Madagascar - Rural Finance Technical Assistance Project : Credit 2459 - Credit Agreement - Conformed

CREDIT NUMBER 2459 NAG Development Credit Agreement (Rural Finance Technical Assistance Project) between REPUBLIC OF MADAGASCAR and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1993 CREDIT NUMBER 2459 MAG DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated ,l1993, between REPUBLIC OF MADAGASCAR (the Borrower) and INTERTIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Borrower has stated in a letter dated January 19, 1993 its policies, objectives and program of actions designed to improve rural finance development (the Rural Finance Development Strategy); (C) the Project will be carried out by Association de Dfveloppement du Mouvement Mutualiste d'Epargne et de Cr6dit (ADMMEC) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to ADMMEC the proceeds of the Credit as provided in this Agreement; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Association and ADMMEC; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the last senteace of Section 3.02 deleted (the General Conditions), constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth, and the following additional terms have the following meanings: (a) "Project Preparation Advance" means the project preparation advance granted by the Association to the Borrower -2- pursuant to an exchange of letters dated February 7, 1991 and March 5, 1991 between the Borrower and the Association; (b) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (c) "ADMMEC" means Association de Ddveloppement du Mouvement Mutualiste 'Epargne et de Cr&dit, a non-governmental organization established under Malagasy laws and regulations pursuant to its Statutes and operating in accordance with Principles of Operation, both dated January 13, 1993; (d) "Project Agreement" means the agreement between the Association and Association de Dfvelopement du Mouvement Mutualiste d'Eparsne tt de Cr6dit (ADIMEC), of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (e) "Subsidiary Credit Agreement" means the agreement entered into between the Borrower and Association de Dfveloppement du Mouvement Mutualiste d'Epargne et de Cr6dit (ADIMEC) pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes any schedules to the Subsidiary Credit Agreement; and (f) "Steering Committee" means the Borrower's committee to be established pursuant to Section 6.01 (f) of this Agreement and referred to in Section 2.02 of the Project Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to two million seven hundred thousand Special Drawing Rights (SDR 2,700,000). Section 2.02. (a) The amcunt of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable -3- cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank on terms and conditions satisfactory to the Association, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. (c) Promptly after the Effective Date, tile Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required to repay the principal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be December 31, 1997 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the Jnne 30 immediately preceding the accrual date or at such other rate, as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each February 15 and August 15, commencing August 15, 2003 and ending February 15, 2033. Each installment to and including the installment payable on February 15, 2013 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years, and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. ADMMEC is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2,02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement and, to this end, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement and in accordance with its Rural Finance Development Strategy, shall cause ADMEC to perform in accordance with the provisions of the Project Agreement all the obligations of ADMMEC therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable ADMMEC to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make available to ADMMEC on a grant basis the proceeds of the Credit under a subsidiary c.'dit agreement to be entered into between the Borrower and ADMMEC, under terms and conditions which shall have been approved by the Association. (c) The Borrower shall exercise its rights under the Subsidiary Credit Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, smend, abrogate or waive the Subsidiary Credit Agreement or any provision thereof. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to the Project Agreement. -6- Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by ADMMEC pursuant to Section 2.04 of the Project Agreement. Section 3.04. The Borrower shall, by June 30, 1995, carry out jointly with the Association and with the participation of ADMMEC a midterm review of the Project and soon thereafter shall implement the reconmendations of such a review. In order to facilitate this review, the Borrower shall cause ADMMEC to prepare and furnish to the Association, not later than four weeks before the scheduled date of this review, a report of Project activities of such scope and in such detail as the Association shall have reasonably requested. The review shall cover inter alia: (a) overall Project performance against established and agreed key performance indicators; (b) evaluation of Project success and problems to take into account for the future expansion of Project activities; (c) assessment of Project sustainability; and (d) evaluation of consultants' performance. ARTICLE IV Financial Covenants Section 4.01. (a) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with sound accounting practices, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made; and (iii) enable the Association's representatives to exami-ie such records. -7- (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) (i) of this Section and those for the Special Account 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, including 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; and (iii) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) ADMMEC shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that ADMMEC will be able to perform its obligations under the Project Agreement. (c) ADMMEC Statutes and Principles of Operation shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of ADMMEC to perform any of its obligations under the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of ADMEC or for the suspension of its operations. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) any event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower; and (b) any event specified in paragraphs (c) or (d) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Subsidiary Credit Agreement has been executed on behalf of the Borrower and ADMMEC; (b) the Special Account has been established in accordance with Section 2.02 (b) of this Agreement; (c) the following ADMMEC staff referred to in Section 3.01 of the Project Agreement have been appointed: the accountant, the senior executive with monitoring and evaluation experience, the senior executive with project management experience and the rural finance specialist; (d) at least two consulting firms for the execution of savings and loan promotion schemes under Part A (a) of the Project have been employed in accordance with the provisions of Section II of the Schedule to the Project Agreement; (e) the Borrower has adopted and promulgated its Law Regulating Savings and Loan Associations (Ordonnance portant r6glementation des activit6s d'fpargne, de cr6dit et de cautionnement des institutions financi&res mutualistes); and (f) the Borrower has established the Steering Committee. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by ADMMEC and is legally binding upon ADMMEC in accordance with its terms; and (b) that the Subsidiary Credit Agreement has been duly authorized or ratified by the Borrower and ADMMEC and is legally binding upon the Borrower and ADMMEC in accordance with its terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. Except as provided in Section 2.09 of this Agreement, the Minister of the Borrower responsible for finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Antananarivo Madagascar Cable address: Telex: MINFIN 22489 Antananarivo - 10 - For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF MADAGASCAR By //~or Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By A c% c aL A &C~ Regional Vice President Africa - 11 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets "orth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated Z of (Expressed in Expenditures Cateyory SDR Eouivalent) to be Financed (1) Consultants' 1,525,000 100% services (2) Vehicles, equip- 210,000 100% ment and materials (3) Training 225,000 90% (4) Operating costs 210,000 100% through December 31, 1995 and 50% thereafter (5) Refunding of 340,000 Amount due pur- Project suant to Section Preparation 2.02 (c) of this Advance Agreement (6) Unallocated 190,000 TOTAL 2,700,000 2. For the purposes of this Schedule, the term "Operating costs" means expenditures related to operation and maintenance of Project vehicles and equipment, travel within Madagascar and per diem of staff involved in the Project, office rental and maintenance, office supplies, and salaries of local contractual staff within ADMMEC for activities relating to the Project. - 12 - 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. - 13 - SCHEDULE 2 Description of the Project The objectives of the Project are, on a pilot scale, to help rural groups to develop into savings and loan associations which, over time, may federate and make links with formal financial institutions, the initial emphasis being to encourage savings in kind or in cash within a group, leading to credit activities within said group. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Savings and Loan Promotion (a) Carrying out of savings and loan promotion schemes in at least three selected areas; (b) expansion of existing schemes in Vakinankaratra and Marovoay; and (c) carrying out of training programs in rural finance for local NGOs and Malagasy nationals. Part B: Project Management and Monitoring and Evaluation Assistance in the overall management of ADMMEC and its coordination, monitoring and evaluation activities, including the provision of consultants' services and the acquisition of vehicles and office equipment. Part C: Services to Micro-enterprises Provision of basic training and entrepreneurship training services to micro-enterprises in rural areas. The Project is expected to be completed by June 30, 1997. - 14 - SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (4) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $300,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. - 15 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall - 16 - specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraph 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY