The World Bank Report No: ISR9535 Implementation Status & Results Kyrgyz Republic KG Financial Sector Development Project (P125689) Public Disclosure Copy Operation Name: KG Financial Sector Development Project (P125689) Project Stage: Implementation Seq.No: 2 Status: ARCHIVED Archive Date: 18-Feb-2013 Country: Kyrgyz Republic Approval FY: 2012 Product Line: IBRD/IDA Region: EUROPE AND CENTRAL ASIA Lending Instrument: Specific Investment Loan Implementing Agency(ies): Key Dates Board Approval Date 08-Mar-2012 Original Closing Date 30-Jun-2017 Planned Mid Term Review Date Last Archived ISR Date 25-Nov-2012 Effectiveness Date Revised Closing Date 30-Jun-2017 Actual Mid Term Review Date Project Development Objectives Project Development Objective (from Project Appraisal Document) Project Development Objectives are to: (i) enhance financial sector stability, and (ii) increase access to financial services. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Strengthening the legal, regulatory, and supervisory framework for banks, MFOs, and credit unions 1.50 Enhancing financial services via KPOs network 5.55 Supporting Aiyl Bank for deposit mobilization and privatization 4.15 Modernizing the secured transactions and debt resolution regime 1.00 Project coordination and monitoring 0.80 Public Disclosure Copy Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Unsatisfactory Moderately Unsatisfactory Overall Implementation Progress (IP) Moderately Unsatisfactory Moderately Unsatisfactory Overall Risk Rating Moderate Moderate Implementation Status Overview Further to the nearly yearlong dialogue on the FSDP approved on March 8, 2012, the government requested the World Bank to restructure the FSDP by cancelling Component 3 (Support to Aiyl Bank for privatization and deposit mobilization) and the related Credit and Grant allocation in the amount of SDR 2.7 million (US$4.15 million equivalent or 30 percent Page 1 of 7 The World Bank Report No: ISR9535 of total project costs) due to opposition to the original privatization of the Aiyl bank raised during the ratification phase. The government no longer wants to hold back the reforms included in the other components while trying to persuade Parliament on the benefits of privatizing Aiyl Bank. Locations Public Disclosure Copy Country First Administrative Division Location Planned Actual Kyrgyz Republic Gorod Bishkek Gorod Bishkek ✔ Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target Legal, regulatory, and supervisory framework Number Value 0.00 15.00 following international good practice to Date 01-Dec-2011 05-Oct-2012 28-Feb-2017 enhance stability is developed, adopted, and Comments implemented Number of transactions through KPO related to Number Value 10000000.00 17000000.00 financial services Date 15-Jan-2012 05-Oct-2012 28-Feb-2017 Comments Deposits/GDP Percentage Value 15.00 20.00 Date 15-Jan-2012 05-Oct-2012 28-Feb-2017 Comments Increase in individual deposits in Aiyl Bank Percentage Value 0.00 300.00 Date 31-Dec-2011 28-Feb-2017 Comments Dec 31, 2011 individual deposits Number of new annual registrations in the Percentage Value 0.00 20.00 secured transactions registry, using moveable Date 31-Dec-2011 28-Feb-2017 assets as collateral (alone or in combination Comments Number of new registrations increase with immoveable collateral) Public Disclosure Copy in 2011 - 36,000 Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Adoption of modern supervision methods Text Value Supervisory framework Implementation of Pillar 2 and lacking modern supervision 3 of Basel II methods Date 15-Jan-2012 28-Feb-2017 Comments Page 2 of 7 The World Bank Report No: ISR9535 Effective supervision, measured in terms of Text Value 6 0 number of banks under special supervisory Date 15-Jan-2012 28-Feb-2017 action for over 1 year Comments Public Disclosure Copy Upgraded ICT system Text Value No No incident of supervisory setback for want of IT support. Date 15-Jan-2012 28-Feb-2017 Comments Contingency planning and crisis management Text Value No No systemic crisis that was framework not adequately addressed in time Date 15-Jan-2012 28-Feb-2018 Comments Improved staff capacity, measured in terms of Number Value 2.00 4.50 number of years of staff experience in Date 15-Jan-2012 28-Feb-2017 supervision departments Comments Number of ICT-equipped Post Offices (with Number Value 0.00 360.00 installed, operational front office cash Date 01-Jan-2012 28-Feb-2017 terminals) connected to the central hub Comments Revenues from non-government transactions Percentage Value 15.00 20.00 as a share of total KPO revenues from financial Date 15-Jan-2012 28-Feb-2017 services Comments Improved quality, reliability and cost-efficiency Text Value 0% >30% of small value payments operations, measured Date 15-Jan-2012 28-Feb-2017 in terms of same day Straight Through Comments Processing as a share of total transactions to&from bank accounts Enhanced transparent financial performance Text Value No Annual audited statements Date 15-Jan-2012 28-Feb-2017 Public Disclosure Copy Comments Introduction of performance measurement, in Text Value 0 Monthly financial reports terms of accounting reports with separated Date 15-Jan-2012 28-Feb-2017 profitability and risk analysis for financial Comments services and postal services Number of cashiers, tellers, postmasters and Number Value 0.00 1200.00 other operational staff completed NBKR Date 15-Jan-2012 28-Feb-2017 training to operate financial services at KPO Comments Page 3 of 7 The World Bank Report No: ISR9535 Enhanced competitive outreach for last mile Percentage Value 0.00 2.00 delivery of remittances, measured in terms of Date 15-Jan-2012 28-Feb-2017 market share of KPO in total remittances Comments Public Disclosure Copy Tender announced for privatization of Aiyl Bank Text Value No Yes Date 15-Jan-2012 28-Feb-2017 Comments Amended legal framework for moveable Text Value No Yes collateral and debt resolution regimes Date 15-Jan-2012 28-Feb-2017 Comments Issued regulations for the well-functioning of Text Value No Yes the collateral registry Date 15-Jan-2012 28-Feb-2017 Comments Online system for registering collateral is Text Value No online system Yes operational Date 15-Jan-2012 05-Oct-2012 28-Feb-2017 Comments Number of dissemination and capacity-building Number Value 0.00 6.00 and training events held Date 15-Jan-2012 05-Oct-2012 28-Feb-2017 Comments Increase in lending based on new registration Percentage Value 0.00 20.00 of security interests in the registry, using Date 15-Jan-2012 05-Oct-2012 28-Feb-2017 moveable assets as collateral Comments To be measured at end-2011 increase Increase in the debt recovery rate for creditors Text Value To be measured at end-2011 30 cents on the dollar of 4% of insolvent companies Date 15-Jan-2012 28-Feb-2017 Comments Volume of Bank Support: Lines of Credit - SME Amount(USD) Value 0.00 0.00 Public Disclosure Copy Date 15-Jan-2012 28-Feb-2017 Comments Volume of Bank Support: Institutional Amount(USD) Value 0.00 0.00 Development - SME Date 15-Jan-2012 28-Feb-2017 Comments Volume of Bank Support: Enabling Amount(USD) Value 0.00 0.00 Environment - SME Date 15-Jan-2012 28-Feb-2017 Comments Page 4 of 7 The World Bank Report No: ISR9535 No of active loan accounts -SME Number Value 0.00 0.00 Date 15-Jan-2012 28-Feb-2017 Comments to be measured at end-2011 Public Disclosure Copy Percentage of project-supported institutions Percentage Value 0.00 0.00 that are reporting on this indicator Sub Type Supplemental Outstanding SME Loan Portfolio Amount(USD) Value 0.00 0.00 Date 15-Jan-2012 28-Feb-2017 Comments Percentage of project-supported institutions Percentage Value 0.00 0.00 that are reporting on this indicator Sub Type Supplemental % active loans to women - Microfinance Percentage Value 0.00 0.00 Date 15-Jan-2012 28-Feb-2017 Comments Percentage of project-supported institutions Percentage Value 0.00 0.00 that are reporting on this indicator Sub Type Supplemental Number of active micro-savings accounts Number Value 0.00 0.00 Date 15-Jan-2012 28-Feb-2017 Comments Percentage of project-supported institutions Percentage Value 0.00 0.00 that are reporting on this indicator Sub Type Supplemental % active micro-savings accounts held by Percentage Value 0.00 0.00 women Date 15-Jan-2012 28-Feb-2017 Public Disclosure Copy Comments Percentage of project-supported institutions Percentage Value 0.00 0.00 that are reporting on this indicator Sub Type Supplemental Portfolio at Risk - SME Percentage Value 0.00 0.00 Date 15-Jan-2012 28-Feb-2017 Comments Page 5 of 7 The World Bank Report No: ISR9535 Percentage of project-supported institutions Percentage Value 0.00 0.00 that are reporting on this indicator Sub Type Supplemental Public Disclosure Copy Return on Assets/Equity Percentage Value 0.00 0.00 Date 15-Jan-2012 28-Feb-2017 Comments Percentage of project-supported institutions Percentage Value 0.00 0.00 that are reporting on this indicator Sub Type Supplemental Data on Financial Performance (as of 09-Mar-2012) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P125689 IDA-50670 Not Effective 08-Mar-2012 30-Jun-2017 30-Jun-2017 P125689 IDA-H7600 Not Effective 08-Mar-2012 30-Jun-2017 30-Jun-2017 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P125689 IDA-50670 Not Effective XDR 4.70 4.70 0.00 0.00 4.70 0.00 P125689 IDA-H7600 Not Effective XDR 3.90 3.90 0.00 0.00 3.90 0.00 Disbursement Graph Public Disclosure Copy Page 6 of 7 The World Bank Report No: ISR9535 Public Disclosure Copy Key Decisions Regarding Implementation During a World Bank mission conducted over the period January 22-26, 2013, the team met with the MoF and all the implementing agencies to (a) reconfirm the government decision; (b) explore any other options that were being discussed at this stage; (c) to explain the full implications of proceeding with the restructuring of the project, and (d) highlighted the importance of addressing the effectiveness conditions while the project was being restructured. In appraising the decision to restructure the project, the Mission concluded that the loss of Component 3 is a significant set-back to years of policy dialogue and the implication of this cancellation will negatively affect the government’s efforts to improve access to finance in the agricultural sector. The Mission concluded that government’s decision to cancel the privatization is one that it makes reluctantly; and is doing so in the interest of ensuring that the other components of the reform project are not delayed any further. This is a decision that the World Bank, with regret, has appraised as appropriate under the circumstances. The financial sector developments globally are such that further delays in strengthening the regulatory and supervisory capacity of the central bank would be detrimental to the financial system. Restructuring History There has been no restructuring to date. Public Disclosure Copy Related Projects There are no related projects. Page 7 of 7