$ Report No: RES00149 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF WAEMU Affordable Housing Finance APPROVED ON 28-Sept-2017 TO BOAD, WAEMU Finance, Competitiveness and Innovation Western And Central Africa Regional Vice President: Ousmane Diagana Regional Director: Abebe Adugna Dadi Country Director: Boutheina Guermazi Practice Manager: Douglas Pearce Task Team Leader(s): Mazen Bouri, Anne Emmanuelle Laurence Marynczak The World Bank WAEMU Affordable Housing Finance (P161658) ABBREVIATIONS AND ACRONYMS AFD Agence Française de Développement (French Development Agency) AfDB African Development Bank BOAD Banque Ouest-Africaine de Développement (West African Development Bank) BCEAO Banque Centrale des Etats de l’Afrique de l’Ouest (Central Bank of West African States) CAH Centre for Affordable Housing Finance in Africa CEMAC Communauté Economique et Monétaire de l’Afrique Centrale (Central Africa Economic and Monetary Community) COVID-19 Coronavirus disease 2019 CRRH CRRH-UEMOA « Caisse Régionale de Refinancement Hypothécaire de l’UEMOA » (West African Regional Mortgage Refinancing Company) DA Designated Account DLI/ DLR Disbursement Linked Indicator/Disbursement Linked Result E&S Environmental and Social EEP Eligible Expenditure Program ERR Economic Rate of Return ESMS Environmental and Social Management System FCFA Franc de la Communauté Française d’Afrique (currency used by the WAEMU region) FM Financial Management GDP Gross Domestic Product IBRD International Bank for Reconstruction and Development IDA International Development Association IEG Independent Evaluation Group IFC International Finance Corporation IFR Interim Financial Report KfW Kreditanstalt für Wiederaufbau (German Development Institution) LOC Line of Credit LTV Loan-to-Value MFI Microfinance Institution (also called “SFD” in the WAEMU region) NPL Non-Performing Loan NPV Net Present Value PDO Project Development Objective POM Project Operations Manual PIU Project Implementation Unit PPSD Project Procurement Strategy for Development OP/BP Operational Policies/Bank Policies SFD Système Financier Décentralisé (Microfinance or financial cooperative institution) SOE Statement of Expenditures The World Bank WAEMU Affordable Housing Finance (P161658) SUF Scale-Up Facility TA Technical Assistance TOR Terms of Reference XOF West AFrican CFA Franc WAEMU West African Economic and Monetary Union (UEMOA acronym in French) WBG World Bank Group The World Bank WAEMU Affordable Housing Finance (P161658) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P161658 WAEMU Affordable Housing Finance Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Western and Central Africa Approval Date Current Closing Date 28-Sept-2017 30-Jun-2024 Original EA Category Financial Intermediary Assessment (F) (PAD Approval Package-28 Sep 2017) Organizations Borrower Responsible Agency BOAD, WAEMU CRRH, WAEMU Commission @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective The development objective is to expand access to long-term housing finance in WAEMU, including for underserved households. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Balance % Disbursed IBRD -- -- -- 0 i The World Bank WAEMU Affordable Housing Finance (P161658) IDA 155.00 144.58 10.42 93.28 Grants -- -- -- 0 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank WAEMU Affordable Housing Finance (P161658) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................1 III. PROPOSED CHANGES ................................................................................................................................................3 IV. DETAILED CHANGE(S) ...............................................................................................................................................4 The World Bank WAEMU Affordable Housing Finance (P161658) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Project was approved by World Bank’s Board of Executive Directors on September 28, 2017 and became effective on December 21, 2017. The Project Development Objective is to expand access to long-term housing finance in the West African Economic and Monetary Union (WAEMU) countries, including for underserved households. The Project financing consists of an IDA Credit of Euro €116 million (IDA-61410) from the IDA Scale-up Facility to the West African Development Bank (Banque Ouest-Africaine de Developpement - BOAD) and an IDA Grant of SDR 18.1 million (IDA- D2360) from the IDA Regional Window to the WAEMU Commission. The BOAD