently across federal entities. By December 2021, 24 federal entities had rolled out the standardized 32 The interoperability of the facts and legal acts of the civil status of individuals is implemented through SID, which is currently been used to assign a CURP, providing further assurance to the robustness of the ID verification process. As mentioned in footnote Error! Bookmark not defined., SID is yet to incorporate biometric data. 33 See footnote 12. 34 The performance exceeded optimistic projections even when the use of biometric data was not assumed (1 million enquiries per day). See more in paragraph 31. Page 23 of 43 The World Bank COVID-19 Financial Access DPF (P172863) ID Service to record vital events, covering 72 percent of the population. 35 According to the roadmap set by RENAPO, all 32 federal entities will have rolled out the service by December 2022. 36 Thus, RI10 is mostly achieved. 37 Table 2. Results Indicators: Achievement of Targets Results Indicator Performance relative to targets RI1 Reduction of the total amount of DRMs Fully Achieved RI2 Number of minors ages 15 to 17 that own a bank account under Fully Achieved their own name RI3 Share of female minors in the total number of minors ages 15 to 17 Fully Achieved that own a bank account under their own name RI4 Percentage of licensed IFPEs in compliance with transparency and Mostly Achieved disclosure rules on contracts RI5 Number of payments processed through the CoDi platform Fully Achieved RI6 Percentage of women benefiting from state development banks’ Fully Achieved financial access programs RI7 Percentage of schools incorporating Financial Education in their Not Achieved official curriculum. RI8 Number of entities requesting verification services Fully Achieved RI9 Number of identification verification enquiries to the SNIP Fully Achieved RI10 Number of states that have rolled out the ID Service to record vital Mostly Achieved events in a standardized manner and percentage of population that they are covering C. Overall Outcome Rating and Justification Rating: Satisfactory 36. With the relevance of prior actions rated Satisfactory, and the efficacy at a Satisfactory level, the overall outcome is rated Satisfactory. The objectives of the operation were relevant and all but one were achieved. The implementation of policy actions under the first pillar of the DPF mitigated the impact of COVID-19 on domestic credit conditions. As for pillar 2, the large number of minors and especially females that opened an account in their own name, the introduction of transparency requirements for ITFs, the contribution to the continued growth of CoDi, the sizeable increase in the number of women receiving credit support by development banks, and the improvements in the robustness of ID verification services, justify the Satisfactory rating. As noted in Table 2, of ten indicators, seven were fully achieved, and two mostly met their target. The introduction of financial education to basic school curricula has not yet been implemented as of the writing of this ICR, due to the delays associated to the COVID-response efforts and also to the time required for the different procedures. While some of the reforms supported by the operation will require more time for a complete assessment of their impact, 35 The 24 federal entities are: Baja California, Baja California Sur, Campeche, Chiapas, Chihuahua, Coahuila, Durango, Guanajuato, Guerrero, Hidalgo, Jalisco, México (DF), Morelos, Michoacán, Nayarit, Nuevo León, Oaxaca, Quintana Roo, Sonora, Tabasco, Tlaxcala, Veracruz, Yucatán, y Zacatecas. 36 The remaining 8 federal entities that are projected to roll out the ID Service to record vital events in 2022 are: Puebla, Ciudad de México, Querétaro, Sinaloa, San Luis Potosí, Tamaulipas, Aguascalientes y Colima. 37 The performance exceeded optimistic projections even when the use of biometric data was not assumed (1 million enquiries per day). See more in paragraph 31. Page 24 of 43 The World Bank COVID-19 Financial Access DPF (P172863) there have been material improvements in the financial access of vulnerable groups including the youth and women. III. OTHER OUTCOMES AND IMPACTS A. Poverty, Gender and Social Impacts 37. The policy measures supported by the operation are likely to have a positive impact on poverty in the short and medium term, and to improve youth’s and women’s access to financial services. The COVID crisis prompted the need to take immediate policy measures to avoid a liquidity crunch, which could disrupt the payment systems, leading to job losses and disproportionately affecting the poor and vulnerable, who have limited resources to cope with negative shocks. The extension of the electronic payment platform CoDi to third-party