The World Bank New Delhi Office Telephone : 24617241/24619491 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 70 Lodi Estate Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION New Delhi -- 110 003 Mailing Address : P.O Box 416 India Facsimile ; 24619393 CONFORMED COPY September 27, 2010 Dr. Anup K. Pujari Joint Secretary (MI) Department of Economic Affairs Ministry of Finance Government of India New Delhi 110 001 Dear Dr. Pujari: Grant No. TF097375 - Enhance Financial Access to the Poor through Technology in Andhra Pradesh In response to the request for financial assistance made on behalf of India ("Recipient") on May 18, 2009 (D. O. No. 8/11/2000-FB.VII), I am pleased to inform you that the International Bank for Reconstruction and Development/International Development Association ("World Bank"), acting as administrator of grant funds provided by the Consultative Group to Assist the Poor ("CGAP") in the United States, under the TF070636, proposes to extend to the Recipient, a grant in an amount not to exceed one million nine hundred thousand United States Dollars (U.S.$1,900,000) ("Grant") on the terms and conditions set forth or referred to in this letter agreement ("Agreement"), which includes the attached Annex, to assist in the financing of the project described in the Annex ("Project"). We regret the delay in setting up this trust fund, due to various processing requirements. This Grant is funded out of the abovementioned trust fund for-which the World Bank receives periodic contributions. In accordance with Section 3.02 of the Standard Conditions (as defined in the Annex to this Agreement), the Recipient may withdraw the Grant proceeds subject to the availability of such funds. The Recipient represents, by confirming its agreement below, that it is authorized to enter into this Agreement and to carry out the Project in accordance with the terms and conditions set forth or referred to in this Agreement. Please confirm the Recipient's agreement to the foregoing by having an authorized official of the Recipient sign and date the enclosed copy of this Agreement, and returning it to the World Bank. Upon receipt by the World Bank of this countersigned copy, this Agreement shall become effective as of the date of the countersignature; provided, however, that the offer of this Agreement shall be deemed withdrawn if the World Bank has not received the countersigned copy of this Agreement within ninety (90) days after the date of signature of this Agreement by the World Bank, unless the World Bank shall have established a later date for such purpose. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT/ INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Roberto Zagha Roberto Zagha Country Director, India Headquarter Washington DC USA Dr, Anup K. Pujari September 27, 2010 AGREED: INDIA By: /s/ Venu Rajamony Authorized Representative Name: Venu Rajamony Title: Joint Secretary (MI) Date: 7-10-2010 Enclosures: (1) Standard Conditions for Grants Made by the World Bank Out of Various Funds, dated July 1, 2008 (2) Disbursement Letter dated September 27, 2010, together with World Bank Disbursement Guidelines for Projects, dated May 1, 2006 cc: Mr. S.V. Prasad, Chief Secretary, GoAP, Hyderabad Ms. V. Mishra, Secretary, Institutional Finance, GoAP, Hyderabad Mr. R. Subramanyam, Principal Secretary, Rural Development, GoAP, Hyderabad Mr. Rajshekhar, Chief Executive Officer, Society for Elimination of Rural Poverty, Hyderabad Mr. T. Vijay Kumar, Joint Secretary, MoRD, GoI, New Delhi Ms. Kavita Prasad, Director, DEA, MoF, GoI, New Delhi Ms. Dakshita Das, Controller of Aid Accounts and Audit, DEA, MoF, GoI, New Delhi Dr. Anup K. Pujari -3- September 27, 2010 ANNEX Grant No. TF097375 Article I Standard Conditions; Definitions 1.01. Standard Conditions. The Standard Conditions for Grants Made by the World Bank out of Various Funds dated July 1, 2008 ("Standard Conditions") constitute an integral part of this Agreement. 1.02. Definitions. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Standard Conditions or in this Agreement. Article II Project Execution 2.01. Project Objectives and Description. The objectives of the Project are to improve access to financial services for Self Help Groups (SHG) members, improve financial transparency of SHGs and create a MIS system with credit bureau capability in the Recipient's State of Andhra Pradesh ("Andhra Pradesh"). The Project consists of the following parts: Part A: Piloting handheld devices for capturing SHG data Pilot test a limited number of handheld devices of different types in small subset of Community Organizations (SHGs and Federation of SHGs) for a) performance of the technology and its ability to support required functionality; and b) user experience and willingness to adopt device. Based on the pilot exercise propose a technical architecture and hardware configuration of the handheld device which can be taken to the mass market. Part B: Enabling Community Organizations as Banking Correspondents and Customer Service Providers (CSPs): The aim is to make banking transactions more convenient for SHG