Nepal: Rural Finance Sector Development Cluster Program (Subprogram 2)

Sovereign Project | 36169-023

Summary

The Program is the second of two subprograms under the Cluster Program. The objective of the Program is to improve the soundness, efficiency, and outreach of the Borrower's rural finance sector through policy, legal, regulatory and institutional reform.

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Consulting Notices

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Procurement Documents


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Project Name Rural Finance Sector Development Cluster Program (Subprogram 2)
Project Number 36169-023
Country Nepal
Project Status Approved
Project Type / Modality of Assistance Grant
Loan
Technical Assistance
Source of Funding / Amount
Grant 0208-NEP: Second Rural Finance Sector Development Project
Asian Development Fund US$ 12.10 million
Loan 2641-NEP: Rural Finance Sector Development Cluster Program (Subprogram 2)
Asian Development Fund US$ 60.40 million
TA 7546-NEP: Capacity Building for Rural Finance Sector Development
Technical Assistance Special Fund US$ 200,000.00
TA 7546-NEP: Capacity Building for Rural Finance Sector Development (Supplementary)
Technical Assistance Special Fund US$ 100,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Finance - Finance sector development

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The Program is the second of two subprograms under the Cluster Program. The objective of the Program is to improve the soundness, efficiency, and outreach of the Borrower's rural finance sector through policy, legal, regulatory and institutional reform.
Project Rationale and Linkage to Country/Regional Strategy ADB approved the Rural Finance Sector Development Cluster Program and its subprogram 1 on 26 October 2006 to develop an enabling environment for the rural finance sector through policy, legal, regulatory, and institutional reforms. Subprogram 1, which was completed in December 2009, achieved successful policy and institutional reforms. Subprogram 2, the second phase of RFSDCP, will complete the rural finance sector reform agenda. It is consistent with the strategic focus of the country partnership strategy for Nepal (2010-2012) on making financial services more accessible to the poor and the rural areas. The RFSDCP supports the government's Financial Sector Reform Program in coordination with the International Monetary Fund and the World Bank.
Impact Economic growth and poverty reduction in rural areas.
Project Outcome
Description of Outcome Inclusive rural finance system that is more sound and efficient, and has wider outreach.
Progress Toward Outcome Ongoing.
Implementation Progress
Description of Project Outputs

1. Supportive Legal and Regulatory Framework

An act for the regulation and supervision of rural and microfinance institutions

An autonomous regulatory authority for rural and microfinance institutions

2. ADBL Institutional Restructuring and Reforms

Reduced government ownership and increased private sector participation in ADBL

Improved ADBL financial and operating performance

3. SFDB Institutional Restructuring and Reforms

Reduced government ownership and increased private sector participation in SFDB

Improved SFDB financial and operating performance

Improved access to financial services in hills and mountain areas

4. GBB Institutional Restructuring and Reforms

Reduced government ownership and increased private sector participation at GBBs

5. Sector Capacity Building

NBTI training programs in finance, banking, and rural and microfinance subjects for a wide range of financial institutions

6. Enabling Infrastructure for Rural Finance

Credit information services to microfinance institutions by the Credit Information Bureau (CIB)

DRT capacity development

Status of Implementation Progress (Outputs, Activities, and Issues)

BTOR for August 2014: Except for the Micro Finance Act and ADBL divestment, all other components are successful. Those include (i) extending microfinance outreach in hills and remote areas ; (ii) establishing the micro credit information service by the Credit Information Bureau ; (iii) enhancing capacity of the Debt Recovery Tribunal; (iv) successfully divesting and privatizing the Small Farmers ' Development Bank; and (v) establishing the Nepal Banking Institute, the country's first professional banking and financial training institute .

BTOR for 25-29 Nov 2013: The establishment of the regulatory authority waits for the approval of the Micro Finance Act.

