Conformed Copy - C1889 - Small Enterprise/APEX Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1889 BU (Small Enterprise/APEX Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and BANQUE DE LA REPUBLIQUE DU BURUNDI Dated June 8, 1988 CREDIT NUMBER 1889 BU PROJECT AGREEMENT AGREEMENT, dated June 8, 1988, between the INTERNATIONAL DEVELOPMENT ASSOCIATION (the "Association") and BANQUE DE LA REPUBLIQUE DU BURUNDI ("BRB"). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Burundi (the "Borrower") and the Association, the Association has agreed to lend to the Borrower an amount in various currencies equivalent to five million seven hundred thousand Special Drawing Rights (SDR 5,700,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that BRB agree to undertake such obligations toward the Association as are set forth in this Agreement; and (B) by a management agreement (the "Management Agreement") to be entered into between the Borrower and BRB, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to BRB on terms and conditions set forth in said Management Agreement; and WHEREAS BRB, in consideration of the Association's entering into the Page 2 Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project; Management and Operations of the Project Management Unit Section 2.01. (a) BRB declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out Part A of the Project and conduct its operations and affairs, in accordance with sound financial standards and practices, with qualified and experienced management and in accordance with its Statutes. (b) For the purposes of paragraph (a) of this Section BRB shall: (i) establish and maintain the Project Management Unit with the management and staff and under the terms of reference set forth in Schedule 1 to this Agreement; and (ii) allocate from the interest it receives from PFIs under Participation Agreements amounts equal to one half of one percent (1/2%) per annum of the principal amount outstanding under such Participation Agreements so as to cover the Project Management Unit's costs and expenses. Section 2.02. BRB shall: (a) enter into Participation Agreements with Participating Financial Intermediaries under which the Franc Burundais equivalent of proceeds of the Credit will be lent to such PFIs for relending in the form of Sub-loans to Investment Enterprises to finance Investment Projects; such Participation Agreements to be satisfactory to the Association and to provide that Sub-loans be made in accordance with the procedures and on the terms and conditions set forth or referred to in Schedule 2 to this Agreement; (b) charge PFIs under Participating Agreements an interest rate established in accordance with Section 3.02 (b) through (d) of the Development Credit Agreement; and (c) exercise its rights in relation to each Participation Agreement in such manner as to: (i) protect the interests of the Association and those of BRB; (ii) comply with its obligations under this Agreement and under the Management Agreement; and (iii) achieve the purposes of the Project. Section 2.03. BRB shall ensure that the aggregate amount lent under Sub-loans for working capital financing unrelated to equipment financing not exceed twenty-five percent (25%) of the amount allocated to Category 1 in the table set forth in paragraph 1 of Schedule 1 of the Development Credit Agreement, and that such Sub-loans be restricted to existing Investment Enterprises in productive sectors. Section 2.04. BRB shall ensure compliance with obligations set forth in Sections 9.03, 9.04, 9.05, 9.06 and 9.07 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports and maintenance) in respect of the Project Agreement and Part A of the Project. Section 2.05. BRB shall duly perform all its obligations under the Management Agreement. Except as the Association shall otherwise agree, BRB shall not take or concur in any action which would have the effect of assigning, amending, abrogating Page 3 or waiving the Management Agreement or any provision thereof. Section 2.06. (a) BRB shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Management Agreement, and other matters relating to the purposes of the Credit. (b) BRB 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 BRB of its obligations under this Agreement and the Management Agreement. ARTICLE III Financial Covenants Section 3.01. (a) BRB shall maintain procedures, records and accounts adequate to monitor and record the progress of Part A of the Project and of each Investment Project (including its cost and the benefits to be derived from it) and to reflect, in accordance with consistently maintained sound accounting practices, its operations and financial condition in respect of Part A of the Project. (b) BRB shall: (i) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate 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, 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 said records and accounts as well as the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, BRB shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received the audit for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. 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. Page 4 Section 4.02. (a) This Agreement and all obligations of the Association and of BRB thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate; or (ii) a date 30 years after the date of this Agreement. (b) If the Development Credit Agreement terminates before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify BRB 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 General Conditions. 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 addresses as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Bank of the Republic of Burundi: Banque de la Republique du Burundi B.P. 705 Bujumbura, Republic of Burundi Telex: 5071 BRB BDI 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 BRB or by BRB on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the Governor of BRB, or by such other person or persons as such Governor shall designate in writing, and BRB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. 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 duly authorized representatives, have caused this Agreement to be signed in their respective names in Page 5 the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Edward V. K. Jaycox Regional Vice President Africa BANQUE DE LA REPUBLIQUE DU BURUNDI By /s/ Edouard Kadigiri Authorized Representative SCHEDULE 1 Project Management Unit Staff 1. Project Analyst (Unit Chief). 2. Accountant/Financial Analyst. 3. Appropriate support staff. Functions 1. Provide guidance to PFIs in selecting eligible Investment Projects. 2. Ensure application of appropriate standards for appraisals of Investment Projects. 3. Review the eligibility and authorize financing for Investment Projects submitted by PFIs. For Sub-loans of less than $80,000 equivalent, check whether the requests meet the eligibility criteria and give approval within five (5) working days from submission. For Sub-loans of/or above $80,000 equivalent, review the requests in more detail, give comments on the quality of appraisal to the PFI concerned and check the eligibility for refinancing of the requests within ten (10) working days from submission. 4. Ensure proper disbursement of proceeds of the Credit, and supervise and centralize the collection and forwarding of supporting documentation. 5. Supervise the PFIs' compliance with their obligations under the Participation Agreements. 6. Supervise, on a sample basis and/or focusing on problem cases, the Investment Projects. 7. Ensure liaison between the Association and the Participating Financial Intermediaries on matters related to the Project. SCHEDULE 2 Terms and Conditions of Sub-loans 1. PFIs will relend the Franc Burundais equivalent of the proceeds of the Credit to Investment Enterprises for Investment Projects, for terms of two (2) to ten (10) years, or of two (2) to twelve (12) years for agricultural projects which shall be Page 6 specifically authorized by the Project Management Unit. The Sub-loans may include periods of grace of up to three (3) years, or up to six (6) years for agricultural projects specifically authorized by the Project Management Unit, and shall include rates of interest which may be subject to maximum ceilings agreed upon between the Borrower and the Association. 2. PFIs shall charge to Investment Enterprises under Sub-loans an interest rate equal to the aggregate of: (a) the rate charged to PFIs under Section 3.02 (b) of the Development Credit Agreement; and (b) a margin which, as long as the situation envisaged under Section 3.02 (a) (i) of the Development Credit Agreement exists, shall not be higher than: (i) four (4) percentage points for Sub-loans having a duration of up to seven (7) years; and (ii) five (5) percentage points for Sub-loans having a duration of more than seven (7) years. The financial charges on Sub-loans shall consist of the above interest only and no other charge, commission and fee shall be payable under Sub-loans. 3. Investment Enterprises eligible for Sub-loans shall be only those enterprises with total net assets not exceeding the equivalent of $300,000, or, if new enterprises, those requesting Sub-loans to finance Investment Projects, the cost of which is estimated not to exceed such equivalent. 4. Sub-loans for any Investment Project for modernization or expansion of small enterprises may not exceed eighty percent (80%) of the total cost of the proposed Investment Project nor a total equivalent to $240,000. 5. Sub-loans for any Investment Project to be carried out by a new enterprise may not exceed a total equivalent to $210,000. 6. Sub-loans may finance up to 90% of any Investment Project to be carried out by a new enterprise, provided, however, that any profit generated by such enterprise shall be reinvested in the same Investment Project until the percentage financed by such Sub-loan shall have been reduced to 70% thereof. 7. PFIs may cofinance up to twenty percent (20%) of the cost of Investment Projects from their own resources. 8. No Sub-loan granted by any PFI shall be eligible for refinancing by BRB out of the proceeds of the Credit without the prior verification of the Project Management Unit as to its eligibility and without the approval of the Association; once five Sub-loans for each PFI shall have been so approved, however, the approval of the Association shall no longer be required for the subsequent Sub-loans granted by such PFI. 9. When presenting a Sub-loan to the Association for approval, the relevant PFI and BRB shall furnish to the Association an application, in form satisfactory to the Association, together with: (i) a description of the Investment Enterprise and an appraisal of the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Sub-loan; (ii) the proposed terms and conditions of the Sub-loan including its schedule of amortization; and (iii) such other information as the Association shall reasonably request. 10. Sub-loans shall be made on terms whereby the PFI concerned shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Association, those of BRB and those of the PFI including the right to: (a) require the Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (b) require that: (i) the goods and services to be financed out of the proceeds of the Credit be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them; and (ii) such goods and services be used exclusively in the carrying out of the Investment Project; Page 7 (c) inspect, by itself or jointly with representatives of the Project Management Unit, or jointly with the Association, or jointly with both, as the case may be, such goods, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (d) require that: (i) the Investment Enterprise take out and maintain with responsible insurers such insurance against such risks and in such amounts, as shall be consistent with sound business practice; and (ii) without any limitation upon the foregoing, such insurance cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Credit to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (e) obtain all such information as the Association, the PFI or the Project Management Unit, as the case may be, shall reasonably request relating to the foregoing, to the administration, operations and financial condition of the Investment Enterprise and to the benefits to be derived from the Investment Project; and (f) suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Sub-loan upon failure by such Investment Enterprise to perform its obligations under its contract with the PFI concerned.