Uzbekistan: Second Small and Microfinance Development Project€¦ · SMDP – Small and Microfinance Development Project TA – technical assistance NOTES (i) The fiscal year (FY)

Completion Report

Project Number: 42007-013 Loan Number: 2634 September 2015

Uzbekistan: Second Small and Microfinance Development Project

This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

CURRENCY EQUIVALENTS Currency Unit – sum

At Appraisal At Project Completion (as of 1 March 2010) (as of 28 August 2015)

1.00 = $ 0.00065 $0.00039 $1.00 = SUM1,530.74 SUM2,594.68

ABBREVIATIONS

ADB – Asian Development Bank AFS – audited financial statement APFS – audited project financial statement BOTR – back-to-office report CBU – Central Bank of Uzbekistan DMF – design and monitoring framework FIL – financial intermediation loan GAP – gender action plan MCO – microcredit organization MOF – Ministry of Finance MSE – micro and small enterprise PAM – project administration manual PCB – participating commercial bank PIU – project implementation unit SLA – subsidiary loan agreement SMDP – Small and Microfinance Development Project TA – technical assistance

NOTES

(i) The fiscal year (FY) of the government, its agencies, and the participating banks ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 31 December 2009.

(ii) In this report, "$" refers to US dollars.

Vice-President W. Zhang, (Operations 1) Director General S. O’Sullivan, Central and West Asia Department (CWRD) Director B. Wilkinson, Public Management, Financial Sector, and Trade Division,

CWRD Team leader L. Schou-Zibell, Principal Economist, CWRD Team member F. Teves, Project Analyst, CWRD

M.C. Yabut, Operations Assistant, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 5 G. Conditions and Covenants 5 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 8 J. Performance of the Borrower and the Executing Agency 8 K. Performance of the Asian Development Bank 9

III. EVALUATION OF PERFORMANCE 9

A. Relevance 9 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 11 E. Impact 11

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 12

A. Overall Assessment 12 B. Lessons 12 C. Recommendations 13

APPENDIXES

1. Design and Monitoring Framework 15 2. Gender Action Plan: Implementation Status 18 3. Status of Compliance with Project Covenants (Loan Agreement) 20 4. Participating Commercial Banks’ Compliance with the Financial Ratios 40 5. Contribution to the ADB Results Framework 41

BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report

Number

Uzbekistan 2634 Second Small and Microfinance Development Project Republic of Uzbekistan Ministry of Finance $50,000,000 PCR:UZB 1550

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity – Grace Period 8. Terms of Relending – Interest Rate – Maturity – Grace Period

26 January 2010 12 February 2010 19 March 2010 20 March 2010 21 April 2010 1 May 2010 15 June 2010 3 August 2010 none 31 December 2013 28 April 2014 none London Interbank Offered Rate (LIBOR)-based lending facility 20 years 5 years 0.5% 15 years 3 years

ii

9. Disbursements

a. Dates

Initial Disbursement

29 October 2010

Final Disbursement

19 March 2014

Time Interval

41 months

Effective Date

3 August 2010

Original Closing Date

31 December 2013

Time Interval

41 months

b. Amount ($’000)

Subloan Original Allocation

Last Revised

Allocation

Amount Added /

(Canceled)

Net Amount

Available

Amount Disbursed

Undisbursed Balance

Open Joint Stock Commercial Bank Agrobank

20,000 6,000 (14,000) 6,000 6,000 0

Open Joint Stock Commercial Bank Hamkorbank

20,000 27,000 7,000 27,000 27,000 0

Open Joint Stock Innovation Commercial Bank Ipak Yuli

10,000 17,000 7,000 17,000 17,000 0

10. Local Costs (Financed) - Amount ($) Not applicable - Percent of Local Costs Not applicable - Percent of Total Cost Not applicable C. Project Data 1. Project Cost ($)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 50,000,000 50,000,000 Local Currency Cost 92,850,000 92,850,000 Total 142,850,000 142,850,000

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2. Financing Plan ($)

Cost Appraisal Estimate Actual

Implementation Costs ADB Financed 50,000,000 50,000,000 Commercial Banks Funds 50,000,000 50,000,000 Subborrowers’ Equity Funds 42,850,000 42,850,000

Total $142,850,000 $142,850,000

IDC Costs Borrower Financed Not applicable Not applicable ADB Financed Not applicable Not applicable Other External Financing Not applicable Not applicable

Total

ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($)

Component Appraisal Estimate Actual

Loan 2634 Loans to Participating Commercial Banks 50,000,000 50,000,000 Agrobank 6,000,000 6,000,000 Hamkorbank 27,000,000 27,000,000 Ipak Yuli Bank 17,000,000 17,000,000 Participating Commercial Banks’ Funds 50,000,000 50,000,000 Agrobank 6,000,000 6,000,000 Hamkorbank 27,000,000 27,000,000 Ipak Yuli Bank 17,000,000 17,000,000 Subborrowers’ Equity Funds 42,850,000 42,850,000 Agrobank 5,142,000 5,142,000 Hamkorbank 23,139,000 23,139,000 Ipak Yuli Bank 14,569,000 14,569,000 Total 142,850,000 142,850,000

