FOR OFFICIAL USE ONLY Report No: PADHI01096 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT FROM THE INTERNATIONAL DEVELOPMENT ASSOCIATION IN THE AMOUNT OF SDR 15.3 MILLION (US$ 20 MILLION EQUIVALENT) AND FROM THE SOMALIA MULTI-PARTNER FUND A PROPOSED GRANT IN THE AMOUNT OF US$ 15 MILION TO THE FEDERAL REPUBLIC OF SOMALIA FOR BULSHO: STRENGTHENING COMMUNITY AND LOCAL INSTITUTIONS FOR SOCIAL COHESION, INCLUSION, AND RESILIENCE (P508408) APRIL 7, 2025 Social Sustainability and Inclusion Practice Eastern And Southern Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective February 28, 2025) Currency Unit = US$ 0.764 = US$1 US$1.309 = SDR 1 FISCAL YEAR January 1–December 31 Regional Vice President: Amit Dar Regional Director: Anna Wellenstein Country Director: Qimiao Fan Practice Manager: Maria Gonzalez de Asis Task Team Leaders: Samuel Thomas Clark, John Muratha Kinuthia ABBREVIATIONS AND ACRONYMS ASA Advisory Services and Analytics DA Designated Account DIALOGUE Develop Informed and Accountable Local Governance through User Empowerment DPSC District Peace and Stabilization Committees EAFS External Assistance and Fiduciary Section E&S environment and social ESCP Environmental and Social Commitment Plan ESF Environmental and Social Framework ESMP Environmental and Social Management Plan ESRS Environmental and Social Review Summary ESS Environmental and Social Standard FCV fragility, conflict, and violence FGS Federal Government of Somalia FMS Federal Member State GBV gender-based violence GHG greenhouse gas GRS Grievance Redress Service IDA International Development Association IRR internal rate of return LSCP Local Social Contract Platform M&E monitoring and evaluation MEAL monitoring, evaluation, accountability, and learning MIS management information system MoI ministry of interior MoIFAR Ministry of Interior, Federal Affairs and Reconciliation NDC Nationally Determined Contribution NPV net present value PDO project development objective PCU project coordination unit PIU project implementation unit POM project operations manual PSC Project Steering Committee RCRF Recurrent Costs and Reform Financing RRA Risk and Resilience Assessment SEA/SH sexual exploitation and abuse/sexual harassment SMPF Somalia Multi-Partner Fund SoE Statements of Expenditure STEP Systematic Tracking of Exchanges in Procurement TA technical assistance TWG technical working group UN United Nations WB World Bank The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) TABLE OF CONTENTS DATASHEET .......................................................................................................................... 2 I. STRATEGIC CONTEXT ................................................................................................... 10 A. Project Strategic Context ...............................................................................................................10 B. Sectoral and Institutional Context .................................................................................................10 II. PROJECT DESCRIPTION ................................................................................................ 13 A. Project Development Objective (PDO) ..........................................................................................13 B. Theory of Change and PDO Indicators ...........................................................................................13 C. Project Beneficiaries ......................................................................................................................15 D. Project Components ......................................................................................................................15 E. Role of Partners ..............................................................................................................................18 F. Lessons Learned and Reflected in the Project Design....................................................................18 III. PROJECT IMPLEMENTATION ........................................................................................ 20 A. Institutional and Implementation Arrangements ..........................................................................20 B. Results Monitoring, Evaluation, and Verification Arrangements ..................................................21 C. Disbursement Arrangements .........................................................................................................22 IV. PROJECT APPRAISAL SUMMARY .................................................................................. 22 A. Technical, Economic, and Financial Analysis .................................................................................22 B. Fiduciary .........................................................................................................................................26 C. Environmental, Social, and Legal Operational Policies ..................................................................27 V. KEY RISKS .................................................................................................................... 29 ANNEX 1. RESULTS FRAMEWORK ........................................................................................ 31 ANNEX 2. DETAILED INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS .................. 40 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) @#&OPS~Doctype~OPS^dynamics@padbasicinformation#doctemplate DATASHEET BASIC INFORMATION Project Operation Name Beneficiary(ies) Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Somalia Resilience Environmental and Social Risk Operation ID Financing Instrument Classification Investment Project P508408 Moderate Financing (IPF) @#&OPS~Doctype~OPS^dynamics@padprocessing#doctemplate Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [✓] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [✓] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster [ ] Alternative Procurement Arrangements (APA) [ ] Hands-on Expanded Implementation Support (HEIS) Expected Approval Date Expected Closing Date 29-Apr-2025 30-Jun-2029 Bank/IFC Collaboration No Proposed Development Objective(s) To strengthen community and local institutions for improved social cohesion, inclusion, and resilience. Components Component Name Cost (US$) Page 2 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) Component 1: Community and District Social and Institutional 8,700,000.00 Strengthening Component 2: Local Social Contract Platform 4,650,000.00 Component 3: Matching Grants for Social Cohesion, Inclusion, and 19,350,000.00 Resilience Component 4: Project Management for Coordination, Delivery, Innovation, 7,300,000.00 and Learning @#&OPS~Doctype~OPS^dynamics@padborrower#doctemplate Organizations Borrower: Ministry of Finance Contact Title Telephone No. Email Implementing Agency: Ministry of Interior, Federal Affairs and Reconciliation Contact Title Telephone No. Email Aidarus Moallim Hassan Director General +252619904040 dg@moifar.gov.so @#&OPS~Doctype~OPS^dynamics@padfinancingsummary#doctemplate PROJECT FINANCING DATA (US$, Millions) Maximizing Finance for Development Is this an MFD-Enabling Project (MFD-EP)? No Is this project Private Capital Enabling (PCE)? No SUMMARY Total Operation Cost 40.00 Total Financing 40.00 of which IBRD/IDA 20.00 Financing Gap 0.00 DETAILS World Bank Group Financing International Development Association (IDA) 20.00 Page 3 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) IDA Grant 20.00 Non-World Bank Group Financing Counterpart Funding 3.50 Local Communities 3.50 Commercial Financing 1.50 Unguaranteed Commercial Financing 1.50 Trust Funds 15.00 Somalia Multi-Partner Fund 15.00 IDA Resources (US$, Millions) Guarantee Credit Amount Grant Amount SML Amount Total Amount Amount National Performance-Based 0.00 20.00 0.00 0.00 20.00 Allocations (PBA) Total 0.00 20.00 0.00 0.00 20.00 @#&OPS~Doctype~OPS^dynamics@paddisbursementprojection#doctemplate Expected Disbursements (US$, Millions) WB Fiscal Year 2025 2026 2027 2028 2029 2030 Annual 0.00 2.50 4.50 6.50 10.00 6.50 Cumulative 0.00 2.50 7.00 13.50 23.50 30.00 @#&OPS~Doctype~OPS^dynamics@padclimatechange#doctemplate PRACTICE AREA(S) Practice Area (Lead) Contributing Practice Areas Governance; Water; Agriculture and Food; Urban, Social Sustainability and Inclusion Resilience and Land Page 4 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) CLIMATE Climate Change and Disaster Screening Yes, it has been screened and the results are discussed in the Operation Document @#&OPS~Doctype~OPS^dynamics@padrisk#doctemplate SYSTEMATIC OPERATIONS RISK- RATING TOOL (SORT) Risk Category Rating 1. Political and Governance ⚫ Substantial 2. Macroeconomic ⚫ Substantial 3. Sector Strategies and Policies ⚫ Moderate 4. Technical Design of Project or Program ⚫ Moderate 5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial 6. Fiduciary ⚫ Substantial 7. Environment and Social ⚫ Moderate 8. Stakeholders ⚫ Moderate 9. Other ⚫ Substantial 10. Overall ⚫ Substantial @#&OPS~Doctype~OPS^dynamics@padcompliance#doctemplate POLICY COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No Does the project require any waivers of Bank policies? [ ] Yes [✓] No ENVIRONMENTAL AND SOCIAL Environmental and Social Standards Relevance Given its Context at the Time of Appraisal Page 5 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) E & S Standards Relevance ESS 1: Assessment and Management of Environmental and Social Risks and Relevant Impacts ESS 10: Stakeholder Engagement and Information Disclosure Relevant ESS 2: Labor and Working Conditions Relevant ESS 3: Resource Efficiency and Pollution Prevention and Management Relevant ESS 4: Community Health and Safety Relevant ESS 5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Relevant ESS 6: Biodiversity Conservation and Sustainable Management of Living Natural Relevant Resources ESS 7: Indigenous Peoples/Sub-Saharan African Historically Underserved Relevant Traditional Local Communities ESS 8: Cultural Heritage Relevant ESS 9: Financial Intermediaries Not Currently Relevant NOTE: For further information regarding the World Bank’s due diligence assessment of the Project’s potential environmental and social risks and impacts, please refer to the Project’s Appraisal Environmental and Social Review Summary (ESRS). @#&OPS~Doctype~OPS^dynamics@padlegalcovenants#doctemplate LEGAL Legal Covenants Sections and Description Section I.A.1(a) of Schedule 2 to the FA - Establish not later than thirty (30) days after the Effective Date, and thereafter maintain throughout the period of Project implementation, a Project steering committee (“Project Steering Committee”): (i) comprised of high level representatives from relevant ministries, departments, and agencies of government, including the Minister of the MoIFAR and the Minister overseeing the FMS Ministry of Interior (MoI); and (ii) vested with such powers, functions and competencies, acceptable to the Association and set forth in the POM, as shall be required to: (A) provide policy direction and guidance in the carrying out of the Project; and (B) promote inter- agencies and federal collaboration, coordination, and cooperation for Project activities. Section I.A.1(b) of Schedule 2 to the FA - Establish not later than thirty (30) days after the Effective Date, and thereafter maintain throughout the period of Project implementation, a technical working group (“Technical Working Group”): (i) comprised of inter alia, Director-General of MoIFAR, and DGs of FMS MoI, and other relevant government agencies as detailed in the POM, (ii) vested with such powers, functions, and competencies as shall be required to provide technical guidance for the Project including reviewing and approving the Annual Work Plans and Budgets and Project Reports. Section I.A.1(c) of Schedule 2 to the FA - Establish not later than sixty (60) days after the Effective Date, and thereafter maintain throughout the period of Project implementation, the Project Coordination Unit within the MoIFAR (variously the “Project Coordination unit” or “PCU”):; (i) led by a Project coordinator and assisted by competent, experienced and qualified staff, in sufficient numbers and under terms of reference acceptable to the Association (including a Page 6 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) procurement specialist, social specialist, gender based violence (GBV) specialist, financial management specialist, community development and local governance specialist, monitoring, evaluation and learning specialist – to be recruited not later than ninety (90) days after the Effective Date), as set forth in the POM; and (ii) vested with such powers, financial resources, functions and competencies, acceptable to the Association and set forth in the POM, as shall be required to: (A) coordinate all activities under the Project among all institutional stakeholders and liaising with the Association; and (B) carry out the day-to-day implementation of the Project including, procurement and contract management, financial management, budgeting and planning, ESCP compliance and monitoring, including establishing and operating grievance redress mechanism(s), communications, and awareness. Section I.A.1(d) (ii) of Schedule 2 to the FA - Without limitation to the provisions of sub-paragraph (c) immediately above, the Recipient shall: (ii) not later than twelve (12) months after the Effective Date, engage and thereafter maintain throughout the period of Project implementation, a data collection and knowledge management firm – all with qualifications and under terms of reference acceptable to the Association, to carry out such functions as shall be detailed in the POM. Section I.B.3 of Schedule 2 to the FA - The Recipient shall cause Somaliland to enter into the Somaliland Subsidiary Agreement in Section B.2 of this Schedule, not later than eighteen (18) months after the Effective Date. @#&OPS~Doctype~OPS^dynamics@padconditions#doctemplate Conditions Type Citation Description Financing Source The Recipient has prepared and adopted the Project Operations Manual, Section 4.01(a) of Article IV Effectiveness including all annexes, in IBRD/IDA, Trust Funds of the FA and SMPF GA form and substance satisfactory to the Association; and The SMPF Grant Agreement has been duly executed and delivered, and all conditions precedent to its effectiveness, or to the Effectiveness Section 4.01(b) of Article IV right of the Recipient to IBRD/IDA make withdrawals under it (other than the effectiveness of this Agreement), have been fulfilled. The Financing Agreement has been duly executed and delivered, and all Effectiveness Section 4.01 of Article IV Trust Funds conditions precedent to its effectiveness, or to the right of the Recipient to Page 7 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) make withdrawals under it (other than the effectiveness of this Agreement), have been fulfilled. Under Categories (1) and (2) unless and until, the Recipient has (i) prepared and adopted a Security Management Plan (SMP), Section III.B.1(b) of the FA in form and substance Disbursement and Section II.B.1(B) of the satisfactory to the IBRD/IDA, Trust Funds SMPF GA Association; and (b) established a Project Grievance Mechanism, in form and substance satisfactory to the Association; Under Category (4) unless and until Somaliland has: (a) executed the Somaliland Subsidiary Agreement setting forth implementation arrangements for Somaliland’s Respective Activities under the Project (including the flow of funds out of the Financing proceeds); (b) prepared and formally adopted the Disbursement Section III.B.1(c) IBRD/IDA Somaliland Manual for its Respective Activities under the Project; (c) established the institutional arrangements set forth in the foregoing manual, as shall be required for carrying out its Respective Activities under the Project, and (d) prepared, adopted and disclosed its environmental and social commitment plan, Page 8 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) including the environmental & social risk management documents; in a manner and substance satisfactory to the Association; For Eligible Expenditures under Category (5), until and unless the Association has notified the Recipient Disbursement Section III.B.1(d) IBRD/IDA that the conditions set forth in Section 5.15 (a) of the General Conditions have been fulfilled; For Complementary Financing for the Cat DDO under Category (6), until and unless: (i) the Recipient has furnished to the Association a request to reallocate and thereafter withdraw all or part of the Unwithdrawn Credit Balance for the Complementary Financing for the Cat DDO, and such Disbursement Section III.B.1(e) notice specifies the Cat IBRD/IDA DDO Legal Agreement; and (ii) the Association has accepted said request and notified the Recipient thereof, and is satisfied, based on evidence satisfactory to it, that the conditions precedent to withdrawal of the financing provided under the Cat DDO Legal Agreement have been fulfilled. Page 9 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) I. STRATEGIC CONTEXT A. Project Strategic Context 1. Somalia has made incremental progress toward consolidating its federal system, building core government capacity, and delivering basic services. On December 13, 2023, Somalia achieved substantial debt relief by reaching the Heavily Indebted Poor Countries Initiative’s completion point. The resulting increase in resources—combined with security measures and governance reforms sanctioned by the United Nations (UN) under Somalia’s Provisional Constitution, such as the establishment of Federal Member States (FMS)—have underpinned efforts to strengthen institutions and enhance the role of the state in service delivery. 