Docwnent of The World Bank Report No: 21446-AL PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$5.5 MILLION TO THE PEOPLE'S DEMOCRATIC REPUBLIC OF ALGERIA FOR A MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT June 5, 2002 Finance, Private Sector and Infrastructure Department Middle East and North Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective as of May 9, 2002) Currency Unit = Algerian Dinar (DZD) DZD 1 = US$0.0137 US$1 = DZD 80.00 FISCAL YEAR January I st -- December 31 ABBREVIATIONS AND ACRONYMS AAP Aide d l'Accession de la Propriete (Housing Ownership Assistance) ANC : Agence Nationale du Cadastre (Land-mapping National Agency) APC : Assemblee Populaire Communale (local government) CAS Country Assistance Strategy (Strategie d 'Assistance au Pays) CF Conservation Fonciere (Title Administration) CNEP : Caisse Nationale d'Epargne et de Prevoyance (Savings & Housing Bank) CNL : Caisse Nationale du Logement (National Housing Agency) DGDN : Direction Generale du Domaine National (State-owned Land Directorate) FONAL: Fonds National d'Aide du Logement (National Housing Fund) GOA : Gouvernement d 'Algerie (Government of Algeria) ICB International Competitive Bidding (Appel d'offres international) LDU Directions de l 'Urbanisme (Local Directorates of Urban Planning, MoH local offices) LG Local governments (collectivites locales) MOF Ministere des Finances (Ministry of Finance) MOH : Ministere de I 'Habitat (Ministry of Housing) NCB : National Competitive Bidding (Appel d'offres national) NGO Nongovernmental Organization (Organisation Non Gouvernementale) NPV Net Present Value (Valeur Nette Actuelle) OD Operational Directive (Directive Operationnelle de la Banque) OPGI : Office de Promotion et de Gestion Immobiliere (Public Housing and Development Agency) PMU Project Management Unit (Unite de Gestion du Projet) SGCI Soci&e de Garantie des Credits Immobiliers (Mortgage Credit Guarantee Company) SNMG Salaire National Minimum Garanti (National Minimum-Guaranteed Salary) SRH Societe de Refinancement Hypothecaire (Mortgage Refinance Company) TA : Technical Assistance (Assistance Technique, AT) Vice President: Jean-Louis Sarbib Country Manager/Director: Christian Delvoie Sector Director: Emmanuel Forestier Task Team Leader/Task Manager: Douglas I. Graham ALGERIA MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 2 3. Sector issues to be addressed by the project and strategic choices 5 C. Project Description Sumnmary 1. Project components 6 2. Key policy and institutional reforms supported by the project 6 3. Benefits and target population 8 4. Institutional and implementation arrangements 8 D. Project Rationale 1. Project alternatives considered and reasons for rejection 9 2. Major related projects financed by the Bank and other development agencies 9 3. Lessons learned and reflected in the project design 10 4. Indications of borrower comnmitment and ownership 10 5. Value added of Bank support in this project 10 E. Summary Project Analysis 1. Economic 11 2. Financial 11 3. Technical 11 4. Institutional 11 5. Environmental 12 6. Social 12 7. Safeguard Policies 13 F. Sustainability and Risks 1. Sustainability 13 2. Critical risks 14 3. Possible controversial aspects 14 G. Main Loan Conditions 1. Effectiveness Condition 15 2. Other 15 H. Readiness for Implementation 15 I. Compliance with Bank Policies 15 Annexes Annex 1: Project Design Summary 17 Annex 2: Detailed Project Description 20 Annex 3: Estimated Project Costs 27 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summnary 28 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 29 Annex 6: Procurement and Disbursement Afrangements 30 Annex 7: Project Processing Schedule 34 Annex 8: Documents in the Project File 35 Annex 9: Statement of Loans and Credits 36 Annex 10: Country at a Glance 37 MAP(S) Map of Algeria: IBRD 29992 ALGERIA MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT Project Appraisal Document Middle East and North Africa Region MNSIF Date: June 7,2002 Team Leader: Douglas I. Graham Country Manager/Director: Christian Delvoie Sector Director: Emmanuel Forestier Project ID: P064983 Sector(s): FS - Financial Sector Development Lending Instrument: Technical Assistance Loan (TAL) Theme(s): Financial Sector; Urban Poverty Targeted Intervention: N Project Financing Data m(X Loan [ ] Credit 1 I Grant ( Guarantee [] Other: For Loans/Credits/Others: Loan Currency: United States Dollar Amount (US$m): 5.5 Borrower Rationale for Choice of Loan Terms Available on File: 1 Yes Proposed Terms (IBRD): Fixed-Spread Loan (FSL) Grace period (years): 4.5 Years to maturity: 12 Commitment fee: 0.85% of undisbursed balances for Front end fee (FEF) on Bank loan: 1.00% first 4 years; 0.75% thereafter Payment for FEF: Capitalize from Loan Proceeds Initial choice of Interest-rate basis: Type of repayment schedule: 1 ] Fixed at Commitment, with the following repayment method (choose one): [XJ Linked to Disbursement Financing Plan (USSm): Source Local Foreign Total BORROWER 2.70 0.00 2.70 IBRD 0.90 4.60 5.50 Total: 3.60 4.60 8.20 Borrower: GOVERNMENT Responsible agency: MINISTRY OF FINANCE Directorate General of the Treasury Address: Ministry of Finance, Algiers, Algeria Contact Person: Mr. Abdelhak BENALLEGUE, Project Director Tel: 213-21-73 54 36 Fax: 213-21-73 56 16 Email: Ab_Benallegue@Hotmnail.Com Other Agency(ies): Soci6te de Refinancement Hypoth6caire Address: 7, Chemin du Paradou, Hydra, Algiers Contact Person: Dr. Abdelkader BELTAS, Pr6sident Directeur Gen6ral Tel: 213-21-60 35 93 Fax: 213-21-6047 41 Email: beltas@djazair-connect-com Societe de Garantie du Cr6dit Immobilier Address: 7, Chemnin du Paradou, Hydra, Algiers Contact Person: Dr. Mourad GOUMIRI, President-Directeur General Tel: 213-21-48 25 87 Fax: 213-21-60 49 58 Email: sgci@ist.ceristdz Estimated Disbursement In USSm Equivalent (Bank FY/Semesters): FY 2001 2002 2003 2004 2005 2006 Source Sem. 1 Sem 1 Sem. 1 Sem.1 Sem. 1 Sem.1 Sem.2 Sem.2 Sem.2 Sem.2 Sem.2 Sem.2 IBRD 1.10 1.60 1.70 1.10 Cumulative I_$1.10 $2.70 $4.40 $5.50 = Project implementation period: 3 years Expected effectiveness date: 10/31/2002 Expected closing date: 12/31/2005 -2- A. Project Development Objective 1. Project development objective: (see Annex l) The main objective of the proposed project is to help strengthen the enabling environment for a well-functioning mortgage loan market, including: (i) legal and administrative measures to improve property rights, mortgage lien efficiency, and property titling and registration system; (ii) strategic assistance to financial institutions; and (iii) the training of operational staff in mortgage lending. 2. Key performance indicators: (see Annex I) 1) Increased volume of annual housing loans extended: - estimated figures for 2002: 14,000 loans and 7.5 billion DZD - objective: 35,000 loans and 20 biDlion DZD in 2005. 2) Increased number of new housing units built annually, not including social rental housing and leasing schemes (location-vente): - average figure 1999/2001: 55,000 units - objective: 80,000 units in 2005. 3) Increased loan refinancing on the secondary mortgage market: - early 2002: about 400 million DZD outstanding - objective: 10 bilion DZD at the end of 2005. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex I) Document number: 15316 Date of latest CAS discussion: 02/05/96 The current CAS is outdated and a new strategy is under preparation with an expected completion date of March, 2003. This project is a direct result of the current policy dialogue going on for the preparation of the new CAS, during which the Government of Algeria communicated that further developing the housing market is one of its top priorities. However, the objectives of the current CAS remain valid, particularly with respect to the priorities given to accelerating sustainable economic growth through the pursuit of financial sector reforms, including the strengthening of the operational environment of the financial sector and the efficiency of basic bank services, as well as through the pursuit of private sector development In this regard, the project is consistent with the CAS and is part of the low case lending scenario for Algeria. The project will support CAS objectives by improving the housing finance system which is a critical part of a well-functioning housing market within a private sector-led economy. 2. Main sector issues and Government strategy: Sector Issues Algeria suffers from a severe housing shortage, particularly in urban areas, where housing programs are still dominated by public sector social rental housing. It is estimated that 175,000 new housing units would need to be built each year during the next ten years in order to absorb the current deficit of units (550,000 units) and satisfy the increase in demand. Moreover, the age and quality of the existing housing stock call for wide-scale investment in renovation. The housing sector has not responded well in terms of contributing to either economic growth or social shelter objectives, and has produced only an average of 100,000 units per year in urban areas. This situation reflects the policy constraints affecting housing supply and demand. - 3- On the housing supply side, there are major constraints to the production of sufficient affordable housing units, particularly with regard to: (a) the availability of land with legal title; (b) the availability of infrastructure, the shortage of which is partly attributable to lack of financing; and (c) the land servicing and housing production process which is governed by regulations and administrative criteria rather than by demand - available urban land is mainly owned by the State and is used as a means of providing subsidies. A study to review the supply constraints in the housing market, financed by French assistance, recently analyzed the bottlenecks and made policy recommendations (report dated May 30, 2002). The report's findings on land titling and legal issues have been incorporated in the project On the demand side, the level of housing prices, which are often high because of limited supply, is a major constraint on effective demand. It is however not the only factor: the lack of loan financing adds a firther dimension to the problem. Based on the standard price of an apartment in a new private development of DZD 2.2 million (about USD 28,000 at DZD 80/USD 1) and on the cost for a self-built house of DZD 1.9 million, it is estimated that about a third of households could afford to borrow in the unsubsidized market to purchase a home, assuming they have significant accumulated savings - which is normally the case in Algeria. With the help of the up-front grant scheme (see description under Caisse Nationale du Logement), which can be very significant since it amounts up to DZD 400,000 (about USD 5,000), or 25% to 30% of typical apartment prices in a subsidized development, this proportion is doubled and two thirds of households are potentially bankable. In addition to serious physical supply bottlenecks, this situation highlights the undeveloped state of the mortgage market and the difficulty in obtaining long-term mortgage loans. The current stock of mortgage loans represents only 1% of GDP, which is particularly low even for an emerging economy, and the value of housing loans to individuals remains less than that of loans to developers. The annual number of new mortgage loans is currently estimated at about 15,000, amounting to approximately DZD 7.5 billion (USD 94 million). As a result, most owner-occupied units are self-financed, which implies lower affordability and delayed access to reasonably comfortable housing. This low level of activity is not due to unaffordable lending conditions. Terms under which loans are extended are, on the contrary, quite favorable, especially after the recent fall in interest rates: new loans typically carry an interest rate between 7.5% and 8.5%, for maturities of 15 to 20 years. The affordability of housing loans suggests that the problem lies more with their lack of availability than with shortage of demand for them. Primary Lenders Housing finance used to be entirely channeled through Caisse Nationale d'Epargne et de Prevoyance (CNEP). Since financial liberalization, interest rates are no longer controlled and CNEP has been transformed into a commercial bank. CNEP collects households' savings and makes housing loans to developers and households. Its long-term housing loans to households cofrespond to a modest DZD 33 billion stock (of which only the more recent loans are actually mortgages). Although CNEP still faces major strategic challenges, it plans to approve 11,000 mortgages each year (DZD 4 to 5 billion). Mortgage lending is expected to diversify and grow as more banks enter the market. The entrance of Crdt Populaire d'Algirie (CPA) to the housing market in 1999, through mortgages and developer loans, -4- has introduced a decisive element of competition to CNEP and is a useful benchmark for other possible banks entering the market. Banque de Developpement Local (BDL) has also started to issue mortgage loans. Two other important public sector banks, Banque Exterieure d'Algrie (BEA) and Banque Nationale d'Algbrie (BNA) launched their housing finance products in 2002, while Banque d'AgrAculture et de CrJdit Local (BADR) intends to do so in the short term. Some private banks have also entered the mortgage finance market Most private banks in Algeria are new and active in short-term trade finance. Their comparative advantage may initially come from their lean and flexible structure. Their participation would enhance innovative practices fuelled by competition. Secondary and Supporting Financial Institutions (i) The Socidtd de ReflnancementHypothicaire (SRH), established late in 1997, provides banks with long-term refinancing in exchange for the collateralization of their refinanced mortgage loans. Primary lenders can thus be assisted to manage their liquidity and interest rate risks (by using matched funding). SRH is a non-banking financial company whose activities are supervised by the Banque d'Algrie. It has been well capitalized - DZD 3.3 billion - by five public banks (with 54% of the equity), three public insurance companies, and the Treasury (with 30% of the equity). Furthermore, SRH has received a loan from the Arab Fund for Economic and Social Development (FADES, Fonds Arabe de Developpement Economique et Social) for an amount of USD 30 million (DZD 2.4 billion), to support its refinancing activities, with a strong concessional dimension. SRH's pioneer product - a recourse refinancing line to lenders - is operational. However, only limited amounts of refinancing have been undertaken by two banks (CPA and BDL). The funding made available amounts to about DZD 400 million. SRH has so far not concluded a refinancing agreement with CNEP. (ii) The Socl& de Garantie des Credits ImmobilUers (SGCI), established in 1998, provides banks with mortgage credit risk insurance, covering risks of death, full invalidity, temporary or permanent insolvency of the Borrower, and up to 90% of the outstanding debt. However, the level of premiums (4% to 5% of loan amounts) and their form (up-front full payment) are seen as high and thus an obstacle to the development and use of the insurance products. In this initial phase of development, their success has been limited and only 2,500 policies have been issued. (iii) The Fonds de Garantie de Caution MutueUe (FGCM) was created in 1999 by the Ministry of Housing and provides guarantees to cover the advances paid by households to developers when units are purchased in advance from building plans. This intermediary function provides a key link between developers and households by protecting consumers while providing advance flnding to developers. (iv) The Caisse Nadonale du Logement (CNL) has, since 1998, become the central conduit for subsidies (AAP - Aide a l'Accession d la Proprintg) to first-time owners of newly-built units for households earning less than 5 times the minimum wage (5*DZD 8,000 = DZD 40,000 or USD 500 a month). Grants ranging between DZD 250,000 to 400,000 are awarded progressively, according to income levels and the cost of the investment, which must not exceed a certain ceiling (DZD 1.6 million in case of a unit within a development, DZD 2.1 million for self-built houses). These grants represent a key contribution to down-payments of complementary housing loans, helping to catalyze the growth of the mortgage industry. There are two distribution channels for these grants, through developers as a reduction in price or through banks as a part of the loan origination process (in theory). - 5- CNL has entered into agreements with two major banks (CNEP and Credit Populaire d'Algerie) to have a one-stop-shop process (applications for loans and subsidies together), but the banks have experienced difficulties in processing the applications. Therefore, clients, after having been pre-approved by a potential lender, now have the option of either applying for a grant through the bank or directly