members, beneficiaries of social payments (including Old Age Pensions and NREGA) and bank clients in rural areas. The program envisions a state-wide network of Banking Correspondents (BCs) and Customer Service Providers (CSPs), appointed by BCs that can handle basic banking transactions (deposits, withdrawals, payments, transfers, etc.) on behalf of banks. Project success will be tracked through metrics such as: a) number of Zilla Samakhayas (District-level Federation of SHGs) appointed as BCs, b) percent of Village Organizations (Village-level Federation of SHGs) acting as CSPs, c) the percent of villages in the state with CSPs present, d) the number of transactions taking place in CSPs, and e) the percent reduction in transaction costs for SHG members and rural bank clients that use these channels. Part C: Creation of a SHG member Database as an input to Establishment of Rural Credit Bureau (incl. CIBIL): The proposed component will complement the UID activity, as and when UIDs are made available. The aim is to develop a database which captures the financial profiles for every SHG and SHG member. The database will be publicly accessible (for a charge) to organizations offering financial services to SHGs and SHG members. This database will be made accessible to, apart from SERP and Mandal Samakhyas; external lenders, insurance companies, and others to understand the repayment capability and repayment history of SHGs and their members. They could also be used for other purposes, such as Dr. Anup K. Pujari -4- September 27, 2010 to design more appropriate micro-insurance and commitment savings products on a more tailored basis. Metrics to track project success that correspond with these broad outcomes will be developed. 2.02. Project Execution Generally. The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall cause the Project to be carried out by the Society for Elimination of Rural Poverty (SERP) ("Project Implementing Entity") in accordance with the provisions of: (a) Article II of the Standard Conditions; (b) the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 ("Anti-Corruption Guidelines"); and (c) this Article II. 2.03. Project Monitoring, Reporting and Evaluation. (a) The Recipient shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of the indicators set forth below in paragraph (b) of this Section. Each Project Report shall cover the period of one (1) calendar semester, and shall be furnished to the World Bank not later than one (1) month after the end of the period covered by such report. (b) The performance indicators referred to above in paragraph (a) consist of the following: (i) development of A web-based MIS and decision support system. (ii) Number of SHG members profile and credit history captured in central database/MIS (iii) Number of Zilla Samakhayas licensed as BCs and VO's appointed as CSPs (iv) Percent of SHG members having bank accounts and conducting banking transactions within the villages (i.e., e-banking) (c) The Recipient shall prepare the Completion Report in accordance with the provisions of Section 2.06 of the Standard Conditions. The Completion Report shall be furnished to the World Bank not later than six (6) months after the Closing Date. 2.04. Financial Management. (a) The Recipient shall maintain or shall cause SERP to maintain a financial management system in accordance with the provisions of Section 2.07 of the Standard Conditions. (b) The Recipient shall or shall cause SERP to prepare and furnish to the World Bank Interim Unaudited Financial Reports (IUFR) for the Project not later than forty-five (45) days after the end of each calendar quarter, covering the quarter, in form and substance satisfactory to the World Bank. The said IUFR shall serve as the basis for disbursement of the Grant for eligible expenditures incurred during the said calendar quarter. (c) The Recipient shall or shall cause SERP to have the Designated Account and the Project's Financial Statements audited in accordance with the provisions of Section 2.07(b) of the Standard Conditions. Each such audit the Designated Account and of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six (6) months after the end of such period. Dr. Anup K. Pujari -5- September 27, 2010 2.05. Procurement. (a) General. All goods, works and services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the requirements set forth or referred to in: (i) Section I of the "Guidelines: Procurement under IBRD Loans and IDA Credits" published by the World Bank in May 2004 and revised in October 2006 and May 2010 ("Procurement Guidelines"), in the case of goods and works; and (ii) Sections I and IV of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" published by the World Bank in May 2004 and revised in October 2006 and May 2010 ("Consultant Guidelines") in the case of consultants' services; and (iii) the provisions of this Section, as the same shall be elaborated in the procurement plan prepared and updated from time to time by the Recipient for the Project in accordance with paragraph 1.16 of the Procurement Guidelines and paragraph 1.24 of the Consultant