4. Project Schedule

Item Appraisal Estimate

Actual

Loan 2634 October–December 2010 Disbursements Not available Agrobank 8 Nov 2010 Hamkorbank 3 Nov 2010 Ipak Yuli Bank 29 Oct 2010-17 Dec 2010 January–December 2011 Disbursements Not available Agrobank 31 Mar 2011-14 Jun 2011 Hamkorbank 25 Feb 2011-12 Dec 2011 Ipak Yuli Bank 25 Jan 2011-12 Dec 2011 January–December 2012 Disbursements Not available Hamkorbank 23 Jan 2012-8 May 2012 Ipak Yuli Bank 13 Jan 2012-24 Jan 2012

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Item Appraisal Estimate

Actual

January–December 2013 Disbursements Not available Hamkorbank 21 Jan 2013-31 Oct 2013 Ipak Yuli Bank 21 Jan 2013-31 Oct 2013

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 3 August 2010 to 31 December 2010 Satisfactory Satisfactory From 1 January 2011 to 31 December 2013 On track

a

a From 1 January 2011 the project performance rating system was replaced with eOperations.

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members

a

Consultation 24–30 Jan 2009 1 7 a Country Consultation 15–19 Dec 2009 3

15

b, c, d,

Loan Reconnaissance (Upgraded to Fact-finding)

b

27 Jan–12 Feb. 2010 8 136 b, c, e, f, g, h, i, j

Inception 1–7 Jun 2010 2 14 b, e Review 19 Nov–2 Dec. 2010 2 13 a Review 28 Nov–2 Dec 2011 2 9 k Midterm Review 13–20 Nov 2012 5 40 k, l, m, n, o Review 9–12 Jul 2013 4 4 k a a = senior project management specialist, b = principal financial management specialist, c = young professional

(economics), d = senior private sector development officer, e = assistant project analyst, f = counsel, g = finance and private sector development officer, h = economics officer, i = poverty reduction and gender specialist, j = microfinance specialist, k = senior economist, l = financial sector specialist, m = operations analyst, n = associate project analyst, o = senior social development specialist.

b The Uzbekistan Resident Mission provided support to all missions in the field.

I. PROJECT DESCRIPTION

1. In November 2009, the Government of Uzbekistan requested that the Asian Development Bank (ADB) approve by 22 April 2010 (i) a loan of $50 million from ordinary capital resources for the Second Small and Microfinance Development Project, to be channeled through three participating commercial banks (PCBs); and (ii) an associated technical assistance (TA) grant for $600,000 to improve (a) their subborrowers' entrepreneurial skills, and (b) PCBs' micro and small enterprise (MSE) finance capacity. 1 To meet the government’s request the loan processing was fast-tracked, with a loan reconnaissance mission to Uzbekistan from 27 January to 12 February 2010 (upgraded to a fact-finding mission on 5 March 2010). By April 2010 loan approval was obtained under summary procedure.2

2. The project was to facilitate MSE access to credit across Uzbekistan. Its envisaged impact was increasing the number of people earning their livelihood in the formal private MSE sector. This was to be achieved through employment generation, with 30,000 new jobs to be created by the end of 2013 (with equal opportunities for women) through activities financed by the ADB project (through the provision of subloans to subborrowers) and attached TA grant (through capacity building). The project’s intended outcome was expanded, viable, and sustainable MSE finance operations. Outstanding PCBs’ microfinance loans were expected to increase from $75 million at the end of 2009 to $360 million by the end of 2013, while keeping the PCBs’ delinquency and write-off ratio at no more than 5% at the end of each year with respect to their total loan portfolios. The project had two outputs:

(i) Delivery of training to improve the entrepreneurial capacity of subborrowers, including women and microcredit organizations (MCOs). Of the 2,000 potential subborrowers trained, at least 1,000 should be men and 1,000 should be women, and at least 25% of the trainees should have access to micro and small business credit.

(ii) An increase in microfinance loans to financially viable subborrowers (men and women). Of the 25,000 microfinance accounts to be opened by the end of 2013, at least 25% should be opened by women, and 10,000 should opened by new microfinance clients. (Appendix 1)3

3. The project was justified based on the large unmet credit demand from MSEs. A 2013 World Bank survey indicated that only 16.1% of firms used banks to finance investment.4 The large unmet demand was also implied by the continued demand for ADB financial intermediation loans (FILs) to Uzbekistan for micro, small, and medium-sized enterprises.5

1 The three PCBs are Hamkorbank, Agrobank, and Ipak Yuli Bank. ADB. 2010. Report and Recommendation of the

President to the Board of Directors: Proposed Loan and Technical Assistance Grant to the Republic of Uzbekistan for the Second Small and Microfinance Development Project. Manila.