to CNL. A major study of the mortgage housing market in Algeria was carried out in 2000, funded by a Japanese PHRD grant. It highlighted the multiple legal constraints present which affect the development of a well-functioning mortgage market in Algeria. These include inexperienced banks, an inappropriate legal framework, the lack of land for building, the underdevelopment of the construction industry, and the lack of long-term finance. The findings of the study and overall the legal constraints present in Algeria were discussed with the Government and representatives of banks and related financial institutions in September 2000. More recently, a study of legal aspects, funded by Canadian assistance, identified numerous shortcomings in the legal and regulatory framework for mortgage credit. The legal framework itself is a source of uncertainty and insecurity. Due to the multiple layers and sources of laws and regulations, property rights, as organized by the Civil Code, are sometimes confusing and contradictory and as a result give rise to conflicting interpretations. This is the case, in particular, with the transfer of ownership for newly built or condominium units. More importantly, the efficiency of a mortgage as a security is impeded by legal constraints. Examples of this situation can be found in the less than full coverage of banks' loans, the difficulty in exercising power of sale foreclosures (without a prior judiciary process) and the inconsistency between the Civil Code and the banking law. Any attempt to give priority rights to financial claims seems to have had little effect due to its unclear relationship with the provisions in the Civil Code. In addition to these legal constraints, there are important constraints which prevent properties being used as collateral for loans: notably, deficiencies in proper titling and recording of many real estate properties. A large proportion of plots, in particular in urban areas, do not have a clear title. A World Bank funded Cadastre Project started dealing with this issue, mostly by providing mapping of the land which goes along with the verification, validation and registration of property rights. However, the extension of Cadastre is a very slow process, which freezes all other property title regularization procedures while in progress, and which has focused mainly on rural areas until now. The coverage of urban and peri-urban areas, where most of the housing needs are located, would take at least ten more years to be addressed if the present pace of progress continues. Not only new procedures need to be designed to speed up the process and to eliminate the present backlogs in recording the validated property rights, but a special program to issue clear titles where most needed, needs to be enforced in anticipation of future integration of urban areas in the cadastre. To summarize, the main issues constraining mortgage finance are as follows: (a) The major banks - all public-owned - are inexperienced and poorly equipped to develop and administer housing loans. Until relatively recently, they acted as government mstruments to exercise control over the financial sector of the economy. This resulted in a strong specialization of their activity, a focus on corporate borrowers, and a bureaucratic approach in the extension of loans. The only institution oriented towards individuals, specializing in the management of savings accounts and in the distribution of housing loans, CNEP, was mostly driven by savings regulations and operated in an bureaucratic way involving poor risk management. (b) A difficult legal and regulatory environment, particularly with regard to issues of access to titled land, transfer of property rights, and to the nature of mortgage rights, compromises effective -6- mortgage collateral and ability to foreclose unpaid mortgages. (c) Implementation of policies intended to stimulate the growth of mortgage finance is thwarted by operational and legal problems. Thus, although the four financial entities dedicated to housing finance aim to provide crucial support to the development of the housing finance market, their contribution to the development of the market has so far been limited, in particular: (i) The mortgage refinance institution (SRH) has done little refinancing up to now, and is contrwcally linked to only two banks. Due to well endowed capital and funding from the FADES , it has not started issuing bonds to the market which was originally envisaged as a key objective. (ii) The mortgage insurance institution (SGCI), which also works with only two lenders at present, has had limited impact. Neither of these institutions do business with the main primary lender, CNEP, which is a cash rich bank with its own insurance system, and which cannot pledge its old mortgage portfolio due to its low quality. Government Strategy GOA's strategy in the housing sector is to shift from the public provision of subsidized rental units to the encouragement of owner-occupied housing, financed through market based resources. GOA has started to cut back on its production of some 60,000 public sector rental units per year, recognizing the high cost and unsustainability of this program due in particular to a high incidence of corruption. Recent restrictions on access to subsidized rental housing, coupled with increases in rents and provision of home-ownership grants, have increased the relative attractiveness of private ownership. A new scheme of lease/sale has been put in place for intermediate income households, with a first tranche of 20,000 units in 2001 and 30,000 in 2002. This new program is, however, very costly and the global cost of subsidies to housing investments already amounts to 3% of GDP. As part of its strategy to develop alternative solutions for housing finance, the Government has begun over the past few years to undertake some key housing finance reforms to respond to the main demand-side constraints, and in particular has established the set of interrelated new institutions described above. On the supply side, reforms have included the privatization of the construction industry, which has significantly reduced delays in implementation and construction costs, and some improvements in availability of land. However much remains to be done in terms of availability of serviced land and sale by the State (recent regulation providing for auction procedure had little effect). The validation and registration of property titles is also a goal, but that has been linked up to now to the extension of the cadastre. 3. Sector issues to be addressed by the project and strategic choices: The project focuses on the development and securitization of financing for households to purchase, build or renovate their homes. To assist the Government of Algeria to realize its strategy for the housing sector as described above, the project addresses the most important constraints affecting the efficient functioning of the mortgage finance market in two fields: - the capacities of the banking system itself; -7 - - the legal and administrative environment of mortgage lending, where insufficient titling and inefficient mortgage liens restrict the scope of secured lending. In doing so, the project will promote the satisfaction of housing needs where effective demand cannot manifest itself due to lack of financing. This will be particularly true for investments in self-building, renovation or extension of existing housing. It will also contribute to transforming land and other properties into marketable assets, because of the extension of title regularization, and thus increase the number of real estate properties available. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The project will consist of three components and will also provide funding for project management. 1. LEGAL AND LAND TITLING IMPROVEMENTS This component will address the deficiencies in the legal framework for mortgage finance and in the property titling and registration systems, which hamper the use of real estate properties as collateral for bank loans. The component will have three sub-components: Sub-component 1.1, Legal Reform: To provide technical assistance to the Government to reform the legal framework (in particular harmonizing the Civil Code and the banking law), mainly for clarification purposes as far as property rights are concerned, but also to improve its effectiveness in the field of mortgage rights: inclusion of interest in the lien, harmonization of the civil code with the banking law, and extension of cases where power of sale foreclosures can take place. Furthermore, specific obstacles will have to be removed so that other subcomponents can be implemented, in particular, a new process of title regularization, and collateralization or sale of loan portfolios refinanced by SRH. Sub-component 1.2, Accelerating the issuance of regular property titles: To provide technical assistance to the Direction Generale du Domaine National, to the Agence Nationale du Cadastre (ANC) and the Conservation Fonciere (CF) to speed up the titling of land and properties in urban areas. The main actions that will be undertaken under this component are: (i) creating a new procedure to regularize property rights without waiting for the extension of the cadastre, based on the initiative of the interested parties (owners, heirs, purchasers, investors, developers), so that they can proceed with transactions or projects which are constrained by current legal procedures; (ii) automation of the delivery of Livrets Fonciers, which act as clear title certificates established by the Conservation Fonciere. Sub-component 1.3, Training of legal professions and land administration staff: To provide training and technical assistance to the afore-mentioned agencies as well as to the legal profession involved in the maintenance, registration and transfer of property rights, or in the creation, registration and enforcement of mortgage rights by public notaries, judges, and bailiffs. This is necessary to create a common understanding on how to interpret the legal provisions, which is not presently the case, to disseminate information regarding reforms, and to make the law enforcement entities aware of the economic importance of mortgage liens. In addition, to strengthen the property valuation skills within the Direction Generale du Domaine -8 - NationaL These skills will be used to assess the economic value of land sold by the state and thus provide a better measure of the subsidies presently granted through arbitrary land price rebates. 2. STRATEGIC ASSISTANCE Under this component, the project will provide technical assistance tailored to the needs of targeted banks and other related institutions. Subcomponent 2.1, Manager's strategic training: The sub-component will provide assistance to targeted banks (i.e. CNEP, CPA, BDL, BNA, BADR, BEA, and possibly one or two private banks) at the top management level in the definition of a development strategy for mortgage finance. This will include the presentation of main issues, major foreign systems, business models, and organizational and 1T prerequisites. Seminars and workshops will be offered to the senior officers of related institutions, the Ministry of Finance, the Central Bank, and the banking Association. Subcomponent 2.2, Specific advisory assistance: Participating banks will be granted access to dedicated advisers who will carry out diagnoses of their capacities in setting up or expanding the mortgage line of business and will recommend adjustments to their organization, procedures and information systems. SRH has asked to benefit from this kind of assistance for IT architecture and bond issuance. Subcomponent 2.3, Improvement of the linkages between primary lenders and supporting institutions: An analysis will be carried out regarding the inefficiencies in the relationships among the agencies involved and recommendations for their removal will be offered. Based on the preliminaiy assessments, the major obstacles are: - the collateralization of refinancing loans made by SRH, which seem to have a questionable legal value, thereby jeopardizing the quality of future SRH bonds - conflicting mortgage rights held by seveml institutions (lenders, SRH, SGCI, FGCM, CNL) - the type and price of services provided by SGCI - the operational links between banks and SGCI and CNL respectively - the latter being the most important obstacle of the two since it hinders the effectiveness of the Government policy of assisting home ownership through up-front grants. Subcomponent 2.4, Credit information sharing system: Information on customers' credit status is a risk management tool that all the lenders are interested in. Although a centralized structure exists at present for that purpose (Centrale des risques des menages), neither its design nor its organization (within a subsidiary of the Banking Association) nor its technical resources have proven approprate to address the competition and privacy rights issues that such a function raises. A study will therefore be conducted to set up a better scheme. In addition, a separate study will examine the credit risk involved for lenders and for SGCI with a view to establishing mechanisms to monitor this risk on a regular basis. 3. OPERATIONAL TRAINING The component will provide the operational staff of the banks with the professional skills necessary to properly carry out all the tasks involved in the mortgage line of business, from marketing and - 9- origination of loans to their servicing, recovery and funding. The component will be critical in giving to the banks the adequate expertise to develop the mortgage loan market. A first assessment of the qualitative and quantitative needs of the lending institutions has been done as follows: (a) A list of 25 to 30 modules has been compiled. Participating banks were particularly interested in risk-related issues (scoring, property valuation, delinquencies management), sales techniques and pricing methods. Sessions will largely rely on case studies. There will be room for possible interactions between the lessons drawn by individual institutions from the strategic assistance and the profile of the operational training. (b) The targeted population among the beneficiary banks has been roughly estimated at 3,000 participants. The sequencing of training modules will depend on every bankls degree of involvement in the market and on the number of branches already active within each bank. (c) Training will be practical, reflecting as closely as possible the actual work environment of the activities concerned. A key objective will be the training of Algerian trainers to ensure, on the one hand, the sustainability of the expertise building process, and on the other hand to optimize the use of foreign expertise in the transmission of knowledge to a very large population. It is expected that foreign specialists will first train local experts, and bank staff who already work in the mortgage market, and that they will then assist Algerian experts in progressively taking charge of the training actions. In the second half of the project, it is expected that all training will be provided by Algerian trainers. The program, which will be implemented over two years, requires a complex organization. The Ecole Superieure de Banque (ESB), a subsidiary of the Banque d'Algrie, will be the pivotal agency. It will benefit from the transfer of know-how and will coordinate the actions conducted by several other institutions including SIBF (another central structure within the Banking Association), the sub-contracting Algerian training schools, the proprietary training centers that some banks have set up, and also: (a) The Global Distance Learning Center (GDLN) which is being set up in Algiers with the assistance of the World Bank. It will offer opportunities to broaden the scope of international trainers, as well as to mininize the cost; and (b) The European Union MEDA project which is assisting the modernization of Algerian banks. One component of this project concerns staff training for which collaboration has already been agreed. The MEDA teams will not address the field of mortgage finance, but instead they will contribute with training on related banking skills. 4. PROJECT MANAGEMENT UNIT This component is centered on project management needs and is intended to ensure that the projectes Financial Management Information System (FMIS) complies with the Bank's requirements for administration, reporting, and transaction recording. A quarterly Financial Monitoring Report (FMR) will be submitted based on reliable and timely recorded information. - 10- Indicative Bank- % of Component Sector Costs % of financing Bank- (US$M) Total (US$M) financing 1. LEGAL AND LAND TITLING Other Public Sector 2.05 25.0 1.60 29.1 IMPROVEMENT Management 2. STRATEGIC ASSISTANCE: Financial Sector 2.00 24.4 1.25 22.7 Development 3. OPERATIONAL TRAINING: Financial Sector 4.00 48.8 2.50 45.5 Development .4. PROJECT MANAGEMENT 0.09 1.1 0.09 1.6 Total Project Costs 8.14 99.3 5.44 98.9 Front-end fee 0.06 0.7 0.06 1.1 Total Financing Required 8.20 100.0 5.50 100.0 2. Key policy and institutional reforms supported by the project: The project will support key policy and institutional reforms already initiated by GOA in the development of the housing finance market, by improving: (a) the legal and regulatory environment, to address the issues of effective mortgage collateral and ability to foreclose unpaid mortgages; (b) the usefulness and efficiency of the supporting institutions, including their legal and operational links with the banks; (c) the technical capacity of the major banks to develop and administer housing loans, in order to increase the availability and affordability of mortgage loans to the population; (d) the issuance of clear property titles in those areas where housing needs are most pressing and the lack of building land most acute. 3. Benefits and target population: The project will help to trigger the development of a mortgage market, aimed at serving households with monthly incomes greater than DZD 15,000 (USD 190), estimated to be about 70% of households. In particular, it will open new possibilities for assisting, through the up-front grant scheme provided by CNL and linked to mortgage loans, low-to middle income households with monthly incomes between DZD 15,000 and DZD 40,000. In the process, the project will also help mobilize savings for investment. It will contribute to the strengthening of the banking system through the development of a long term, stable and low risk mortgage activity, and by raising the technical qualifications of bank management and staff. 4. Institutional and implementation arrangements: The project will be implemented by a Project Management Unit (PMU) in the Directorate of the Treasury in the Ministry of Finance. The PMU will be headed by a Director who will coordinate all project activities. The Director will be assisted by a financial management specialist who will be responsible for financial management, and by an administrative assistant. - 1 1 - Day-to-day execution of the project will be managed by two established agencies, SRH and SGCI, which will be responsible for procurement and contract management of project components. SRH will be responsible for components related to banks, using the Banking School (ESB) for the training component. SGCI will be responsible for the legal and administrative components, including the sub-component relating to DGDN. These two agencies have been evaluated and are considered capable of carrying out the specified tasks, particularly due to their involvement in the sector and their experience in managing multilateral aid programs. A steering committee has been appointed and a Project Director has been nominated. Together they will oversee the overall direction of the project The core membership of this commnittee will consist of the Director General of the Treasury, the Vice-Govemor of the Bank of Algeria and the project Director. As necessary, representatives of other ministries, such as the Ministry of Justice, will be part of the committee. When relevant issues are raised and dealt with by the Committee, SRH, SGCI, ESB, and DGDN may be invited to participate. The organization chart below depicts the institutional anrangements described. Financial Management The recording of day-to-day project related transactions will be undertaken by the executing agencies, SRH and SGCI. Their financial management systems have been reviewed by the Bank's Financial Management Specialist and are considered satisfactory and meet the requirements of OP/BP 10.02. The PMU will be responsible for consolidating the records of the executing agencies, for maintaining project books of accounts and for preparation of Financial Monitoring Reports (FMR) and their transmission to the Bank on a quarterly basis. It will also be responsible for preparation of annual Project Financial Statements and their submission to the auditor. To do this, the PMU will install a financial management information system in accordance with the actions described in Annex 6, to be operational by effectiveness. The financial management procedures, including job descriptions, internal control mechanisms, flow of funds, accounting policies, disbursement procedures and reporting are defined in the Project Implementation Manual, the contents of which were agreed at negotiations. The management of the Special Account will be with the Algerian Development Bank (BAD), which has extensive experience of managing Bank projects in Algeria. The PMU will appoint an independent auditor acceptable to the Bank, to carry out an annual audit according to internationally acceptable auditing standards as issued by the Intemational Federation of Accountants, the Bank's Guidelines and specific Terms of Reference (TORs) acceptable to the Bank. The auditor will express a professional opinion on (i) the annual project financial statements, (ii) SOEs, and (iii) Special Account transactions. The audit report, which will include three separate opinions, will be trnsmitted to the Bank within six months of the close of each fiscal year. - 12 - Mfl Finance TA PFvct MINISTRY OF FINANCE BANQUE DALGEORE BIRD Socl IGroausm Oam PROJECT MOF * BDA *RH. MOFlBDA.Mn JUST. * DDNICF* DESIGN ESS + ABEF SGCI *INM sCh NoW I BAD _r;tv I~~~~~~~~~~~~~~~~~~~- Ikd I \\ \\le | B I~~~~~~~~~~SAMK \ \ D tssues I STRArEGlCASSISTANCE / ORTtNAL LOWTRAtNlNy ymft kV Twtn |~~~~~~~~~~~~~~~~~~~~~~~~~--- ltV tu/\\PtSJ \n Ro 1 I~~~ ~ ~~~~~~ Main\ MotagAefnnn6Nroet Initial proecutdeign9e foue on prvdn ln fceit to SRH. linkingAcs Separate Project|. As the project addresses amutI Spicit Exoefont Asenew aC n compi (sCet ps h 1 interrelate, changes inanyI Cone arane I intonI e p i c w coprhnsiv aprahaotdbIh roetwlaealre effec in jump-tartng temotgag . _, - 1 '\ i, , -13 8Bark 2 8 2 1C _bht n 18^1 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~Eaxl d Fin. SRH rSYS111W_1 8n hNt CF13CM auF( @ a ,__ JASEF | CNLn I t "tnSupwvbn MWsbbs ~~~INFORMATION | 1 >Tr*rWd%ftmd D. Project Rationale 1. Project alternatives considered and reasons for rejection: Mortgage re.financing Pr-oject. Initial project design focused on providing a line of credit to SRKH linking the training component to the refinancing issue. When it becamne clear that the refinancing issue was not the first priority, the cunrent pro.ject configuration was tdeveloped to address the critical issues. It is expected that the refinancing needs of the secondary mortgage market will follow a first phase of the development of primary mortgage lending. Separate Projects. As the project addresss a multiplicity of bottlenecks and comprises three sub-components, an alternative considered was addressing each issue independently through separate projects. But despite their separate management and the variety of entities involved, the issues are closely interrelated, changes in any one area need to be pursued in conjunction with changes in another, and the comprehensive approach adopted by the project will have a larger effect in jump-starting the mortgage market due to its critical mass. - 13 - It could be argued that some of the most critical issues in the provision of housing are the obstacles which limit the supply of land and infrastructure, and the promotion of mortgage finance could have been followed a project focused on removing the supply bottlenecks. However, the magnitude of the problems to be addressed would likely have postponed effective action on housing finance by several years. Moreover, increasing effective demand is likely to also stimulate supply, and indirect benefits are expected in this respect through increased numbers of regular titles and the extension of lending to developers. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). The table below summarizes the status of all major projects related to this Technical Assistance Loan. The most relevant project is that of Cadastre, funded by the Bank, with the objective of improving the land registration process in Algeria, mostly by providing mapping of the land that accompanies the verification, validation and registration of property rights. However, the extension of the cadastre is a very slow process, which freezes all other property title regularization procedures while in progress, and which until now focused mainly on rural areas. The coverage of urban and peri-urban areas, where most of the housing needs are, would take at least ten more years to be achieved at the present pace of progress. Therefore a component of the present project will speed up the process, aiming to eliminate the present backlog in recording valid property rights. A second component will include a special program to issue clear titles, where they are most urgently required, to be implemented in anticipation of future integration of urban areas in the cadastre. Latest Supervision Sector Issue Project (PSR) Ratings (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Shelter for low income groups Low Income Housing S S Land registration Cadastre S S Earthquake damage repair Ain Temouchent Emergency S S Banklng infiastructure Financial Systems S S Infiastructure Modernization Other development agencies IP/DO Ratings: HS (Highly Satlsfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: The following experience from previous projects and country involvement is reflected in the project design: * A high level of Government commitment to project objectives and establishment of an effective coordination mechanism when more than one agency is involved are essential for successful project implementation. For this reason, a steering committee has been appointed and a Project Director has been nominated and conjointly will determine the overall direction of the project. In addition, the project will be implemented by a Project Management Unit (PMU) in the Directorate of the Treasury in the Ministry of Finance. * Proper primary market infrastructure and bank training is required before tapping capital markets. For this reason, a comprehensive training component has been agreed with the Government and SRH bond issues will be carefully prepared only after technical assistance has been delivered. - 14 - 4. Indications of borrower commitment and ownership: Resolution of the unsatisfactory conditions in the housing sector is a top politicaL social and economic priority for GOA. As such, the govenmment has shown its commitment to reform through a series of actions already taken and further policy changes which are underway. An important objective of the Government's current housing strategy is to look for substitutes for public social rental housing. The recent leasing scheme, in which part of the rent is devoted to progressive purchase of a dwelling, is evidence of the GOA's commitment, despite the high cost of the program. Promoting market-based finance for owner-occupied housing contributes to the same goal, in particular if associated with the up-front grants program, which is a far less costly method for the government than the leasing scheme. The direct beneficiaries of the project have shown a strong interest in it. The main characteristics of the strategic assistance and of the operational training components have been designed in close cooperation with the banks, which have agreed on the proposed program. Letters of understanding have been signed between all participating banks and the Ministry of Finance. The DGDN is extremely interested in receiving more resources to accelerate the process of clearing up property titles in parallel to extension of the cadastre. 5. Value added of Bank support in this project: The main value added by the Bank comes from its unique widespread experience in housing finance development and land titling and registration. By providing the opportunity to the banldng sector and to the related public authorities of accessing highly qualified training and assistance in the area of mortgage financing, the Bank will help in developing a more fluid and active mortgage market. Such an initiative may pave the way for future development and strengthening of the banking sector, and consequently give access to credit to an increased number of households, including those with relatively modest incomes. The Banls involvement will offer a unique opportunity to kick start a moribund mortgage market at a critical time, as frustration has been growing due to the lack of accessible mortgage loans. Unlike other donors, the Bank can provide expert assistance in the preparation of a comprehensive package of reforms necessary for the sustainable development of housing finance, including key legal reforms, proper integration within financial markets, and a specific focus on housing accessibility by lower-income households. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) l. Economic (see Annex 4): O Cost benefit NPV=US$ million; ERR = % (see Annex 4) O Cost effectiveness * Other (specify) The project does not lend itself to an economic evaluation. 2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) No project cost recovery is expected, therefore no financial analysis is warranted. -15 - Fiscal Impact: N/A 3. Technical: The project will not finance investments, therefore no technical analysis is warranted. 4. Institutional: The project places a significant emphasis upon building institutional capacity both in the private sector (banks, financial institutions and the legal profession) and in the public sector (in-line ministries and agencies). 4.1 Executing agencies: In order to ensure effective project implementation, MOF has established a Project Management Unit (PMU) in its Directorate General of the Treasury and appointed a Director whose qualifications and expenence are acceptable to the Bank. Under the overall supervision of the Director, SRH and SGCI will carry out the day-to-day execution of the project in their relevant domains. These agencies will be responsible for advertising the project and for relevant procurement activities including preparing bidding documents/RFPs, evaluating proposals/bids, preparing evaluation reports, and negotiating and signing contracts. The staffing of evaluation committees will be approved by the Steering Committee. The reasons for this choice of executing agencies, made by GOA, are twofold. Firstly, SGCI has already started to investigate how to improve the risk situation of mortgage lending. In particular, it mandated in 2001 a study to identify the sources of weaknesses in the legal regime of property and mortgage rights. Secondly, the institutional nature of SGCI, a semi-public institution which provides the banking community with support services, has given it the necessary expertise to manage funding from international donors. SRH has also acquired similar expertise, through its execution of Japanese PHRD-funded studies of the mortgage maket, and has extensive experience in organising training programs destined for the banking community. SRH and SGCI will be maintained with functions, staffing and resources satisfactory to the Bank. 4.2 Project management: The MOF will manage the project through the PMU, which will have the responsibility for coordinating and monitoring the projecVs implementation, consolidating related technical and financial data, and ensuring compliance with procedures and timetables agreed with the Bank. The PMU will be responsible for keeping all financial and procurement files on its premises. A Steering Committee chaired by the Director General of Treasury of the MOF has been established and will review and monitor the implementation of the Project and ensure that Project objectives and goals are met. The Project Director will report to the Steering Committee on a quarterly basis. A Project Implementation Manual has been developed, including (i) organizational structure; (ii) implementation schedules; (iii) a description of financial management policies and procedures, and internal control arrangements, (iv) definition of roles, and responsibilities of PMU staff, and (v) a procurement plan and procedures. The Steering Committee and the PMU will be maintained with functions, staffing and resources satisfactory to the Bank. In order to adhere to World Bank Guidelines, the PMU has appointed an experienced financial management specialist whose qualifications are acceptable to the Bank. The PMU will be responsible for consolidating financial and administrative information provided by the SRH and SGCI. Training will be provided to staff in charge of managing financial transactions related to the Project to generate financial reports and monitor Project activities. - 16 - 4.3 Procurement issues: See Annex 6. 4.4 Financial management issues: Financial management issues center mainly on the ability of the PMU to consolidate and report on project-related financial transactions (the two executing agencies, SRH and SGCI, have satisfactory accounting and reporting systems). The recruitment of qualified personnel and inplementation of the actions described in Annex 6, which were agreed at negotiations, will mitigate any possible risks. 5. Environmental: Environmental Category: C (Not Required) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. It is not anticipated that the project will have any direct environmental impact 5.2 What are the main features of the EMP and are they adequate? N/A 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: N/A 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? N/A 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? N/A 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. Resolution of the unsatisfactory conditions and overcrowding in the housing sector is a top political, social and economic priority for GOA, which is looking for a substitute for public social rental housing. Promoting market-based finance for owner-occupied housing contributes to the same goal, by offering housing finance affordable to many more households, in particular if associated with the up-front grants program, which is a far less costly mechanism for the government than the leasing scheme. As a result, it is expected that the project's social outcomes may be in the form of an increase in the number of households served to about 70%/a of all households, i.e. those with monthly incomes greater than DZD 15,000 (USD 190). In particular, low-to middle income households earning between DZD 15,000 (USD 190) and DZD 40,000 per month (USD 500) will have increased opportunity to participate in the housing market. 6.2 Participatory Approach: How are key stakeholders participating in the project? The banks and related financial institutions, who are the direct beneficiaries of the project, have shown a strong interest in the projects and have participated thoroughly in its design. Indeed, the main characteristics of the strategic assistance and of the operational training components have been designed in close cooperation with the banks and agreements have been signed by all participating banks. - 17 - 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? N/A 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? Training of bank staff and the strategic assistance component will help ensure the development of the mortgage market. 6.5 How will the project monitor performance in termns of social development outcomes? Numbers of mortgages issued will be a key indicator. 7. Safeguard Policies: 7.1 Do any of the following safeguard policies apply to the project? Policy Applicability Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) 0 Yes 0 No Natural Habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes * No Forestry (OP 4.36, GP 4.36) O Yes * No Pest Management (OP 4.09) 0 Yes * No Cultural Property (OPN 11.03) 0 Yes * No Indigenous Peoples (OD 4.20) 0 Yes * No Involuntary Resettlement (OP/BP 4.12) 0 Yes * No Safety of Dams (OP 437, BP 437) 0 Yes * No Projects In Internatfonal Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes * No Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* 0 Yes * No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. N/A F. Sustainability and Risks 1. Sustainability: Sustainability of the benefits of the project will be promoted by several factors incorporated into the design. These include: (a) Strategic assistance to individual institutions focuses on the awareness of the top management so that the planning and development of this new line of business (mortgages) is based on a clear understanding of opportunities and constraints. A solid foundation for the pursuit of mortgage lending, as opposed to trial and error, should result in better implementation and results, hence sustainability. (b) Strategic assistance to the group of related institutions, based on the precise identification of the issues, will solve major systemic bottlenecks that are an impediment to the fulfillment of their objectives. (c) Training of operational staff will be based on training-the-trainers principles, which promotes the further replicability and transfer of the skills to new generations of staff. (d) Changes in the legal framework are structural measures with a permanent effect. - 18- 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk Risk Rating Risk Mitigation Measure From Outputs to Objective No improvement in the supply of land and M i) In the private sector, the new procedure for housing takes place, and the expansion of regularizing property rights is based on users' demand through increased lending results initiative: owners, buyers or developers will in higher real estate prices. trigger it for their specific purposes. If borrowing is needed, it will be coupled with transactions or projects that would have been inpeded in the present context ii) It is expected that GOA will (a)follow recommendations for orienting the release of land in better accordance with demand, (b)develop land servicing capacities and (c)speed up the sale of land. Proposals for more security for lenders S Training and information provided to the legal are halted due to political opposition. profession by the project will focus on the overall impact of weak security on the volume and cost of lending. Training will include Ministry of Justice officials who are responsible for pushing the reforms forward. The Government may decrease the M Improving the management of AAP should program of up-front grants - in particular confirm to the Govenmment the usefulness of if new financing needs lead to its such grants to households. The program is much overshooting budgetary goals. cheaper for the State than the two other main programs (susidized renting and lease). Banks' lending is stunted by liquidity N Liquidity, even in the long term, will not be an constraints before SRH develops an issue until banks other than CNEP (which has a efficient mortgage facility. large savings deposit base) expand mortgage lending significantly. From Components to Outputs Banks will not participate in the training N The training program outlines have been of staff. designed in concert with beneficiaries. This will facilitate the task of the international consultant of pinpointing precise needs of individual banks. In addition, the cost sharing rule favors banks. Participating banks have signed a letter of agreement with the PMU which will formalize their commitment Executing Agencies action is dominated M The content of the project has been elaborated in by their own business objectives. agreement with all parties concerned. Precise terms of reference have been defined. The power of approving the overall approach and direction - 19- of the project will lie with the steering committee; Executing Agencies, although attending meetings, will not be full members. The project Director will oversee the resolution of potential conflicts of interest The lack of permanent professional S ESB and banks will have to set up groups of trainers will jeopardize the replicability of dedicated trainers. The student courses skdll dissemination. organized by ESB will integrate the transferred expertise. The complexity of the project will M The roles of each agency are clearly defined and diminish its effectiveness coordination is assured by the PMU. Overall Risk Rating M Risk Rating - H (High Rlsk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: None G. Main Loan Conditions 1. Effectiveness Condition The Project Management Unit shall install a satisfactory financial management information system with appropriate software and manuals, including the final version of the Project Implementation Manual. 2. Other [classify according to covenant types used in the Legal Agreements.] In order to help expedite the start of project implementation, retroactive financing not exceeding US$550,000 (10 percent of the Loan amount) will be made available for eligible expenditures made after May 20, 2002, but before the date of Loan signing, for goods and consultant services and training under all components of the project. The Borrower will carry out a mid-term review by March 31, 2004. H. Readiness for Implementation El 1. a) The engineering design documents for the first years activities are complete and ready for the start of project implementation. 1 1. b) Not applicable. 1 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. El 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. El 4. The following items are lacking and are discussed under loan conditions (Section G): -20- The Terms of Reference fot the Study of Legal Reforms and also for the Study of Banks' Training Needs have been finalised. The Project Implementation Manual (PIM), including procurement plan, was discussed and agreed at negotiations. Completion of the final version is a condition of effectiveness (see above). 1. Compliance with Bank Policies 3 1. This project complies with all applicable Bank policies. O 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. Douglas I. Graham Emmanuel Forestier Team Leader Sector Director Country Manager/Director - 21 - Annex 1: Project Design Summary ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT Key Performance Data Collection Strategy Hierarchy of Objectives Indicators Critical Assumptions Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) Increase access to quality 1. Increase in private and ESW reports Legal and institutional home ownership including for public investment in urban reforns coupled with well moderate income groups residential real estate designed focused training in the public and private sector 2. Increase in economic on the application and use of growth of the construction mortgage finance significantly sector contributes to more equal distribution of quality housing Project Development Outcome / Impact Project reports: (from Objective to Goal) Objective: Indicators: To help strengthen the 1. Increased housing loans, Banks surveys Political support for enabling environment for a currently 14, 000 annually, institutional reform - well-functioning mortgage objective: 35,000 in 2005 especially of the efficiency of loan market mortgage liens - and for liberalization of the supply of public building land will be sustained 2. Increased construction of Government statistics Relaying of the transmitted new housing and renovation know-how by initially-trained of existing housing, currently local experts to wider groups 55,000 units annually, and further generations of objective: 80,000 in 2005 staff 3. Increased loan refinancing SRH balance sheet on the secondary market, currently about DZD 400 million cumulative, objective: 10 billion DZD by end 2005. -22 - Key Performance Data Collection Strategy Hierarchy of Objectives Indicators Critical Assumptions Output from each Output Indicators: Project reports: (from Outputs to Objective) Component: 1. Acceleration of the 1. I Legal measures taken to (a) Easing of policy and production of clear property harmonize and clarify (a) PMU reports procedural constraints in titles, followed by provisions governing property (b) Conservation Fonciere public land management permanently improved and mortgage rights statistics (b) Commitment by all the property rights systems. (c) Ministry of Justice reports public entities involved, in Reinforcement of the 1.2 (a) Number of recorded (d) State Budget documents particular local Authorities, in efficiency of mortgage liens, regular titles in urban areas. (d) Client satisfaction survey the acknowledgement and reduction of uncertainties and (b) Share of public land approval of the suggested inconsistencies in the legally ready to be sold legal and administrative interpretation and recommendations regarding implementation of legal 1.3 (a) Decrease in the overall registration of property provisions . delays and costs of the (c) Mobilization of DGDN Improvement of asset foreclosure process and Conservation Fonciere valuation skill (b) Valuation in for a quick production of titles Government budgetary in anticipation of the cadastre documents of subsidies vested completion in land prices. (d) The trained legal Increase of sales of public professions will effectively land through auction. adjust their behavior and decisions after the training 2. Improved capacity of 2.1(a) All banks that received 2.1 and 2.2: PMU user client (a) The target Banks stay financial entities to handle technical assistance surveys and reports mobilized regarding business concepts and to implement demonstrate use of a business development mortgage finance business plan for mortgage loan (b) Government policy plans while also developing products maintains assistance to new appropriate mortgage (b) all banks that receive home owners products advisory services demonstrate use of an adjustment plan SGCI and SRH will not take 2.2 (a) New collateralization strategic routes incompatible Harmonization of relationship arrangements for each with their purpose of being between banks and support institution service providers to the institutions (b) Number of AAP lenders distributed through bank channels Number of loans insured by SGCI Creation of a new credit Design of a credit information information structure either structure by regulation or on a private basis 3. Providing bank staff with 3.1 Number and proportion of Monitoring and Evaluation The dissemination method of advanced professional banks' staff trained reports expertise is efficient and standards sustainable - 23- Key Performance Data Collection Strategy Hierarchy of Objectives Indicators Critical Assumptions Project ComponentsI Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) 1. Legal and administrative US$2.05 million Quarterly FMR reports The responsible institutions Improvements: Bank's supervision reports will provide all needed 1.1 Legal reform infornation on administrative 1.2 Issuance of regular process property titles 1.3 training of legal profession and land administration staffing 2. Strategic assistance: US$2.00 million Quarterly FMR progress 2.1 Top management reports 2.2 Organizational advisory Bank's supervision reports services 2.3 Harmonization of links between institutions 3. Mortgage loan training US$4.00 million Quarterly FMR reports Cofinancing of trsining by Bank's supervision reports banks is available Project financial US$0.09million Quarterly FMR reports management Bank's supervision reports - 24 - Annex 2: Detailed Project Description ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT The technical assistance will consist mainly in consulting and advisory services; the only physical output of the project will the delivery of an increased number of cleared property titles, which involves a small investment in equipment. By Component: Project Component I - US$2.05 million LEGAL AND PROPERTY TITLING IMPROVEMENTS This component will address the problems in the legal framework for mortgage lending and the deficiencies of the property titling and registration systems which hamper the use of real estate properties as collateral for bank loans. The component will have three sub-components: Sub-component 1.1, Legal Reform: The legal provisions governing ownership and mortgage rights are scattered in numerous texts of different origins - in particular the Civil Code and the 1990 Banking Law - and have been shaped through the successive stages of the Algerian legal system (French colonial period, centralized economy, on-going liberalization phase). Therefore, they are sometimes confusing, or even contradictory, and give rise to varied interpretations. This legal uncertainty leads to wariness on the part of potential lenders. Legal reforms could eliminate contradictions in the laws and promote wider use of mortgages. Many of the deficiencies have been identified. They have been found in the ownership laws, in particular, property transfers, and in the different provisions goveming mortgage law, which result in poor efficiency even without taking implementation problems into account. Furthermore, specific reforns will be needed to achieve the objective of other components of the project - for instance, to better secure SRH's refinancing activity or to harmonize the presently competing requirements between lenders and support institutions for the benefit of mortgage rights Sub-component 1.2, Accelerating the issuance of regular property titles: Currently, formal evidence of undisputable ownership rights is a prerequisite for using real estate properties as collateral. CNEP's former lending policy did not include clear titles as an absolute condition for extending mortgages, which resulted in approximately 40% of bad loans in its portfolio. Despite numerous actions undertaken in this field - in particular the 1990 land reform, and the creation of a systematic land mapping (cadastre) with the assistance of the World Bank - it is still a major obstacle to secured lending. The absence of clear titles not only constrains housing finance: it also impedes the development of urban policy, and the supply of building land. In this respect, it is part of a much broader problem affecting land and housing supply, which is deeply rooted in the present management and delivery