Burkina Faso - Artisan and Small and Medium Scale Enterprise Project

Document of PILE Copy The World Bank FOR OFFICIAL USE ONLY Report No. P-2 1 81-UV REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE iTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF UPPER VOLTA FOR AN ARTISAN AND SMALL AND MEDIUM SCALE ENTERPRISE PROJECT November 15, 1977 This document has a restricted distribution nd may be used by reciplents only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authoriation.  Currency Equivalents US$ 1 - CFAF 245 The CFA (Communaute Financiere d'Afrique) Franc is fixed with respect to the French Franc (1 FF = CFAF 50) and floats with respect to the US dollar. In this report the following conversion has been used: US$ I = CFAF 245 CFAF 1 million - US$4,082 ABBREVIATIONS ADB African Development Bank AFCOPA Association Francaise de Formation, Cooperation, Promotion et Animation d'Entreprises ARCOMA Atelier Regional de Construction de Materiel Agricole BCEAO Banque Centrale de Etats de l'Afrique de l'Ouest BICIA Banque Internationale pour le Commerce, l'Industrie et l'Agriculture BIV Banque Internationale des Voltas BND-HV Banque Nationale de Developpement - Haute Volta BOAD Banque Ouest Africaine de Developpement CAISSTAB Caisse de Stabilisation du Prix des Produits Agricoles CCCE Caisse Centrale de Cooperation Economique CEAO Communaute Economique de l'Afrique de l'Ouest CIDA Canadian International Development Agency CNDI Caisse Nationale des Depots et Investissements CNPAR Centre National de Perfectionnement des Artisans Ruraux DEG Deutsche Entwicklungsgesellschaft FAC Fonds d'Aide et Cooperation FED Fonds Europeen de Developpement ILO International Labor Organization KfW Kreditanstalt fur Wiederaufbau OPEV Office de Promotion de 1/Entreprise Voltaique ORD Office Regional de Developpement SACS Service d'Assistance, Conseil et Soutien SME Small and Medium Scale Enterprise SSE Small Scale Enterprise UMOA Union Monetaire de l'Afrique de l'Ouest UNIDO United Nations Industrial Development Organization USAID United States Agency for International Development FISCAL YEAR October 1 - September 30  FOR OFFICIAL USE ONLY Page 1 of 3 pages UPPER VOLTA: ARTISAN AND SMALL AND MEDIUM SCALE ENTERPRISE PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Upper Volta. Beneficiaries: Banque Nationale de Developpement (BND); Centre National de Perfectionnement des Artisans Ruraux (CNPAR); Office de Promotion de l'Entreprise Voltaique (OPEV). Amount: US$4.0 million. Terms: Standard. Relending Terms: Government will relend US$2.7 million of the proceeds of the IDA credit to BND at 7.9 percent, the current Bank lending rate, for 15 years including 3 years grace. US$230,000 of this would be for technical assistance and US$20,000 for staff training. Repayment from BND to Government will be on a fixed term with equal payments of interest and principal. The on lending rate to sub-borrowers will be 11.5 percent. Terms are flexible with a maximum of 15 years and a minimum of 2 years. For small scale loans that are within the Central Bank's small scale Enterprise limit of borrowings below CFAF 20 millions Government has agreed to compensate BND for the difference between the interest it is permitted to charge, 8.5 percent, and its on lending rate 11.5 percent, through a subsidy account. The upper limit for BND's lending to medium scale firms (assets of up to 125 million FCFA) would be US$1,000,000 or 40 percent of the US$2.45 million line of credit. Interest charged on sub-loans from the US$400,000 that Government is to give to the CNPAR as a grant will be at 8.5 percent and include flexible terms up to 10 years with -up to 3 years grace. Project Description: The project is designed to generate off-farm employment by providing financial and technical support to artisans and small and medium scale enterprises through the BND, OPEV and CNPAR. BND will receive a line of credit for small and medium scale enterprises and technical assist- ance in the spheres of management and accounting. Tech- nical assistance will also be provided for training OPEV and CNPAR personnel as well as for imparting technical and managerial skills to entrepreneurs. The beneficiaries are the artisans, entrepreneurs and their employees who would be the recipients of funds provided through the project and technical assistance. It is estimated that This documont ha a restncted dsttibution and my be wed by recipients only in the performance of their olafiW duties. Its contents may not otherwise be disclosed without World Dank authorization.  Page 2 of 3 pages 750 jobs will be created in the modern sector and 1500 in the traditional sector. The project faces no special risks, though the job creation targets would not be fully realized if OPEV and BND fall short of lending the average cost per job target of US$5,000 or if CNPAR is unable to expand operations to reach the projected number of sub-borrowers. Estimated Cost: The total cost of the project, net of taxes, is esti- mated at US$4.4 million. Taxes account for an addi- tional US$.7 million. The proposed IDA credit of US$4.0 million would cover 90 percent of total costs net of taxes. Details of cost estimates including taxes are summarized in the following table: Proposed Financing Entre- IDA. BND Other Government preneurs Total ------------------($ Million)-------------------- Credit Component Artisans (CNPAR) .40 - .05 .45 Modern Small (BND) 1.45 - .50 1.95 Modern Medium (BND) 1.00 .06 .26 1.32 Subtotal 2.85 .06 .81 3.72 Technical Assistance 1.15 .06 .086 - 1.296 TOTAL 4.00 .12 .086 .81 5.016 DISTRIBUTION % 80 2 2 16 100 Financing Plan: IDA's contribution of US$4 million would cover 100% of the foreign costs, US$3.4 million, and US$.6 million of local costs. It is estimated that IDA's contribution towards local costs would include US$.2 for BND sub- loans to small scale borrowers, US$.1 million for CNPAR's credit-in-kind to artisans, and US$.3 million for support to CNPAR, OPEV and Government. US$1.0 million equivalent including taxes will be provided by Government, other local sources and entrepreneurs.  Page 3 of 3 pages Final Date for Prolect Submission: June 1980. Free Limit: US$50,000 for individual sub-projects, the aggregate free limit is US$1,500,000. Estimated Disbursements: Fiscal Year Annual Cumulative