2 A country consultation mission fielded from 24 to 30 January 2009 explored on a preliminary basis a possible small

and microfinance credit line for Uzbekistan for processing in 2009. BTOR L2634 UZB Country Consultation. 3 During the midterm review, the project team noted that several design and monitoring framework (DMF) indicators

were not achievable; however, after internal discussions, the targets were not changed. BTOR L2634-UZB Midterm review (with attachments), Attachment 10, VIII. November 2012.

4 World Bank Group. 2013. Enterprise Surveys. Country Note. Uzbekistan. Firms in the Enterprise Survey are

referred to small, medium and large. 5 ADB. 1996. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical

Assistance Grant to the Republic of Uzbekistan for the Rural Enterprise Development Project. Manila; ADB. 2000. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of Uzbekistan for the Small and Medium Enterprise Development Project. Manila; ADB. 2002. Report and

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According to the Central Bank of Uzbekistan (CBU), the amount allocated to microcredit by commercial banks increased by about 100% in 2009 compared to 2008, and was targeted to increase by another 30% to reach $275.0 million in 2010. Based on historic trends, the MSE loan balances of the three PCBs were forecast to reach a total of $484.6 million by 2013, justifying a $50.0 million loan. The project was to be catalytic by raising an equal amount of loan funds from the PCBs, with 30% in equity being provided by the subborrowers. The project was to be demonstrational by making use of market-based principles in MSE lending, including use of market-based onlending rates, choice of currency, and the ability to draw down loans in cash (to effectively address existing difficulties in withdrawing cash from bank accounts). To improve outreach, PCBs were allowed to lend up to $20,000 equivalent to each MCO and up to $1,000 to each subborrower. To ensure wide distribution, 50% of the aggregate outstanding principal amounts lent by PCBs to subborrowers other than MCOs were to be for loan sizes up to $10,000. Lending by the three PCBs to women was to represent one-quarter to one-third of the total number of microcredit loans. TA was provided to help improve the PCBs’ capacities for credit appraisal of MSEs and gender sensitivity, as well as to improve the skills of subborrowers (particularly women) in preparing business plans and applying for credit from PCBs.

4. MSEs’ access to credit was constrained by the underdeveloped nature of the country’s financial sector along with various market distortions. These included directed lending at subsidized interest rates leading to a misallocation of resources, and practical difficulties in cash withdrawals from bank accounts, leading to a premium for cash and a trust gap for banks in their ability to mobilize customer deposits. This was manifested in a low (individual and household customer) bank deposits–gross domestic product ratio of 6.6% in 2009 based on CBU records. To mitigate the low deposit ratio, measures were put in place by the government to increase public confidence in the banking system and raise deposit mobilization.6

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. The project remained relevant at appraisal and at completion. The project was consistent with the government’s Welfare Improvement Strategy 2006–2010, which provided the strategic framework for the government’s efforts to reduce poverty and improve welfare.7 It supported the government’s Microfinance Development Program, operational from 2007 to 2010, which sought to make microfinance a sustainable component of the country’s financial sector by, among other initiatives, expanding the network and participation of nonbanks in the sector. Financial sector development and reform formed one of the key tasks of the Welfare Improvement Strategy. The project was aligned with ADB’s country strategy and program, 2006–2010, which supported sustainable economic growth, poverty reduction, and gender and

Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to the Republic of Uzbekistan for the Small and Microfinance Development Project (SMDP). Manila.

6 The government (i) revoked the law allowing tax authorities to access customers’ bank deposits without a court

order, (ii) ended legal restrictions on customers’ cash withdrawals from their bank accounts, (iii) introduced a deposit insurance scheme, and (iv) supported banks’ increased capitalization to improve their solvency. These measures, complemented by the banks’ own deposit mobilization efforts, measures that contributed to the consistent increase in (individual and household) bank deposits–gross domestic product ratio from 0.9% (SUM33.6 billion) in 2000 to 6.6% (SUM2.9 trillion) in 2009—an average of 0.6 percentage points per year. Footnote 1 (Macroeconomic and Sectoral Analysis, accessible from the list of linked documents in Appendix 2).

7 International Monetary Fund. 2008. Republic of Uzbekistan: Poverty Reduction Strategy Paper. Washington, DC;

ADB. Financial Sector Development in Central and West Asia. Consultant’s report (Uzbekistan Country

Assessment, Sector Assessment [Summary]: Micro, Small, and Medium-size Enterprise Development). Manila (TA 7709-REG). Unpublished.