IDA Credit supports three components: (i) Mortgage refinancing by participating banks (€35.7 million-Part 1a), (ii) Subordinated loan to strengthen the capital of the Regional Housing Refinancing Facility -Caisse Régionale de Refinancement Hypothécaire-CRRH UEMOA (€58 million-Part 1b) ; (iii) Mortgage refinancing by the participating non-bank financial institutions (€22.3 million-Part 2). The IDA Grant supports the WAEMU Commission Affordable Housing Policies (SDR 10.85 million-Part 3) and Capacity Building for the CRRH and the Design of a Regional Housing Loan Guarantee product by the CRRH (SDR 7.25 million-Parts 4 and 5). At approval, the project overall financing was equivalent to US$155 million. 2. The project is performing well and concludes on June 30, 2024. As per the last ISR, the project overall PDO and IP ratings were satisfactory and with disbursements at 93%. Two of three PDO results indicators surpassed their end targets, and one PDO indicator is at 92 percent of end-target achievement. • PDO 1: Number of housing loans issued by banks and non-bank financial institutions below FCFA 20 million refinanced by CRRH – actual value as of April 2023 is 10,688 vs 8,700 end target. • PDO 2: Number of banks and SFD refinanced by CRRH offering affordable housing loans – actual value is 34 vs 25 end target. • PDO 3: Average maturity of loans refinanced by CRRH-UEMOA - actual value is 14 vs. 15 end target. II. DESCRIPTION OF PROPOSED CHANGES 3. This is the fourth Level 2 Restructuring for this project. The first Level 2 restructuring took place in June 2020 to reflect the impact of COVID-19 on the operation, update the mortgage loan amounts that are eligible for refinancing, and the result framework. The second level 2 restructuring approved on June 30, 2022, entailed changes to components and costs, results framework modification and a 12 months’ closing date extension to allow the project to achieve its development objective. The latest level 2 restructuring approved on December 16, 2023, which extended the project closing date to June 30, 2024. 4. This Restructuring Paper seeks approval to reallocate among the IDA credit disbursement categories of the Project. There are no other changes proposed in this restructuring for the project which closes on June 30, 2024. 5. The objective of this restructuring is to have a greater impact, consistent with the results framework, on access to affordable housing finance by households in the WAEMU region. CRRH-UEMOA has been very successful in deploying long-term resources to banks to refinance their mortgage portfolios. CRRH-UEMOA has additionally managed to reach households via refinancing of bank loans and microfinance institution loans. It had been observed that the majority of the banks’ mortgages were granted to low-income households with 70 percent of the documented mortgages made for an amount of less than €23,000. However, providing mortgages has been more challenging for microfinance institutions (“SFD”). Historically, SFDs have focused on consumer loans with a mortgage lien. One of the big achievements of the project has been to bring in SFD institutions as shareholders into CRRH-UEMOA and begin integrating them to access refinancing windows. The project has invested significant technical assistance in building SFD capacity to originate, Page 1 The World Bank WAEMU Affordable Housing Finance (P161658) process, and monitor longer term loans for mortgages and four SFDs have already started providing eligible mortgages for refinancing. Nonetheless, the uptake has so far been limited and less than expected initially. Therefore, based on current forecast, the CRRH will not be able to fully utilize the credit line dedicated to SFDs advanced by the project. On the other hand, the CRRH has already identified eligible mortgage portfolios with banks that the project available financing can be directed to. 6. The subordinated loans provided under the project have also served as a catalyst to CRRH-UEMOA and to maximize project impact and leverage through private capital mobilized. By strengthening its capital with the subordinated loans, CRRH-UEMOA has managed to issue three bonds in the local financial markets for a total amount of US$133 million, and an additional local bond with an international issuance which mobilized US$274 million in 2023- a total of US$407 million. CRRH-UEMOA has used the long-term funding to refinance affordable housing mortgage portfolios of financial institutions. Subordinated loan disbursements so far have been on the basis of Disbursement Linked Indicators and a Performance Based Condition linked to the issuance of bonds by the CRRH-UEMOA. The IFC, a shareholder of the CRRH, also invested in the regional bond issuances. Netting out the IFC investments of US$21 million, the project has mobilized US$386 million in Private Capital. 