2. However, foundational security, governance, cohesion, and development challenges continue to threaten the legitimacy of the state and the country’s transition out of fragility, conflict, and violence (FCV). The root causes of FCV are complex and multifaceted, but the 2023 Somalia Risk and Resilience Assessment (RRA) identifies three main drivers: (a) continued intrastate instability and elite contestation; (b) fractured relations between the state and citizens; and (c) deep-seated intercommunal divisions. The presence of the state remains limited in many parts of the country, particularly in areas experiencing conflict and violence and where nonstate armed groups, including Al-Shabab, retain territorial control and influence. Access to basic services remains poor and, despite some progress enhancing the role of local authorities in frontline service delivery, service delivery remains highly dependent on humanitarian assistance, UN and nongovernment actors, and the private sector. Social cohesion in Somalia is fragile due to clan divisions, political instability, and ongoing conflict. 3. Such challenges and multiple shocks, including climate shocks, have kept economic growth low and contributed to widespread poverty. Between 2019 and 2023, economic growth rates averaged only 2.1 percent, compared to a population growth rate of 2.9 percent. Based on the national line of US$754 per person, poverty rates were 54 percent nationally, 46 percent in urban areas, 66 percent in rural areas, and 78 percent among nomadic groups, according to the 2022 Somalia Integrated Household Budget Survey. Minority clans, ethnic groups, and religious minorities often face discrimination when seeking access to services and overall exclusion from economic and social life. 4. Somalia is extremely vulnerable to climate risks that pose significant threats to social stability. The country frequently experiences severe climate-induced shocks, such as prolonged droughts, floods, landslides, extreme heat, wildfires, and locust infestations, with far-reaching consequences, particularly for people living in poverty, members of marginalized groups, and those in hard-to-reach areas for the state and development partners. Current projections show temperatures raising by at least 2⁰C in most of central and southern Somalia—extremely vulnerable and conflict-affected areas. B. Sectoral and Institutional Context 5. The three main levels of the Somali state are federal, federal member state, and district. The Provisional Constitution recognizes two levels—the Federal Government of Somalia and the Federal Member States (article 48)—the latter including local government. The ongoing constitutional review process therefore assumes a three-tier governance structure. FMS laws recognize even more localized structures, such as municipalities and villages. There are approximately 172 districts across FMS and Somaliland and one interim administration.1 6. The presence and capacity of state institutions varies significantly across the country. The country’s complex political and security landscape generates complex de jure and de facto institutional arrangements on the ground. In Somaliland and Puntland, which have held local elections, district governments are relatively well-established and directly involved in the collection of revenues and the delivery of basic services. In other states, structures are present primarily 1The exact number of districts is unclear because Somali states created districts following the collapse of the central government in 1991. In many cases, the districts were announced by presidential decree with the involvement of the state legislatures, and they are not universally recognized. Page 10 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) in select urban centers. Overall, an initial mapping found that approximately 20 percent of districts have functioning district councils and authorities, 50 percent have interim administrations with weak capacity, 20 percent have accessible state structures whose stability is fragile, and about 10 percent have no state presence or access. 7. Somalia is not short of social capital and community institutions. As is common in FCV environments, Somalia has relied on social capital and informal institutions to resolve disputes, facilitate business, and address basic development problems. The 2023 RRA emphasized how social capital is a key source of resilience, highlighting Somalia’s traditional dispute resolution mechanisms, clan support networks, diaspora remittances, and civil society groups that step in to provide public services and help communities adapt to, cope with, and mitigate the impacts of diverse shocks. At the community level, clan elders utilize revenues from qaaraan (clan “dues”) to cover the convening of clan meetings, conflict resolution, compensation to clan members in case of loss of property or life, and support for the most vulnerable members.2 Development and humanitarian partners also work with and through community institutions. A quantitative survey conducted as part of the Bulsho Advisory Services and Analytics (ASA) engagement (P179287) found that in each rural village or urban ward, there is an average of five community institutions, including village development committees; village councils; women’s and youth groups; and, less commonly, sector committees for education, health, and water. The sustainability of community institutions varies depending on whether they enjoy broad grassroots support or if they were created only to attract aid. 8. Collaboration among community, local, and state institutions is critical to taking on common development challenges, including expanding access to basic services, responding to climate and conflict shocks, and enhancing livelihoods and local economic development. Extensive analytical work conducted through the Bulsho ASA contributed to efforts to deepen the understanding of community and local institutions in Somalia. Quantitative surveys of households and community leaders and comparative case studies on how rural and urban communities resolve common development problems reveal the crucial role of community institutions in facilitating collective action in response to common development problems. This research also found that communities were more successful when they could combine community resources and knowledge with external support, particularly from district authorities (if active), local nongovernment organizations, and local partners of international actors. 9. Fostering collaboration based on an inclusive social settlement and agreed rules and processes that Somalia citizens can trust regardless of their clan affiliation remains challenging. Obstacles include: a) Unequal access to and participation in existing community institutions. The Bulsho ASA surveys found that the distribution of community institutions is highly variable, and that household participation is concentrated in a small number of households. Only about 10 percent of survey respondents said they had participated in a community institution in the past two years. b) Foundational social cohesion and reconciliation. The Bulsho ASA and other surveys show that rates of social cohesion are lowest among social groups such as clans, subclans, livelihood groups, internally displaced persons, and host communities—impeding collective action and collaboration on common development problems. c) Citizen-state trust and the social contract. Trust is the weakest component of social cohesion across all groups, including between citizens and state authorities. Even when formally established, districts often lack the legitimacy to raise and manage resources due to the level of distrust. d) Fiscal resources. The Federal Government of Somalia (FGS) has increased its capacity to raise revenue, but it is still low according to international standards. Moreover, FMS and districts depend significantly on indirect taxation (e.g., custom duties), external donor resources, and fiscal transfers. The state lacks both the resources 2Jordan, K. 2016. “Community-Based and Customary Taxation in South-Central Somalia.” Report commissioned by the Somalia Stability Fund, the Danish Refugee Council, and the International Centre for Tax and Development. Page 11 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) to deliver services and the kind of direct taxation that gives citizens a voice—hindering the nascent “fiscal contract.”3 e) Dynamic security and alliance dynamics. Al-Shabab still controls large swaths of rural areas, and many areas remain fragile.4 The situation is partly security-related, with the government and Al-Shabab vying for the support of clan militias.5 Al-Shabab has successfully co-opted some local elders by offering them a stake in tax collection. The dynamics impede the establishment of robust state institutions and citizen-state relationships. f) Women are excluded from decision-making forums and peacebuilding efforts. Somalia ranks 169 out of 177 countries on the 2023 Women, Peace and Security Index. Only 21 percent of parliamentary seats were held by women after the recent FGS elections cycle.6 The recent Puntland elections only returned 2 percent female candidates.7 Women lack representation on most district councils as well.8 Key constraints to women’s participation in decision making include the clan system, traditional attitudes, and women’s lack of skills and access to financial resources and decision-making forums.9 10. The government’s policies on decentralization, stabilization, and reconciliation recognize these challenges and the need for both a top-down and a bottom-up approach to overcoming them. The FGS and FMS have issued a series of interconnected policies to create pathways for expanding the state’s presence and creating an inclusive social contract. The National Stabilization Strategy seeks to enhance community safety and recovery, social cohesion, social reconciliation, conflict management, youth livelihoods, community recovery, local institutional capacity, and the social contract. The National Reconciliation Framework aims to restore social relations, strengthen trust between the people and the government, and to support social recovery and environmental peacemaking. The FGS and FMS Decentralization Policy including the Wadajir Framework seek to strengthen the role of community institutions and local governments in service delivery, local economic development, livelihoods and resilience, resource mobilization, participatory planning, coordination, and accountability. These three core policies—in addition to policies on social cohesion and local climate Box 1. The Bulsho Program adaptation—provide a policy foundation for establishing and • A government-led program—not a development expanding the presence of an inclusive and legitimate state. partner project. • Implemented in all Federal Member States (FMS). 11. Development partner support to community • Focused on extending state institutions and services development and local governance efforts, while rich and to hard-to-reach and rural areas innovative, is fragmented and lacks clear pathways for • Ten-year timeline—2025 to 2035. scaling, institutionalization, and sustainability. Multiple • Local commitments or charters between citizens studies, including an in-depth operational review under the and authorities on process and resources—how Bulsho ASA that examined 15 years of community and local services are delivered matters. development initiatives implemented in Somalia between 2007 • National framework and local platform for and 2023, have identified numerous innovative and effective development partners and sector operations. interventions and approaches, including bottom-up • “Bottom up” approach to decentralization—drawing participatory planning, matching grants to incentivize cross- on both community-driven development (CDD) and community collaboration and build citizen-state trust, online local governance methods. digital platforms for tracking community and external resource • Led by the Ministry of Interior, Federal Affairs and mobilization and expenditures for local investments, and Reconciliation, in partnership with the Ministry of hybrid public financial management solutions. Such Finance, sector ministries, and FMS. 3 Di John, J. 2023. “Taxation, Resource Mobilization, and State Performance.” Crisis States Research Centre. Working Paper 84. London School of Economics. 4 See “Somalia Control Maps at Political Geography Now” at https://www.polgeonow.com/2023/01/al-shabaab-controlled-territory-2023-map-somalia.html. 5 ACLED. 2023. “Somalia: The Government and al-Shabaab Vie for the Support of Clan Militias,” ACLED (September 15). 6 Georgetown Institute of Women, Peace and Security 2023. Women, Peace and Security Index Country Profile: Somalia. 7 Puntland Development and Research Centre. 2019. “Women’s Political Participation: Case of Puntland 2019 Elections.” Puntland Development and Research Centre. 8 Somalia Ministry of Interior, Federal Affairs and Reconciliation 2022. Somalia Local Government Gender Advocacy Strategy 2022–2026. 9 MoIFAR (Ministry of Interior, Federal Affairs and Reconciliation). 2023. Gender Strategy for Local Government, p. 6. MoIFAR. Page 12 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) innovations provided a proof of concept in the Somali context but could not be scaled and mainstreamed because they ended when donor financing ceased. 12. The current approach provides inadequate incentives for the long-term engagement of communities and districts. Boutique and donor-driven initiatives tend to cluster in districts retaken from Al-Shabaab by the government several years prior or focus on already well-functioning districts and regions. There is limited support and incentives for local leaders to engage in state-building efforts over the medium and long term. And investments in improved service delivery do not automatically translate into enhanced state legitimacy or reduce conflict if not paired with legitimate “rules of the game” for planning, prioritization, resource mobilization, and service delivery. These findings align with studies on strengthening the social contract between citizens and the state.10 13. In response to these issues and to chart a new direction, the government recently proposed the “Bulsho” program, a multi-year effort that sets forth an operational framework (see box 1). With a bottom-up approach to enhancing social cohesion, inclusion, and resilience, and building on lessons learned from previous programs, in Somalia, Bulsho seeks to complement existing decentralization efforts. While the program’s focus is the community and district levels, it also aims to strengthen vertical intergovernmental linkages between FGS and FMS and between FMS and districts, as well as among communities to promote the social contract and state legitimacy. The Bulsho project was prepared in close collaboration with the Somali states and development partners, who have endorsed it as a framework for coordinating, scaling, and institutionalizing their individual efforts. 14. The World Bank’s Investment Project Financing (referred to as the “Bulsho anchor financing” or the “Bulsho project”) will support the Bulsho program, complementing existing sector projects and building on lessons learned and resources of development partner initiatives. The government has requested that the World Bank provide anchor financing to the government’s Bulsho program over a 10-year period. This initial operation would finance the program’s core structures, which would guide other development partner programs as well as the World Bank operation, and the piloting of the project’s three support packages, customized to each district’s social and institutional context. It is expected that Bulsho will operate in Galmudug, Hirshabelle, Jubaland, Puntland, Southwest State, and Somaliland. II. PROJECT DESCRIPTION A. Project Development Objective (PDO) To strengthen community and local institutions for improved social cohesion, inclusion, and resilience. B. Theory of Change and PDO Indicators 15. The Bulsho project will provide anchor financing for government implementation to strengthen community and local institutions to foster social cohesion, inclusion, and resilience. The government’s decentralization, stabilization, and reconciliation policy framework guides the program, which will support decentralization and the expansion of state reach by strengthening district and community institutions and coordinating with FMS and FGS; process legitimacy through inclusive and participatory governance; and trust and social cohesion by incentivizing collaborative action within and among communities and between communities and the state. The program aims to extend local governance and services to hard-to-reach and rural areas. 16. The theory of change centers around a bottom-up and process-oriented approach to strengthening community and local institutions. The project seeks to leverage Somalia’s robust social capital, community institutions, and nascent state institutions while providing technical support and incentives for intercommunity collaboration, inclusive citizen-state engagement, and the expansion of the state’s presence. Project activities will include delivering adaptive capacity-building assistance to local officials and community leaders commensurate with the local context; implementing at scale a local 10 Cloutier, Hasson, Isser, and Raballand. 