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development.8 The project was also aligned with ADB’s microfinance development strategy.9 At completion the project was aligned with ADBs Country Partnership Strategy 2012-2016, which supports access to credit for SMEs and for microfinance beneficiaries in rural and urban areas through new and ongoing assistance. 6. The project (i) encouraged forward and backward linkages in the agricultural sector, as mentioned in the country strategy and program 2006-2010; (ii) supported the development of rural financial services; (iii) promoted more efficient intermediation functions by commercial banks; and (iv) took into account lessons learned from previous ADB FILs to PCBs in Uzbekistan, which had underestimated the demand for micro and small business credit. During design the ADB mission consulted stakeholders comprising MSEs, nongovernment organizations, women’s organizations, MCOs, credit unions, commercial banks, the CBU, and other development partners. At project completion, the project remained consistent with government programs aimed at developing MSEs and with ADB’s country strategy and program 2006-2010.

7. More time for project preparation could have contributed to better project design and formulation. Issues that could have been resolved during project appraisal included: (i) restrictions on banks preventing provision of dollar-denominated subloans to be used in subborrowers’ credit cards made for use outside Uzbekistan; (ii) requirements on banks to deposit their daily cash balances with the CBU (as part of its monetary policy), which limited the ability of banks to make sum-denominated subloans in cash to their subborrowers, as envisaged by the project; and (iii) CBU requirements for PCBs to present documents on every subloan (rather than on a batch of subloans) to be able to withdraw from the PCBs’ imprest accounts. Had these issues been resolved during project appraisal, the initial delay in declaring loan effectiveness and initial slow loan disbursement could have been avoided.

8. At project appraisal, Hamkorbank was allocated $20 million, Agrobank $20 million, and Ipak Yuli Bank $10 million. However, due to Agrobank’s breach of financial covenants in 2011, the remaining unused allocation to Agrobank of $14 million was reallocated to Ipak Yuli Bank and Hamkorbank in equal amounts of $7 million. At project completion the final allocation was $27 million to Hamkorbank, $17 million to Ipak Yuli Bank, and $6 million to Agrobank. More time for project preparation could have contributed to a more diligent review of potential PCBs and ex-ante identification of weaknesses in Agrobank.

B. Project Outputs

9. Under output 1, 11,254 potential subborrowers were trained in business planning and management, of which 7,500, or 67%, accessed microfinance loans under the project, exceeding the 25% target. Of these trainees 4,682 were women and 2,818 were men, exceeding the targets of 1,000 women and 1,000 men trained. Specific training on business plan and credit application was provided to women borrowers. The curriculum covered the business plan, marketing, production, inventory control, financial statements, and ratio analysis. A small handbook describing requirements for business establishment, registration, and implementation was produced and distributed to the trainees.

10. Under output 2, a total of 819 microcredit loan officers, or 86% of the total number of microcredit loan officers, were trained in microcredit appraisal, exceeding the design and

8 ADB. 2006. Country Strategy and Program: Uzbekistan, 2006–2010. Manila.

9 ADB. 2000. Finance for the Poor: Microfinance Development Strategy. Manila.

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monitoring framework (DMF) target of 30%. However, 18% of the trained microcredit loan officers were women, which was below the gender action plan (GAP) target of at least 25% women microcredit loan officers trained. Training focused on (i) financial and nonfinancial analysis, and (ii) risk assessment in lending to MSEs. This output resulted in (i) the training of 17 PCB trainers in capacity building for gender mainstreaming, (ii) the establishment by Hamkorbank and Ipak Yuli Bank of gender focal points to support gender-sensitizing capacity, and (iii) the training of 113 male and 10 female PCB staff members in gender and development mainstreaming. By completion 18,646 microfinance loan accounts were opened (short of the targeted 25,000 accounts), of which 37% were opened by women (exceeding the 25% target). The loan was fully disbursed within the implementation period, thus meeting the target of $50 million disbursed by end-2013.

11. It was noted during the midterm review that several targets were not likely to be attained (number of jobs created and outstanding microfinance loans), although these indicators were not changed. The midterm review mission could not establish the basis for the DMF targets.10 The deviations from targets (paras. 9 and 10) are not considered to have affected project costs, time schedules, or expected benefits.

C. Project Costs

12. The project cost of $142.85 million comprises the ADB loan of $50 million, the counterpart funds from the PCBs that match the ADB loan of $50 million, and the 30% equity contribution by subborrowers.11 At appraisal, up to $20 million of the ADB loan was allocated to Hamkorbank, up to $20 million was allocated to Agrobank, and up to $10 million was allocated to Ipak Yuli Bank.