participants can potentially foster financial inclusion in the medium term by fostering the development of new applications for electronic payments that encourage the reduction of cash transactions and opening of new bank accounts. Increased transparency requirements for ITFs will promote trust in the financial sector, empower consumers, improve financial intermediation and overall access to finance. The incorporation of financial education into the official curricula from preschool to high school is likely to have sizeable and robust impacts on financial knowledge for the youth, as international evidence shows. Such reform is expected to raise financial capabilities in a cost-effective way, possibly motivating young individuals of vulnerable groups to engage in paid work and accumulate wealth. In parallel, the reform that enables minors to own a bank account in their own name is also foreseen to contribute to the formation of good financial habits and provide incentives for those who already employ young people to pay formally through the banking system. The reform that prioritizes government targeting women’s financial needs contributes to the closure of gender gaps in financial inclusion, with positive effects in terms of smoothing consumption, providing security, and expanding investment rates of females. Gender equity is also backed by a gender balanced administration of development banks, especially in the context of Mexico, where less than 25 percent of the decision-makers at financial regulators were women. 38 Lastly, the improvements on access to a national identification can contribute to addressing one key constraint in the effective implementation of social programs and, by facilitating access to account ownership by females, it can also reduce gender gaps in financial inclusion. B. Environmental, Forests, and Natural Resource Aspects 38. Prior actions supported by this operation were not expected to have any significant negative effects on the environment, forests and other natural resources, although indirect effects are expected to be positive. The prior actions were expected to contribute to economic inclusion, unlocking economic potential of particularly women and youth and in rural areas, bringing about economic growth. Measures to promote the use of digital financial services will bring indirect positive environmental effects associated with reduced need of travel due to increasing opportunities for the use of electronic payments. The prior actions geared to increased economic inclusion in rural areas can have indirect positive effects on increasing climate resilience among rural population. C. Institutional Change/Strengthening 38 Global Microscope, 2019. Page 25 of 43 The World Bank COVID-19 Financial Access DPF (P172863) 39. The implementation of the SNIP was possible thanks to the collaboration of RENAPO with the authorities of the 32 federal entities, as well as the provision of technical assistance to the 2,460 civil registries. The joint effort was a critical contribution to harmonizing the way the Mexican state collects information on births, vital events and deaths. Moreover, other branches of the GoM benefited from a more robust ID verification system. As noted above, the 204 entities requesting verification services from SNIP went beyond financial entities. Among the 81 entities that belonged to the public administration, 27 corresponded to the central government and 54 to the state level, many of which are part of the System for the Integral Development of the Family (DIF, entities charged with the protection of the rights of children and adolescents). As for the 31 educational establishments, 7 corresponded to the central government level and 24 to the state level. D. Other Unintended Outcomes and Impacts 40. The reforms that enabled the SEGOB to establish the SNIP and enabled mechanisms to exchange data between civil registries related to individual’s identity are part of a broader policy and institutional reform agenda to create a unique system of personal ID in the country. As noted in the Program Document, the right to a unique identity is a human right that allows individuals to exercise a number of fundamental civil rights, while it also provides access to critical economic transactions and opportunities to improve their wellbeing, such as financial services, social programs, education, and employment. IV. BANK PERFORMANCE Rating: Moderately Satisfactory 41. The Bank’s performance in supporting preparation and implementation of the operation is rated Moderately Satisfactory, as the DPF preparation was grounded on strong foundations albeit the design of the results frameworks offered opportunities for improvement. Furthermore, there was intense engagement with