2021. “Understanding Somalia’s Social Contract and State-Building: Consequences for Donor Interventions.” Washington, DC: World Bank. Page 13 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) social contract platform that starts with citizens’ objectives, needs, and priorities; and providing matching grants that incentivize communities, local leaders, district authorities, the private sector, and the diaspora to mobilize resources and collaborate in the delivery of sustainable solutions. As described in table 1 below, strengthening collective action and state institutions will enable communities and local authorities to stimulate economic development and respond to climate and conflict shocks. Table 1. Project Theory of Change Problem Statement: Unequal participation in community institutions, low trust levels among social groups and in state institutions, elite capture and patronage, weak resource mobilization, and fragmented development partner support undermine the social contract between citizen and state and prevent the expansion of state institutions capable of stimulating local economic growth, mitigating climate shocks, and delivering basic social services in partnership with citizens, local authorities, and the private sector. Activities Outputs Outcomes Impact Short Term Medium Term Bulsho’s commitments on District-level capacity in Awareness campaigns and process and inclusion signed community outreach and commitment ceremonies on participatory planning, Bulsho’s core principles Social, technical, and public financial administrative training and Collaboration among management, monitoring Adaptive graduation-style support delivered to district communities to resolve and evaluation (M&E), capacity building for district officials and community leaders development problems Social cohesion and E&S improved authorities and community increased between groups leaders, including women and Tools and model regulations for enhanced Districts graduate from youth resource mobilization, Community, local support package A to B investment tracking, social government, and Trust in state and then from B to C District incentives to execute accountability, and core district private sector resource institutions inclusive community and structures established pooling for capital enhanced Community, leadership, district spaces for planning, investments increased and private sector prioritization, resource Annual district capacity-building Empowerment participation in forums for mobilization, and oversight plans executed Influence of women of women and decision making and and marginalized marginalized resource mobilization Matching grant incentives Intergovernmental conditional groups in decision groups increased and voice vouchers for cross- grant mechanism and voice making on priorities increased community investments in vouchers operationalized and resource Participation of women, economic infrastructure, local mobilization increased Resilience to youth, and marginalized climate resilience, and basic Climate-resilience, basic conflict and groups in decision making social services services, and economic Climate-resilient climate shocks increased infrastructure investments planning, preparation, increased Project management support made and surveillance Public knowledge of, for state- and FGS-level improved agreement with, and implementation, technical States and FGS technical, satisfaction with district backstopping, and oversight fiduciary, and environmental development plans and and social (E&S) staffing investments increased capacity enhanced Critical assumptions: (a) Citizens and local leaders are willing to commit to Bulsho’s principles and processes; (b) communities, local leaders, and district authorities are adequately incentivized to engage in the Bulsho program’s multi-year graduation approach; (c) households, the diaspora, and the local private sector are able and willing to contribute financial resources for prioritized investments; and (d) there are adequate incentives for the sector agencies of FGS and states to provide technical support for the design and execution of prioritized investments. 17. The proposed PDO indicators are: • Number of communities that collaborate to resolve development problems in project target areas • Number of co-financing resources mobilized by communities, the diaspora, local governments, or the local private sector Page 14 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) • Number of people benefiting from actions to expand women’s participation in decision making (Corporate Results Indicator). • Number of people benefitting from climate-resilience planning, preparation, surveillance, or response (Corporate Results Indicator) C. Project Beneficiaries 18. The main categories and overall estimated number of beneficiaries who will be reached in the first three-year phase of the project are: • Individuals. About 1.7 million citizens (30 percent women) from 50 target districts will benefit from enhanced participation in decision making at the community and district levels. • Communities. About 400 villages or wards will benefit from an increased capacity to identify opportunities, collaborate across social groups, and implement small-scale investments that strengthen climate resilience, basic social services, and local economic development. • District governments. The project will support up to 50 district governments increase their capacity to plan, budget for, and execute local investments; raise and manage financial resources; and deliver services. D. Project Components 19. The Bulsho project will be delivered under four inter-related components. The first will strengthen the capacity of the Ministry of Interior, Federal Affairs and Reconciliation (MoIFAR) to coordinate and cascade delivery to FMS and districts, including working with other partners. The second will support institutional strengthening at the state and district level, tailored to specific local contexts based on where a district falls on the stabilization continuum. The third will focus on institutionalizing local social contract platforms that build on and expand district participatory planning and implementation. The fourth will match grants to districts that meet eligibility criteria and conditions for participation detailed in the project operations manual (POM). 20. Component 1. Community and District Social and Institutional Strengthening—$8,700,000 total ($3,700,000 from Somalia Multi-Partner Fund [SMPF] and $5,000,000 from International Development Association [IDA], including $1,200,000 for Somaliland). The first component will finance institutional-strengthening activities under the three district support packages (see description below). Package A includes foundational institutional strengthening for districts emerging from an early stage of stability with minimal state presence (approximately 29 districts across Somalia). Package B includes enhanced institutional strengthening for districts that have established an interim or permanent state administration but possess limited capacity for community Diagram 1. Bulsho’s Spatial Focus across the Continuum of engagement, planning, and service delivery (approximately State Presence and Fragility 90 districts). Package C includes advanced institutional strengthening for districts that have established district councils and are capable of resource mobilization, coordination, and service delivery (approximately 37 districts). See diagram 1 for a summary of the Bulsho ∼ 16 districts ∼ 29 districts ∼ 90 districts Approx 37 districts program’s spatial focus. N/A—Not eligible 6–13 districts in 12–17 districts in 6–20 districts in Component 1 will finance first three years first three years first three years technical assistance to identify Page 15 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) inclusive community and local institutions and activities on foundational reconciliation, social healing, conflict management, public financial management, leadership, and awareness raising on Bulsho’s inclusive principles and processes. The component will also include dedicated capacity-building activities on community climate risk and vulnerability diagnostics (including drought, floods, extreme heat, and landslides), participatory planning and budgeting to build resilience to climate risks, and incorporation of climate-resilience objectives into subproject investment designs.11 There will also be a subcomponent for strengthening environmental and social risk management at the state and district level, including subproject screening tools. 21. Component 2. Local Social Contract Platform—$4,650,000 ($2,000,000 from SMPF and $2,650,000 from IDA, including $650,000 for Somaliland). Component 2 will support districts and communities eligible for support packages B and C to establish and execute spaces and forums for participatory planning and social accountability as well as the systems for communities and district authorities to monitor, assess and adapt to local climate risks. Each district will receive support to execute Bulsho’s local social contract platform aimed at engaging communities in a coordinated manner and building its adaptive capacity to respond to climate shocks, such as prolonged droughts and extreme floods. The component offers: (a) community diagnostic, prioritization, and collaboration forums in each community to assess its exposure to climate risks and natural hazards, identify development problems, and explore ways to reduce risks and address development priorities, including using Bulsho’s digital tools to generate climate risk and adaptation solutions in visual and audio formats; (b) participatory planning systems that convene citizens, community institutions, and local authorities to prioritize development interventions in their respective districts and promote climate adaptation practices tailored to local needs, such as the use of drought-resilient seeds; (c) resource mobilization and budgeting for local investments that tag climate adaptation and mitigation priorities; (d) community oversight and accountability systems to track, monitor, and provide feedback on government spending, implementation of priority interventions, and crisis response; and (e) charters between citizens and the government that encompass the government’s commitment to address climate risks and provide or facilitate the provision of basic services through private or humanitarian actors based on community priorities; commitments regarding process, such as participation, transparency, and grievance handling; and commitments of citizens regarding process and their contributions. The objective is to create a platform for government, development partner programs, and World Bank-financed projects to jointly and systematically engage communities and citizens to foster community-led proactive responses to climate and other risks. Component 2 will also cover the operational costs associated with districts administering the matching grants and voice vouchers (see component 3). Components 1 and 2 will apply the principal of subsidiarity when assigning capacity-building roles to FGS and Box 2. Matching Grants Formula FMS. Bulsho will provide funding to districts through an imprest Bulsho’s matching grants approach will foster collective financial accounting system to execute outreach activities and action using a variable formula that rewards participatory and social accountability tools. Component 2 will intercommunity collaboration. support the execution of a financial technology (fintech) • An investment among three or more villages or platform to track contributions and grants to districts and sections of a town will receive a match of $3 for communities, with a dedicated repository for documentation every dollar raised. related to local investments and enhanced functionalities to tap 12 • An investment between two villages or sections of a into diaspora funding. town will receive $2 for every dollar raised. 22. Component 3. Matching Grants for Social Cohesion, • A small investment in a village or section of a town Inclusion, and Resilience—$19,350,000 ($4,800,000 from will receive $1 for every dollar raised. SMPF and $9,550,000 from IDA, including $2,350,000 for 11 The dedicated climate capacity building activities covering the 50 target districts and 1,250 communities will absorb an estimated one-third of the total Component 1 allocation ($2,900,000). This amount will consist of district climate resilience regulatory framework and tool development for all FMS and Somaliland districts ($500,000) with the remainder equally divided between three types of capacity building (community climate risk diagnostics and prioritization, district planning and budgeting, and incorporation of climate resilience designs in investment design). 12 The Economist (2025), ‘Government by Social Media in Somalia,’ The Economist. Page 16 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) Somaliland, plus $5,000,000 targeted for mobilization from the community, diaspora, and local private sector). Component 3 will finance matching grants to districts that graduate from support package B or otherwise meet the minimum criteria for participating in package C activities. The grants will finance community priorities identified through the social contract platform, prioritizing three themes: (a) climate adaption and resilience investments, such as water supply systems, small water catchments, embankments, drains and rain-off regulations, wind breakers, and erosion protection; (b) dual purpose design or rehabilitation of facilities for basic social services and act as emergency shelters for local communities in response to climate-induced risks, such as primary and secondary schools, health facilities, daycare centers, and dispensaries; and (c) local economic infrastructure, such as markets, tertiary roads, and irrigation rehabilitation.13 The POM will include an iterative list developed in collaboration with each state. The matching formula aims at incentivizing collaboration among communities to resolve shared development problems (see box 2). During the initial three budget cycles, only a few districts receiving support packages A and B are meeting the minimum conditions for participating in the matching grants activity under package C. The POM will specify minimum and maximum grant sizes, with an anticipated average of $15,000. Grant amounts for villages will be based on their resource mobilization efforts and the size of their investments. Each district will execute an average of 15 local investments per budget year, promoting equity and inclusion without straining capacity. The component will utilize the Inter-Governmental Fiscal Transfers Pilot under the Recurrent Costs and Reform Financing (RCRF) project (P173731) to promote intergovernmental transfers as a crucial aspect of federalism. 23. Voice Vouchers. Component 3 will also finance collective action “voice vouchers” for selected marginalized and disempowered groups such as women, youth, and internally displaced persons to increase their influence in their communities and at district-level decision-making forums. Members of the selected groups will receive monetary vouchers that can be allocated to their priority investments. The matching grants and voice vouchers build on successes of the Develop Informed and Accountable Local Governance through User Empowerment (DIALOGUE) project (see section on lessons learned and reflected in the project design below). 24. Component 4. Project Management for Coordination, Delivery, Innovation, and Learning—$7,300,000 ($4,500,000 from SMPF and $2,800,000 from IDA, including $800,000 for Somaliland). Component 4 will finance operational and project management support for MoIFAR to review, develop, and/or cascade institutionalization of policy, legislation, regulations, and guidelines, as well as operational and project management manuals for FMS and the ministries of interior in Somaliland to execute the project at the subnational level. This component will also augment the capacity of MoIFAR to deliver technical support and backstopping to FMS related to components 1, 2, and 3 to comply with World Bank guidelines and requirements; foster coordination between and across government and with development partners; monitor results and report progress; and document and disseminate innovations and lessons, including those from other development partner initiatives. 25. Support Packages. Three distinct support packages, drawn from components 1, 2, and 3 (see table 2), form the core of the Bulsho project. Each package is tailored to one of the three types of districts described above. Districts that advance along the stabilization continuum can qualify for an enhanced package. a) Package A supports districts that lack pre-existing foundational capacity. The package provides technical assistance delivered by the states and FGS to foster the conditions needed for districts, towns, or villages to eventually access enhanced Bulsho support (packages B and C). 