D. Disbursements

13. Loan proceeds were withdrawn in accordance with ADB’s Loan Disbursement Handbook. The disbursements for the loan were through imprest accounts under the statement of expenditure procedure. The imprest fund was highly useful in project implementation and was effectively utilized, with statements of expenditures regularly submitted by the PCBs to ensure adequate fund flow. Loan disbursement was slow at the start, prompting ADB intervention, especially with regard to subloans issued by Agrobank.12 While the appraisal disbursement schedule was realistic, it was not anticipated that there would be (i) a suspension of disbursement of funds to Agrobank in September 2011, and (ii) a delay in effecting the reallocation of the unused allocation of $14 million from Agrobank to Hamkorbank ($7 million) and to Ipak Yuli Bank ($7 million) by the Ministry of Finance (MOF) in July 2013. Nonetheless, the full amount of $50 million was disbursed and liquidated within the project implementation period without the need to extend the loan. Initial disbursements were made to Ipak Yuli Bank on 29 October 2010, to Hamkorbank on 3 November 2010, and to Agrobank on 8 November 2010; final disbursements were made to Agrobank on 29 June 2011, and to Hamkorbank and Ipak Yuli Bank on 31 October 2013. A summary of the project’s appraisal and actual financing plans and costs are provided in the Basic Data section of this report. The time interval between the initial and final disbursements was 41 months, the same time interval between the actual effective date and original loan closing date.

10

Project team leadership was changed in November 2011. 11

Schedule three, para 8 of the loan agreement requires the subborrower to meet and maintain a debt to equity ratio of 70:30 for the project, which the subloan is financing.

12 A loan review mission was fielded in December 2010 at which time loan disbursement was reviewed.

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E. Project Schedule

14. The project was approved on 21 April 2010 under summary procedure. The loan agreement was signed on 1 May 2010. The loan became effective on 3 August 2010. The original schedule for loan effectiveness was 15 June 2010; the delay was caused by the drafting and signing of the subsidiary loan agreements (SLAs) between the government and the three PCBs, and the obtaining of legal opinions on the loan, which were to be provided ADB by the executing agency. At appraisal, the project completion date was 30 June 2013, and the loan closing date was 31 December 2013. The actual project completion date was 31 December 2013, and the loan was closed on 28 April 2014.

F. Implementation Arrangements

15. Implementation arrangements to deliver project outputs and achieve the project purpose were adequate. The MOF was the executing agency for the project. The loan was onlent by the government to three PCBs under subsidiary loan agreements. Subloans by the PCBs to subborrowers were covered under separate project agreements. Each PCB established project implementation units (PIUs) for this purpose. A project administration manual (PAM) was prepared detailing arrangements for procurement, disbursement, accounting, audit, monitoring, and evaluation, including consulting services for the TA.

16. A minor change in implementation arrangement for the loan was approved on 25 January 2013, allowing the reallocation of the $14 million unused allocation by Agrobank to Hamkorbank ($7 million) and Ipak Yuli Bank ($7 million) (para. 31). The minor change in implementation arrangements also increased the subloan ceiling from $20,000 to $40,000. Agrobank disbursed $6 million of its original allocation of $20 million.

G. Conditions and Covenants

17. The PCBs’ sum-denominated subloan interest rates ranged from around 16% to 36% per year depending on whether the loan was in cash or noncash, the loan maturity, and the use of funds. The interest rates included the weighted average cost of capital and a risk premium that reflected the average annual rate of currency depreciation (10%). The CBU refinancing rate was 12.0%, and the inflation rate for 2012 was 12.9% according to International Monetary Fund estimates, and about 7.0% during the same period according to the CBU methodology.

18. At loan processing the subloan limit was set at $20,000. In response to requests made by the PCBs during the midterm review mission in November 2012, the subloan limit was raised from $20,000 to $40,000. This was in line with the law on microfinance that limits the maximum size of microcredit to less than or equal to 1,000 times the minimum wage (SUM79,590 in November 2012). The higher subloan limit was also in line with market demand for a higher limit, as it was viewed to encourage business growth, development, expansion, and competition. The project agreement required that at least 50% of all subloans made by each PCB should be for loan amounts not exceeding $10,000 equivalent each, with the exception of subloans to MCOs, which could be for up to $20,000 each. Based on a screening of all subloans issued during the project implementation period, 67% were for $1 to $10,000, and 33% were above $10,000.

19. The PCBs did not extend subloans to MCOs. MCOs are allowed to receive external funds from donors, but the process is cumbersome due to conflicting regulations. In the typical case of a donor-funded onlending program—in which commercial banks receive funds for onlending to either MSE clients or MCOs directly—banks are not allowed to lend without a

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purpose, which leads to direct loans to the clients of the MCOs, cutting the MCOs out. There is no possibility to extend a standing credit line to MCOs, which they can use at their own risk for their clients. Accepted and approved practice is that when MCOs borrow from banks and onlend to their clients, banks must open separate loan accounts for each client of a MCO and transfer the amount to their accounts.

20. Of Hamkorbank’s and Ipak Yuli Bank’s total outstanding loan portfolio, subloans were distributed as follows: trade, 80%; manufacturing, 10%; services, 6%; agriculture, 3%; and other, 1%. Of their total outstanding loan portfolio, 36% were corporate loans, 28% were SME loans, 21% were microfinance loans, and 15% were individual loans.

