Conformed Copy - C2231 - Poverty Alleviation Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2231 CE (Poverty Alleviation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and JANASAVIYA TRUST FUND Dated May 8, 1991 CREDIT NUMBER 2231 CE PROJECT AGREEMENT AGREEMENT, dated May 8, 1991, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and JANASAVIYA TRUST FUND (the Trust). WHEREAS (A) by the Development Credit Agreement of even date herewith between Democratic Socialist Republic of Sri Lanka (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to forty million six hundred thousand Special Drawing Rights (SDR 40,600,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that the Trust agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and the Trust, part of the Page 2 proceeds of the credit provided for under the Development Credit Agreement will be made available to the Trust on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS the Trust, in consideration of the Association's entering into the 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 this 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) The Trust 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 with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and the Trust shall otherwise agree, the Trust shall carry out the Project in accordance with the Implementation Program set forth in the Schedule to this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works 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 Schedule 4 to the Development Credit Agreement. Section 2.03. The Trust shall carry out 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) in respect of the Project Agreement and Part A of the Project. Section 2.04. The Trust shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, the Trust 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 2.05. (a) The Trust 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 Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. Page 3 (b) The Trust 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 the Trust of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. The Trust shall, for the purpose of providing Loans and grants under the Project to Partner Organizations, enter into Participation Agreements with such Partner Organizations on terms and conditions satisfactory to the Association, which shall include those outlined in the Schedule to this Agreement. ARTICLE III Management and Operations of the Trust Section 3.01. The Trust shall carry on its operations and conduct its affairs in accordance with sound administrative and financial practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. The Trust shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.03. The Trust shall: (a) in accordance with a program satisfactory to the Association, review the methods and results of its endeavors; (b) by June 30, 1993 appoint consultants to conduct an independent review of such endeavors, in accordance with terms of reference satisfactory to the Association; and (c) cause said consultants to furnish their report by December 31, 1993. Section 3.04. The Trust shall manage and invest the funds extended by the Borrower pursuant to the provisions of Section 3.04 of the Development Credit Agreement, in a manner satisfactory to the Association. ARTICLE IV Financial Covenants Section 4.01. (a) The Trust shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) The Trust shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) 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 Page 4 four 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 said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of the Trust 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) the 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 the Trust of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. 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: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (ITT) Page 5 Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) For the Trust: Janasaviya Trust Fund 5th Floor, Unity Plaza Building Colombo 4, Sri Lanka Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of the Trust may be taken or executed by its Managing Director or such other person or persons as the Trust shall designate in writing, and the Trust shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. 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 the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Attila Karaosmanoglu Regional Vice President Asia JANASAVIYA TRUST FUND By /s/ Susantha de Alwis Authorized Representative SCHEDULE Implementation Program for Part A of the Project Part A: Credit under Part A.1 of the Project 1. Terms for onlending from the Borrower to the Trust Interest rate : 3% per annum Amortization period : 25 years, inclusive of 5 years of grace Foreign exchange risk : to be borne by Borrower 2. Terms for relending from the Trust to Partner Organizations Interest rate : at least 7% per annum Amortization period : in line with maturities of Sub-loans, provided it will not exceed 3 years inclusive Page 6 6 months of grace (a) A Loan under the Credit Fund is extended following appraisal of an application carried out in accordance with guidelines satisfactory to the Association. (b) Each Partner Organization is to have at least two years' experience lending to the rural poor, and achieved a collection ratio of at least 70% for two years preceding submission of the Loan application. (c) Failure to repay Loans as scheduled renders a Partner Organization ineligible for further Loans under Part A.1 of the Project during the period for which arrears are outstanding. (d) Each Partner Organization is to establish and maintain an accounting and financial reporting system in accordance with guidelines satisfactory to the Association, and is to have its accounts audited annually by an independent auditor. (e) Continued access to the Credit Fund by any Partner Organization requires a Sub-loan collection rate of at least 90%. 3. Terms for Sub-loans to Beneficiaries Interest Rate : not less than the average weighted rate charged by the Commercial Banks, Development Finance Corporation of Ceylon, National Development Bank of Sri Lanka, Regional Rural Development Banks, Credit Societies and Cooperatives as published semi-annually by the Central Bank of Sri Lanka Amortization period : determined by the respective Partner Organization, pro- vided it will not exceed 3 years inclusive 6 months of grace Rescheduling : once, for a maximum period of two years Maximum Sub-loan size : $1,000 equivalent Maximum cumulative : $1,000 equivalent borrowings under Sub-loans per Beneficiary (a) Sub-loans are directed at assisting the rural poor develop remunerative uses for their time and skills, through financing productive activities in agriculture, artisanal production, transport, petty trading and other village activities. (b) Activities financed under any Sub-loan are to be technically feasible and manageable by the Beneficiary, and are to improve the standard of living and quality of life. (c) Beneficiaries are enrolled in a savings program with the relevant Partner Organization throughout the Sub-loan period. (d) Goods and services to be financed under any Sub-loan shall be purchased in accordance with the Page 7 provisions of Section I of Schedule 4 to the Development Credit Agreement. 4. Adjustment of Terms Terms specified above for the Trust, Partner Organizations and Beneficiaries, shall be reviewed on each January 1 and July 1 and if necessary, adjusted, based on procedures agreed upon by the Borrower, the Association and the Trust. Part B: Human Resources Development under Part A.2 of the Project 1. The Trust provides grants under the Human Resource Development Fund to eligible Partner Organizations for: (a) Human Resource Development Group formation, awareness building, and training in skills and entrepreneurship development of the rural poor, mainly in support of programs under Part A of the Project. (b) Institutional Development Strengthening the management and operational capabilities of Partner Organization, mainly in the implementation of programs outlined under Part A of the Project. 2. (a) Each Partner Organization is to have at least one year of experience in group mobilization and training of the poor. (b) Each Partner Organization has submitted a medium term plan acceptable to the Trust, for human resource development in support of programs under Part A of the Project. Part C: Rural Works 1. The Trust provides grants under the Rural Works Fund to eligible Partner Organizations for rural infrastructure projects. 2. Each rural infrastructure project eligible to receive grants under the Rural Works Fund: (a) has a labor content in excess of 50% of total project cost; (b) generates maximum employment and use local labor to the extent possible; and (c) meets technical requirements. Part D: Nutrition The Trust provides grants under the Nutrition Fund to eligible Partner Organizations to reduce malnutrition among infants, pregnant women and lactating mothers through, inter alia, growth monitoring, delivery of nutrition services, nutrition education and thriposha distribution. Page 8