authorities to monitor reform impact. Nonetheless, the design of the results frameworks offered opportunities for improvement. The operation met the expected outcomes of World Bank performance in terms of design, despite the urgency to prepare the operation in a short period of time in the challenging context of the first global outbreak of COVID-19 in early 2020. The rapid preparation of the DPF required a very high of coordination among staff (including the task team, PM, CMU, RD, GD, legal, WFAFO), as everyone was adapting to the challenges of remote work. The quality at entry rested on the solid foundations of well-established Bank engagements in the reform areas covered by the DPF. The project design included considerations for the urgent needs of a client facing the unprecedented COVID-19 crisis, as well as the attention to the importance in the medium term of improving financial access for vulnerable groups. The preparation of the DPF identified the main risks to the operation and the tools available to mitigate them, though institutional capacity for implementation risk may have required further mitigation measures. The RIs were relevant to the prior actions but two of the indicators were not properly designed (RI6, RI7) and in four cases the thresholds set were quite easy to reach. As for the implementation, while an Implementation Status Report (ISR) was not required, the WB team was in close contact with authorities during implementation period, requesting information on the results indicators as of June 2021 for an interim assessment of effectiveness prior to the ICR.39 The team had several meetings with authorities and multiple email requests to 39 TheMexico COVID Financial Access DPF closing date was established 12 months after World Bank Board approval in May 2020, and thus there was no requirement for ISRs for the operation. Page 26 of 43 The World Bank COVID-19 Financial Access DPF (P172863) track indicators from different institutions in Mexico in the absence of active monitoring from the government unit responsible for the loan monitoring: the unit of Banking, Securities and Savings (UBVA) at the SHCP. The early engagement and discussion on loan performance initiated by the WB team soon after June 2021 was key to ensure the review of this DPF could be completed by May 2022. 42. The DPF preparation relied on a wealth of analytical work and prior experience. The operation followed a financial inclusion DPF (P167674) approved in June 2019, and it was supported by the technical work developed under the thematic Programmatic Approach for Mexico (P163627) and the FIGI program, as well as other analytical work as described in Annex 7. The operation design considered lessons learned from the previous DPF and was aligned with a World Bank investment project, the Expanding Rural Finance Project (P153338), which provided a line of credit for second-tier lending. That IPF that was very successful at enhancing small and micro enterprises’ access to finance in rural areas, particularly in the poorer south of the country, and with special focus on women. It also complemented the Mexico National Digital Identity System IPF (P172647), which was under preparation when the operation was implemented. 40 43. The operation was aligned with the WBG MFD approach. The reforms supported by the DPF were aimed towards factors that would enable the private sector to increase access to finance for individuals, while also facilitating sustainable private sector financing for productive activities. In line with the previous DPF, the program promoted the use of new technologies (Fintech) to address access to finance and improve financial inclusion through greater transparency. Moreover, the reforms introduced to the electronic payment platform developed by the public sector will enable the incorporation of private third-party participants, increasing the possibilities for greater financial sector inclusion. 44. The World Bank collaborated closely with the IMF and the International Finance Corporation (IFC). Collaboration and communication with the IMF focused on macroeconomic and structural developments. Within the World Bank, the preparation of the operation benefited from coordination and inputs received from IFC colleagues on areas related to access to finance and Fintechs. 