21. As set out in the project agreement, for subloans the following criteria were to be maintained by qualified subborrowers: (i) a debt–equity ratio not higher than 70:30 for the subproject that the subloan is financing, (ii) a debt service coverage ratio not lower than 1.25 times, and (iii) a proven track record (i.e., no past defaults). Subloan documentation was reviewed during project review missions to ensure that qualified subborrowers met these criteria. The results indicated widespread compliance, with one exception. A review mission in July 2012 established that not all subloans issued by Ipak Yuli Bank were in compliance with subloan requirements. As a result, a full compliance review was undertaken for all subloans issued by Ipak Yuli Bank from 10 May 2013 to 10 July 2013. The review confirmed that 97.5% of the subloans were in compliance. Those that did not meet the criteria were not credited by ADB.

22. Subloans were issued in domestic currency due to restrictions as set out in para. 7.

23. Financial covenants were achieved by Hamkorbank and Ipak Yuli Bank throughout the project implementation period (Appendix 4). Each PCB was to maintain a capital adequacy ratio of not less than 12%, a return on assets of not less than 1%, a loan–deposit ratio of less than 100%, an intermediation cost ratio of less than 15%, and a loan delinquency and write-off ratio of no more than 5% of its total loan portfolio. 13 Disbursement of funds to Agrobank was suspended by ADB in September 2011 after Agrobank breached its loan covenants by (i) failing to meet the return on assets ratio of 1% as stipulated in the loan and project agreements for 2010 and 2011, and (ii) failing to provide either its 2010 audited financial statement (AFS) within the stipulated period or an auditor’s report on the use of loan proceeds. 14 In addition, the misappropriation of funds by former employees of Agrobank from February 2009 to February 2010, which was reflected in the 2010 and 2011 audit, necessitated a restatement of Agrobank’s 2009 AFS. The misappropriated funds, in a departure from International Financial Reporting Standards, were reported as receivables from former employees rather than being written off the books. Agrobank is majority-owned by the government, with the MOF holding about 25.1% of its shares as of 2009.

24. Qualified subprojects for which the PCBs provided subloans to qualified subborrowers were for activities that (i) were excluded from the list of prohibited investment activities, and (ii)

13

Definitions of requirements: capital adequacy ratio: ratio of regulatory capital to risk assets as a percentage; return on assets: net profit divided by the sum of total assets in the year at issue and total assets at the end of the previous year; loan–deposit ratio: total net loans to customers divided by customer deposits; intermediation cost ratio: noninterest expenses divided by average total assets; loan delinquency and write-off ratio: aggregate of loans classified as a “loss” and loans written in a year as a percentage of total loan portfolio.

14 In a letter dated 8 September 2011, ADB informed Agrobank it would cease disbursing funds to Agrobank due to Agrobank’s failure to submit (i) its 2010 AFS within the prescribed deadline, and (ii) quarterly progress reports in 2011. The 2010 AFS, which was subsequently submitted to ADB on 21 December 2011, showed noncompliance with the financial covenant that the return on assets be no less than 1%. As a result, ADB discontinued the allocation of the remaining $14 million to Agrobank.

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had minimal or no adverse environmental or social risks. The PCBs and their subborrowers adhered to these requirements.

25. The project was classified as category C for the environment, involuntary resettlement, and indigenous peoples. As such, the PCBs were not required to implement an environmental and social management system that complies with ADB’s Safeguard Policy Statement (2009). ADB staff and a consultant reviewed the current status of the existing environmental and social management system and provided advisory support to PCBs where gaps were identified. Hamkorbank and Ipak Yuli Bank have their own environmental and social management systems that (i) contain requirements on environmental screening, conducting environmental and social due diligence, and environmental impact assessment and (ii) include environmental monitoring and reporting procedures. The banks have designated safeguards officers who are responsible for environmental policy implementation. Responsible environmental and social management was confirmed during review missions and on site visits to subborrowers.

26. Ipak Yuli Bank and Hamkorbank (i) prepared their financial statements (balance sheet, statement of income and expenses, and related statements) in accordance with International Financial Reporting Standards; (ii) each have an internal audit unit with an independent reporting structure; (iii) arranged for their financial statements to be audited by reputable, internationally affiliated audit firms; and (iv) have formal risk management units.

27. Ipak Yuli Bank and Hamkorbank were delayed by an average of 16.9 months in submitting their annual audited project financial statements (APFSs) and related audit reports. In 2013, both PCBs submitted their consolidated APFSs for FY2010–FY2012, including audit opinion on use of loan proceeds and compliance with financial covenants. The delay in submitting APFS was because the project agreement was not clear on reporting requirements, and it did not make specific reference to APFSs. Both Ipak Yuli Bank and Hamkorbank were required to submit consolidated APFSs, while Agrobank has not provided any APFSs. The project team encountered difficulties in providing the PCBs with clear guidance on reporting requirements related to APFSs. This issue is being resolved internally with more clarity on project agreements with PCBs, loan agreements, and ADB requirements for audit terms of reference.

28. Ipak Yuli Bank and Hamkorbank submitted AFSs on a timely basis. Agrobank was informed that ADB would stop disbursing funds since Agrobank had failed to submit its 2010 AFS within the prescribed deadline. The 2010 AFS was submitted to ADB on 21 December 2011, at which time ADB discontinued the allocation of the remaining $14 million to Agrobank, as its AFS showed noncompliance with the financial covenant to maintain a return on assets of not less than 1%.

H. Related Technical Assistance

29. The TA was rated successful.15 The TA of $615,000 (with $15,000 contributed by the government in kind) was attached to the loan for capacity development to strengthen (a) their subborrowers' entrepreneurial skills, and (b) PCBs' micro and small enterprise (MSE) finance capacity. The TA became effective on 17 May 2010. In November 2011, a minor change in implementation arrangements for the TA was made, extending it for another year to continue to help PCB staff strengthen their capacity in credit appraisal; accounting reporting and standards;

15

ADB. 2013. Technical Assistance Completion Report: Capacity Building for Microfinance Development in Uzbekistan. Manila (TA 7523-UZB).

8

identify key constraints to the development of women MSEs, products available for women entrepreneurs; improve production and dissemination of public information materials on women’s entrepreneurship; and review progress made in the implementation of the gender action plan (GAP). This was made possible through available uncommitted funds of $245,000. Accordingly, the TA completion date was moved from 30 June 2011 to 30 June 2012. Of the $600,000 allocated for the TA grant, $456,602.69 was disbursed, leaving 23.9% of TA funds unutilized. TA resources were used efficiently and at lower cost than originally anticipated. TA targets were achieved or exceeded.

I. Consultant Recruitment and Procurement

30. To undertake the TA, the TA envisaged recruitment of a consulting firm comprising a team leader with expertise in small and microfinance enterprise credit, a micro and small enterprise credit and financial reporting specialist, and a gender specialist. Maxwell Stamp was selected as the consulting firm. In addition, six individual consultants were also engaged. They reviewed and provided recommendations on: (i) current conditions relating to bank lending to MSEs; (ii) key constraints to the development of women MSEs, (iii) products available for women entrepreneurs; (iv) production and dissemination of public information materials on women’s entrepreneurship; and (v) progress made in the implementation of the gender action plan (GAP). Additional training was provided in credit appraisal skills and gender sensitization of PCB staff, and the GAP was further developed.

J. Performance of the Borrower and the Executing Agency

31. The performance of the executing agency for the loan is rated partly satisfactory. The project was delayed at the start. Loan effectiveness could not be declared, as the SLAs and legal opinions, as well as the notices of PIU establishment by Agrobank and Hamkorbank, were not ready. Loan disbursement was initially slow, necessitating an ADB mission to follow up in December 2010. The delay was traced to inconsistencies in CBU restrictions and the project design (para. 7). The November 2011 review mission established that there was no CBU policy or procedure allowing the use of cash to pay for US dollar-denominated subloans; as a result this was not allowed. The project was designed to ensure that subborrowers might have access to foreign currency loans to be able to purchase equipment and materials outside Uzbekistan as a means of raising productivity and employment for the benefit of Uzbek consumers. As part of project design, the ADB loan agreement specified that the subloan carry interest at an appropriate rate that takes into account the cost of funds, administrative costs and credit, and foreign exchange risks.

32. In June 2012, ADB recommended that MOF reallocate Agrobank’s unused allocation to the other PCBs. The reallocation was effected in July 2013 when the MOF countersigned the SLAs, providing Ipak Yuli Bank and Hamkorbank with only 5 months to fully disburse their new allocations of $7 million each. The MOF did not provide ADB with a project completion report. Following a review mission during 20–24 October 2014, the project team requested a project completion report to be provided. This was documented in an aide memoire dated 28 November 2014.

33. The performance of the executing agency for the TA is rated satisfactory. Facilities provided were good, and the PCBs were very obliging in meeting with the TA team, allowing access to their branches and personnel, and explaining their methods and tools. They also involved the TA team in resolving their problems by asking for advice and possible solutions. Attendance at trainings was good, but it would have been preferable if the venues had been far

9

from the participants’ workplaces due to frequent disruptions arising from business calls and work exigencies to attend other matters.16

K. Performance of the Asian Development Bank

34. The performance of ADB is rated satisfactory. There were nine missions carried out throughout the project period. The timely interventions by ADB helped sustain the project at its various stages: (i) at inception to meet loan effectiveness conditions, (ii) when disbursements lagged behind schedule, (iii) during the suspension of disbursement for the Agrobank loan and its prompt reallocation to the other PCBs, and (iv) during the raising of the subloan limit from $20,000 to $40,000 to encourage expansion of lending into more business areas and to better meet higher demand by the PCBs.17

35. For the TA, ADB performance is rated satisfactory. Project review missions were fielded in December 2010 when TA consultants were guided regarding their terms of reference, and in November 2011 when the TA implementation period was extended after review. A midterm review mission was fielded in November 2012, which included a review of performance targets of the DMF and the GAP. Field visits were conducted during which subborrowers were interviewed for feedback regarding their training and other services provided by the PCBs.