13Although local investments will depend on community and local decisions, past experience from similar pilots suggests that approximately 40 percent of investments will be directed to climate-resilience investments and the remaining 60 percent will include climate-resilient design features and, where possible, adapt climate resilience dual objectives, e.g., schools acting as climate emergency evacuation or emergency shelter in response to extreme heat, floods, or other risks. Page 17 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) b) Package B supports districts that have a pre-existing foundational capacity or that have graduated from package A. Capacity-building activities such as crowdfunding; participatory planning; project management; revenue management; budgeting; procurement; public financial Table 2: Components of Each Package management for local authorities, towns, and communities; and access to the funding platform will be Packages / Comp 1 Comp 2 Comp 3 tailored to the local context to allow for the management Components of Bulsho’s matching grants and financial support and to Package A ✔ establish the local social contract platform under Package B ✔ ✔ component 2. Package C ✔ ✔ ✔ c) Package C supports districts with pre-existing enhanced planning, budget, and public financial management capacity as well as those that have graduated from package B. Package C will provide access to matching grants and voice vouchers under component 3, in addition to continuous technical support and refresher capacity- building support. E. Role of Partners 26. The government will draw on an active group of development partners to achieve the aims of the Bulsho program and the Bulsho project and complement the financing from the IDA and the SMPF project. Partners engaged in the triple nexus of stabilization, reconciliation, and decentralization are already contributing to the program through policy development, the establishment of district-level public financial management systems, matching grants, and community stabilization and reconciliation. The roles of each partner are outlined below. Name of Partner Nature of Involvement International Organization for Migration – The International Organization for Migration will build an enabling environment Community Stabilization Program for vulnerable districts and communities to access package A activities and for maturing districts to access package B activities. Somalia Stability Fund The reconciliation and decentralization interventions of the Somalia Stability Fund will create the conditions for districts and communities to access package B activities. Joint UN Programme on Strengthening The Dowladkaab Programme will create district-level systems and processes such Local Governance and Decentralized as the District Development Framework and Local Development Fund that the Service Delivery (Dowladkaab Programme) Bulsho program can use to deliver package C activities. F. Lessons Learned and Reflected in the Project Design 27. Bulsho’s design is underpinned by local and global knowledge, including an in-depth operational review under the Bulsho ASA engagement, which encompassed the World Bank’s prior Community Driven Recovery and Development Project, the DIALOGUE project, and the UN’s Joint Program for Local Governance. The design also draws from lessons learned from ongoing operations, including public participation and community planning under the Barwaaqo Somalia Water for Rural Resilience Project (P177627), fund flows to local authorities under the Somalia Urban Resilience Project II (P170922), and the intergovernmental fiscal transfer pilot under the RCRF project and the Enhancing Public Resource Management project (P177298). Globally, the design draws on experience from the Citizen Charter Program (P160567) in Afghanistan to inform the citizen charters for the local social contract platforms where district authorities and citizens will define their respective commitments; the Financing Locally-Led Climate Action Program (P173065) in Kenya; and a global review of social cohesion and displacement interventions. Bulsho also draws on FCV analytics, including the RRA, to better understand the operating context, as well as a forthcoming report on delivering projects in highly insecure FCV settings. 28. Decentralizing management structures enhances coordination and efficiency. The use of project implementation units (PIUs) at the national and state levels is vital to fostering efficient project execution at the local level. The Bulsho Page 18 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) project will adopt coordination and implementation units at both the national/federal and state level based on lessons gleaned from other projects in Somalia, such as the Somalia Urban Resilience Project II, whose fiduciary specialists support national and FMS staff in executing fiduciary functions at the state level and across states, and the Somali Crisis Recovery Project (P173315), which centralizes the procurement function but collaborates with state-level officials. 29. Local-level awareness-raising and capacity-building activities for government officials and communities on participatory processes are crucial to the long-term sustainability of effective community engagement. Lessons from existing community investment planning projects, such as the Barwaaqo Somalia Water for Rural Resilience Project, point to the importance of streamlining the community engagement processes. The experience also shows that community engagement can be quite intensive, sometimes requiring considerable time and deployment of human resources. Bulsho will take a streamlined approach to scaling its efforts across districts and villages, informed by the experience of moving away from large and expensive facilitation teams under the first World Bank-funded Community Driven Recovery and Development Project, which usually had one facilitator lead the mobilization process in three communities, to a lighter and more organic approach under the DIALOGUE project, which averaged one facilitator to guide and oversee a self- organized process in 28 communities.14 30. Matching grants can incentivize collaboration and build trust. Bulsho’s matching grants approach draws on the experience of the DIALOGUE project, which successfully piloted the use of matching grants to incentive cross-community collaboration and build citizen-state trust. A randomized control trial by the International Centre for Tax and Development, a research center hosted by Sussex University in the United Kingdom, found evidence of a significant overall increase in trust among treatment communities in in the district government and in other clans, a significant increase in individuals who had engaged with a state official, improvements in citizen perceptions of the district government’s transparency, and some improvement in views of the district government’s inclusivity.15 To date, several aid agencies have leveraged more than $1.5 million in cash contributions from communities through matching schemes. This funding is being tracked by Sokaab and Bulshokaab—financial platforms created by other development partners. 31. Leveraging the External Assistance and Fiduciary Section (EAFS). EAFS units are responsible for the overall financial management of all externally financed projects, including those supported by the World Bank, and their performance has been satisfactory. The existing organizational and functional structure of the EAFS units are expected to be maintained and further strengthened to provide effective financial management support to Bulsho and oversee the project’s fiduciary arrangements. All project financial management transactions will be recognized, captured, recorded, analyzed, summarized, and reported through the Somalia financial management information system and Bisan system in FMS. The effectiveness of the EAFS units, alongside other key functional units, will be continuously monitored. The Bulsho project will identify and support key areas for capacity strengthening. 32. Intergovernmental Fiscal Transfers Pilot. The Bulsho project will use the country’s nascent fiscal transfer system to channel matching grants under component 3. The RCRF project is piloting the Inter-Governmental Fiscal Transfer Framework as a mechanism for providing fiscal transfers (grants) to districts for service delivery. This pilot was developed in consultation with FMS and MoIFAR. In September 2024, the Intergovernmental Fiscal Federalism Technical Committee (IGFF-TC) approved a grant manual agreement establishing the framework for intergovernmental transfers to district governments and service delivery agreements; and in October 2024, the Finance Ministers Fiscal Forum endorsed it. The initial pilot allocated $1 million across five FMS, that is, a potential allocation of $200,000 for each eligible district per FMS. 33. Supporting country systems is crucial to fostering government accountability, legitimacy, and trust in state institutions. This was a key conclusion in a FCV analytical report detailing the World Bank’s global experience working in highly insecure areas. The report also underscores the importance of engaging across various levels of government, 14Bandula-Irwin, Tanya. 2021. Sool DIALOGUE Project: Endline Report, International Centre for Tax and Development. 15 van den Boogaard, V., and F. Santoro. 2001. “Explaining Informal Taxation and Revenue Generation: Evidence from Southcentral Somalia.” International Centre for Tax and Development Working Paper 118. Brighton: Institute of Development Studies. Page 19 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) avoiding an overly centralized approach to foster inclusivity and ownership, minimizing risks, and taking a phased implementation approach to interventions. III. PROJECT IMPLEMENTATION A. Institutional and Implementation Arrangements 34. The FGS MoIFAR will be the lead implementing agency for the Bulsho project. At the state level, the ministries of interior (MoIs) will take the lead, working with relevant sector ministries. Because Bulsho seeks to build the country’s capacity over the long term, the institutional arrangements will favor the use of government staff to the extent possible. The following structures are expected to coordinate with partners active in the governance space as well as with other existing coordination structures, such as for reconciliation and stabilization. 35. Project Steering Committees. Project steering committee (PSC) members will include senior-level government representatives (ministers or deputy ministers) from the relevant FGS ministries and FMS and Somaliland MoIs. The committee will be chaired by the minister of MoIFAR and co-chaired by the minister of an FMS MoI on rotating basis. The primary duties of the committee is to champion the Bulsho approach with stakeholders; make strategic decisions about priorities; coordinate the involvement of sectors; and ensure policy and operational alignment including with other processes under the triple nexus of stabilization, reconciliation, and decentralization; approve the POM, annual work plans, and budget allocations; resolve disputes; and address political economy and spatial equity challenges. 36. Technical Working Group. Technical working group (TWG) members will include the directors general of MoIFAR and the MoIs of FMS and Somaliland. The director general of MoIFAR will serve as chair, and the directors general of the FMS and Somaliland MoIs will serve as co-chairs on a rotating basis. The TWG will guide and oversee the implementation of the Bulsho project. It will hold preparatory sessions prior to PSC meetings. The TWG will involve government agencies from FGS and FMS as relevant to a given sector. It will receive updates from relevant projects to aid coordination as well as crowd-in direct and indirect support to the government’s Bulsho project. 37. National Project Coordination Unit. MoIFAR is responsible for the overall delivery of the Bulsho Program and World Bank anchor financing (the Bulsho project), although most of the day-to-day implementation of components 2 and 3 will be delegated to states and districts, with MoIFAR providing oversight. A national-level (FGS) Project Coordination Unit (PCU) housed at MoIFAR under the supervision of the director general, with guidance from the TWG and PSC, will be staffed with a mix of externally recruited specialists and seconded FGS staff. The PCU will allocate operational costs for internship initiatives for women and youth. 38. State Project Implementation Units. State-level Project Implementation Units (PIUs) will work under their respective director general of the state MoI, with technical support and guidance provided by the PCU. The PIUs will be responsible for the project management of state-level activities and for coordinating with their respective districts. 39. District and Community Implementation. The Bulsho project will work through district administrations and community institutions. A memorandum of understanding will be signed between the states and participating districts. The conditions for a district to participate in package B and C, which include component 2 activities, will require the assignment of core focal points (see table 2). Districts that participate in package C activities will receive and manage matching grants from component 3. Prior to the mobilization of community resources that the grants will match, the district finance and outreach officers will help communities establish subproject execution committees to collect and deposit contributions from households, the diaspora, and the local private sector, which the Bulsho fintech platform will track. These committees will also develop technical designs and execute the subprojects.16 Under package C, subsidiary memoranda of understanding between the districts and the community committees that will implement the subproject investments will be signed. Page 20 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) 40. Table 2 summarizes the personnel for each delivery level, and annex 2 provides more detail on implementation arrangements, including the roles and responsibilities of the PCU, PIUs, and districts. Table 2: Multi-Level Delivery Structure National Project Coordination Unit State Project Implementation Units Head Director General of MoIFAR Directors General of MoIs Leadership • Relevant department directors • Relevant department directors Consultants • National project coordinator • Project manager • Procurement specialist • Public financial management specialist • Financial management specialist • Community development and local governance • Local government and community specialist development specialist • MEAL officer • Monitoring, evaluation, accountability, • Gender and social officer and learning (MEAL) specialist • Environment officer • Social specialist • Environment specialist • GBV specialist (at least part-time) Secondees • Two support staff per specialist • One support staff per specialist Support Firms • Third-party monitoring firm (fiduciary, inclusion, and technical quality) • Security risk management firm • Digital innovation firm • FGS and State-level Logistic service providers • Knowledge management and research firm District Focal Points • Coordinator (packages B and C) (for districts • Community outreach officer (packages B and C) receiving packages • Finance officer (packages B and C) B and C) • Administration officer (packages B and C) • Planning and monitoring officer (package C) • Engineer (package C) 41. Female Staffing Quotas. The project will mandate that at least 30 percent of staff at all three levels (FGS, state, and district) be women. It is critical that the project itself demonstrates to communities and citizens the inclusive values that Bulsho seeks to promote and the outcomes it seeks to achieve. Measures to meet this minimum representation will include active outreach to women’s groups, organizations, and universities to encourage female applicants; the development of an internship scheme to attract newly graduated women; and a requirement that at least a third of shortlisting/interviewing panel members be women. Additional measures include a project security management plan that considers the specific security needs of women, the creation of a female-friendly work environment through dedicated leadership trainings, the provision of a childcare benefit for female employees, and the introduction of flexible working arrangements—especially in non-field positions. To the extent possible, candidate interviews and assessments will be held locally and employ competency-based criteria, with allowances made for candidates falling marginally short of required established experience or qualifications. Advertisements for jobs will include specific language targeting female candidates and those from disadvantaged backgrounds. B. Results Monitoring, Evaluation, and Verification Arrangements 42. M&E System. MoIFAR will be responsible for M&E overall, including the preparation of consolidated quarterly progress reports and an annual report to the World Bank. The MoIFAR-hosted Bulsho National PCU and the state-level Page 21 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) MoI-hosted PIUs will have M&E specialists and officers on staff responsible for collecting and collating data on project outputs and outcomes. Communities will play a significant role in monitoring the implementation of the local investments co-funded by Bulsho and in assessing the implementation quality of the citizen charters on scorecards. The POM will include reporting templates for MoIFAR monitoring, as well as standard operating procedures or guidelines for community monitoring and scorecards. 