Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) Financial Sector Rapid Response Project (P119047) SOUTH ASIA | Afghanistan | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2012 | Seq No: 11 | ARCHIVED on 07-Jun-2018 | ISR32191 | Implementing Agencies: Ministry of Finance, DA AFGHANISTAN BANK, Islamic Republic of Afghanistan Key Dates Key Project Dates Bank Approval Date:25-Aug-2011 Effectiveness Date:06-Sep-2011 Planned Mid Term Review Date:04-Oct-2014 Actual Mid-Term Review Date:25-Apr-2015 Original Closing Date:30-Jun-2014 Revised Closing Date:31-Oct-2019 Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project's development objective is to assist DAB to develop actions plans for improved banking supervision and implementamodernnational payment system for efficient and transparent payment transactions. Has the Project Development Objective been changed since Board Approval of the Project Objective? Yes Board Approved Revised Project Development Objective (If project is formally restructured)PHRPDODEL To assist DAB to develop action plans for improved banking supervision and to establish key building blocks of financial sector infrastructure: payment system, movable collateral registry, and public credit registry. Components Name Strengthening the DAB's capacity:(Cost $9.00 M) Development of the financial sector infrastructure:(Cost $29.70 M) DAB Skill Development; Technical Assistance and project implementation:(Cost $7.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Moderately Satisfactory  Moderately Satisfactory Overall Implementation Progress (IP)  Satisfactory  Moderately Satisfactory Overall Risk Rating  Substantial  Substantial 6/7/2018 Page 1 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) Implementation Status and Key Decisions Component 1: Strengthening of DAB’ capacity There are three key TA activities under this component, mainly (i) Strengthening Financial Supervision Department (FSD), (ii) Adoption of Risk Based Internal Audit (RBIA) and (iii) adoption of International Financial Reporting Standards (IFRS). Under this component, a firm would be recruited to provide TA to strengthen the capacity of the Financial Supervision Department in the areas of banking regulation and supervision. The contract was signed off on November 2017 between DAB and international firm Unicon. The firm is already on board as the implementation of the project started in November 2017. The request for expression of interests (REOIs) for the RBIA and as well as adoption of IFRS were both announced on April 25, 2018 and procurement process is underway. Component 2: Development of the financial sector infrastructure: Support to establishment of Collateral Registry (CR) and Public Credit Registry (PCR): 1 . The Collateral Registry (CR) and the Public Credit Registry (PCR) remains a significant achievement. Since it officially started operations in 2013 and 2014 respectively, CR is now utilized by DAB’s FSD, 15 commercial banks, 4 microfinance institutions as well as the MoF Revenue’s department. The implementation of the PCR has been undertaken in partnership with IFC Advisory Services. As per a DAB circular issued on November 18, 2014, all commercial banks are mandated to make an inquiry to the PCR and obtain a Credit Report before issuing a loan. 2 . As of end-April 2018 (after three years and eight months of operations), DAB indicated that the total number of active contracts in the PCR system reached 92540. The PCR has been well received in the Afghan financial sector as a significant step forward to circumventing bureaucracy within financial institutions, as well as reducing the cost of access to credit and systematic risk. Stakeholders also recognized the role of the CR and PCR in bridging the credit information gap in the country. Although much more needs to be done in enhancing financial intermediation on the lending side by banks, the establishment of the CR and PCR is fundamental to sound financial market development and as economic activity picks up, will serve to establish a valuable service that can greatly facilitate the development of credit markets over time. On the other hand, the public searches on PCR by end April 2018 has reached 263,189. Modernization of National Payment Systems: including setting up an Automated Transfer System (ATS), National Card and Mobile Payment Switch (Afghanistan Payment System) and an Interbank Communication Network: The Modernization of National Payment Systems included financing the setup of ATS which entails the Real Time Gross Settlement System (RTGS), Automated Clearing House (ACH) and Centralized Securities Depository (CSD). It is meant to modernize the national payment system for efficient and transparent payment transactions. DAB is currently finalizing the staff training and operational testing by September 2018. Component 3: DAB Skill Development; Technical Assistance and project implementation 1 . Support to the development of the Afghanistan Institute of Banking and Finance (AIBF): • AIBF is in the final stages of adopting a more proactive business plan. It recently engaged in providing accredited Association of Chartered Certified Accountants (ACCA) courses in Afghanistan. It also acquired the necessary to be authorized to hold exams. They also acquired advanced curriculum to provide Association of Certified Anti-Money Laundering Specialists (ACAMS) courses relating to AML/CFT. • In early 2018, it launched Certified Internal Auditor (CIA) professional courses for CFOs and Internal audit offices of commercial banks respectively. These courses are conducted outside the office hours and as such the employees can continue their job responsibilities as well as build their capacity. • As of now, AIBF has trained 7873 professionals from commercial banks in different training programs. This is way beyond the set target of 6000 till end of project. 2 . Skill development and upgrading talent management for DAB’s staff. • Another key activity for DAB’s skills development program has started. Under this program, employees would be able to study Bachelor and Master level degree programs (allocated $1.6 million) and specialized professional certifications. Professional certification would cover key functions of DAB's operations including ACCA, Certified Internal Audit, and Certified Expert in Financial Inclusion Policy (CEFI) has already started. 6/7/2018 Page 2 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  High  High Macroeconomic  --  High  High Sector Strategies and Policies  --  High  High Technical Design of Project or Program  --  Substantial  Substantial Institutional Capacity for Implementation and Sustainability  --  Substantial  Substantial Fiduciary  --  Substantial  Substantial Environment and Social  --  Low  Low Stakeholders  --  Substantial  Substantial Other  --  --  -- Overall  --  Substantial  Substantial Results Project Development Objective Indicators PHINDPDOTBL  Actions plans developed, with initial implementation monitored,for the ten banks audited (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Procurement of the Targeted TA on targeted TA on banking Action plans Value No action plan banking supervision supervision has been under under procurement finalized the firm was implementation mobilized on the ground. Date 01-Aug-2011 12-Sep-2017 25-Apr-2018 31-Oct-2019 Comments The firm is currently operating on the ground and an action plan is being developed in coordination with the FSD. 6/7/2018 Page 3 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) PHINDPDOTBL  Payment system conforms to international norms (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Substantially Value Not conform Not conform Not conform Conform Date 01-Aug-2011 12-Sep-2017 25-Apr-2018 31-Oct-2019 Overall Comments Many developments are taking place, APS is operational, IBN bid was awarded after three tedious rounds and should be operational end of current calendar year. Finally ATS, is currently (as of May 2018) being tested in Baku and should be installed in Kabul by July 2018 and operational by September 2018. Intermediate Results Indicators PHINDIRITBL  Audit reports completed highlighting strengths and weaknesses of each bank (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target No audit reports to Audits Value Audits completed Audits completed international standards completed Date 01-Aug-2011 12-Sep-2017 25-Apr-2018 30-Jun-2016 PHINDIRITBL  RTGS operational and transactions settled in real time by end of project (Text, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value No RTGS No RTGS No RTGS RTGS goes live Date 01-Aug-2011 12-Sep-2017 25-Apr-2018 31-Oct-2019 6/7/2018 Page 4 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) PHINDIRITBL  Number of commercial banks? staff trained in AIBF reaches 6,000 by end of project (Text, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 1,017.00 6,161.00 7,873.00 6,000.00 Date 01-Aug-2011 12-Sep-2017 25-Apr-2018 31-Oct-2019 PHINDIRITBL  Increased transparency through the adoption of international central bank accounting and auditing standards (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target DAB financial Financial statements statements for prepared based on local the year ended Financial statements Financial statements accounting standards. in 2018 prepared based on Value prepared based on local The procurement prepared in local accounting accounting standards process for “adoption of accordance standards IFRS standards” project with IFRS (as already started. applicable in 2016) Date 16-Aug-2016 12-Sep-2017 25-Apr-2018 31-Oct-2019 Comments This is an indicator relating to the IFRS activity under the second additional financing and is currently in the procurement stage. We expect results to reflect as we progress on implementation. PHINDIRITBL  Effective Financial Supervision Department (FSD) organization with training processes in place to ensure sustainable capacity development (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Procurement of TA for Procurement of TA for Financial Supervision Continuous Revised FSD organization Financial Supervision Value Department completed implementation approved by DAB Department Under and implementation of action plan NPA review started in Nov, 2017 Date 01-Nov-2013 12-Sep-2017 25-Apr-2018 31-Oct-2019 Comments This is an indicator relating to the FSD capacity building TA.This activity suffered many delays and the issues was recently resolved and we expect the this to reflect on achieved results shortly. 