45. The government's original commitment to the program was strong, though the monitoring and evaluation (M&E) arrangements were not satisfactorily implemented during the implementation period. As described in paragraph 6, the objectives of the DPL were well aligned with the PNIF that was published in March 2020 as the operation was under preparation. Some prior actions were devised in close cooperation with senior leadership of the implementing agencies (Banxico, CONDUSEF, RENAPO) to ensure ownership. As a result, these agencies have shown strong commitment to reforms supported by the DPL. The scale and scope of the program were aligned with the government's regulatory architecture and implementation capacity. The monitoring of the DPF could have benefited from stronger implementation by the borrower. The Loan Agreement delegated DPF M&E arrangements to the UBVA of SHCP, which would be tasked with the coordination with CNBV, RENAPO and other entities. Staff rotation in the unit and lack of effective procedures to transfer knowledge regarding the monitoring framework for the loan between new staff and the staff leaving the unit resulted in the lack of a system to centrally collect indicators from different institutions and monitor their evolution. Thus, the UBVA was not aware of its M&E responsibilities regarding the loan and had not set a system to collect the indicators. After the WB contacted the authorities in the summer of 2021, only some outcome indicators were provided with several months of delay. By February 2022, the information received by the Bank was still fragmented and not enough on its own to carry out a comprehensive assessment of the operation. During the ICR mission a series of exchanges 40The Mexico National Digital Identity System to Facilitate Inclusion (P172647) was approved by the World Bank Board on January 21, 2021, but it had not been signed as of March 21, 2022. Page 27 of 43 The World Bank COVID-19 Financial Access DPF (P172863) between the Bank team, Banxico, SHCP, RENAPO and CNBV took place to confirm the validity of the reported outcome indicators. 46. The World Bank assessed the overall risk for the DPF as Substantial and advanced mitigation measures, though additional consideration for the Institutional Capacity for Implementation risks may have been warranted. The rating was driven by macroeconomic risk, which was adequately graded as substantial due to COVID-19 that was bringing multiple shocks to emerging economies. At the time of the preparation of the operation, there was a high degree of uncertainty regarding the ultimate implications of the pandemic, including how long it would last and how the different transmission channels of the crisis would evolve, such as trade, financial flows, and commodity prices. The DPF first two PAs involved measures to support liquidity in the financial system, mitigating the spillover risks through that channel. Though the economy has been recovering and economic activity is expected to reach the pre-pandemic levels in 2023, it will remain 6.9 percent below the pre- pandemic trend. 41 Institutional Capacity for Implementation and Sustainability was rated as Moderate. To mitigate this risk, which had been highlighted in the previous operation, a different unit within SHCP was selected for M&E arrangements. 42 The M&E deficiencies highlighted previously show that further mitigation measures may have been explored in order to ensure timely coordination of the unit appointed with M&E responsibilities with the rest of the government agencies involved. V. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES 47. The program outcomes are likely to be sustained, though risks remain for some of the areas that need further reform. The Mexican authorities remain committed to improving access to finance, especially for vulnerable segments of the population including the youth and women. Furthermore, the world that is emerging of the COVID-19 pandemic is increasingly reliant on digital technologies, as these are quickly gaining usage for payments, investing, advisory services and government transfer programs. While the government's implementation capacity appears to be adequate to proceed with this agenda, there is space for its M&E framework to improve. Moreover, reforms such as the inclusion of financial education in the basic school curricula depend on the coordinated work of a wide array of different stakeholders in order for them to be implemented by August 2023 and to be postponed for another year. Also, the reforms to enable the use of CURP for ID verification enquiries are part of a broader policy and institutional reform agenda to create a unique system of personal ID that faces its own set of challenges, including the need for additional funding for RENAPO. In addition, some of the results achieved through this DPL are closely linked to COVID-19 crisis response and may not continue once the economy normalizes. For example, the current number of youth accounts may not be sustainable once COVID-related benefit transfers are modified. In the same manner, the financial institutions using CURP for verification services may change their usage once the COVID-19 induced remote customer onboarding needs change. VI. LESSONS AND NEXT PHASE A. Lessons Learned 41 Global Economic Prospects, World Bank Group, January 2022. 42 The Financial Inclusion DPF (P167674) delegated M&E arrangements to UBD of SHCP. Page 28 of 43 The World Bank COVID-19 Financial Access DPF (P172863) 48. The institutional arrangements for the monitoring system to be implemented by the Borrower need to be institutionalized and be robust to foreseeable issues such as personnel rotation. In the cases of policy operations that include a wide array of policy actions, it becomes imperative for the implementation unit (in the case of this DPF, the UBVA) to have a predetermined mechanism to coordinate monitoring activities with other government agencies. This lesson is in line with the experience of the Financial Inclusion DPF (P167674), where the ICR also underscored the permanent need for training officials for M&E given common staff rotation.43 The lessons from the previous DPF on M&E prompted the WB team for this DPF to engage actively with the authorities during project implementation but the repeated challenges in M&E frameworks need to have an institutional response from the Borrower. 49. It is essential to engage with all stakeholders involved in the implementation of the PAs to ensure feasibility . The team should validate the timeline and steps involved in the implementation of potential PAs with stakeholders involved in the implementation and widen the dialogue beyond SHCP when preparing DPFs. The selection of PA7 relied on the feedback provided by the UBVA, which was coordinating the efforts to introduce Financial Education in the official curriculum of schools. Nonetheless, broader consultations with the other four entities working on the operationalization of the reform would have provided more early evidence that the development objective and the result indicator proposed by the Borrower was too ambitious and most likely unattainable. Furthermore, consultations with the World Bank education teams working in Mexico may have also provided greater insight of the complexity of the reform, suggesting a more moderate objective for the PA. 50. Previous engagements and solid analytical underpinnings can lay the foundations for a strong performance of a fast-disbursing crisis-response DPF. The ability to prepare an operation of this size and complexity from concept to approval in only 3.7 month (and then become effective in 0.3 months) underscores the importance of The World Bank holding a longstanding policy dialogue with the Borrower, including TA that increased the understanding of the necessary reforms and cemented ownership. At the same time, it shows the suitability of the DPF as an instrument for crisis-response. Additionally, these analytical foundations were strengthened by previous operations’ contribution to the Borrower objective of enhancing financial access of vulnerable segments of the population. These elements, together with a remarkably high degree of internal coordination among all World Bank staff involved in the preparation, have been critical for the rapid preparation of a complex operation that has been able to support the Borrower in crisis times and achieved most of its development objectives. 51. Teams should be cautious of the assumptions underlying the establishment of targets for the outcome indicators. In cases where the objectives set in the policy and results matrix incorporate the effect of additional factors outside the scope of the DPF, these should be clearly stated. In this DPF, it was assumed that the identity verification services by RENAPO under PA8 would incorporate the use of biometric data, which was supported by a World Bank project. 44 The implementation of PA8, though successful in establishing CURP as a more robust way to verify the identification of people, did not have this more sophisticated feature and as a result the target was overly unambitious. Teams could mitigate this contingency by providing an alternative target that would give guidance on the efficacy of the reform. Also, it was impossible for schools to have implemented a financial education curriculum given the need for involvement for different institutions at the State level. This calls also for further efforts to ensure policy implementation processes are fully mapped out during loan preparation. 43See ICR00005394. 