43. Third-Party Monitoring. The project will adopt a two-pronged third-party monitoring strategy. First, MOIFAR will engage an independent firm to cover three areas: (a) fiduciary oversight; (b) inclusion processes and requirements under component 2; and (c) technical quality of subproject investments under component 3. In addition to producing quarterly reports, the monitoring firm will work closely with relevant government departments at all levels to address issues and implement corrective actions. In this way, the third-party monitor will improve internal controls, fiscal management, and compliance with financing criteria, as well as technical capacity. Second, the World Bank will engage consultants to conduct ad hoc third-party monitoring on a semi-annual basis in connection with its supervision and implementation support mission, including as it relates to fiduciary, inclusion, and technical quality issues. 44. Data Collection. The PCU at MoIFAR will engage a research firm to conduct surveys to capture project results over the lifespan of the project, including baseline, mid-term and endline surveys. The firm will take responsibility for developing and executing surveys on: (a) beneficiaries of capacity building under component 1 to measure their increased understanding of government processes related to the Bulsho Local Social Contract Platform; (b) community members that participate in the Bulsho forums on the Local Social Contract Platform under component 2 to directly track the quality of their interactions with the district and state governments; and (c) users of infrastructure co-financed by Bulsho under component 3, such as schools, health facilities, water systems, and markets, to directly track their satisfaction levels and increased access to services. C. Disbursement Arrangements 45. The project will follow the Statements of Expenditure (SoE) method of disbursements. Two designated accounts’ (DA-A, and DA-B) will be opened for the project at the Central Bank of Somalia (CBS) for FGS and FMS level activities respectively. A third designated account will be opened for Somaliland in a financial institution acceptable to the Bank. Funds from the World Bank will be deposited in the respective designated accounts and payments for project activities will be made therefrom. An initial advance will be made to the DA based on submission of withdrawal application to the Bank accompanied by a six-month cash forecast. Subsequent disbursements to the DA will be based on submission of withdrawal application accompanied by a SoE. As much as possible, consultants, contractors and suppliers will be paid through the direct payment method to mitigate the fiduciary risks associated with holding funds in the DA. See Diagram 1 in Annex 2 for fund flows. IV. PROJECT APPRAISAL SUMMARY A. Technical, Economic, and Financial Analysis 46. Project Operations Manual. The Bulsho project will provide anchor financing for the first three-and-half years of the government’s Bulsho Program (2025–2030), whose objectives, approach, and implementation modalities are set out in the government’s program document. The document anticipates that development partners will execute their support to the government program in accordance with their own implementation modalities and requirements. Per World Bank standard procedures for Investment Project Financing, the Federal Republic of Somalia, through FGS MoIFAR, the state- level MoIs, and districts will execute the IDA-financing “on-budget” and “on-treasury.” Implementation modalities will be detailed in the Bulsho POM. At the time of appraisal, MoIFAR had prepared a draft covering all aspects of the project, including district selection, component implementation, fiduciary arrangements, E&S arrangements, monitoring and evaluation, and governance. MoIFAR will submit the final POM as a condition of effectiveness. Page 22 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) 47. Paris Agreement Alignment—the project aligns with Paris Agreement objectives for mitigation and adaptation. The proposed operation does not hinder the adaptation and mitigation goals of the Paris Agreement. It aligns with Somalia’s Nationally Determined Contribution (NDC) 2022 and the Somalia National Climate Change Policy of 2020. As of 2022, Somalia had contributed less than 0.03 percent of total global greenhouse gas (GHG) emissions. Under the updated contribution, Somalia has set a 30 percent reduction target in GHG emissions against a business-as-usual (BAU) scenario by 2030. Project activities fall under the Services category of eligible activities on the Universally Aligned List, thereby limiting mitigation risks and any hindrances in meeting the GHG emissions goal. The project will contribute to the adaption actions outlined in Somalia’s updated NDCs through capacity building and incentives, support the establishment of local climate adaption systems, encompassing climate diagnostics, resilience planning, resilience and resilient sub-project design, and local climate expenditure tracing. 48. Assessment and reduction of adaptation risks. Bulsho project activities include climate adaption capacity building (Component 1), implementation of local climate adaption systems (Component 2), investment in climate resilience and climate resilient sub-projects (Component 3), and climate sensitive project management (Component 4). Climate change is not likely to affect the project’s capacity-building and institutional-strengthening efforts. However, the project’s investments under Component 3 are exposed to climate risks, including extreme precipitation, flooding, and droughts. To keep any possible material impacts to an acceptable/low level, the project design includes several risk reduction measures, including training for community and local authorities on understanding local and site-specific climate risks and vulnerabilities, and contingency measures to address climate-exacerbated disasters, such as using climate vulnerability mapping tools to support the selection of resilience solutions and resilient sub-project design. 49. Assessment and reduction of mitigation risks. The project is expected to have low level of impact on GHG emissions and aligns with the Somalia’s transition to low GHG emissions pathways. Many project activities focus on capacity building that is not expected to cause emissions. Other activities aimed at building or rehabilitating small-scale infrastructure (see above) are likely to generate GHG emissions, but only at low levels, and significantly less than without the project. Facility and infrastructure investment under all three priority themes—climate resilience, basic social services, and local economic development—under Component 3 will integrate low-carbon features such as water harvesting, solar power and extreme heat insultation. Road sub-projects will not expand or promote expansion of roads into areas of high carbon stocks or high biodiversity areas. Overall, the project does not prevent the transition to lower-carbon alternatives that may become viable in the future and remains viable after accounting for transition risks. 50. Economic Analysis. The project is expected to generate economic benefits at three levels: (a) most tangibly, at the outcome level by increasing technical capacity (components 1 and 2) and improving access to basic services (component 3); (b) at the PDO level by strengthening communities and local institutions; and (c) at the impact level, by generating improvements in social cohesion, inclusion, and resilience with broader societal benefits. As elaborated below, the latter two are expected to generate significant positive external benefits for Somali citizens, the state, and development actors. 51. The rationale for public sector financing for the Bulsho program is twofold. First, the project will invest in core public institutions at the district and community level, and then it will seek to address spatial and social inequalities in the delivery of services. The project investments in public institutions, including community and district planning, social accountability, transparency, and local financial systems, are expected to generate high positive externalities for Somalia citizens, private sector actors involved in service delivery, FGS and state financed activities, as well as other development partner-financed activities in Somalia. The project will address inequalities in the delivery of services that markets are currently unable to deliver due to instability. Indeed, over time, the project will support an expanded state presence, which will then enable the expansion of markets and the private sector. 52. The economic analysis reviewed numerous quantifiable benefits associated with investing in community resilience, basic social services, and economic infrastructure. All surveyed investments had positive net present values (NPVs) with Page 23 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) the internal rate of return (IRR) ranging from 13 to 60 percent. The road scenarios had positive NPVs with IRRs ranging from 12 to 22 percent. Secondary school investments had a positive NPV with an IRR of 60 percent. Small-scale water systems had a positive NPV with an IRR of 24 percent. An investment in health facilities is expected to generate $1.94 for every $1 spent. The economic analysis was unable to quantify the project’s institutional strengthening activities under components 1 and 2, but the literature suggests that they will be significant if trust levels can be increased by enhancing resource mobilization; social cohesion improved by promoting collective action; interclan conflicts reduced, resulting in a decrease in violence and destruction; and institutional fragility reduced, lowering risk levels and transaction costs. 53. Fiscal Sustainability and Institutional Reforms. The Bulsho project will leverage the existing country systems for its financial management processes, including utilizing the national frameworks for accounting and reporting, banking, and oversight arrangements with the Office of the Auditor General Somalia. The project will ensure that staffing is managed through the established country systems, thereby promoting consistency and integration with national procedures. This approach aims to enhance the project’s alignment with local practices and strengthen the overall financial management capacity in the country. 54. The Bulsho project focuses on fiscal sustainability by strengthening local governance and ensuring transparent financial management. It establishes a fiscal framework that links intergovernmental transfers to last-mile service delivery, supporting fiscal decentralization. The project provides district governments with resources to address service gaps and improve essential services in underserved areas. These efforts align with broader FGS and state initiatives to enhance fiscal sustainability through improved resource management, strengthened intergovernmental fiscal coordination, and adherence to public financial management reforms. By integrating performance-based financing and ensuring compliance with national fiscal reporting standards, the project contributes to ongoing institutional strengthening efforts that improve budget credibility, expenditure efficiency, and financial accountability across government levels. It also emphasizes capacity building at the district level by developing robust systems for managing and reporting financial transfers, thereby addressing capacity gaps and establishing sustainable local government spending. Strengthening domestic revenue mobilization ensures the long-term sustainability of local government finances, reducing dependence on external funding and fostering economic independence at the district level. 55. The project aims to institutionalize the intergovernmental transfer system, creating a systematic and sustainable approach to funding across all government levels; improving coordination among federal, state, and district governments; and contributing to more effective public service delivery. Compliance with existing financial management legislation ensures compliance with legal standards, reinforcing sound fiscal governance. These mechanisms support the fiscal sustainability of the Bulsho project, strengthen local institutions, ensure accountability, and foster an environment for the long-term expansion of service delivery. 56. Gender. Bulsho presents opportunities to enhance and formalize women’s participation in reconciliation and peacebuilding, thereby increasing their representation in leadership and voice in local decision-making. Despite their political exclusion, Somali women play critical yet unrecognized roles in perpetuating conflict as well as in building peace.16 They have broader cross-clan social networks than men, which enables them to monitor early warning signs of conflict and mediate between rival clan interests in ways that men (who have strictly patrilineal clan affiliations) cannot. Women are also disproportionately affected by conflict dynamics, which means they have a profound interest in ending conflicts.17 However, the formal inclusion of women in peacebuilding and reconciliation efforts is constrained by social and cultural norms; a lack of security in public; limited skills and education among women; and the existing clan system, under which leadership and roles in public decision-making are reserved for men. According to one estimate, only 28 percent of the 16 A cross-clan study with women and men in Kismayo documents women’s roles in advancing local conflicts as well as in bringing hostilities to an end by leading collective action, inter-clan mediation, advocating with politicians and male clan leaders, and providing early warning to prevent conflict initiation and escalation. 17 Life & Peace Institute, Peace Direct and Somalia Women’s Solidarity Organization. 2018. Women, Conflict and Peace: Learning from Kismayo Study Report. Page 24 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) membership (204 members) of 38 currently active District Peace and Stability Committees (DPSCs) are women.18 Due to the FCV context, there are no data available on the share of executive positions in these committees held by women. However, anecdotal evidence suggests that women remain excluded from these positions and that any new or reconstituted DPSCs are likely to face severe challenges in ensuring women‘s representation, both as general members and in executive positions.19 Due to their lack of representation in DPSCs, including executive positions, women voices and leadership capabilities have been excluded from the state stabilization and decentralization process. The project will therefore support women’s inclusion in new and re-activated DPSCs, including in executive positions, such as early warning monitors, executive secretaries and treasurers. This is expected to increase women’s representation in formal leadership positions typically reserved for men from influential clans; and cement their influence over state stabilization and decentralization processes, in which they have previously either been excluded or involved in an ad hoc and tokenistic/instrumentalized manner. 20 The table below summarizes how the project will address women’s lack of inclusion in DPSCs, including the actions, rationale, and corresponding results indicators related to this gaps. The table also summarizes additional gender mainstreaming measures supported by the project to improve women’ s participation in community decision-making. # Description of Gender Action Rationale for Action and/or Underlying Results Indicator Lessons Women’s participation in reconciliation and peacebuilding efforts 1 The conflict analysis and mapping under Women have special capabilities and interest Percentage of new or Bulsho support package A will identify entry in peacebuilding and reconciliation efforts, reactivated DPSCs with at points for gender inclusion in peacebuilding including monitoring early warning signs for least one woman trained and activities.21 The package will train female conflicts. Their inclusion increases the holding an executive position representatives in peacebuilding, conflict likelihood of a peace agreement being (target: 30 percent). mediation and social healing skills, and build reached, enforced, and sustained. their capacity to serve in executive positions on DPSCs. Women’s participation in community and local decision making 2 Three key interventions: (a) voice vouchers to Women’s inclusion in planning and Percentage of women among empower women in decision-making forums, monitoring of local investments enhances community members who: (b) community fundraising and subproject the quality and effectiveness of local (a) participate in community execution committees must have female governance by increasing community decision-making meetings members (at least 30 percent) and receive ownership, improving service delivery, and (target: 30 percent); and onboarding and training, and (c) citizen expanding the pool of resources. (b) agree or strongly agree charters and community investment plans The support of officials and community with the priorities identified will include commitments on women’s leaders can enhance opportunities for in the district community inclusion in participatory planning, women’s inclusion in local governance planning forum (target: monitoring, and accountability mechanisms, processes. 70 percent). 18 DPSCs serve as a framework for stabilizing districts through reconciliation and building structures at the district level. Their work includes conflict early warning, water, marital and GBV cases, inheritance and property disputes, murder, rape, banditry, inter-ethnic/inter-clan conflicts, and cases of petty crime and theft. In their role, they coordinate with judicial and security institutions within their jurisdiction to enforce and implement decisions taken. Once established, DPSCs convene to nominate/elect five executive officials, including a chairperson, vice chair, executive secretary, treasurer, and early warning monitor. Previous efforts to engage women in DPSCs have been successful in making visible women‘s previously unrecognized role in district-level peacebuilding and carving out a space for them to influence related decisions. 