6/7/2018 Page 5 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) PHINDIRITBL  Percentage increase in the number of on-site and off-site examinations by the department (Number, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 10.00 PHINDIRITBL  Approval by DAB of financial sector regulations ensuring consistency with international standards (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target A new banking law and A new banking law and AML/CFT regulations Afghanistan financial AML/CFT regulations were approved. sector regulations not fully were approved. TA for Procurement of TA for Key regulations Value aligned with international Financial Supervision Financial Supervision approved standards Department under Department completed procurement and implementation started in Nov, 2017 Date 01-Nov-2013 12-Sep-2017 25-Apr-2018 31-Oct-2019 PHINDIRITBL  Interbank payment (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Same day all T+1 for Kabul area and T+1 for Kabul area and T+1 for Kabul area and Value over T+3 for other areas T+3 for other areas T+3 for other areas Afghanistan Date 01-Aug-2011 12-Sep-2017 25-Apr-2018 31-Oct-2019 6/7/2018 Page 6 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) PHINDIRITBL  Card payment system (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target System goes Implementation of Implementation of live and, on an interbank card system interbank card system ongoing basis, underway. The Afghan underway. The Afghan processes over Payment system Payment system 80% of platform was platform was domestic Value No interbank card system inaugurated on April 26, inaugurated on April interbank/inter- 2016. Discussions 26, 2016. Discussions institution ongoing to increase ongoing to increase payment card number of participants. number of participants and mobile The system is live. (6 (6 banks) money banks) transactions Date 01-Aug-2011 12-Sep-2017 25-Apr-2018 31-Oct-2019 Comments System is live and 6 banks are already part of the APS. There are ongoing negotiations to increase this number. PHINDIRITBL  Rating of national payment system (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Med-High: a, b, Low: a, e, f; Med-low: d; Low: a, e, f; Med-low: Low: a, e, f; Med-low: d; Value d, f; Med-Low: n.a. b, c d; n.a. b, c n.a. b, c c, e Date 01-Aug-2011 12-Sep-2017 12-Sep-2017 31-Oct-2019 Comments This indicator will be updated as soon as the installation of the network equipment as well as the ATS is finalized and they become operational. 6/7/2018 Page 7 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) PHINDIRITBL  Increase in the number of creditreports sent by the Public Credit Registry to commercial banks (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 150,000.00 263,189.00 250,000.00 Date 01-Nov-2013 12-Sep-2017 25-Apr-2018 31-Oct-2019 PHINDIRITBL  Increase in the number of items of collateral registered in the Collateral Registry (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 815.00 18,664.00 19,480.00 10,000.00 Date 01-Nov-2013 12-Sep-2017 25-Apr-2018 31-Oct-2019 PHINDIRITBL  Enhanced operational efficiency of DAB staff : percentage reduction in time spent to prepare DAB balance sheet (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 80% Date 16-Aug-2016 12-Sep-2017 25-Apr-2018 31-Oct-2019 Comments This is an indictor relating to the IFRS activity under the second additional financing and is currently in the procurement stage. We expect results to reflect as we progress on implementation. PHINDIRITBL  DAB training - Number of key DAB staff trained (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 20.00 205.00 1,443.00 Date 16-Aug-2016 12-Sep-2017 25-Apr-2018 31-Oct-2019 Comments This is an indicator relating to the capacity building component and was added under the second additional financing. The guidelines for the 6/7/2018 Page 8 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) program were finalized and it was launched in February 2018 and will reflect on the results indicator shortly. PHINDIRITBL  Number of DAB staff who have completed or enrolled into a Bachelor or Masters program (Number, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 88.00 0.00 220.00 250.00 PHINDIRITBL  DAB training - Percentage of eligible staff in critical functions who completed specialized, professional training sessions (Percentage, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 20.00 55.00 50.00 PHINDIRITBL  Number of key DAB female staff trained under the project (Text, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 5.00 12.00 172.00 Date 16-Aug-2016 12-Sep-2017 25-Apr-2018 31-Oct-2019 6/7/2018 Page 9 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) PHINDIRITBL  Improved sustainability of APS and AIBF (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 15.00 50.00 Date 16-Aug-2016 -- 25-Apr-2018 31-Oct-2019 Overall Comments The sustainability plans of both institutions underway as well as the financial audits. We will update this indicator as soon as the audits are finalized Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P119047 IDA-D1400 Effective USD 20.00 20.00 0.00 0.00 19.56 0% P119047 IDA-H7320 Effective USD 19.00 19.00 0.00 11.71 5.70 67% P119047 IDA-H8930 Effective USD 6.70 6.70 0.00 2.60 3.72 41% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P119047 IDA-D1400 Effective 27-Oct-2016 04-Jan-2017 12-Apr-2017 31-Oct-2019 31-Oct-2019 P119047 IDA-H7320 Effective 25-Aug-2011 27-Aug-2011 06-Sep-2011 30-Jun-2014 30-Jun-2018 P119047 IDA-H8930 Effective 26-Nov-2013 10-Mar-2014 04-Jun-2014 30-Jun-2016 30-Jun-2018 Cumulative Disbursements 6/7/2018 Page 10 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Financial Sector Rapid Response Project (P119047) Restructuring History Level 2 Approved on 26-Jan-2015 ,Level 2 Approved on 25-May-2016 Related Project(s) P147624-Additional Financing to Financial Sector Rapid Response Project ,P160073-Financial Sector Rapid Response - Additional Financing 6/7/2018 Page 11 of 11 Public Disclosure Copy