process of served land by the main owner, the State. But the project cannot deal with an issue of this magnitude, and instead only focuses on improvements aimed at making the banking system more active. - 25 - Clear property title, without which ownership rights are not enforceable against third party claims, relies basically on (i) proof of ownership - which in a fomual system involves among other things title search, and the authentication of the will of parties to a transaction, and (ii) notification to the public through recording in a public registry. In Algeria, the first function is fulfilled by Public Notaries and by the Direction Generale du Domaine National (DGDN) on behalf of the State. The second function is exclusively fulfilled by the office of Conservation Fonciere, a specialized subdivision of the DGDN. Where the land mapping system (cadastre) is in process or achieved, these two basic functions are fulfilled. Creating a cadastre does not only involve physical description and identification of properties, but comprises the clarification and validation of the ownership through a rigorous and transparent procedure. As a result, "livretsfonciers" are delivered which include ownership evidence. Until then, however, the slow process freezes all other ownership regularization procedure while in progress in a community. The mapping is much more advanced in the rural regions than in the urban areas where the process is much more complex and started later. DGDN estimates that close to 50% of rural space is now covered by the Cadastre, against only 10% in or around urban areas. At the present pace, the mapping process, and the associated recording of ownership rights will not be completed within the next ten years. Finally, the Conservation Fonciere does not keep up with the pace of the mapping progression for organizational as well as legal reasons, and as a result there are growing backlogs in the registration of properties identified by the Cadastre. In areas yet to be covered by the Cadastre, conditions for undisputable evidence of ownership rights are often not met. In the private sector (i) the majority of properties (60% according to DGDN) are held without formal title, although regularization tools have been made available by law. The regular and uninterrupted possession of a property can be validated after a certain number of years either thanks to the "prescription acquisitive" concept, verified by Notaries, or through a "certificat de possession" delivered by Conservation Fonciere. Different legal or operational flaws seem to have limited the impact of these instruments, especially the second one. (ii) in some cases, proper titles exist but have not been recorded. The official property registries are therefore not up-to-date. (iii) state-owned land has been sold during the 1980s under problematic conditions. In all these cases, assets are difficult to mortgage and the propert's latent equity cannot be mobilized. The flawed titling situation constrains the secondary housing mark.et, which has a direct impact on the new building market, and limits the channeling of financial means towards the highly needed improvement and renovation of the existing housing stock. Since existing dwellings are often less expensive than new ones, these impediments particularly affect moderate income households. The problem in the public sector (Government, local authorities, other public bodies) is of a much bigger impact, since the vast majority - over 80% - of the land which can be used for building purposes in urban or sub-urban areas belongs to the public sector; the lack of sound and clear titles contributes to constraining the supply of new housing. The main actions to be undertaken under the project will be: (a) Establishing a new process for the regularization of titles of private owners at their own initiative. This procedure will allow regularization of titles independently, and in anticipation of, the cadastre. When a mortgage loan will be needed for construction or renovation, it will thus be possible to regularize fairly quickly the property status. - 26 - (b) Eliminating backlogs of registration for proven and well identified properties within the cadastre scope waiting to be formerly recorded. (c) computerizing the delivery of livretsfonciers for each cleared property. These actions will be pursued through: * changes in the legal franework; * task outsourcing with Public Notaries and land surveyors; * introduction of new organization metiods and procedures in the Conservation Fonciire: * upgrading of computers and information systems. Sub-component 1.3, Training of legal professionals and land administration staff Vocational training needs are significant, considering the varied interpretations of legal provisions and the lack of awareness of the economic role of securing bank loans. In addition, the legal reforms and the titling and registration measures will generate new trauuining requirements, especially on new Civil Code provisions, new procedures, and new ways of enforcing mortgage rights. Finally, an expertise in real estate appraisal needs to be developed within the DGDN, where low skill and lack of credibility not only results in slowness, inconsistency and litigation, but also implies lack of transparency and control in the distribution of subsidies through the prices of land sold by the State. This training will be organized for each profession, each of which has its own taining capabilities: DGDN and Conservation Fonciere (Ecole des Finances), Institut National de la Magistrature (judges and bailiffs), Chambre des Notaires. The training in asset valuation will be carried out in conjunction with the modules organized in this field for the banldng sector (Component 3) as much as possible. Implementation SGCI will be responsible for the general coordination of the actions under the component The reasons for this choice, made by GOA, are twofold: first, SGCI has already made a considerable effort to improve the environment of mortgage lending, in particular, it commissioned a legal study in 2001 financed by CIDA to identfy all sources of dysfunctions and weaknesses in the legal regime of property and mortgage rights. Second, the institutional nature of SGCI, as a semi-public institution which provides the bank community with support services, has resulted in the development by the institution of the necessary expertise for managing funding from international donors. Coordination will be necessary within this component - integration of legal adjustments needed for the new titling process for instance, or training actions- and with the other components. Sub-component 1. 1 will be led by a team of legal experts, comprising an international expert and an Algerian lawyer. A working committee will be set up with qualified participants from banks, SGCI, Ministry of Justice, legal professions and DGDN/CF to draft with them the new provisions. Sub-component 1.2 will be delivered by the different legal training institutes and the training school of the MOF, under the supervision of SGCI. SGCI will decide if external support should be brought in by a consultant. Sub-comronent 1,3 will be directly carried out by the DGDN and the Conservation FonciSre; the procurement aspects will be shared between them and SGCI. - 27- Planning and financing The selection of consultants may start before September 2002 in the legal sub-component. Time tables will be prepared by SGCI and the land administration. The delivery of all outputs should be completed in two years. Estimated cost: (a) Lel ref The loan will pay for the work of two legal consultants, who will prepare the proposals for agreed reforms . Estimated cost: US$200,000 (DZD 16 million). (b) Training. The loan will fund seminars directed to a large numbers of legal professionals already expert in their fields. Estimated cost: US$300,000 (DZD 24 million). (c) Propertv titling and recording. The loan will pay for a variety of related actions .Estimated cost: US$1,000,000 (DZD 80 million). Project Component 2 - US$2.00 million STRATEGIC ASSISTANCE Objectives of the Component Until relatively recently, major banks were acting as instruments of government economic policy. This resulted in a strong specialization of their activity, a focus on corporate borrowers, and a bureaucratic approach to the extension of loans. CNEP was the only client-focus institution, specializing in the management of savings accounts and in the distribution of housing loans, but was mostly driven by product regulation and operated in a bureaucratic way involving poor risk management. Despite the deep economic reforms which were carried out in the early nineties, the operational capacities of the banks are still handicapped by this past. Newcomers in the housing finance field - three banks within the last few years: CPA, BDL, BEA, and BNA and BADR in 2002 - launched mortgage loans though learning-by-doing. There is therefore a general need, shared for other reasons by the CNEP, to acquire at the management level a strategic understanding of the mortgage industry, and to assess the internal capabilities of each institution. Moreover, although specialized entities were formed to provide lenders with critical support services: long-term funding (SRH), mortgage insurance (SGCI), distribution of direct-demand subsidies (CNL), and developers insurance (FGCM), the new system is not well integrated, which is one of the reasons for the very slow start of the provision of mortgages by newcomers. A functional audit of the system as a whole needs to be undertaken, and guidance on how to make it more consistent through operational improvements should be offered. Finally, specific actions should be taken to establish on proper grounds a credit information sharing system, which is seen by most lenders as a prerequisite for expanding their activities. Subcomponent 2.1, Manager's strategic training: Seminars and presentations will be organized by international experts for the benefit of top management of banks, of specialized support institutions (SRH, SGCI, CNL, FGCM), of the Association des Banques et des Etablissements Financiers (ABEF) and of relevant Ministries' staff. Their objective will be to present the main concepts of housing finance underlying strategic decisions: - 28 - business models, long term approach to a market, credit risk valuation and mitigation, loan portfolio management, asset liability management, loan pricing, internal organization, human resources requirements, IT, internal audit, and regulatory supervision. Developing an understanding of systems in various countries will be an important part of this strategic training. Workshops with professionals and institutions in foreign countries may be organized for this purpose. Particular attention will be paid to encouraging the pro-active involvement of participating institutions. Subcomponent 2.2, Specific advisory assistance: The project will provide lending institutions with tailored advisory services. Consultant will be sent to each interested bank in order to carry out a diagnosis of the strength and weaknesses of its organization with respect to developing mortgage finance, and to recommend any needed structural changes. The assistance will be focused on the following areas: * organization of the mortgage line of business * risk management structures * pricing and profitability control * audit and supervision * information systems. The consultants' recommendations will include: re-engineering recommendations, broad definition of new processes where appropriate, terms of reference for any further advisory service, preliminary definition of information technology enhancements, action plans for strengthening the bank's organization. It is expected that the 6 public banks - CNEP, CPA, BDL, BNA, BADR, BEA- will wish to benefit from this assistance. The detailed assessment of operational training needs will be completed during the implementation of these two components; the banks' management will thus have the opportunity to influence the structure and emphasis of the training program. Subcomponent 2.3, Improvement of the relationship patterns between lenders and supporting institutions: The legal and operational arrangements for the relationships between banks, SRH, SGCI, CNL and FGCM presently contain various conflicting procedures and unnecessary complications. They hamper the efficiency of the whole system, which theoretically offers the basic services required for a sound development of mortgage finance. Examples of sometimes paralyzing obstacles are as follows: (a) Relationship between SRH and primary lenders. SRH requires that primary lenders' mortgage rights are subrogated to SRH. However (i) the effectiveness of this substitution is questionable - if the bank defaults, the transfer of the ownership of the loans is not assured; (ii) the combination of the subrogation - ruled by the Civil Code- with a provision of the banking law giving to the financier (SRH) a priority claim. The real value of this general privilege is not clear conceming the assets of its debtor (the bank), including the loan portfolio; (iii) the enforcement of the mortgage collateral in the event of a mortgagor's default is difficult; (iv) the SRH's procedure conflicts with other institutions' own requirements (see below). -29- (b) CoUateralization conflicts arise in several instances, hindering the intervention of one of the service providers who should normally be involved. For example, if a mortgage insurance contract is enacted, SGCI requests to be subrogated in the lender's mortgage rights which can conflict with SRHIs rights. Another conflict arises when a developer seeks financing from a bank and a guarantee from FGCM at the same time. Some bankers also cite the example of the up-front subsidies distributed by CNL - they are included in the mortgage deed in order to have them returned in case of a quick prepayment of the loan (however, the secured subsidy amount is ranked second behind the lender's mortgage, which should avoid real conflict). (c) Role of SGCI. The recent mortgage insurance scheme has met little success up to now despite the extreme desire of banks to reduce credit risks. One likely reason lies in the targeting of the covered loans, which must fulfill conservative eligibility criteria: lenders do not see much value added in guaranteeing safe transactions, especially for the premium they have to pay, which is perceived , rightly or wrongly, as excessive. SGCI only sells packaged guarantees, which includes property and life insurance, for a premium of 4% to 5% of the loan amount. The services that can be expected from such an institution must be better defined. Moreover, a separation between the activities (and guarantee funds) of SGCI, which insures loans to developers as well as individual home purchasers, should increase clients' confidence in its long term sustainability. (d) Operational links between banks, and CNL and SGCI. The addition to the loan of either an up-front grant or insurance is, according to most banks, a source of delays and additional cost in the lending process. CNL and SGCI disagree with this and tend to lay the blame on lenders' not following proper procedures. For CNL, the problem lays with the difficulties in having up-front grants direcdy disbursed by the lenders. Therefore, a new procedure has been recently developed, through which subsidy application can be presented to CNL itself, once the households have been pre-qualified by a bank. For SGCI the problem appears to be the efficient linkage of its centralized structure with the decentralized organization of some banks. An audit of the organizational interfaces is needed, even if it leads to the conclusion that the problems lie mainly in lack of information among the participants. In this context, the deliverables of the sub-component will be: (a) conditions to improve the techniques for securing refinance loans made by SRH, and in particular a system of pledging loan portfolios, (b) design of a combination of mortgage rights held by different institutions on the same loan, (c) recommendations for SGCI's products with more added value for the lenders, and (d) an assessment of the operational bottlenecks handicapping the distribution of subsidies and the insurance of loans, and recommendations to eliminate them. As far as the legal issues (civil code, banking law) are concerned, this subcomponent will have to be closely coordinated with component 1. The recommendations will in particular have to be done in conjunction and integrated with the conclusions of sub-component 1.1 above. Subcomponent 2.4, Credit information sharing system: Among the identified obstacles to the extension of housing loans, a major one is the lack of appropriate information sources regarding clients' credit status. Such information is centralized by the "Centrale des risques des menages" (CRM) and maintained by the professional banking federation (ABEF) through a subsidiary which deals primarily