BTOR for 25-29 Nov 2013: The Micro Finance Act is being processed at the Ministry of Law and Justice. Due to the change of the government, the approval of the Act has been delayed.

BTOR of 25-29 Nov 2013: Formation of ADBL divestment technical sub-committee, approval of draft of ADBL divestment action plan, ADBL valuation report and share purchase agreement report by privatization committee. Procurement Process for Special Audit started.

BTOR of 25-29 Nov 2013: Financial and operational performances are satisfactory.

BTOR of 25-29 Nov 2013: The initial public offering was completed in March 2010.

BTOR of 25-29 Nov 2013: Financial and operating performances are satisfactory.

BTOR of 25-29 Nov 2013: 151 cooperatives including 69 new cooperatives (non-Small Farmer Cooperative Limited) with 124,376 members (of which 60% are women) received on-lending support

BTOR of 25-29 Nov 2013: SFDB has already divested its Govt share to small farmers cooperatives

BTOR of 25-29 Nov 2013: NRB made a decision to merge all GBBs by March 2014. Due diligence audit of five GBBs completed.

BTOR of 25-29 Nov 2013: NBTI conducted 43 regional trainings to train 1154 staff of banks and financial institutions.

BTOR of 25-29 Nov 2013: NBTI has completed design of long-term accredited diploma and degree program, awaiting accreditation. Bantch launch planned to begin from the first week of Dec 2013. Certification course for existing bankers on Credit in the final phase. To be launched soon.

BTOR of 25-29 Nov 2013: NBTI commenced training program substantially to the operational plan.

BTOR of 25-29 Nov. 2013: Consultant recruitment completed. Management information system established. DRT substantially improved its efficiency.

BTOR of 25-29 Nov 2013: The procurement process is completed and contract awarded in March 2013. Disbursement started.

Geographical Location Nepal
Summary of Environmental and Social Aspects
Environmental Aspects No negative environmental issues are expected.
Involuntary Resettlement No involuntary resettlement issues are expected.
Indigenous Peoples The Project support to improved access to finance inclduing indigenous people.
Stakeholder Communication, Participation, and Consultation
During Project Design During the implementation of subprogram I and preparation of the project preparatory technical assistance (PPTA), the extensive consultations have been carried out with the Ministry of Finance (MOF),(the executing agency); NRB; ADBL; SFDB; GBBs; Nepal Bankers' Association (NBA); commercial banks, financial institutions, MFIs, and cooperatives. Development partners including IMF, the World Bank, Department for International Development (DFID) of the United Kingdom, German Technical Cooperation (GTZ), International Labour Organization (ILO), Japan International Cooperation Agency (JICA) have been consulted for possible cooperation and coordination for subprogram II. The World Bank has been supporting the Financial Sector Restructuring Project since 2004 to restructure the two largest commercial banks in Nepal for the Government's financial sector reform program. In connection with this, the specialists at the World Bank promised close coordination during the implementation of subprogram II.
During Project Implementation During the implementation, the executing and implementing agencies with assistances from the consultants will carry out intensive participation and consultation process. The executing agency will conduct periodical consultation with implementing agencies and relevant Government agencies through the steering committee meetings. The implementing agencies will have frequent discussion forums and workshops with staff and management of respective institutions to review and discuss the progress of reform activities. The executing and implementing agencies will extend their consultations to regional and rural areas to have participatory assessments with rural communities and women organizations to identify issues and constraints and develop measures on how to effectively extend inclusive financial services to rural communities.
Business Opportunities
Consulting Services Consulting services will be procured in accordance with ADB's Guidelines on the Use of Consultants (February 2007 as amended from time to time). The Project will finance approximately 59 person-months of international consulting services and 330 person-months of national consulting services. Where firms are to be engaged, the quality- and cost-based selection method with 80:20 of quality and cost ratio will be used for selecting consultants. For the consultant recruitment package over $1 million will be recruited using full technical proposals; for packages over $600,000 and below $1 million, simplified technical proposals; for ones below $600,000, biodata technical proposals. Details of the consultant recruitment packages are in the procurement plan.
Procurement The procurement of goods, related services, and works financed by the grant will follow procedures outlined in the ADB's Procurement Guidelines (February 2007 as amended from time to time). Goods and equipment for an MIS package for ADBL and CIB, estimated to cost $500,000 equivalent or more per contract, will be procured using international competitive bidding. Goods and equipment contracts estimated to cost between $100,000 and $500,000 will be procured through national competitive bidding. Goods and equipment to be procured through national competitive bidding include all types of office furniture, computer (stand-alone), computer peripherals, and office equipment. Contracts that cost $100,000 or less may be procured through shopping. Before commencement of national competitive bidding, ADB and the Government will review the Government's procurement procedures to ensure consistency with ADB requirements. Any necessary modifications or clarifications to the Government's procedures will be documented in the procurement plan.
Responsible ADB Officer Mayumi Ozaki
Responsible ADB Department South Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SARD
Executing Agencies
Ministry of FinanceMahendra Man Gurungeapad@mof.gov.npKathmandu, Nepal
Timetable
Concept Clearance 21 Aug 2009
Fact Finding 01 Oct 2009 to 16 Oct 2009
MRM 23 Feb 2010
Approval 18 Jun 2010
Last Review Mission -
PDS Creation Date 21 Oct 2010
Last PDS Update 30 Mar 2015