19 Life & Peace Institute (2018), Women, Conflict, and Peace: Learning from Kismayo and Conflict and Peace Dynamics International, District Peace Committees in Somalia. https://www.globalgiving.org/pfil/52116/projdoc.pdf 20 Martinez-Cordoba et al. 2022. “Women's Management in Local Government: The Effects of Substantive Representation on Welfare Service Efficiency.” Social Policy and Administration, 57 (3); Gomez. 2012. Increasing Women’s Participation in Local Government; UN-HABITAT. 2004. Gender and the Involvement of Women in Local Governance. 21 This will include: (a) mapping/identification of active and dormant DPSCs and their current/past female members; (b) a needs assessment to identify skills and attitudinal barriers hindering women’s representation and leadership in DPSCs; and (c) formulation of terms of reference for existing and new DPSCs with provisions on women’s representation and leadership. Page 25 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) as well as the integration of women’s needs Tracking community investments that and priorities into the design and execution of include women in their design and community subprojects and matching grant implementation will enable adjustments investments. within districts and promote knowledge exchange and advocacy. Crosscutting issues/actions 3 Project-supported trainings will engage men and women as equal partners in peacebuilding and local governance. Initial rounds of training will be gender-segregated, with sessions for women held at convenient times and locations. Further rounds will be mixed to socialize women in non-segregated spaces and encourage alliances with men. Strategic communications and advocacy modules will train participants to frame women’s public participation in culturally sensitive ways. 4 Broader public communications and advocacy campaigns will support women’s participation in local governance and peacebuilding activities. These campaigns will engage officials and community leaders who have previously supported the inclusion of women to foster a change of attitude within the bureaucracy and clan hierarchy. 5 Security management and Gender-Based Violence (GBV) and sexual exploitation and abuse/sexual harassment (SEA/SH) risk mitigation processes will be undertaken in an integrated manner to address risks of sexual, physical, psychological and political violence/coercion against women. 57. Citizen Engagement. Bulsho is designed with a community-centered approach that adopts mechanisms to give citizens a meaningful say in decision making and oversight through the implementation of a local social contract platform to address Somalia’s core development and service delivery challenges. The platform, detailed under component 2, will empower communities to participate in investment and service-delivery planning, monitoring, and oversight. The platform is a nexus for communities, the government, and other partners to mobilize resources and collaborate in the delivery of sustainable solutions. Key features of the platform include an online portal where communities can track and provide oversight on government spending and implementation of their priorities and a feedback mechanism. MoIFAR conducted preliminary stakeholder consultations across a sample of selected states to gather feedback on the proposed activities and how communities would like to be engaged, with a specific focus on women, youth, traditional ethnic minorities, and persons with disabilities, as well as a grievance management mechanism to further inform project design. The Results Framework includes four indicators tagged for citizen engagement. 58. Private Capital Mobilization. The project is expected to mobilize private capital by providing incentives to the local private sector for contributing to community and local investments in local economic development, climate resilience, and basic social services through the matching grants. Component 3 provides direct transaction support for public investments in local economic development, basic services, and resilience. Private capital mobilization of $1.5 million has been added to the financing table based on a pilot that was implemented in 13 districts from 2018 to 2021. The evaluations and final reports concluded that, on average, $1 of project funds mobilized $0.33 in cash contributions from communities.22 The main source of community contributions were households, the diaspora, and the local private sector. About 10 to 25 percent of contributions came from the private sector, depending on the prioritized subproject. B. Fiduciary 59. Financial Management. The financial management arrangements will be mainstreamed into the country’s established public financial management policies and systems and in line with arrangements for the use of country systems. The project’s financial transactions will be processed through the Somalia Financial Management Information System (or the Somaliland Financial Management Information System), which will also be used to generate periodic financial reports. The project’s internal control arrangements will be based on the government’s Comprehensive Operations and Accounting Procedures Manual. To mitigate the risk of diversion of funds and unsupported payments, contractors, consultants, and suppliers will be paid using a direct payment method, and payment requests will be supported by adequate documentation, including evidence of outputs and deliverables. In addition, proper due diligence 22 Danish Refugee Council. Project Completion Reports to the Somalia Stability Fund (Gedo: March 2019; Sool: January 2021; Abudwaq: June 2021). Page 26 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) will be conducted in the recruitment of consultants in line with regular procurement procedures to mitigate the risk of recruitment irregularities and “double dipping.” 60. The project’s financial management capacity will be supported by EAFS in the Office of the Accountant General to advance the segregation of functions and build capacity for the full use of country systems. The project will prepare interim unaudited financial reports and submit them to the World Bank no later than 45 days after the end of the quarter. Disbursement of funds will follow the SoE method. An initial advance will be made to the DA based on the submission of a withdrawal application to the World Bank accompanied by a six-month cash forecast. Subsequent disbursements to the DA will be based on the submission of a withdrawal application accompanied by an SoE. The project will maintain three designated accounts (DA-A for FGS, DA-B for FMS, and DA-C for Somaliland). An external audit of the project will be conducted by the FGS Office of the Auditor General (in collaboration with the various FMS auditors general), with necessary capacity support provided by an external audit agent. In Somaliland, the National Audit Office will conduct the external audit. 61. The main fiduciary risks relate to challenges of supporting the institutionalization of district development across all the regions under component 2 and matching grants under component 3. The risks will be mitigated by an independent fiduciary agent whose role is embedded in the project design. The fiduciary agent will: (a) review the proposed district interventions and implementation arrangements prior to the disbursement of funds; (b) monitor implementation and use of funds for the intended purpose; and (c) periodically submit financial reports to the government and the World Bank. These efforts will mitigate the risks associated with transferring funds to the districts under the two components. 62. Procurement Procedures. Procurement will be conducted in accordance with the World Bank’s Procurement Regulations for Investment Project Financing Borrowers, July 1, 2016, and updated September 2023 (Procurement Regulations); the Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, revised July 1, 2016; and the provisions stipulated in the financing agreement. 63. Project Procurement Strategy and Plan. MoIFAR has prepared a draft project procurement development strategy and procurement plan for the first 18 months of the project, focused on selecting the optimum fit-for-purpose method and market approach. The strategy will include a summary of procurement risks, mitigation measures, an action plan, and a procurement implementation support and supervision plan. Procurement regulations require that the strategy and initial procurement plan be finalized prior to project negotiations. The procurement plan will be updated in agreement with the World Bank at least annually or as required to reflect modifications to procurement arrangements due to factors such as a change in requirements, market conditions, or the procurement environment. 64. Procurement Capacity and Risk Assessment. The FGS MoIFAR will serve as the main implementing agency at the federal level and will conduct procurement activities. A World Bank team conducted a procurement capacity assessment and determined that the capacity of implementing agencies is adequate for implementing the project’s procurement activities. The procurement capacity assessment covered issues related to the regulatory framework and management capability, integrity and oversight, procurement process, market readiness and procurement complexity. Procurement risk and mitigation measures have been identified based on the capacity assessment. MoIFAR has agreed to engage a dedicated procurement specialist and has drafted terms of reference, which have been reviewed by the World Bank. 65. Systematic Tracking of Exchanges in Procurement (STEP). The World Bank’s STEP approach will be used to prepare, clear, and update procurement plans and conduct all procurement transactions for the project’s implementing agencies. MoIFAR and MoI procurement staff who are unfamiliar with the system will be provided training on STEP. C. Environmental, Social, and Legal Operational Policies 66. The Project Is Associated with Positive Social Impacts. It will benefit districts, communities, and vulnerable groups by strengthening institutions, establishing local contract platforms, and supporting local investments. Further, the project design incorporates measures to create an enabling environment for the formation of district councils; reconciliation and Page 27 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) social healing; and awareness-raising activities on the program’s principles of inclusiveness, fairness, transparency, and accountability. 67. The Social Risk Level Is Moderate. Key risks relate to the exclusion of target beneficiaries, including traditional ethnic minorities, and inadequate stakeholder engagement, grievance management, and monitoring. A limited labor influx could generate and exacerbate associated risks and impacts, such as SEA/SH. Workers could be subjected to working conditions that do not align with World Bank’s Environmental and Social Standard 2 (ESS2) provisions. 68. The Environmental Risk Level Is Moderate. Most of the environmental risks relate to component 3. The social and economic infrastructures to be supported by the matching grants may pose a range of environmental impacts, including noise, air, and water pollution from construction activities, habitat fragmentation, and disruption due to land clearing, soil erosion, land use changes, increased waste generation, altered water flow patterns, impacts on biodiversity, potential changes to local ecosystems, resource depletion, and ecological degradation. The likelihood of having several geographically dispersed small projects using untrained labor in communities might increase occupational health and safety risks. However, the specific impacts will depend on the proposed project type, location, and mitigation strategies employed by the communities. 69. E&S Management Plans. To address the risks associated with the project activities, MoIFAR will engage with a wide- range of stakeholders and will prepare and disclose in-country the Environmental and Social Commitment Plan (ESCP), which details commitments for compliance with the environmental, social, health, safety, and security standards; the Stakeholder Engagement Plan, which ensures robust stakeholder engagement, inclusion of disadvantaged groups, and information disclosure procedures; labor management procedures highlighting labor issues associated with the project and procedures for managing project workers; and a GBV and SEA/SH Prevention and Response Action Plan, which addresses the management of SEA/SH risks. Further, the Stakeholder Engagement Plan will include a standalone chapter outlining measures to mitigate adverse impacts on traditional ethnic minorities and ensure their meaningful consultation and access to project benefits and opportunities with a culturally appropriate approach. 70. As disbursement conditions under components 1–3, MoIFAR will: (a) prepare a security management plan proportionate to the scope of project risks and impacts; and (b) put in place grievance mechanism structures in line with ESS1, ESS2, ESS7, and ESS10. The security management plan will inform the nature of security measures that will be required to oversee the implementation of security protocols, guided by the principles of proportionality and applicable law related to hiring, rules of conduct, training, equipping, and monitoring of personnel. 71. As an effectiveness condition, MoIFAR will, as part of the POM, develop a template Environmental and Social Management Plan (ESMP) with provisions for chance finds and E&S screening procedures and cognizant of the local investment exclusion list in the ESCP, and a simplified Resettlement Action Plan template. The negative list for local investments will include activities categorized as high risk according to the World Bank’s Environmental and Social Framework, and activities that may cause long-term, permanent, and/or irreversible adverse E&S impacts. The template ESMP will identify general potential E&S risks and impacts related to infrastructure investments and corresponding mitigation measures. MoIFAR will then elaborate on the template to generate an activity-specific ESMP, after the infrastructure investments to be supported are selected and locations are known. The screening procedures will help MoIFAR determine which of the proposed infrastructure investments can proceed to implementation under the project based on their potential E&S risks and impacts and their evaluation against the exclusion list provided in the ESCP. The ESMP will apply to more significant activities, such as road construction and drainage systems, while the E&S screening procedures in the POM will suffice for activities with minor expected impacts. 