with the clearing of retail payments, in particular through debit cards. - 30 - However, this system does not presently provide satisfactory services. The information is incomplete and out-of-date, a critical flaw which relates to the fact that until recently, aLl the mortgage business was concentrated in one institution that still owns most of the available credit information. In addition, its design appears to be flawed, and the communication between CRM and the users is technicaLly below expectations. A working committee has been established by the banking community in order to design a new organization and draft new operational rules to be set out in a charter. However, the draft document shows that a clear picture of such a scheme does not exist, and stresses the need for extenal assistance. Designing and implementing a feasible system is critical as the historical consistency of collected data is paramount. Having to modify an ill-conceived scheme would involve a disruption in information services and the loss of several years of information. Therefore, a comprehensive and legally secured system capable of offering a proper basis for credit risk assessment in a sustainable manner needs to be assessed. Such an assessment, which should make reference to experiences in other countries, will identify user needs, present the different possible models ('black"- record of delinquencies only- or "white" information - a picture of all existing indebtedness, voluntary or compulsory participation, privacy protection, etc), propose options, and spell out related conditions in terms of legal provisions, the technical environment and banking regulation. Planning and financing (a) Top management training: The number of attendants is estimated to be 120 persons for 10 institutions. The program will provide 30 days of training to each participant through workshops and seminars organized by international experts. The cost is estimated at US$300,000 (DZD 24 miLiion) (b) Individual advisory services: the loan will fund six months advisory services for seven institutions. The cost is estimated of US$ 1,000,000 (DZD 80 million) (c) Three studies will be undertaken (SGCI's products; links between banks, SGCI, CNL; credit information scheme): at an estimated cost of US$200,000 (DZD 16 million). Project Component 3 - USS 4.00 million OPERATIONAL TRANING Objectives of the component This component will provide the operational staff of the banks engaged in mortgage finance with the professional slills necessary to properly carry out all the activities involved in this line of business, from marketing and origination of loans to servicing and funding. The component will be critical in providing banks with adequate expertise to develop the mortgage loan market. A first assessment of the qualitative and quantitative needs of the lending institutions has been undertaken during the pre-appraisal of the project. It is estimated that 3,500 participants may attend the training (one person being eligible to receive more than one training). ALl the proposed modules met the requirements expressed by the main banks, which particularly emphasized risk-related issues (scoring, property valuation, delinquency management), sales techniques, and pricing methods. A key objective will be the training of Algerian trainers; while foreign expertise is necessary, the sub-component aims to ensure the sustainability of the training process. - 31 - TiDning modules The training program will comprise 25 to 30 technical modules, lasdng about five days each, and will cover the following topics: (a) Origination: * Sale: (i) analysis of real estate markets (economic, demographic, legal aspects); (ii) relationship with intermediaries, (iii) marketing techniques; (iv) individual clients' approach; * Product development and pricing; * Risk assessment: (i) properties' appraisal; (ii) creditworthiness assessment; (iii) scoring techniques; (iv) project analysis; * Risk mitigation: (i) legal aspects of mortgages; (ii) insurance/guarantees; * Applications management, operations, links with related actors, procedures, decision tree and responsibilities; and * Stadstics, reporting, intemal audit. (b) Funding: * Market tools * Savings schemes * A/L management, adequacy of loans with funding constraints * Hedging techniques and cost. (c) Loans servicing: * Loan portfolio management. Issues and gwudelines * Payment instruments * IT functions * Handling of arrears * Recovery policy and tools * Bad loans management and accounting * Judiciary processes * Repossessed properties management. The deliverables will be the development of the modules, the organization of traing sessions, and the creation of adequate documents and other forms of support for tuining, including those based on multimedia techniques, to facilitate the dissemination of knowledge beyond the first school of trainees. Implementation The implementation will be organized around two basic considerations: (a) The technical expertise will be brought by foreign specialists in training and in mortgage finance. (b) There must be a local coordinator and planner to efficiently meet the tuining needs, given the numerous different entities which will be involved. There will be a combination of Algerian and international supporting entities: Ecole Supeineure de Banques (ESB), Socite Interbancaire de Formation (SIBF), private training schools, internal training centers; European MEDA program of assistance to the modernization of the financial sector, and the World Bank's Global Distance Learning Network (GDLN), whose correspondent center in Algiers will be operational at the end of 2002. - 32 - Implementation will be based on the ESB, who has available capacities, and already hosts the MEDA team. ESB will participate in the selection of international experts and as such it will be the first beneficiary of the know-how transfer by training its own trainers and by up-grading the standards and contents of the certifications it delivers to young professionals. It will act as an integrator of the various actions and logistics providers - SIBF, private subcontractors, banks' own training departments and it will plan the sequencing of training sessions, which should last for about two years in total. ESB will create an internal unit dedicated to the management of its responsibilities in the project It is to be noted that ESB does not have permanent in-house trainers, but sub-contracts the trining to local consultants or to banks' staff. Therefore, ESB will have to create a core group of local experts in order to provide its clients with a permanent source of training to meet the sustainability objective of the project A firm will be selected through an international bidding process - which will be jointly organized for Components 2 and 3 - to provide the first wave of training. This wave will benefit the ESB network, critical operational bank's staff - in particular in the local branches that have already started granting mortgage loans, and other management staff in operations. The terms of reference will therefore limit the population to be trained by international experts to much fewer than 3,500 and will specify that the consultant will have to evaluate each bank, based on its own individual strategy and structure, the numbers of persons of the first wave, broken down between the different skills involved, and the calendar for developmg the activity. Given the present state of expansion of the mortgage lending, it is expected that the number of beneficiaries directly trained by the foreign contractor will be on the order of 1,000. The terms of reference have been drafted and submitted to the Algerian team, who will be responsible for the selection of the contractor in compliance with World Bank standards. In order to obtain the highest possible level of training quality, the selection of the international contractor will be based, in order, on (i) proven knowledge and practice of mortgage loans; (ii) ability to deliver rapidly the core traiing modules (based on case studies, adapted to the local environment, and emphasizing significant class interactions); (iii) the level of quality and adequacy of learning materials and trainers; and (iv) close involvement during the entire duration of the program. Another specification of the terms of reference will be to seek a coordination with the MEDA program and the GDLN. The European Union is carrying out a project to build up general capacities of Algerian banks, with a view to developing future alliances with European institutions. It has been agreed that its program will leave training in housing finance up to this Bank assisted project. However, some general components of the European operational training action could be used, in order to avoid replication and to mininize costs, provided that the implementation of the two projects can be coordinated. GDLN will add another dimension to the transfer of know-how, and as such the international consultant will need to take advantage of GDLN's logistics to optiniz the dissemination of knowledge and to aim at a reduction of cost. Planning and financing The average length of one module is assumed to be one week. The average number of attendants is assumed to be between 10 and 15. Assuming 3,500 attendants, about 300 sessions will be necessary, which should last between one and a half and two years. The modules will be developed at the outset, which could take between 3 and 6 months depending on - 33 - the readiness of the selected consultants; development of the modules will include dissemination material. It is expected that international experts will be involved in half of the sessions, either training directly or assisting local trainers. The unit cost of one day of a consultant, including expenses, is estimated at US$1,200 (DZD 96,000) for international experts, and at US$500 (DZD 40,000) for local experts. This leads to a global estimate of US$3 million (DZD 240 million). The actual figure will depend on (i) the individual consultants and (ii) the precise evaluation of needs that will be done for each individual institution. The component will finance the assistance provided by foreign experts. Beneficiary institutions will cover logistics cost, mainly fees (ESB and its sub-contractors, GDLN ) and travellodging expenses, which will depend on each organization (centralization or decentralization of the training, availability of internal training centers). Project Component 4 - US$0.09 million PROJECT MANAGEMENT UNIT This component is centered on project management needs and is intended to ensure that the projectes Financial Management System (FMS) complies with the Bank's requirements for administration, reporting, and transaction recording. A computerized financial management system will be installed in the PMU, with software capable of generating the reports needed for project management and the quarterly reports required by the Bank. All other incremental costs and operating costs of the PMU and the Steering Committee will be covered by the Government. Pernanent staff of the PMU will be civil servants of the Government and salaries will not be paid out of the Loan. - 34 - Annex 3: Estimated Project Costs ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT Local Foreign Total Project Cost By Component US $million US $million US $million Legal and Administrative Improvements 1.35 0.70 2.05 Strategic assistance 0.80 1.20 2.00 Mortgage Loan Training 1.40 2.60 4.00 Project Management Unit 0.05 0.05 0.10 Total Baseline Cost 3.60 4.55 8.15 Physical Contingencles 0.00 0.00 0.00 Price Contingencies 0.00 0.00 0.00 Total Project Costs' 3.60 4.55 8.15 Front-end fee 0.05 0.05 Total Financing Required 3.60 4.60 8.20 Local expenses ame estimated on the following basis: Financed by the Loan Financed bv the Borrower Total 1) logistic expenses, taxes (travel, lodging of trained stafi 2.70 2.70 2) Consultants Component 1 0.60 0.60 3) Equipment Component I (DGDN) 0.25 0.25 PMU 0.05 0.05 TOTAL 0.90 2.70 3.60 Identtfiable taxes and duties are n (US$m) and the total pmject cost. net oftaxes. is 8.2 (USSm) Therefore. the projeCt cost shanng ratio is 67.07% of total project cost net of taxes - 35- Annex 4 ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT NOT APPLICABLE -36- Annex 5: Financial Summary ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT NOT APPLICABLE - 37 - Annex 6: Procurement and Disbursement Arrangements ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT Procurement A. Procurement Responsibilities The Ministry of Finance (MOF), through its newly created Project Management Unit, would be responsible for monitoring the overall project's procurement activity, including compliance with procedures and timetables agreed with Bank. In addition, the executing agencies, Societe de Refinancement Hypoth6caire (SRH) and Societe de Garantie de Credit Immobilier (SGCI), who have adequate experience in dealing with procurement of previous Bank-financed project such as Low-Income Housing, will be responsible for advertising projects, preparing RFPs/bidding documents, evaluating proposals/bids, negotiating and signing contracts, and ensuring quality of the works in their respective domain. The projectes implementation would require significant technical assistance services for studies and other consultants assignments (86% of the project), for which selecting, contracting, and monitoring of consultants would be the predominant procurement activity. Procurement of goods would be limited to office supplies, vehicles, hardware and software equipment to be used by Conservation Fonciere (CF) representing 14% of the project cost. B. Procurement Arrangements. Procurement under the proposed Project would be carried out in accordance with World Bank Guidelines for Procurement under IBRD Loans and IDA credits, January 1995, revised in January and August 1996, September 1997 and January 1999, using Standard Bidding Documents, Contract Forms, and Evaluation Forms agreed with the Bank. The procurement arrangement, contract thresholds, and Bank financing ratios are indicated in Tables A, B, and C of this Annex. Consultants will be selected in accordance with the Bank's Guidelines for Selection of Consultants, January 1997, revised in September 1997 and January 1999, using the Standard Request For Proposals, Contract Forms, and Evaluation Forms agreed with the Bank. General Procurement Notice A General Procurement Notice (GPN) will be advertised in the "United Nations Development Business" (UNDB) not less than six weeks prior to loan signing. Procurement of Goods ICB. Contracts estimated above the equivalent of US$200,000 would be awarded through Interational Competitive Bidding (ICB). NCB. Contracts estimated between the equivalent of US$50,000 and US$200,000 would be awarded through National Competitive Bidding (NCB) in accordance with Bank guidelines, up to an aggregate amount not to exceed US $500,000. International Shopping (IS)/National Shopping (NS). IS/NS will be used for procuring goods (including equipment, materials, commodities, etc.) of standard specifications available off-the-shelf for contracts each estimated to cost less than US$50,000 per contract up to an aggregate amount not to exceed US$300,000. - 38 - Shopping. requires comparison of price quotation obtained from at least three suppliers from two countries. Quotation for foreign goods located in Algeria and offered by a firm located in Algeria, are considered as quoted from abroad for purposes of satisfying the "two different countries" rule. The list of firms will be prepared by giving first consideration to those who have expressed interest in response to the press publications (e.g. GPN, local press). In order to obtain the minimum requirement of three quotations, efforts should be made to request quotations from more than three firms where practical, as a means of taking into account the possibility that some of them may not submit quotations. Under Shopping procedures, requests for quotations may be sent and quotations obtained by fax. Selection of Consultants Fiml All contracts for firms will be contracted, using Quality and Cost-Based Selection method (QCBS), except for smaller contracts estimated to cost US$100,000 equivalent or less, which may be contracted using Consultants Qualifications (CQ) up to an aggregate amount not to exceed US$500,000. The Bank's Standard Request for Proposal (SRFP) should be used whenever possible. Individuals Specialized advisory services will be provided by individual consultants, selected by comparison of qualifications of at least three candidates and hired in accordance with the provisions of paragraph 5.1 through 5.3 of the Consultant Guidelines, up to an aggregate amount to US$1,000,000. C. Capacity Assessment A procurement capacity assessment (PCA) of the project implementing agencies, SRH and SGCI, was initiated and completed during project appraisal. The PCA (Project Files) concluded that the said agencies are not subject to Algeria's Procurement