Tanzania - Kigoma Rural Development Project : Credit 0508 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 508 TA Project Agreement (Kigoma Rural Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND TANZANIA RURAL DEVELOPMENT BANK DATED AUGUST 21, 1974 CONFORMED COPY CREDIT NUMBER 508 TA Project Agreement (Kigoma Rural Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND TANZANIA RURAL DEVELOPMENT BANK DATED AUGUST 21, 1974 PROJECT AGREEMENT AGREEMENT, dated August 21, 1974, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and TANZANIA RURAL DEVELOPMENT BANK (hereinafter called TRDB). WHEREAS by the Development Credit Agreement of even date herewith between United Republic of Tanzania (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to ten million dollars ($10,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that TRDB agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and TRDB, a portion of the proceeds of the credit provided for under the Development Credit Agreement will be made available to TRDB on the terms and conditions therein set forth; and WHEREAS TRDB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) TRDB shall carry out Parts B and C of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, agricultural, engineering and financial practices. 4 (b) In carrying out Parts B and C of the Project, TRDB shall follow the operating policies and procedures set forth or referred to in Schedule 1 to this Agreement, as such Schedule shall be amended from time to time by agreement between TRDB and the Association. Section 2.02. Except as the Association shall otherwise agree, contracts for the purchase of goods or for the carrying out of works or services (other than consultants' services) for the Project and to be financed out of the proceeds of the Credit, shall be awarded in accordance with the provisions of Section 2.03 of the Development Credit Agreement. Section 2.03. (a) TRDB undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit made available to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by TRDB to replace or repair such goods. (b) Except as the Association may otherwise agree, TRDB shall cause all goods and services financed out of the proceeds of the Cretit made available to it by the Borrower to be used exclusively for the Project. Section 2.04. (a) TRDB shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) TRDB: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out 6f the proceeds of the Credit made available to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Association's representatives to visit the facilities and construction sites included in the Project, and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so made available to it and the goods and services financed out of such proceeds. (c) TRDB shall enable the Association's representatives to examine all installations, sites, works, buildings, property and equipment of TRDB relating to Parts B and C of the Project and any relevant records and documents. 5 Section 2.05. TRDB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, TRDB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.06. (a) TRDB shall, at the request of the Association: (i) exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit; and (ii) furnish to the Association all such information as the Association shall reasonably request in respect of the Project. (b) TRDB shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by TRDB of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.07. TRDB shall staff its office in Kigoma Region with adequate numbers of competent and experienced persons to ensure the effective implementation of Parts B and C of the Project. ARTICLE III Financial Covenants Section 3.01. TRDB shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 3.02. TRDB shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts 6 and financial statements of TRDB and the audit thereof as the Association shall from time to time reasonably request. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of TRDB thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date twenty-five years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify TRDB of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 7 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For TRDB: Tanzania Rural Development Bank P.O. Box 268 Dar es Salaam United Republic of Tanzania Cable address: MTAJI Dar es Salaam Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of TRDB may be taken or executed by the General Manager or such other person or persons as the General Manager shall designate in writing. Section 5.03. TRDB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of TRDB, take any action or execute any documents required or permitted to be taken or executed by TRDB pursuant to any of the provisions of this Agreement. Section 5.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed 8 in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Michael L. Lejeune Director, Country Programs Department Eastern Africa Regional Office TANZANIA RURAL DEVELOPMENT BANK By /s / Paul Bomani Authorized Representative 9 SCHEDULE 1 Operating Policies and Procedures 1. On-lending Terms (A) Subsidiary Loan (from the Borrower to TRDB): Repayment period of 25 years, including 5 years of grace, 4% per annum rate of interest, the Borrower to bear the exchange risk. (B) Sub-loans to KCU (from TRDB to KCU): (i) For purchase of vehicles: maximum repayment period of 3 years, including up to 1 year of grace, 8-1/2% per annum rate of interest. (ii) For construction of godowns and buildings: maximum repayment period of 10 years, including up to I year of grace, 7-1/2% per annum rate of interest. (iii) For on-lending to Project Villages, for seasonal inputs and productive infrastructure, same terms as are provided hereinafter for Sub-loans to Project Villages. (C) Sub-loans to Project Villages: (i) (From KCU to Project Villages): For purchase of seasonal inputs: maximum repayment period of I year, 8-1/2% per annum rate of interest. (ii) (From either TRDB directly or through KCU to Project Villages): For purchase of productive infrastructure, as follows: (a) Godowns: maximum repayment period of 15 years, including up to 2 years of grace, 7-1/2% per annum rate of interest. 10 (b) Maize mills: maximum repayment period of 5 years, including up to I year of grace, 7-1/2% per annum rate of interest. (c) Maize shellers: maximum repayment period of 4 years, including up to I year of grace, 7-1/2% per annum rate of interest. (d) Fishing gear: maximum repayment period of 2 years, including up to I year of grace, 7-1/2%X, per annum rate of interest. 2. Procedures (A) General: (1) TRDB shall provide credit to KCU only after the following initial steps have been taken: (a) KCU shall have made its financial reorganization pursuant to the provisions of Section 3.08 of the Development Credit Agreement; (b) KCU's 1972/1973 financial statements shall have been aud ited; and (c) KCU shall have employed an operations manager and a financial controller pursuant to the provisions of Section 3.02(a) of the Development Credit Agreement. (2) TRDB shall continue to review the creditworthiness of KCU from time to time, taking into account inter al/a the following organizational and procedural changes which TRDB shall require KCU to make: (a) KCU shall employ a general manager, a credit and training supervisor and an adequate number of society credit officers (at least one society credit officer for 15 Project Villages); (b) KCU shall have adopted new procedures for obtaining cash advances for crop purchases from the National Bank of Commerce; and * 11 (c) KCU shall introduce similar lending terms and procedures for all affiliated primary societies which receive credit from KCU. (B) Project Villages: TRDB shall provide credit under the Project, through KCU to Project Villages for the purchase of seasonal inputs and, either directly or through KCU, for investment in village infrastructure. To be eligible for Sub-loans, Project Villages shall be required to: (i) be fully registered as multi-purpose primary cooperative societies, (ii) have a qualified bookkeeper and agricultural field assistant working full-time within the Project Village, and (iii) have demonstrated satisfactory agricultural performance and, if applicable, prompt debt repayment during the previous crop season. Credit shall be made available to Project Villages only after TRDB verifies that the Project Village has shown acceptable past agricultural performance and debt repayment, and only in amounts consistent with expected crop projections for the subsequent season. (C) KCU: TRDB shall provide credit under the Project to KCU for its own capital investment. Before providing such credit, TRDB's credit appraisal shall include: (i) a review of KCU's general financial position, both present and historical including, inter alia, liquidity, debt-equity ratio, total outstanding debt, total revenues and expenditures, and earnings; (ii) an evaluation of KCU's management; and (iii) an examination of KCU's expected trading volume and margins and KCU's expected working capital, investment and debt service requirements for the period during which Sub-loans may be made to KCU.