44This was supported by the Mexico National Digital Identity System to Facilitate Inclusion IPF (P172647). The project was approved by the Board on January 21, 2021, but it has not become effective as of the writing of this ICR. Page 29 of 43 The World Bank COVID-19 Financial Access DPF (P172863) B. Next Phase 52. The reforms supported by the DPF were continued in other interventions to enhance financial inclusion, especially for vulnerable segments of the population. Building on the changes introduced by the DPF and its predecessor, the Financial Inclusion DPF (P167674), the World Bank has supported an operation approved in 2021, the Mexico Strengthening Economic Sustainability DPF (P174150), and one that was under preparation as of the writing of this ICR, the Mexico Inclusive and Sustainable Growth DPL (P178224). Following the reforms to develop digital finance in Mexico, the 2021 DPF backed further enhancements of the regulatory framework for CNBV, using the attributions delegated to it in the Fintech Law, to authorize Application Programming Interfaces to enable the sharing of open data with the objective of generating greater competition in the financial sector. It also supported the implementation of a number of facilities to establish liquidity conditions for banks to support MSMEs. The 2022 operation supports a reform that allowed Mexican migrants in the United States to remotely open transaction accounts with Mexican development and commercial banks, facilitating their financial inclusion. Other reforms supported by the operation under preparation include secondary regulations for electronic payment institutions under the Fintech Law to further enhance consumer protections and cybersecurity of digital payment services, and an update of retail agent banking regulations, with the purpose of easing contracting processes, strengthening security standards, and establishing clear rules for contracts with agent network managers. Page 30 of 43 The World Bank COVID-19 Financial Access DPF (P172863) ANNEX 1. RESULTS FRAMEWORK . RESULTS INDICATORS Pillar: Supporting liquidity in the financial sector Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Reduction of the total amount Number 320.00 270.00 270.00 of Monetary Regulation Deposits (MXN billion) 31-Mar-2020 31-Aug-2020 31-Aug-2020 Comments (achievements against targets): Data source: Banxico. Available at: https://www.banxico.org.mx/SieInternet/consultarDirectorioInternetAction.do?accion=consultarCuadro&idCuadro=CF105&locale=es This target was reached by design. Pillar: Establishing instruments for improved financial access Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of minors ages 15 to Number 0.00 1,200,000.00 4,439,206.00 17 that own a bank account under their own name 31-Mar-2020 31-Dec-2021 30-Nov-2021 Comments (achievements against targets): Data source: UBVA - SHCP. Page 31 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Prior to reform minors were not allowed to have accounts under their own name. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Share of female minors in the Percentage 0.00 50.00 52.00 total number of minors ages 15 to 17 that own a bank account 31-Mar-2020 31-Dec-2021 30-Nov-2021 under their own name Comments (achievements against targets): Data source: UBVA - SHCP. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Percentage of licensed IFPEs in Percentage 0.00 100.00 89.00 compliance with transparency and disclosure rules on 31-Mar-2020 31-Dec-2021 31-Dec-2021 contracts Comments (achievements against targets): Data source: CONDUSEF. Available at: https://webapps.condusef.gob.mx/SIPRES/jsp/pub/index.jsp As of December 2021, 8 out of 9 IFPEs which had been authorized to operate were fully compliant with the transparency and disclosure rules on contracts issued by CONDUSEF. Page 32 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of payments Number 260.00 450.00 3,606.13 processed through the CoDi (Thousand) platform 31-Mar-2020 31-Dec-2021 31-Dec-2021 Comments (achievements against targets): Data source: Banxico. Available at: https://www.banxico.org.mx/sistemas-de-pago/codi-cobro-digital-banco-me.html Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Percentage of women Percentage 46.00 60.00 57.00 benefiting from state development banks’ financial 31-Mar-2021 31-Dec-2021 31-Dec-2021 access programs Comments (achievements against targets): Data source: SHCP. Achievement calculated as the simple average of FND, FIRA and Banjercito. If new available data was used, the (weighted) baseline would reach 69 percent, and the value achieved would be 74 percent. See Annex 6 for more details. Page 33 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Percentage of schools Percentage 0.00 100.00 0.00 incorporating Financial Education in their official 31-Mar-2020 31-Dec-2021 31-Dec-2021 curriculum Comments (achievements against targets): Data source: SHCP. Education has not been incorporated to the official curriculum as of the writing of this ICR. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of entities requesting Number 0.00 50.00 204.00 verification services 31-Mar-2020 31-Dec-2021 31-Dec-2021 Comments (achievements against targets): Data source: RENAPO. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of identification Number 0.00 300,000.00 6,300,000.00 verification enquiries to the 31-Mar-2020 31-Dec-2021 31-Dec-2021 Page 34 of 43 The World Bank COVID-19 Financial Access DPF (P172863) National Service of Personal Identification (per day) Comments (achievements against targets): Data source: RENAPO. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of states that have Text 6 states, 18% of 25 states, 65% of 24 states, 72% of population covered rolled out the ID Service to population covered population covered record vital events in a standardized manner and 31-Mar-2020 31-Dec-2021 31-Dec-2021 percentage of population that they are covering Comments (achievements against targets): Data source: RENAPO. . Page 35 of 43 The World Bank COVID-19 Financial Access DPF (P172863) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES A. TASK TEAM MEMBERS Name Role Preparation Patricia Caraballo Task Team Leader(s) Antonio Leonardo Blasco Financial Management Specialist Jozef Draaisma Team Member Cara Zappala Team Member Stefano Curto Team Member Maria Virginia Hormazabal Team Member Djibrilla Adamou Issa Peer Reviewer Jasmin Chakeri Team Member Jose Antonio Garcia Garcia Luna Team Member Beatriz Elena Franco Team Member Zafer Mustafaoglu Program Manager Fredesvinda F. Montes Herraiz Team Member Harish Natarajan Peer Reviewer Tuuli Johanna Bernardini Environmental Specialist Kiyomi E. Cadena Team Member Anita Tarce Team Member Maja Murisic Team Member Maria Gabriela Inchauste Comboni Team Member Renata Pantoja Team Member Page 36 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Luis Anibal Cano de Urquidi Team Member Gabriela Grinsteins Counsel John Martin Wilson Team Member Daniela Fernanda Gayraud Aguayo Team Member Ligia De Souza Neves Lopes Team Member Ana Georgina Marin Espinosa Team Member Diana Martinez Ramirez Team Member Supervision/ICR Eva M. Gutierrez Task Team Leader(s) Alfred Jean-Marie Borgonovo Financial Management Specialist Juan Carlos Serrano-Machorro Financial Management Specialist Anita Tarce Team Member Maja Murisic Team Member Maria Gabriela Inchauste Comboni Team Member Renata Pantoja Team Member Luis Anibal Cano de Urquidi Team Member Gabriela Grinsteins Counsel John Martin Wilson Team Member Daniela Fernanda Gayraud Aguayo Team Member Ligia De Souza Neves Lopes Team Member Ana Georgina Marin Espinosa Team Member Diana Martinez Ramirez Team Member Federico Alfonso Diaz Kalan Team Member Patricia Caraballo Team Member Kiyomi E. Cadena Team Member Tuuli Johanna Bernardini Environmental Specialist Harish Natarajan Peer Reviewer Fredesvinda F. Montes Herraiz Team Member Page 37 of 43 The World Bank COVID-19 Financial Access DPF (P172863) Beatriz Elena Franco Team Member Jose Antonio Garcia Garcia Luna Team Member Jasmin Chakeri Team Member Djibrilla Adamou Issa Peer Reviewer Maria Virginia Hormazabal Team Member Stefano Curto Team Member Cara Zappala Team Member Jozef Draaisma Team Member . B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY20 27.262 183,247.36 Total 27.26 183,247.36 Supervision/ICR Total 54.52 366,494.72 . Page 38 of 43 The World Bank COVID-19 Financial Access DPF (P172863) ANNEX 3. BORROWER’S COMMENTS The Closing Report included the analysis of the results of the actions that were implemented by various federal agencies to promote financial access development. These results were previously reviewed with the implementing agencies, who expressed the challenges they faced derived from the emergency health crisis present worldwide. However, despite this, the report highlights the satisfactory achievements obtained with the implementation of this project, as well as the relevance of the recognized policy reforms. In this sense, for future projects, it is of great importance to consider the changes that may occur in the economic, social and public policy environment when determining the indicators and goals of the Programs. Page 39 of 43 The World Bank COVID-19 Financial Access DPF (P172863) ANNEX 4. RESULTS CHAIN Figure 1. Results Chain of the Operation Source: Own elaboration. Page 40 of 43 The World Bank COVID-19 Financial Access DPF (P172863) ANNEX 5. BANXICO LIQUIDITY SUPPORT MEASURES 1. PA1 (decrease in DRM) and PA2 (lowering the cost of short-term funding at FLAO) were part of a set of measures implemented by Banxico to provide liquidity to the banking system at the onset of the COVID-19 pandemic. The other liquidity-provision measures included: a) FLAO: Beyond the reduction in cost (PA2), access to development banking institutions was expanded so that they could obtain liquidity through guaranteed loans or