Legislation, as they are subject to their own Commercial Practices, which is mainly inspired by the Algerian Public Legislation, hence agreed to follow the Bank's Procurement Guidelines. Although, the Algerian Procurement Legislation for goods, works and services, is generally in line with the Bank's Procurement Guidelines, the PCA revealed several incompatibilities between applicable Algerian procurement rules, procedures and practices and applicable Bank procurement policies and procedures. Some of these incompatibilities include: (i) bid opening taking place one to eight days after bid submission date; (ii) under ICB, bid security to be counter-guaranteed by a local bank; (iii) bid price to be on FOB or C&F basis, not including CIF prices for comparison purposes; (iv) use of local materials often required under ICB contracts, (v) price not necessarily the guiding selection criteria under works and goods contract (vi) price negotiation with the lowest evaluated bidder; (vii) use of a merit point system in bid evaluation for goods and works; (viii) lack of proper advertising; and, (ix) price negotiation with the lowest evaluated bidder,and for employment of consultants, govermment agencies and public enterprises tend to apply existing legislation for services through open competitive bidding (not through a short list) where price is the predominant factor. The Algerian procurement practices not acceptable to the Bank were discussed with SRH and SGCI and PMUTs director, from whom assurances were obtained that all incompatibilities with applicable Bank's Procurement Guidelines and policy would not be permitted in carrying out procurement under the proposed project. Similarly, assurances were obtained for the project to fully comply with applicable Banl's Procurement Guidelines. - 39 - Risk Assessment The overall risk assessment resulting from the above mentioned agencies' capacity assessment is judged to be average, as SRH and SGCI have good experience, and are familiar with Bank-financed procurement procedures. While PMU is still being formed, the director who has been appointed is expected to play a key role in monitoring the project's procurement and financial activity. Thus, the PMU will need to have in place a satisfactory system for filing, monitoring and reporting procurement actions. D. Procurement Plan A draft procurement plan for project implementation was discussed at negotiations. The revised plan will be included in the Project Implementation Manual and will be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph I of Appendix I to the Guidelines. At the end of each calendar year, the Borrower will update the Procurement Plan with a detailed procurement schedule for the coming year. E. Frequency of Procurement Supervision Mission proposed The proposed frequency of procurement supervision mission, including special procurement supervision for post-review/audits, is one every 6 months. F. Procurement Records Detailed procurement records, reflecting the project's consultant assigrnent and services, including records of time taken to complete key steps in the process, review and audits, will be maintained by the PMU. The records, which will be maintained for at least two years after the project's closing date, should include public notices for expression of interest, request for proposals and addenda/bidding documents, terms of reference (TORsyrechnical Specifications, proposal opening information, technical and financial evaluation reports, formal appeals by consultants and outcomes, signed contracts with related addenda and amendments, records on claims and dispute resolution, any other useful information. G. Bank Procurement Review The Banles review of selection of consultants will be in accordance with the provisions stipulated in the Loan Agreement and Appendix I of Bank's Guidelines for Selection and Employment of Consultants. Subject to the threshold level, the Bank's review will consist of prior review, before inviting proposals and post review, after signing the contract but prior to withdrawal of funds (or prior to the first replenishment of the Special Account). The review will include, but not be limited to, advertising, consultant short list, TORs, letter of invitation, applicable procedures, selection criteria, cost estimate, the contract packaging, evaluation of proposals/bids, contract implementation program, etc. The Bankes review of procurement of goods will be in accordance with the provisions stipulated in the Loan Agreement and Appendix I of Bank's Guidelines for procurement. Bank's Prior Review The Bank's prior review requirements will be applicable to the procurement of goods for (i) contracts estimated to cost the equivalent US$200,000 or more, per contract; under ICB procedures, and (ii) the first -40 - three contracts estimated to cost less than US$200,000, per contract; under NCB procedures, and (ii) the first three contracts estimated to cost less than US$50,000, under Shopping procedures. The Banles prior review will also be applicable to: (i) consultant contracts estimated to cost the equivalent of US$100,000 or more, per contract; under QCBS procedures; (ii) employment of individual consultants estimated to cost the equivalent of US$ 50,000 or more, per contract; (iii) amendments to contracts for employment of consulting firms raising their contract value to US$100,000 or more; (iv) amendments to contracts for individual consultants raising their contract value to US$50,000 or more; (v) assigmnents of a critical nature, as reasonably determined by the Bank (i.e., special audit); and (vi) all sole source contracts. In addition, in all cases, for contracts with firms or with individual consultants, regardless of the estimated contract cost, the Bank should be given the opportunity to review, commnent and provide its "no objection"for the terms of reference, prior to inviting consultant proposals. Bank's Post Review The Bankes post review will be applicable to all of the above mentioned contracts when their cost is below the threshold for prior review. In addition to the regular tasks of prior and ex-post reviews, the Bank may also carry out spot checks of the quality and consistency of the procurement work financed by the Bank Loan, with the objective of strengthening the fulfillment of the Bank's fiduciary responsibilities. Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (US$ million equivalent) Procurement Method Expenditure Category ICB NCB Other' N.B.F. Total Cost 1. Works 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 2. Goods 0.56 0.88 0.56 0.00 2.00 (0.45) (0.60) (0.35) (0.00) (1.40) 3. Services 0.00 0.00 6.13 0.00 6.13 (0.00) (0.00) (4.03) (0.00) (4.03) 4. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Front-end fee 0.00 0.00 0.00 0.07 0.07 (0.00) (0.00) (0.00) (0.07) (0.07) Total 0.56 0.88 6.69 0.07 8.20 _____ ____ ____ ____ ____(0.45) (0.60) (4.38) (0.07) (5.50) "Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2) Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. - 41 - Table Al: Consultant Selection Arrangements (optional) (US$ million equivalent) Selection Method Consultant Services Expenditure Category QCBS QBS SFB LCS CQ Other N.B.F. Total Cost' A. Firms 4.63 0.00 0.00 0.00 0.10 1.35 0.00 6.08 (3.00) (0.00) (0.00(0.0.00) (0.05) (0.95) (0.00) (4.00) B. Individuals 0.00 0.00 0.00 0.00 0.00 0.05 0.00 0.05 _ (0.00) (0.00) (0.00) (0.00) (0.00) (0.03) (0.00) (0.03) Total 4.63 0.00 0.00 0.00 0.10 1.40 0.00 6.13 ____ 1(3.00) (0.00) (0.00) (0.00) (0.05) (0.98) (0.00) (4.03) 1\ Including contingencies Note: QCBS = Quality- and Cost-Based Selection QBS Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CO = Selection Based on Consultants' Qualifications Other = Oelection of individual consuitants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parenthesis are the amounts to be financed by the Bank Loan. -42 - Prior review thresholds (Table B) Table B: Thresholds for Procurement Methods and Prior Review Contract Value Contracts Subject to Threshold Procurement Prior Review Expenditure Category (US$ thousands) Method (US$ millions) 1. Works 2. Goods >200 ICB ALL <200 NCB Three first contracts <50 IS/NS Two first contracts 3. Services Firms >100 QCBS All contracts <100 QCBS/CQ/others Two first contracts Individuals >50 See Section V of Guidelines All TORs, Contracts, CVs <50 See Section V of Guidelines TORs only 4. Miscellaneous 5. Miscellaneous 6. Miscellaneous ' Total value of contracts subject to prior review: 6.2 Overall Procurement Risk Assessment Average Frequency of procurement supervision missions proposed: One every 12 months (includes special procurement supervision for post-review/audits) Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance. -43 - Disbursement Allocation of loan proceeds (Table C) Table C: Allocation of Loan Proceeds Expenditure Category Amount In USSmIllion Financing Percentage Goods 0.57 80% Consulting Services 4.62 76% for local consultants and 62% for international consultants Unallocated 0.25 Total Project Costs 5.44 Front-end fee 0.06 Total 5.50 Withdrawals from the proceeds of the loan will be based on the traditional disbursement methods of the Bank, using direct payments, requests for special commitments and reimbursement applications, either fully documented or using Statement of Expenditures (SOEs) as per applicable procedures. As projected by Bank's standard disbursement profiles, disbursements would be completed four months after project closure. Disbursements would be made against standard Bank documentation. In order to help expedite the start of project implementation, retroactive financing not exceeding US$550,000 (10% of the proposed Loan amount) will be made available for eligible expenditures made after May 20, 2002, but before the date of Loan signing, for goods and consultant services and training under all components of the Project. The purpose of retroactive financing will be to enable the bidding process for the major consulting contracts, for which terms of reference have been prepared, to proceed immediately. Equipment and services for the PMU will also be acquired. Use of statements of expenditures (SOEs): All applications to withdraw proceeds from the loan will be fully documented, except for: (i) expenditures of contracts with an estimated value of US$200,000 or less for goods; (ii) expenditures of contracts with an estimated value of US$ 100,000 or less for consulting firms; and (iii) US$50,000 or less for individual consultants training and study tours, which may be claimed on the basis of Statements of Expenditures (SOEs). Documentation supporting expenditures claimed against SOEs will be retained and will be available for review when requested by Bank supervision missions and project auditors. All disbursements will be subject to the conditions of the Loan Agreement and the procedures defined in the Disbursement Letter. Special account: To facilitate disbursement of eligible expenditures for goods, services and training, the Borrower will open and maintain a Special Account (SA) at the Banque Algerienne de Developpement to cover eligible project expenditures to be managed and administered by the Project Management Unit (PMU). Authonzed allocation of the Special Account would be US$500,000 covering an estimated 4 months of eligible expenditures financed by the loan. The PMU will be responsible for submitting monthly replenishment applications with appropriate supporting documentation for expenditures incurred, and will retain and make the documents available for review by Bank supervision missions and project auditors. To the extent possible, all eligible project expenditures should be paid through the Special Account. Specifically, all eligible project expenditures of less than US$50,000 equivalent shall be paid from the SA. -44- The Special Account will be replenished through the submission of Withdrawal Applications on a monthly basis and will include reconciled bank statements and other documents as may be required. Financial Management Assessment: The financial management assessment carried out during project preparation, indicated that the accounting and financial management systems of the two executing agencies, SRH and SGCI, do not present accountability issues and meet the requirements of OP/BP 10.02. They can be used to provide inputs to project accounts and Financial Monitoring Reports (FMRs) for the project. The chart of accounts of each agency will be extended to include the project components and activities. A separate financial management system is being established in the PMU to enable it to record and control project expenses and prepare FMRs. The timetable for establishment is described later in this Annex. Project Implementation Project Management. The Project Management Unit (PMU) will have overall responsibility for project implementation. The PMU has been set up and a Project Director has been appointed. A qualified financial management specialist has been selected for the staff of the PMU. The PMU will be in charge of implementing the project in accordance with the directives of the Steering Committee and with the Project Implementation Manual (PIM). Financial Management Arrangements. The Project Director will maintain project accounts with the assistance of the financial management specialist and will prepare annual Project Financial Statements (PFSs) and quarterly Financial Monitoring Reports (FMRs) in accordance with Bank guidelines for submission to the Bank each quarter. Procedures for accounting and financial reporting, as well as internal control mechanisms specific to the Project, will be defined in writing and incorporated into the Project Implementation Manual. The main elements of the PIM are summaized below: * Staffing. Job descriptions and responsibilities will be issued in writing and included in the PIM. * Financial management procedures. These procedures will reflect the flow of funds, internal control rules, payment and disbursement procedures, the relationship between the PMU and extemal entities involved in project implementation (SRH, SGCI), and reporting procedures and rules. * Chart of accounts. SRH and SGcr s current chart of accounts will be updated by the accounting department to reflect the project components and detailed activities. Specific codes will be added in order to identify the project categories and the related financing percentages. * A specif caiy tailoredfinancial management system is being developed in order to enable FMRs to be issued directly by the PMU and also to enable analyses by components and categories as well as for monitoring and evaluation indicators. Financial Management Characteristics Organization of the PMU. The Project Director will be responsible for monitoring and coordination as well as procurement, finance, budgeting, accounting and reporting functions. He will be assisted by a financial management specialist, among others. -45- Financial and accounting policies for the SRH and SGCI are considered satisfactory; those for the PMU are being developed and will be operational prior to effectiveness. The purpose of these policies is to ensure transparency, provide clarity regarding financial aspects to the various stakeholders and finance staff and ensure uniformity and accountability. These policies will, inter alia, cover the following aspects: (i) project expenditures, including their classification; (ii) the eligibility of expenditures for reimbursement from the Bank loan; and (iii) project accounting policies. Project Accounting System. The Project Director, assisted by the FMS, will be responsible for project financial management and accounting. He will maintain accounting records specific to the Project that will enable the issuance of annual PFSs and quarterly FMRs. The Project Director will submit these documents on a timely basis to the Bank and to the auditors. The overall principles for project accounting are outlined below: (a) Records of accounts specific to the project will be maintained under the financial management system being installed in the PMU. The records will reflect detailed transaction flows and provide summaries required for monitoring and evaluation purposes. Annual PFSs and quarterly FMRs will be issued based on data from the records, (b) Project accounting will cover all sources and uses of project funds. This will include payments received and expenditures incurred. All project-related transactions will be reflected in the reporting system. Disbursements made by the World Bank directly and Special Account transactions will be included in the project accounting system. Counterpart funds will be included and reflected separately in the PFSs and FMRs. (c) Physical information on key perfonnance indicators that can be readily linked to financial costs will be maintained as part of the project financial management system. These itemns will be identified and indicated in the PIM. The PIM will also outline: (i) job responsibilities within the PMU, (ii) the chart of accounts and accounting