Guidelines ("Procurement Plan"). (b) Definitions. The capitalized terms used in the following paragraphs of this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, refer to the corresponding method described in the Procurement Guidelines, or the Consultant Guidelines, as the case may be. (c) Particular Methods of Procurement of Goods and Works. Except as otherwise provided in Sub paragraph (i) below, all goods shall be procured under contracts awarded on the basis of National competitive Bidding subject to additional procedures agreed to between the World Bank and the Recipient and referred to in the Procurement Plan. (i) The following Methods other than National competitive Bidding maybe used for Procurement of Goods for those Contracts: (A) (Shopping for Goods estimated to cost $30000 equivalent.; and (B) Direct Contracting. for Goods which meet the requirement of paragraph 3.6 of the Procurement Guidelines. All Direct Contracting shall be with Bank prior concurrence. (d) Particular Methods of Procurement of Consultants' Services (i) Except as otherwise provided in item (ii) below, consultants' services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. (ii) The following methods may be used for the procurement of consultants' services for those assignments which are agreed with the Bank and meet the requirement set forth in the Consultant's Guidelines for their used and are specified in the Procurement Plan: (A) Fixed Budget Selection (B) Least Cost Dr. Anup K. Pujari -6- September 27, 2010 Selection;(C) Quality Based Selection (D) Selection based on Consultants' Qualifications; and (E) Single-source Selection. (e) Review by the World Bank of Procurement Decisions. The Procurement Plan shall set forth those contracts which shall be subject to the World Bank's Prior Review. All other contracts shall be subject to Post Review by the World Bank. Article III Withdrawal of Grant Proceeds 3.01. Eligible Expenditures. The Recipient may withdraw the proceeds of the Grant in accordance with the provisions of: (a) the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the following table. The table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Grant ("Category"), the allocations of the amounts of the Grant to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Amount of the Grant Percentage of Expenditures Allocated to be Financed Category (expressed in USD) (inclusive of Taxes) ( 1 ) Goods 125,000 100% ( 2 ) Consultants' services 1,594,856 100% ( 3 ) Incremental Operating Costs 179,844 100% TOTAL AMOUNT 1,900,000 For the purposes of this section: (i) the term "Training" means reasonable and necessary costs incurred by the Recipient for the carrying out of training activities related to the Project, including travel and subsistence costs for training participants, costs associated with securing the services of trainers, rental of training facilities, preparation and reproduction of training materials, and other costs directly related to training; and (ii) the term "Incremental Operating Costs" means the incremental operating costs incurred by the Recipient on account of the implementation, management and monitoring of the Project, including salaries of contractual staff; office supplies and consumables, utilities, communications, mass media and printing services, and travel, lodging and per diems and other reasonable and necessary costs directly associated with the Project, but excluding salaries of officials or staff of the Recipient. 3.02. Withdrawal Conditions. Notwithstanding the provisions of Section 3.01 of this Agreement, no withdrawal shall be made for payments made prior to the date of countersignature of this Agreement by the Recipient. Dr. Anup K. Pujari -7- September 27, 2010 3.03. Withdrawal Period. The Closing Date referred to in Section 3.06(c) of the Standard Conditions is December 31, 2012. Article IV Recipient's Representative; Addresses 4.01. Recipient's Representative. The Recipient's Representative referred to in Section 7.02 of the Standard Conditions is Secretary, Additional Secretary, Joint Secretary, Director, Deputy Secretary or Under Secretary of the Department of Economic Affairs in the Ministry of Finance of the Recipient. 4.02. Recipient's Address. The Recipient's Address referred to in Section 7.01 of the Standard Conditions is: Department of Economic Affairs Ministry of Finance North Block, New Delhi 110 001 India Facsimile: 91-11-23092039 4.03. World Bank's Address. The World Bank's Address referred to in Section 7.01 of the Standard Conditions is: International Bank for Reconstruction and Development and International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Facsimile: 1-202-477-6391 Dr. Anup K. Pujari -8- September 27, 2010 Cleared with and bcc: Juan Carlos Alvarez (LEGES); Jill A. Roberts (LOA-TF) bcc: Messrs./Mmes. Chatterji, Shukla, Nagaraju (ED12); Kodderitzsch, Shah (SASDA); Ricks, Rannachandran, Sousa (SASDO); Deshpande (SARFM); Jain, Toure (SARPS); Djumena (SACNA); India Coordinator; SASSD Core Team; TFadmin (TACT); Arikatla, Sairam (CTRDM) IRIS Box: 333884B Drafted by: Parmesh Shah (TTL)/ss