7. Both banks and microfinance institutions have requested a solution for risk sharing for their mortgage portfolio, in addition to the refinancing solutions offered by CRRH-UEMOA. To respond to this request made by WAEMU financial institutions, and with TA under the Project Part 5, CRRH-UEMOA has developed a regional housing loan guarantee product dedicated to banks and microfinance institutions. This solution has been reviewed and vetted by the project task team and the product launched in May 2024. 8. As a result of this restructuring, additional WAEMU households will benefit from access to affordable housing mortgages with higher targets achieved. CRRH-UEMOA will be further strengthened to support the new regional housing loan guarantee product. 9. Based on the above the restructuring requests the following reallocation among categories: • Reallocate €8.4 million from Mortgage Refinancing Part 2 to Mortgage Refinancing Part 1 (a) • Reallocate €10.7 million from Mortgage Refinancing Part 2 to Subordinated Loan Part 1 (b) for a new Performance- based Condition (PBC) based on the launch of a regional housing loan guarantee product for banks and SFDs. Below is the table summarizing the requested reallocation: In Euros/€ Current Allocation Proposed Reallocation Revised Reallocation Category 1 –Mortgage 35,700,000 8,400,000 44,100,000 refinancing under Part 1 (a) Category 2 - Subordinated 58,000,000 10,700,000 68,700,000 Loan under Part 1(b) Category 3 - Mortgage 22,300,000 (19,100,000) 3,200,000 Refinancing under Part 2 TOTAL 116,000,000 116,000,000 Page 2 The World Bank WAEMU Affordable Housing Finance (P161658) With the new proposed PBC, a new line item as Tranche IV would be added to the DLI table as follows: Performance-Based Conditions for Category (2) of the Withdrawal Table Maximum Amount Allocated Tranche (EURO) Performance-Based Conditions I 17,850,000 CRRH-UEMOA has issued a bond in the regional capital market and refinanced Eligible Mortgage Loans for Participating Banks, for a total amount of at least FCFA 12,400,000 with the proceeds of the bond. II 17,850,000 CRRH-UEMOA has issued an additional bond in the regional capital market and refinanced additional Eligible Mortgage Loans for Participating Banks, for a total amount of at least an additional FCFA 12,400,000 with the proceeds of the additional bond. III 22,300,000 CRRH-UEMOA has issued a bond in the regional or international capital market of at least an amount equivalent to EUR 22,300,000 or FCFA 14,697,209,988. IV 10,700,000 CRRH-UEMOA has made available to regional financial institutions a housing loan guarantee product @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Results Yes Reallocations Yes Disbursements Arrangements Yes Loan Closing Date Extension No Development Objective No Loan Cancellations No Safeguard Policies Triggered No Financial Management No ISDS No Procurement No MFD/PCE No Institutional Arrangement No Page 3 The World Bank WAEMU Affordable Housing Finance (P161658) Risks No Implementation Schedule No Legal Covenants No Conditions No Implementation Modalities No Disbursements Estimates No DDO No Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? LOANS Reallocations IDA-61410-001 Cancellations (if any): New Allocation: Currency: EUR 0.00 0.00 Financing % (Type Total) Category Expenditure Current Actuals + Proposed No. Category Allocation Committed Allocation Current Proposed 1 Mortage refinancing 35,700,000.00 39,474,951.44 44,100,000.00 100.00 0.00 Part 1(a); 2 Subordinated Loan 58,000,000.00 56,700,000.00 68,700,000.00 100.00 0.00 Part 1(b); 3 Mortage refinancing 22,300,000.00 0.00 3,200,000.00 100.00 0.00 Part 2; Page 4 The World Bank WAEMU Affordable Housing Finance (P161658) 4 PREMIUM FOR 0.00 0.00 0.00 0.00 0.00 CAPS/COLLARS; Total 116,000,000.0 116,000,000.0 0 0 IDA-D2360-001 Cancellations (if any): New Allocation: Currency: XDR 0.00 0.00 Financing % (Type Total) Category Expenditure Current Actuals + Proposed No. Category Allocation Committed Allocation Current Proposed 1 GD,NCS,CS,OC,Tng,W 10,850,000.00 5,237,852.86 0.00 100.00 0.00 kps under Part 3; 2 GD,NCS,CS,OC,Tng,W 7,250,000.00 2,745,094.08 0.00 