policies, and (iii) banking and cash procedures. This system will be reviewed in light of implementation experience and modified as necessary. Information Flows for Accounting Purposes. The information flows will be as follows: (a) The PMU will generate and maintain vouchers, records and supporting documentation for expenditures on all project related activities; (b) The Project Director will transmit to the BAD all invoices to be paid after confinning that the related transactions were: (i) eligible; and (ii) performed in a satisfactory manner. (c) The BAD will proceed with payments after review of the supporting documentation and their compliance with Bank guidelines. Monthly statements of accounts will be issued by the BAD and transmitted to the PMU in order to allow close follow-up of the disbursement operations and an adequate update of the accounting records; and (d) Expenditures incurred by the PMU will be reviewed by the project auditors in accordance with International Standards of Auditing as issued by the International Federation of Accountants, the Bank's guidelines (e.g. Financial, Accounting, Reporting and Auditing Handbook (FARAH)), and specific tenms of reference (TORs) acceptable to the Bank. - 46 - Intemal Controls. The PMU financial management system will include the following internal control mechanisms: (a) Operation of a budgeting system, and regular monitoring of acuala financial performance with budgets and targets; (b) Adoption and operation of simple, clear and transparent financial and accounting policies which will govern the financial management and accounting for the project These policies and procedures will be described in the PIM; (c) Establishment, at the transaction level, of policies, procedures and systems for ensuring acceptable internal control mechansms, such as checking of expenditures, appropriate documentation, levels of authorization, segregation of duties, periodic reconciliation, physical verification, easy access to supporting documentation, etc. These policies and procedures will be reviewed and updated periodically; and (d) Implementation of a fully computerized financial management system which will enable the issuance of the annual PFSs and quarterly FMRs. Financial Monitoring Reports FMRs for the Project will be generated from the computerized financial management system on a quarterly basis. These reports will be management-oriented (i.e., summaries rather than tmnsactional details) and will be used for project monitoring and implementation. The FMR format will be designed to meet the needs of the project and will include the following three sections: (a) Financial Statements, including: (i) Summary of sources and uses of funds (ii) Uses of funds by project activity (iii) Special account statement. (b) Project progress statements, including output monitoring reports using contract management information. (c) Procurement management report, including: (i) Contract expenditures report - Goods and works (ii) Contract expenditures report - Consultants (iii) Procurement management report - Goods and works (iv) Procurement management report - Consultants. Formats of the reports, which were agreed at negotiations, will be part of the PIM. These reports will be transmitted to the Bank no later than 45 days after the calendar quarter. Annuallv: Audited PFSs will be submitted to the Bank. PFSs will include: (i) a Statement of Sources and Utilization of Funds indicating funds received from various sources and project expenditures; (ii) schedules classifying project expenditures by components and expenditure categories; (iii) a Special Account Reconciliation Statement; and (iv) a Statement of Withdrawals made on the basis of Statements of Expenditure (SOEs). Audited PFSs will be submitted to the Bank as soon as possible and not later than six months after the end of each fiscal year. -47 - Audit Arrangements rhe PMU wiUl appoint an auditor acceptable to the Bank to carry out an annual audit according to the [nternational Standards of Auditing as issued by the International Federation of Accountants, the Bank's Guidelines (e.g. Financial, Accounting, Reporting and Auditing Handbook), and specific TORs acceptable to the Bank. The auditor will express a professional opinion on the annual project financial statements including SOEs and the SA balance, and wrill subnit to the Bank an annual audit report within six months aflter the end of each government fiscal year. The audit will be comprehensive and cover all aspects of the project (i.e., all sources and uses of funds and - Dxpenditures incunred). The TORs for this assigmnent will include an audit of financial transactions and an assessment of the financial management system, including a review of internal control mechanisms. The PMU will provide the auditor with access to project-related documents and records and any other information required for the purposes of the audit. Actions The PMU wil install a financial management information system (FMIS) capable of recording aU project related transactions and generating Financial Monitoring Reports; The timetable for implementing the FMIS, which was agreed at negotiations, is described below: Action Planned Completion Date By Whom? 1. Appoint FMS June 30,2002 PMU 2. Contract system June 30, 2002 PMU 3. Purchase hardware August 31, 2002 PMU 4. Complete installation September 30, 2002 PMU The Financial management Specialist (FMS) has been selected and his appointment will be effective by June 30, 2002 in order to work with the software company installing the information system. The system will be instaUed over the period June 30 to August 31, 2002, during which period training to users will be provided. On completion of installation the supplier wil provide all relevant operational manuals. -48- Annex 7: Project Processing Schedule ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT Project Schedule Planned Actual Time taken to prepare the project (months) 15 27 First Bank mission (identification) 11/14/1999 11/14/1999 Appralsal mission departure 02/20/2002 02/20/2002 Negotiations 03/30/2002 05/20/2002 Planned Date of Effectiveness 10/31/2002 10/31/2002 Prepared by: Preparation assistance: PHRD Grant No.TF026124 Bank staff who worked on the project included: Name Speciality Douglas Graham Task Team Leader Sonia Hammam Sector Manager Loic Chiquier Housing Finance Specialist Jean-Jacques Soulacroup Urban Management Specialist Samir El Daher Urban Finance Specialist, peer reviewer Bertrand Renaud Housing Finance Specialist, peer reviewer Samia Msadek Financial Management Specialist Dominique Dietrich Program Assistant Helen PafAaritis Public Sector Management Specialist Radia Lalouani Procurement Analyst Olivier Hassler Housing Finance Specialist Deane Jordan Sector Manager (Acting) Dominique Bichara Lawyer -49 - Annex 8: Documents in the Project File* ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT A. Project Implementation Plan I. Description du projet II. Execution du Projet II.1 Calendrier General 11.2 Indicateurs de performance III. Cadre Institutionnel du Projet -organigramme et description IV. Proc6dures d'Attribution des March6s. V. Gestion Financiere. VI. Suivi du Projet. B. Bank Staff Assessments Procurement Capacity Assessment Financial Management Assessment C. Other SOGEMA: Etude du March6 Hypoth6caire en Alg6rie, october 2000: Rapport Synthese & Rapport Final. Le march6 Immobilier et son risque en Alg6rie, SGCI. Horenfeld, Gilles, L'analyse des blocages de l'offre de logements en Alg6rie, May 2002. Minister of Finance, Project Implementation Plan, May 2002. World Bank, Terms of reference for the Strategic Study of Banks' Training Needs, May 2002. World Bank, Terms of reference for the Study on Legal Reforms, May 2002. SRH and SGCI documentation: I. Financial Statements and Audit reports; II. Procedures manuals and internal regulations; HI. Organization structure; IV. Business Plan. *Including electronic files - 50 - Annex 9: Statement of Loans and Credits ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT 03-Jun-2002 DHrerence between expected and actual Orginal Amount In USS MNilbm dlburments Prjdct ID FY Purpose IBRD IDA Cancel. Undbsb. Orig Fnn Revd P072458 2002 DZ-TRANSPORT TECHNICAL ASSISTANCE 8.72 0.00 0.00 6.72 2.34 0.00 P064217 2002 DZ-PNANCIAL SYSTEM WFRASTR. MODERN. 1.a0 0.00 0.00 16.60 1.67 0.00 PO7667 2001 DZ.ENERGY AND MINING TA LOAN (ETAL) 16. 0.00 0.00 o 16.4 3.60 0.00 Poe6421 2001 OZ-BWDGET SYST. MODERN. 23.70 0.00 0.00 22.46 22.46 0.00 P069947 2000 DZ-TEERP 63.46 0.00 0.00 6.00 49.79 0.00 P070123 2000 OZ4Pva0zeIon Asisnoe (LUL) 5.00 0.00 0.00 3.79 1.86 0.00 P070308 2000 OZ-Toeoomncons and Postal Setor 9.00 0.00 0.00 6.1e 4.02 0.47 P042940 1S99 DZ4LOW INCOME HOUSING 150.00 0.00 0.00 13300 132.47 63.67 P043724 1997 OZ-RURAL EMPLOYMENT 89.00 0.00 0.00 41.0 41.80 .1.00 P004960 1996 IND.POLLUTION CTRL 78.00 0.00 0.00 61.08 48.92 53.28 P004907 1995 DZ-HIGHWAYSVI 130.00 0.00 0.00 19.83 19.63 7.17 P004974 1994 OZ-WATERSUPPLYANDSEWERAGE 11000 000 26.1O 57.75 6.66 4.42 Total: 721.38 0.00 28.10 449.44 414.61 123.15 ALGERIA STATEMENT OF IFC's Held and Disbursed Portfolio Jan - 2002 In Millions US Dollars Committed Dlsbursed IFC IFC FY Approval Company Loan Equity Quasi Parnic Loan Equity Quasi Partic 1998 ABCA 0.00 1.88 0.00 0.00 0.00 1.88 0.00 0.00 2000 AEP 0.00 0.30 0.00 0.00 0.00 0.12 0.00 0.00 2001 ALC 0.00 0.69 0.00 0.00 0.00 0.35 0.00 0.00 1999 Aldaph 6.03 1.70 0.00 5.17 0.00 0.00 0.00 0.00 1992 Helios 1.33 0.00 0.00 0.00 1.33 0.00 0.00 0.00 1998 SGA 0.00 0.72 0.00 0.00 0.00 0.72 0.00 0.00 Total Portfolio: 7.36 5.29 0.00 5.17 1.33 3.07 0.00 0.00 Approvals Pending Commitment t FY Approval Company Loan Equity Quasi Partic 2001 ALC 4.00 0.00 0.00 0.00 2002 ATEF 20.00 0.00 0.00 0.00 Total Pending Commitment: 24.00 0.00 0.00 0.00 - 51 - Annex 10: Country at a Glance ALGERIA: MORTGAGE FINANCE TECHNICAL ASSISTANCE PROJECT East Lower- POVERTY and SOCIAL & North middle- Algeria Africa Income Development diamond' 2000 Populaion. mid-year (mItlIons) 30.4 2S6 2,046 ulfe expectancy GNI Per capita (Atlas mSthOd, US$) 1,580 2,040 1,140 GNI (Atlas metod. USS bilthns) 47.9 602 2,327 Averag, annual growth. 1994400 PopulaUon (%) 1.7 2.0 1.0 Labor force /X) 3 4 2.8 1.3 GNI Gross Labor force M ~ ~~~~ ~~~~~~per primary Most recent ostmate (latest year available. 199440) capita rlment' Poverty v% of populaton below nstonal povertvy lne) 23 Urban Dopulaton (% of total popuaton) 60 69 42 Ufe expectancy at birth (years) 71 6s 60 . Infant mortailtv (per 1,000 Ive births) 34 44 32 Child malnutrlUon (1 of children under 5) 13 I I Access to Improved water source Access to an Improved water source (1 of Population) 94 89 80 lilteracv (%fX population age I5+) 32 36 16 Gross Primary enrollment (of scaool-as populatlon) 108 95 114 AlgerIa Male 113 102 11e -Lower-middle-Income group Female 102 88 114 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1950 1990 1999 2000 Economic ruUos GDP (USS blillonsa 42.3 62.0 47.6 53.3 Gross domestic lnvestmenUGDP 39.1 28.6 27.8 23.8 T Exports of goods and serviceslGDP 34.3 23 4 27.9 42A rade Gross domestic savinae/GDP 43.1 27.1 31.4 44.2 Gross natonal savlnas/GDP 40.8 26.2 28.2 40.6 Current account balance/GDP 0.6 2.2 0.0 16.9 Domestic In t Interest paymentslGDP 3A 2.9 3.6 3.3 savings _ Investment Total debUGOP 45.7 44.9 58.8 46.9 sn Total debt saervlcelexporta 27.3 654 40.2 19.4 Present value of debaGOP e0.9 Present value of debt/exports 216.8 Indebtedness 1980-90 199040 1999 2000 2000w04 (aversae annual agwth) GDP 2.7 1.9 3.2 24 4.2 Age,la GDP Per capita 40.3 -0.1 1.7 0.9 2.4 Low r-minddle-lncome group Exports of aoods and services 4.1 33 6.0 7.4 4.2 STRUCTURE of the ECONOMY 1980 1990 1999 2000 Growth of Investment and GOP (%) (1 of GDP) 3o AAriculture 8.6 11.4 I1A 8.6 Industrv 57.7 48.2 50.4 60.3 201. Manufacturina 10.6 11.4 9.6 7.7 10 . Services 33.8 40.5 38.2 31.2 0 0C Private consumption 41 7 s6.s 51.6 417 .10 so General govemment consumpUon 15.2 16.1 17 1 14.1 G- n - -P Imports of goods and servIces 30.3 24.9 24.3 22.0 1980.90 199040 1999 2000 Growth of exports and Imports (1) (average annual growth) Aariculture 4.1 3.6 2.7 40.0 Industrv 2.6 1 8 4.5 4.3 0 Manufacturing 4.1 -2.1 1.6 1.1 I Services 3.0 1.9 1.7 1 7 o s o Private consumpUon 1.4 0.8 2.9 1.8 n General govemment consumpUon 0.7 3.6 2.5 2.8 15 Gross domesUc Investment -1 8 -0.5 -2.1 -4.2 Eots _ Imports Imports of goods and services -4.2 -0.7 1 7 7.0 Note: 2000 data are preUminary estimates. The diamonds show four key Indicators In the countrv (In bold) compared with Its Income-wroup average. If data are mIssinag the dlamond will be Incomplete. -52- Algeria PRICES and GOVERNMENT FINANCE 1960 1990 1999 2000 V% change) Consumer proes 10.2 16.8 2.7 0.3 so Implict GDP deflator 25.9 30.3 10A 23.7 t 5 Govementfinanceo (% of GDP. Incudes cun'nt grant) 5 27 go w o Current revenue 37.9 28.8 30.0 39.3 156 Current budget babano 20.9 11A 5.5 17.9 GDPdef',o CR Overal surplusldeflcIt -8.4 3.6 -0.5 9.9 TRADE (USSmi$nI s) 1980 190 199 2000 Export and tpout levels (US mil.) Total expots (fob) *. 12,843 12,320 21,700 amcu Natural gas .. 2,730 2.735 4,815 _0. Refined product .. 3,549 2.422 3.999 Manufactures 258 48 81 aoo. Total Imports (CH) 10,559 10,736 9,588 9,201 oc Food 1,992 2,134 2,609 2,485 Fuel and energy 259 141 127 105 Captal goods 3,324 3.092 3,155 2.983 o 94 Oa go OF ca o Export price dex (19951) .. 130 93 Import prbe Index (1995=100) .. 85 94 .. KEptS *lnport Terrnsoftrade(1995=100) .. 154 99 BALANCE of PAYMENTS (USS NIionsJ 1980 1990 1999 2000 Currwt account bal_ne to GDP I%) Exports of goods end servIcos 14,257 13,90 13.040 22.600 20. ImportsofQoodsandsertcs 13,061 11,480 11,520 11,700 15 Resource balance 1198 1,910 1,520 10,900I)l 10 Net income -1,198 -2,090 -2,290 -2,700 Net currmnt transders 243 1,530 790 800 6 Current account balance 242 1,350 20 9.000 o- oo FinancIng ttems (net) 1,100 -1,620 -2,370 -1 400 4 Changes In net reserves -1_341 270 2.350 -7.600 10- moo: Reserves ncluding oold (US$ mn1bnsJ 4,022 981 4,794 12,279 Convsion rats (DEC, ocalUSS) 3.8 9.0 66.5 75.3 EXTERNAL DEBT and RESOURCE FLOWS 1980 1990 1S99 2000 (USS milns) Composion ot eon debt (USS mIll.) Total debt outstanding and disbursed 19,365 27,877 28,015 25.002 IBRD 253 1208 1,540 1,425 G: 222 1,425 IDA 0 0 0 0 C: 1r71 Total debt service 4,084 8.803 5,332 4.467 F 5.872 IBRD 39 203 325 300 IDA 0 0 0 0 09 2709 Compositon of net resource flows Offlcial amnts , 77 45 0 0 OffcIal creditors 322 580 -359 -521 Prvate creditors 548 -424 -1,496 232 Foreign drct Investment 281 -40 460 400 Portftlo eqUty 0 0 0 0 E: 13,O5 Wortd Bank pogram CommItment 210 231 0 98 A-lFRD E-lBsteral Disbursements 39 300 68 58 a - IDA D - Oler mtuatral F - Prvate Principal rpayments 13 130 199 172 C-IMF G0- Short-tem Netflows 26 170 -131 -114 Interest payments 25 73 126 128 Net transfers 0 97 -257 -242 Development Econmics 9WI01 - 53 - 2- 0- 2- *- 6 r- IIBRD 29992 Mediterran ean Sea A L G E R I A A L G E R E IELS T.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~AGE* 6 E 2.TN 2mS J roA;n t 42 . orh=nl=n El. , /. Mt- / N.k v, RODS 0 TOWNSANDVILLAGES fl . .. * I AR 1 EL 24 4 6 A IN T E h A O U C H E N T 3 6 E L T A R F 4 8 R E L IZ A N E - te I rb 0 0 0 6 * ' , , .- ' 4 E b " .1. B.66.1, ~ ~ ~ oNGoc666. ~ ..f *.~ 16 ~ ~ ~ ~ ~ ~ ~ ~ M~~' ALIR 47 GHARDAIA 28 5AD '* RAILROADS .." TeIO AbCPIAstso2' \ S BA TNA 33 ILLIZIk22 SIDI BL* A '--.BB W8R. * 12 10 80UIRA 43 MILA 37 TINDOUF \ | \ w _;~~Dh.b 8 25 CONSTANT13 450 D150 7 A~~ 5 2.ElT. dhN ld- WILAYA NAMES 13 PAVED NATIONAL ROADS 0 TOWNS AND VILLAGES S..06fl 3/' NOMS DES WILAYATE ROUTES NATIONAIES VILLES ET VSLLAGES IO ALIERS I ADRAR 32 EL BAYADH 30 OUARGLA PAVED WILAYA ROADS 0D WILAYA HEADQUAIRTERS 44 AIN DEFLA 39 EL OUED 4 GUM EL BOUAGHI ROUTES SECONDAIRES SIEGES DES WILAYATE ,, Areoo Mo 46 AIN TEMO UCHENT 36 EL TARF 48 RELIZANE RAIRODSNA5OALCAITL 16 ALGIERS A7 GHARDAIA 20 SAIDA VAILSFROADS r NAPIONLECPTL~T -2 23 ANNABA 24 GUELMA 1N9SETIF 19 S BATNA 33 ILLIZI 22 SDIG BEL ABBES + AIRPORTS - WILAYA BOUNDARIES 6- 8 ' -3G - ' S RECHAR 1 8 JIJ EL 21 SKIKDA AEROPORTS LIMITES DES WILAYATE- 6 REJAIA 40 KHENCHELA 41 SOUK AHEADS-1A 7 RISKRA 3 LAGHIOSAT I 1 TAMANGHASSET - - INTERNATIONAL BOUNDARIES 33 /-,~ . 9 BLIDA 29 MASCAURA 13 TTEBESSA UIMITES INTERNATIONALES e~ ~L 34 BORDJ ROU ARRERIDJ 26 MEDEA 14 TIARET -o 4- > 10 EOUIRA 43 MILA 37 TINDOUF - -- 35 BOUMERDES 27 MOSTAGANEM -42 TIPAZA N14o, 2 2 CHLEP 28 MSILA 38 TISSEMSILT ThOo=p, pOdOcbdy Ih,oM.p D- L,n Th U,cGWord o-k ' 25 CONSTANTINE 45 NAAMA 15 TIZI OUZOU 5 155 150 Th. edoocI., J,dC-1,- -ol, ,doylb ...o,oE -- - 0 5~~~~~~~~~0 A-~~~~~580 IcIS,,cpdo- ,py flS,G-TOW'd6d30 17 OJELPA- 31 ORAN 13 TLEMCEN KIOEESdowg ,co wSelo9plsIcEo 013, tlooF, l0Th. W,oyd,04fl7 NOVEMBER 1998 Report No. 21446 AL Type: PAD
Группа Всемирного банка · Project Appraisal Document
Algeria - Mortgage Finance Technical Assistance Project
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Группа Всемирного банка
Тип документа
Project Appraisal Document
Страна
Алжир
Источник
Всемирный банк