72. E&S Staffing and Capacity Building. MoIFAR will recruit an experienced environmental specialist, social specialist, and GBV-SEA/SH specialist at the FGS level, and will nominate and train E&S focal points to support environmental and social risk management activities at the state and district level. It will hire the specialists before the commencement of investment activities and will build their capacity throughout implementation. If during implementation, the World Bank Page 28 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) determines that Hands-on Expanded Implementation Support is needed, it will be provided. All capacity-building and technical assistance (TA) activities needed to achieve the program objectives will comply with the Environmental and Social Framework and be based on terms of reference that will be developed before activities start. The parameters for the TA will be defined in the ESCP, and the terms of reference for the TA activities will be consistent with the World Bank’s Operations Environmental and Social Review Committee Advisory Note on TA and the Environmental and Social Framework of 2019 and policies on public participation. @#&OPS~Doctype~OPS^dynamics@padlegalpolicy#doctemplate Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Area OP 7.60 No Grievance Redress. If communities or individuals believe they are being adversely affected by a World Bank-supported project, they may submit complaints to existing project-level grievance mechanisms or to the World Bank’s Grievance Redress Service (GRS). The GRS ensures the prompt review of project-related concerns. Project-affected communities and individuals can also submit a complaint to the World Bank’s independent Accountability Mechanism. It houses the Inspection Panel, which determines whether harm occurred or could occur as a result of World Bank noncompliance with its policies and procedures, and the Dispute Resolution Service, which offers communities and borrowers an opportunity to address complaints through dispute resolution. Parties can submit complaints at any time after concerns have been brought directly to the attention of World Bank management and after management has had the chance to respond. For information on how to submit complaints to the Bank’s Grievance Redress Service (GRS), visit http://www.worldbank.org/GRS. For information on how to submit complaints to the Bank’s Accountability Mechanism, visit https://accountability.worldbank.org. V. KEY RISKS 75. Risks. The overall risk rating for the project is substantial. The main obstacles to achieving the PDO are: • Political and Governance (Substantial). The risk level was assessed as high at concept due to ongoing political disputes between FGS and FMS about core state powers and functions, upcoming elections in 2026, as well as intra- and inter-state tensions and community-level conflict. Mitigation includes retaining technical-level dialogue, flexible implementation arrangements, and strong cross-community stakeholder engagement, awareness raising, and community leadership ownership. After mitigation, the residual risk is substantial. • Macroeconomic (Substantial). The risk level was assessed at concept as high given the weak fiscal capacity of the FGS, FMS, and districts to mitigate economic and natural shocks, co-finance project activities, provide security, and stimulate economic activity, which could impact project implementation and PDO achievement. The Bulsho project’s reliance on incentivizing co-financing from communities, the diaspora, and local private sector will mitigate these macroeconomic risks and over the longer-term, the project’s contribution to district resource mobilization and citizen-state trust will enhance the fiscal sustainability of project achievements. After mitigation, the residual risk is therefore substantial. • Institutional Capacity for Implementation and Sustainability (Substantial). The risk level was assessed at concept as high because MoIFAR is implementing a World Bank-financed operation for the first time and due to the varying Page 29 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) capacities of FMS, districts, and communities. Residual risk is substantial after mitigation, including increasing the capacity of the PCU/PIUs and seconded government staff and strengthening implementation support from development partners and the World Bank through trust funds. • Fiduciary: Financial Management and Procurement (Substantial). The risk level was assessed at concept as high due to the implementation by a new implementing agency and the need to design, build capacity for, and implement new fiduciary arrangements for district- and community-level implementation of activities. The risk level is still substantial after mitigation measures, most notably the provision for the PCU to hire an independent fiduciary agent (third-party monitoring) to support the implementation of support package B—institutional strengthening grants (component 2) and package C—matching grants (component 3). • Other: Security Management (Substantial). The risk level was assessed at concept as high due to the dynamic security environment and the project’s focus on expanding state presence into hard-to-reach areas. Most security risks stem from the need for project personnel and staff to regularly travel to fragile districts emerging from stabilization efforts where state and UN-sanctioned security and control are dynamic. The transition from the African Union Transition Mission in Somalia and uncertainty about the financing for the new African Union Support and Stabilization Mission in Somalia exacerbate the risk. The residual risk level is substantial after mitigation, including the engagement of a security and conflict monitoring firm in the National PCU to support conflict assessments, monitor security dynamics, execute a protocol for reviewing and approving staff movements, track and monitor local dynamics, and establish tiered response mechanisms. The team will tap into the World Bank’s Somalia FCV Risk Platform for regular FCV risk monitoring and tailored project-level analysis. Page 30 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion and Resilience(P508408) ANNEX 1. RESULTS FRAMEWORK @#&OPS~Doctype~OPS^dynamics@padannexresultframework#doctemplate PDO Indicators by PDO Outcomes Baseline Period 1 Period 2 Closing Period Strengthened community and local institutions for improved social cohesion, inclusion and resilience People benefiting from actions to expand women’s participation in decision-making (Number of people) CRI Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 71,500 230,000 510,000 ➢People benefiting from actions to expand women’s participation in decision-making - Youth (Number of people) CRI Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 30,000 92,000 205,000 People benefitting from climate resilient planning, preparation, surveillance, and/or response (Number of people) CRI Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 240,000 770,000 1,700,000 ➢People benefitting from climate resilient planning, preparation, surveillance, and/or response - Female (Number of people) CRI Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 120,000 385,000 850,000 ➢People benefitting from climate resilient planning, preparation, surveillance, and/or response - Youth (Number of people) CRI Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 95,000 212,000 372,000 Communities that collaborate to resolve development problems in project target areas (Number) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 25 60 200 Co-financing resources mobilized by communities, diaspora, local governments and/or the private sector (Amount(USD)) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 750,000 2,500,000 5,000,000 Intermediate Indicators by Components Baseline Period 1 Period 2 Closing Period Page 31 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion and Resilience(P508408) Component 1: Community and District Social and Institutional Strengthening Tools, model regulations, and guidelines developed by FGS and FMS to institutionalize Bulsho processes in community and local institutions (Number) Dec/2025 Dec/2026 Dec/2027 Dec/2028 4 6 8 8 Participating districts that complete their agreed annual capacity building plan including climate resilience planning and systems (Number) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 15 25 40 Districts whose personnel increase knowledge on priority capacity building topics including climate planning and systems (Number) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 10 20 30 New or re-activated DSPCs with at least one woman trained and holding an executive position (Percentage) Dec/2026 Dec/2027 Dec/2028 N/A 20 30 Districts graduating to successive support packages (Number) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 2 5 15 Component 2: Local Social Contract Platform Community members who participate in community decision-making meetings (Percentage) Jun/2023 Dec/2026 Dec/2027 Dec/2028 10 15 20 25 ➢Percentage of women who participate in community decision-making meetings (Percentage) Jun/2023 Dec/2026 Dec/2027 Dec/2028 5 10 20 30 District officials and community leaders that commit to Bulsho's principles for inclusion, transparency and accountability (Number) Jun/2025 Mar/2026 Mar/2027 Mar/2028 0 200 350 500 Community members with knowledge of the Bulsho Local Social Contract Platform (LSCP) and its decisions. (Percentage) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 N/A 25 50 Community members that agree or strongly agree with the priorities identified in the district community planning forum (Percentage) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 N/A 50 70 Component 3: Matching Grants for Social Cohesion, Inclusion, and Resilience New or better jobs to which investments contribute (Number) Page 32 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion and Resilience(P508408) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 TBD TBD TBD Citizens that report that Bulsho resource mobilization and funds were managed transparently (Percentage) Dec/2025 Dec/2026 Dec/2027 Dec/2028 40 N/A 60 70 Beneficiaries of voice vouchers that feel included in the community decision-making (Percentage) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 N/A 60 70 Component 4: Project Management for Coordination, Delivery, Innovation, and Learning PCU/PIU personnel priority positions filled by seconded officials (Percentage) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 N/A 1 2 Project staff positions held by women (Percentage) Jun/2025 Dec/2026 Dec/2027 Dec/2028 N/A 30 30 30 Local innovations documented and disseminated to peer districts at an annual learning forum (Number) Dec/2025 Dec/2026 Dec/2027 Dec/2028 0 2 4 8 Page 33 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) Monitoring and Evaluation Plan: PDO Indicators by PDO Outcome Communities that collaborate to resolve development problems in project target areas (number) This indicator tracks the investments that span across two or more villages or district-wide because they require Description collaboration among local clans and political elites. The annual target should increase over time as more districts receive package C and communities experience the benefits of collective action. Frequency Annual (in December) Data source Bulsho fintech platform The platform will mark the local investments that receive two or more dollars for each dollar raised by communities as Methodology for “collaborative investments.” It will calculate the total number of collaborative investments compared to the total data collection number of investments. Responsibility for MEAL specialist from the MoIFAR PCU and MEAL officers from the State-level PIUs. data collection Co-financing resources mobilized by communities, the diaspora, local governments, and the private sector (amount in U.S. dollars) This indicator tracks in U.S. dollars the financial resources that communities, the diaspora, local governments, and the private sector contribute to the subproject investments financed under component 3. These contributions are a function of the perceived legitimacy of local authorities, trust in the Bulsho platform and its processes, and the matching grant Description incentives. The indicator can therefore serve as a proxy for outcomes related to the project’s governance interventions. The annual target should increase over time as more districts receive package C and more communities implement local investments. Frequency Annual (in December) Data source Bulsho fintech platform Methodology for Contributions are collected in bank accounts dedicated to the local investments and linked to the Bulsho fintech data collection platform, which receives data from the local financial institutions. Responsibility for MEAL specialist of the MoIFAR National PCU and MEAL officers from the state PIUs. data collection People benefiting from actions to expand women’s participation in decision making (number) Description This indicator tracks the participants to village- and district-level forums under the Local Social Contract Platform. Frequency Annual (in December) Data source District reports and Bulsho management information system (MIS) District governments are expected to provide quarterly reports to the state PIUs on their activities under the Local Social Methodology for Contract Platform, including number of participants at village and district forums disaggregated by gender, age, clan, and data collection displacement status. These data will be entered into the project MIS. Responsibility for MEAL specialist of the MoIFAR National PCU and MEAL officers from the state PIUs. data collection People benefitting from climate-resilience planning, preparation, surveillance, or response (number) This indicator tracks the number of people who have directly or indirectly benefitted from local investments to make Description their communities more resilient to climate change. Page 34 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) Frequency Annual (in December) Data source Bulsho fintech platform The platform will mark climate-change-related local investments as “climate resilience,” based on their typology (e.g., water reservoirs or river embankments) and/or their stated goals (e.g., increased water for irrigation). The platform will then calculate the total number beneficiaries of the climate-resilience investments. Endline surveys will measure the Methodology for proportion of respondents who have or have not directly or directly benefitted from Bulsho local investments, data collection disaggregated by district, gender, age, clan, and displacement status. Estimates of the number of beneficiaries of a climate-resilient response will assume that a corresponding share of the residents of the villages or sections of the town where the climate-resilience investments are located are directly or indirectly benefitting from the effort. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Monitoring and Evaluation Plan: Intermediate Results Indicators by Component Component 1: Community and District Social and Institutional Strengthening Tools, model regulations, and guidelines developed by FGS and states to institutionalize Bulsho processes in community and local institutions (number) This indicator measures the cumulative number of tools (e.g., digital and analog), model regulations (e.g., the FGS Description decentralization policy with functional assignments between FGS, states, and districts), and guidelines developed by FGS and states that support Bulsho’s institutionalizing its processes in community and local institutions. Frequency Annual (in December) Data source Government gazette and websites Methodology for The MoIFAR National PCU will maintain an online repository of all relevant tools, policies, and laws developed by FGS data collection and the states. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Participating districts that complete their agreed annual capacity-building plan (number) This indicator tracks the number of districts that have undertaken all activities and steps of component 1 under their Description respective packages and as per the annual capacity building plan. Frequency Annual (in December) Reports from the Local Governance Institute or any training institutions indicating the name of the training, its content Data source and duration, the dates, venue, and location where the training took place, and the signed list of participants, disaggregated by gender Methodology for Bulsho MIS will retrieve the data from the training reports and will mark the districts that have completed all the training data collection sessions. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Districts whose personnel increase knowledge on priority capacity-building topics (number) This indicator tracks the number of districts whose average score for their staff members or representatives attending Description trainings and capacity-building activities is at least 50 percent higher in the post-training test compared with the pretest. Frequency Annual (in December) Reports from the Local Governance Institute or any training institutions with both pre- and post-test average scores for Data source every training conducted in each district Methodology for The Bulsho MIS will retrieve the data from the training reports and will mark the districts whose staff or representatives data collection have increased their knowledge by 50 percent in at least half of the training sessions and capacity-building activities. Page 35 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) Responsibility for M&E specialist of the MoIFAR National PCU. data collection New or re-activated District Peace and Stabilization Committees with at least one woman trained and holding an executive position (percentage) This indicator tracks the outcomes of component 1’s efforts to address the gender gap in local peacebuilding initiatives. There are usually five execution positions on the DPSC: a chair, a vice chair, an executive secretary, a treasurer, and an Description early warning monitor. The target will ensure that 30 percent of new or re-activated DPSCs have at least one woman in an executive position. Frequency Annual (in December) Data source Reports from the state-level MoIs on the annual assessment of districts Methodology for In the first quarter of every year, each state-level MoI assesses which districts want access to the successive package, data collection including data from packages A and B on peace committees. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Districts graduating to successive support packages This indicator tracks the cumulative number of districts that graduate from one package to the next, including graduates Description from package A to B as well as graduates from package B to C. A district that graduates from A to B and then from B to C within the target period can be counted twice. Frequency Annual (in December) Data source Reports from the state-level MoI on the annual assessment of districts In the first quarter of each year, the state-level MoI assesses which districts want access to the successive package, Methodology for based on pre-determined criteria spelled out in the POM. Districts that qualify for a higher package will be counted data collection against these indicators. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Component 2: Local Social Contract Platform Community members who participate in community decision-making meetings (percentage) This indicator measures the number of individuals—disaggregated by gender, age, and clan—out of the total population Description who participated in the previous six months at a community meeting where decisions about the development of the town or village were made (e.g., a community diagnostic or the prioritization of local investments). Frequency Annual (in December) Data source Baseline, midline, and endline surveys; quarterly reports from districts (for years when surveys are not conducted). Bulsho will conduct a baseline survey of a representative sample of residents of project-targeted districts. The survey will measure participation rates among the sample population at decision-making meetings. Bulsho will conduct a midline Methodology for survey by December 2027 and an endline survey within three months after project closure. The project will also analyze data collection data contained in the reports provided by the district, triangulated with survey data. Data from the district reports will inform project targets for December 2026 and 2028. Responsibility for M&E specialist of the MoIFAR National PCU. data collection District officials and community leaders who commit to Bulsho’s principles of inclusion, transparency, and accountability (number) Page 36 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) This indicator captures the cumulative number of district officials, community leaders, and private sector actors that sign Description Bulsho’s charter acknowledging and committing to implementing the principals of inclusion, transparency, and accountability in executing the platform, the matching grants, and their day-to-day affairs. Frequency Annual (end of first quarter of each year) Data source Quarterly reports from state PIUs. Methodology for State PIUs will prepare quarterly reports that will include results of the Bulsho commitment ceremonies conducted at data collection the district and community levels. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Community members with knowledge of the Bulsho Local Social Contract Platform and its decisions (percentage) This indicator measures the percentage of individuals—disaggregated by gender, age and clan—out of those who have participated in decision-making meetings (see indicator above), that have heard of the Bulsho Local Social Contract Description Platform, know what it is meant to achieve (from a drop-down list of options), and are able to recall any major decisions made in any of the meetings taking place in their districts during the previous 12 months. Frequency Midline (December 2027) and endline (within three months after project closure) Data source Midline and endline surveys Methodology for Bulsho will conduct a midline survey of a representative sample of residents of project-targeted districts by December data collection 2027 and an endline survey within three months after project closure. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Community members that agree or strongly agree with the priorities identified in the district and community planning forums (percentage) This indicator measures the percentage of individuals—disaggregated by gender, age, and clan—of those who have Description knowledge of the Local Social Contract Platform who agree or strongly agree with the priorities identified in the district and community planning forums conducted in the previous 12 months. Frequency Midline (December 2027) and endline (within three months after project closure) Data source Midline and endline surveys Methodology for Bulsho will conduct a midline survey of a representative sample of residents of project-targeted districts by December data collection 2027 and an endline survey within three months after project closure. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Component 3: Matching Grants for Social Cohesion, Inclusion, and Resilience New or better jobs to which investments contribute (number) The World Bank’s new WBG Scorecard and related Corporate Results Indicators seek to capture the effects of World Bank Group interventions that help people get jobs, either through investments in human capital and skills or by promoting the growth of firms and employment opportunities in the private sector. This indicator therefore captures the Description aggregate number of new or better jobs that the subproject investments are expected to generate under the three themes: resilience, basic social services, and local economic development. This will include jobs from the subproject implementation, operations and management arrangements as well as private employment. Frequency Annually (every December) Data source Subproject investments plans (job generation potential section) As part of the district-level prioritization process, state PIUs technical specialists and local private sector participants will Methodology for report on the new or better job potential of each subproject investment, which will then be captured in each data collection subproject’s technical specifications. Page 37 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) Responsibility for M&E officer (state PIUs) and MEAL specialist (National PCU) data collection Citizens who report that Bulsho resource mobilization and funds were managed transparently (percentage) This indicator measures the number of individuals—disaggregated by gender, age and clan—out of the total population, who think that the district or community committees in charge of the implementation of the local investments have Description accounted for community contributions and Bulsho grants and that they have not hidden any unauthorized expenditures. Frequency Midline (December 2027) and endline (within 3 months from the closure of the project). Data source Midline and endline surveys Methodology for Bulsho will conduct a midline survey of a representative sample of residents of project-targeted districts by December data collection 2027 and an endline survey within three months after project closure. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Beneficiaries of voice vouchers who feel included in community decision making (percentage) This indicator measures the number of voice voucher beneficiaries—disaggregated by gender, age and vulnerability— Description against a group of potential beneficiaries, who are either more likely to participate in a meeting or think that their needs have been taken into consideration in the community planning process. Frequency Years two and three Data source Beneficiary surveys Methodology for Bulsho will conduct a midline survey of a representative sample of residents of project-targeted districts by December data collection 2027 and an endline survey within three months after project closure. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Component 4: Project Management for Coordination, Delivery, Innovation and Learning PCU and PIU priority positions filled by seconded officials (percentage) This indicator tracks the positions in the national and state PIUs filled by government civil servants, as compared to the total number of positions. The goal of the project is to decrease reliance on external consultants compared with most Description World Bank projects. The role of the external consultants is, among other things, to build the capacity of civil servants to manage the project. The number of civil servants seconded to the PCU/PIUs is expected to increase over time. Frequency Annual (in December) Data source Reports from Bulsho’s coordination and implementation units. Methodology for Bulsho will count the number of positions that have a seconded civil servant, including both positions filled by civil data collection servants only and consultants who coach seconded civil servants who will assume the responsibilities at a later date. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Project staff positions held by women (percentage) Description This indicator will track the percentage of FGS and state-level positions filled by women. Frequency Annual (in December) Data source Annual project report Methodology for The National PCU and state PIUs will compile data on its staffing profile, including women hires. data collection Page 38 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) Responsibility for M&E specialist of the MoIFAR National PCU. data collection Local innovations documented and disseminated to peer districts at an annual learning forum (number) Bulsho will conduct annual national learning forums where districts and the states that have piloted innovative approaches can present findings from their experiences. To participate in the learning forum, districts and states must Description present approaches and processes never previously tested in the country and must clearly demonstrate added value such as improved efficiency, greater impact, and potential to scale. An entity that has not been involved in the effort, such as the Bulsho National PCU, must assess these approaches and processes. Frequency Annual (in December) Data source Reports from the Bulsho coordination and implementation unis and proceedings of annual learning forums Bulsho will count the number of approaches and processes presented in the annual learning forum. It will also keep track Methodology for of all approaches and processes that have been tested, including those that did not qualify for the annual learning data collection forum) and those scaled up or mainstreamed into Bulsho, other projects, or government practices. Responsibility for M&E specialist of the MoIFAR National PCU. data collection Page 39 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) ANNEX 2. DETAILED INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS 1. The Ministry of Interior, Federal Affairs and Reconciliation (MoIFAR) for the Federal Government of Somalia (FGS) will be the lead implementing agency for the Bulsho project. The FGS will establish the PSC, and MoIFAR will convene the TWG. This annex elaborates on implementation at the federal, state, and district levels. 2. National Project Coordination Unit. There will be a National Project Coordination Unit (PCU) housed at MoIFAR under the supervision of the director general of MoIFAR, with guidance from the TWG and PSC. It will be staffed by a mix of externally recruited specialists and seconded FGS staff. Where capability exists, the preference will be to use existing FGS staff for sustainability and ownership. Where capability is not sufficient, externally personnel will need to be recruited; however, they will be shadowed by FGS staff with a plan to take over the roles. The PCU will be deliberately integrated into MoIFAR’s structure, including having the coordinator sit in and regularly attend MoIFAR’s senior management team meetings and drawing from different MoIFAR departments and relevant FGS ministries to support the implementation, quality assurance, monitoring, and oversight of the project. 3. The National PCU is also responsible for: (a) preparing procurement plans, including consolidating procurement plans from FMS; (b) carrying out procurement for FGS-level activities and overseeing FMS procurement; (c) preparing quarterly narrative and financial reports for the overall project based on inputs from FMS; (d) providing quality assurance and technical backstopping to FMS (this includes preparation of training curricula and training of trainers); (e) preparing and implementing the E&S plan, including verifying FMS E&S appraisal of local investments; (f) consolidating FMS sustainability plans; (g) preparing security management plans and overseeing FMS security management, including reporting security incidents directly affecting project staff, contractors, and assets. MoIFAR will engage six key consultants for the National PCU: a national project coordinator, a procurement specialist, a financial management specialist, a community development and local governance specialist, a MEAL specialist, environmental and social specialists, and a GBV specialist. The National PCU will also engage four technical support firms for the project implementation period: (a) a third-party monitoring agent that will cover fiduciary, inclusion, and technical quality; (b) a security management firm; (c) a data collection and knowledge management firm; (d) a digital innovation firm; and (e) a logistics firm. 4. State Project Implementation (PIUs). The state Project Implementation Units (PIUs) will work under their respective state MoI’s director general, with technical support and guidance provided by the National PCU. The state PIUs will be responsible for managing state-level project activities and for coordinating with districts. The state PIUs will each engage four core consultants to support their roles and responsibilities: (a) a project manager; (b) a public financial management specialist with expertise in procurement and financial management; (c) a community development and local governance specialist; (d) a social and gender specialist; and (e) a M&E officer. The state PIUs are responsible for: (a) verifying eligibility and fulfilment of district participation conditions for the three support packages; (b) preparing annual work plans and budgets; (c) delivering capacity-building activities and providing quality assurance and technical backstopping to districts, including training district officials and staff and community entities in partnership with districts; (d) preparing quarterly narrative and financial reports for project activities taking places in their states; (e) verifying technical and E&S appraisal of local investments (component 3) as well as other E&S actions; (f) preparing sustainability protocols, including verification of operations and maintenance prepared by districts and public-private partnerships for the management of local infrastructures; and (h) applying security protocols in partnership with the security firm. 5. District and Community Implementation. The project will work through district councils where they exist or interim/caretaker administrations if they do not. There will be a memorandum of understanding between each state and participating districts. The district participation conditions for packages B and C will require the assignment of core personnel: at least four focal points for package B (coordinator, community outreach, finance, and office administration) and at least six focal points for package C (coordinator; community outreach; finance, planning, and monitoring; engineer; Page 40 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) and office administration).23 District administrations, with the support of state PIUs, will mobilize community groups and institutionalize structures for community engagement in district development planning, identify community priorities, and onboard communities to the fintech crowdfunding platform. Through the local social contract platform component, Bulsho will help develop context-appropriate models for engagement (village-level consultation forums for diagnostic and participatory planning involving existing community institutions and multistakeholder engagement at the district level. Districts participating in package A will not implement activities. State PIUs, with support from the National PCU, will deliver all capacity-building activities under component 1 to all three district types. 6. District Implementation of Matching Grants (component 3). Districts that participate in package C will receive and manage matching grants from component 3. Prior to the mobilization of community resources that the grants under component 3 will match, the district finance and outreach officers will support communities in establishing subproject execution committees.24 These committees will open dedicated bank accounts with local commercial banks; collect and Diagram 2. Flow of Funds Arrangements Payment request Withdrawal application (client World Bank (SMPF / IDA) connection) Payment request FGS /SL EAFS UNITS DA – B DA – C DA – A Banking data FGS TSA FMS SL FGS Reporting & Payment request Govt Expenditure Transfers to FMSs FMS Bulsho Project FGS and FMSs budgeted FMS EAFS UNIT Banking data Account activities Payment Transfers to Districts Payment Reporting & Payment request Direct Payment Eligible project expenditure Districts Approved Accounts (Vendor payments e.g. for imprest system consultants, contractors, Somaliland eligible committees etc.)) deposit contributions from households, the diaspora, and the local private sector; develop technical designs; and execute the subprojects (contributions and expenditures will be tracked by the Bulsho fintech platform). The district will review financial reports for subprojects, manage disbursements, and provide technical backstopping. The district’s financial management systems will require strengthening to ensure budget forecasts and cash flows align with existing financial management regulations and that the oversight of funds follows guidelines from the periodic financial management assessments conducted across various districts. The state PIUs will conduct technical reviews to make sure district-level 23 The project will cover their operating costs, including stipends for travel and legitimate implementation activities, but districts must cover their core salaries. 24 The 30 percent minimum women quota will apply to these committees. Page 41 The World Bank Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience (P508408) finance teams have the necessary capacity and systems in place to manage these funds. In addition, the state PIUs will work to bridge gaps in internal controls and ensure an adequate flow of funds and revenue generation. The fiduciary agent will conduct oversight. The matching grant formula is expected to encourage the aggregation of committees, and there will likely be restrictions on the districts’ grant allocations and volume of subprojects in the first two years. These restrictions will be aimed to address the gaps identified in the financial management assessments, including inadequate finance capacity and insufficient internal audit structures. This approach builds on experience from multiple development partner pilots in Somalia, indigenous resource management practices, and global community and local development operations. Page 42