100.00 0.00 kps under Prt 4&5; Total 18,100,000.00 0.00 Page 5 The World Bank WAEMU Affordable Housing Finance (P161658) RESULTS COUNTRY: Burkina Faso, Togo WAEMU Affordable Housing Finance Note to Task Team: The following sections are system generated and can only be edited online in the Portal. Delete this note when finalizing the document. @#&OPS~Doctype~OPS^dynamics@restrannexpolicyandresult#doctemplate PDO Indicators by PDO Outcomes PDO Indicators Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Number of housing loans issued by 3,490.00 Dec/2016 8,885.00 15-Dec-2023 10,688 30-Apr-2024 8,700.00 Jun/2024 banks and non bank financial institutions below FCFA 25 Million refinanced by CRRH (Number) PBC The average maturity of loans 10.20 Dec/2016 14.00 15-Dec-2023 14.00 30-Apr-2024 15.00 Jun/2024 refinanced by CRRH-UEMOA (Number) The number of banks and SFD 0.00 Dec/2016 34.00 15-Dec-2023 34.00 30-Apr-2024 25.00 Jun/2024 refinanced by CRRH offering affordable housing loans (Number) Intermediate Results Indicators by Components Participating Banks Mortgage Refinancing Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Page 6 The World Bank WAEMU Affordable Housing Finance (P161658) Bonds issued by CRRH 180,000,000.00 Dec/2016 565,816,585.00 15-Dec-2023 565,816,585.00 30-Apr-2024 412,000,000.00 Jun/2024 (Amount(USD)) Non-Bank Financial Institutions Mortgage Refinancing Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Number of non-bank financial 0.00 Dec/2016 6.00 15-Dec-2023 6.00 30-Apr-2024 4.00 Jun/2024 institutions making use of CRRH refinancing window (Number) Number of housing loans issued by 0.00 Dec/2016 210.00 15-Dec-2023 516 30-Apr-2024 930.00 Jun/2024 non-bank financial institutions below 15 M FCFA and refinanced by CRRH (Number) Affordable Housing Policies Technical Assistance Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year A land and housing price index is 0.00 Dec/2016 0.00 15-Dec-2023 0.00 30-May-2024 1.00 Jun/2024 established in a research centre, harmonized across all 8 countries and with effective data in at least 2 countries (Number) Number of countries who approve 0.00 Dec/2016 4.00 15-Dec-2023 5.00 30-Apr-2024 6.00 Jun/2024 recommendations from advisory services and studies on housing and land (Number) Technical Assistance for Non-Bank Financial Institutions and CRRH Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Survey of a sample of beneficiaries by 0.00 Dec/2016 1.00 15-Dec-2023 1.00 30-Apr-2024 1.00 Jun/2024 mid-term review to provide feedback Comments on achieving targets A firm has been identified to undertake the survey, which is still planned to take place by on terms and conditions of housing loans (Number) mid-term review Page 7 The World Bank WAEMU Affordable Housing Finance (P161658) The number of banks and SFD that 0.00 Dec/2016 28.00 15-Dec-2023 32.00 30-Apr-2024 34.00 Jun/2024 adopt an environmental and social policy for housing loans (Number) The number of banks and SFD that 0.00 Dec/2016 96.00 15-Dec-2023 96.00 30-Apr-2024 100.00 Jun/2024 are trained on environmental and social risk management for housing loans (Number) Design of Regional Guarantee Product for Housing Loans Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year 0.00 Dec/2016 0.00 15-Dec-2023 1.00 31-May-2024 1.00 Jun/2024 Revise A guarantee product for housing Comments on achieving targets Product was launched and is available. This is following the signature of a protocol between the CRRH and Africa loans is available in the region Solidarity Fund for initial capital of the guarantee fund on November 23, 2023, the dissemination of the product (Yes/No) PBC term sheets to the financial sector through a dissemination workshop which took place on May 3, 2024, and the public launch workshop held on May 17, 2024. Performance-based Conditions (PBC) Actual (Previous) Actual (Current) PBC Name Baseline End Target Result Date Result Date 1 Number of housing Value 3,490.00 loans issued by banks and non bank financial institutions below FCFA 25 Million refinanced by Allocated 8885.00 15-Dec-2023 10688 30-Apr-2024 0.00 0.00 CRRH (Number) Amount Total Allocation:25,000,000.00 Value 0.00 1 31-May-2024 Page 8 The World Bank WAEMU Affordable Housing Finance (P161658) New A guarantee product for housing loans is available in the region Allocated 10,700,000.00 0.00 (Yes/No) Amount Total Allocation:10,700,000.00 Note to Task Team: End of system generated content, document is editable from here. Delete this note when finalizing the document. Page 9