repurchase agreements. b) FLAO and dollar financing: Increased number of securities became eligible as collateral. This had the objective of providing temporary liquidity to stock market instruments that saw their liquidity decrease in the secondary market. c) Government Securities Repurchase Window: This facility aimed to provide liquidity to financial institutions holding government debt, allowing the institutions to access to short-term funding without having to dispose of their securities under conditions of high volatility in the financial markets. d) Window for the temporary exchange of guarantees: this window provided liquidity to stock market instruments that, due to conditions of uncertainty and volatility, saw their operability and liquidity decrease in the secondary market. e) Corporate Securities Repurchase Facility: The purpose of this facility was to provide liquidity to short-term corporate stock certificates and long-term corporate debt that, due to conditions of uncertainty and volatility, saw their liquidity reduced in the secondary market. Page 41 of 43 The World Bank COVID-19 Financial Access DPF (P172863) ANNEX 6. STATE DEVELOPMENT ENTITIES’ FINANCIAL ACCESS PROGRAMS Table 3. Percentage of women benefiting from state development entities’ financial access programs March 2020 (12m) December 2021 (12m) Revised No. No. Baseline Target Latest % change Baseline Women Women FIRA 65% 78.0% 1,328,247 - 81.6% 2,023,188 +52% FND 71% 74.5% 342,860 - 75.6% 221,158 -35% SHF - 64.6% 44,828 - 65.1% 51,162 +14% Banjercito 14% 14.3% 41,396 - 14.0% 40,890 -1% NAFIN - 42.9% 4,341 - 44.8% 4,247 -2% BANCOMEXT - 7.3% 322 - 3.4% 112 -65% Banco del Bienestar - - - - - - - FOCIR 32% - - - - - - Total No. Women 1,761,994 2,340,757 +33% Simple Avg 46% 46.9% 60% 47.4% Weighted Avg n.a. 69.5% - 74.1% Source: SHCP. Page 42 of 43 The World Bank COVID-19 Financial Access DPF (P172863) ANNEX 7. SUPPORTING DOCUMENTS The DPF preparation relied on a wealth of analytical work. These included: (i) the SCD; (ii) the CPF 2020–25; (iii) the National Financial Inclusion Policy; (iv) the 2016 Financial Sector Assessment Program; (v) The Global Findex Database 2017; and (vi) substantial technical assistance activities funded by the Financial Inclusion Global Initiative Program (FIGI). In addition, for Pillar 1 these included: (i) Basel Committee coordinates policy and supervisory response to Covid-19, BIS (2020); (ii) Macroprudential Policy with Capital Buffers, BIS (2019); (iii) Macroeconomic Policy in the Time of COVID-19: A Primer for Developing Countries, WB (2020); and (iv) Monetary and Financial Stability During the Coronavirus Outbreak, IMF (2020). For Pillar 2 additional studies included: (i) Good Practices for Financial Consumer Protection, WB (2017); (ii) Achieving Effective Financial Inclusion in Mexico: The Payments Perspective, WB (2019); (iii) Women’s Financial Inclusion and the Law, WB (2018); (iv) Improving Financial Education Delivery in Mexico: A Financial Education Report and Roadmap, WB (2018); (v) Toolkit: Integrating Financial Capability into Government Cash Transfer Programs, WB (2018); (vi) Digital Identification Mexico, WB (2018). Published Documents Banco de Mexico, 2021, “Informe anual sobre el ejercicio de las atribuciones conferidas por la Ley para la Transparencia y Ordenamiento de los Servicios Financieros.” https://www.banxico.org.mx/publicaciones-y-prensa/informes-anuales-de-cumplimiento-de-la-ley-para- la/%7B673FB877-292B-1DF2-2703-140F9168FDA9%7D.pdf Comisión Nacional Bancaria y de Valores (CNBV), Instituto Nacional de Estadística y Geografía (INEGI), 2018, “Encuesta Nacional de Inclusión Financiera” https://www.inegi.org.mx/programas/enif/2018/ Comisión Nacional Bancaria y de Valores (CNBV), 2021, “Panorama Anual de Inclusión Financiera.” https://www.cnbv.gob.mx/Inclusi%C3%B3n/Anexos%20Inclusin%20Financiera/Panorama_IF_2021.pdf Comité de Educación Financiera (CEF), 2017, “Estrategia Nacional de Educación Financiera.” https://www.gob.mx/cms/uploads/attachment/file/254432/Estrategia_Nacional_de_Educaci_n_Financiera.pdf Consejo Nacional de Inclusión Financiera (CONAIF), 2020, “Política Nacional de Inclusión Financiera.” https://www.afi-global.org/sites/default/files/publications/2020- 03/Strategy_National_Financial_Inclusion_Strategy.pdf Secretaria de Hacienda y Crédito Público, 2020, “Programa Nacional de Financiamiento del Desarrollo 2020-2024.” https://www.finanzaspublicas.hacienda.gob.mx/work/models/Finanzas_Publicas/docs/pronafide/pronafide2020.p df Economist Intelligence Unit, 2019, “Global Microscope 2019 The enabling environment for financial inclusion” http://www.eiu.com/Handlers/WhitepaperHandler.ashx?fi=EIU_Global_Microscope_2019.pdf&mode=wp&campai gnid=microscope2019 Page 43 of 43