Grant 0208-NEP

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
18 Jun 2010 23 Dec 2010 26 Dec 2010 31 Dec 2012 31 Dec 2014 -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 12.10 Cumulative Contract Awards
ADB 12.10 18 Jun 2010 11.71 0.00 97%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 18 Jun 2010 11.25 0.00 93%

Loan 2641-NEP

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
18 Jun 2010 23 Dec 2010 26 Dec 2010 31 Dec 2012 31 Dec 2015 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 60.40 Cumulative Contract Awards
ADB 60.40 18 Jun 2010 57.57 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 18 Jun 2010 57.57 0.00 100%

TA 7546-NEP

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
18 Jun 2010 - 18 Jun 2010 30 Sep 2011 31 Dec 2014 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
300,000.00 0.00 0.00 0.00 0.00 0.00 300,000.00 18 Jun 2010 164,499.04
Title Document Type Document Date
Rural Finance Sector Development Cluster Program (Second Tranche of Subprogram 2): Progress Report on Tranche Release Progress Reports on Tranche Releases Jul 2015
Rural Finance Sector Development Cluster Program (Subprogram 2) Procurement Plans Jul 2012
Rural Finance Sector Development Cluster Program - Subprogram 2 Project/Program Administration Manual Feb 2011
Grant Agreement for Second Rural Finance Sector Development Project between Nepal and Asian Development Bank dated 23 December 2010 Grant Agreement Dec 2010
Program Agreement for Rural Finance Sector Development Cluster Program - Subprogram II between Asian Development Bank and Nepal Rastra Bank Project/Program Agreement Dec 2010
Loan Agreement (Special Operations) for Rural Finance Sector Development Cluster Program - Subprogram II between Nepal and Asian Development Bank dated 23 December 2010 Loan Agreement (Special Operations) Dec 2010
Project Agreement for Second Rural Finance Sector Development Project between Asian Development Bank and Agricultural Development Bank Limited Project/Program Agreement Jun 2010
Rural Finance Sector Development Cluster Program (Subprogram 2): Gender Action Plan Gender Action Plans May 2010
Rural Finance Sector Development Cluster Program - Subprogram 2 Project/Program Administration Manual May 2010
Rural Finance Sector Development Cluster Program (Subprogram 2) Reports and Recommendations of the President May 2010
Rural Finance Sector Development Cluster Program (Subprogram 2) Summary Poverty Reduction and Social Strategies May 2010

Safeguard Documents

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Evaluation Documents

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