III. EVALUATION OF PERFORMANCE

A. Relevance

36. The project design was relevant. It was consistent with the country’s development priorities as enunciated in its Welfare Improvement Strategy, 2006–2010, which outlined pillars of its economic growth strategy, including financial sector development and reform; and the acceleration of the development of the private sector, especially small and medium-sized enterprises (SMEs) and microfinance. The project was aligned with ADB’s country strategy and program 2006-2010. Small and micro-businesses was one of the sectors selected under the updated country operations business plan.18

37. The project was justified on the bases of market and coordination failures, and the filling in of market gaps. Access to finance for MSEs has been constrained by an underdeveloped financial sector and policy distortions that abound in the sector. Consequently, there is large unmet demand for credit from MSEs based on CBU forecast indicators as shown in the report and recommendation of the President. 19 The project was also justified on the basis of employment generation and its contribution to expanded, viable, and sustainable MSE finance operations.

38. The country strategy and program, 2006–2010 for Uzbekistan stated that the Operations Evaluation Department found that credit lines were provided before ensuring that conditions were in place to allow credit to work effectively. 20 The validation report for the Small and Microfinance Development Project (SMDP) observed that heavy reliance on the use of credit

16

Consultant Report. 2011. Technical Assistance 7523-UZB Final Report. Maxwell Stamp Ltd. June. Bangladesh. 17

Inception Mission, 14 June 2010, BTOR L2634 UZB Loan; Review Mission, 10 December 2010, BTOR L2634 UZB Loan; Review Mission,12 January 2012, BTOR L2634 UZB Loan.

18 ADB. 2010. Country Operations Business Plan: Uzbekistan, 2010–2011. Manila. pp.

19 Footnote 1, Para. 4 in the report and recommendation of the President discuss the unmet demand for small and microcredit.

20 Footnote 8, para 58.

10

lines through commercial banks was inadequate in meeting the intended long-term development needs and constraints of the microfinance sector.21 The intended impact and outcome of the project were therefore incongruent with the policy gaps in the financial and MSE sectors. The Presidential Resolution No. 1438, issued in 2010, consisted of an action plan focused on (i) priority areas for further reforms, (ii) sustained improvement of the country’s finance and banking system, and (iii) measures aimed at development of the microfinance and nonbank financial sectors 2011–2015 and to achieve high ratings by international rating agencies.

39. Presidential Decree No. 1474 was issued in 2011 to further strengthen MSME development. The measures outlined in the decree aim to improve the enabling environment for MSMEs by reducing bureaucratic bottlenecks, rationalize MSMEs’ registration and inspection requirements to lower transaction costs, and increase the competitiveness of MSME exports. While the policy environment may not have been ideal, sector reforms had been initiated and the overall direction of reforms was set. The SMDP disbursed 98.32% of the original loan amount. Outstanding MSE subloans reached $211.9 million at loan closing, which was attributed to economic growth and increasing demand for MSE loans. 22 In the absence of conditionalities, experience shows that advisory TA can be effective in the right circumstances.23 To this end, the Second SMDP included an attached TA in its design.

40. The decision during the midterm review to raise the subloan limit from $20,000 to $40,000 contributed to meet market demand for larger subloans.

B. Effectiveness in Achieving Outcome

41. The project was less than effective in achieving its expected outcome. PCBs’ outstanding microfinance loans reached $127 million (from a baseline figure of $75 million) against the original target of $360 million. The indicator of PCBs having a delinquency and write-off ratio not exceeding 5% was achieved (Appendix 4). The outcome target for outstanding microfinance loans established during project processing was considered overly ambitious; this was also highlighted following the midterm review.

42. At completion, $142 million was disbursed under the project. The excess amount was due to recycling of repaid subloans. The PCBs disbursed $600 million of subloans: Agrobank disbursed $30 million, Hamkorbank disbursed $432 million, and Ipak Yuli Bank disbursed $138 million.

43. Achieving the intended outcome of expanded, viable, and sustainable MSE finance operations was hampered by a lack of clarity with regard to CBU restrictions on subloans disbursed in cash and in US dollars, which resulted in banks’ lending only in local currency. Furthermore PCBs did not lend to MCOs as originally envisioned under the project, as microloans under the law on microfinance could not be given for entrepreneurial activities and microcredits could not be given in cash under CBU regulations.24

44. The interest rate is not considered to have impacted the disbursement performance of the PCBs (para. 18).

21

ADB. 2012. Validation Report: Small and Microfinance Development Project. Manila. 22

ADB. 2011. Completion Report: Uzbekistan: Small and Microfinance Development Project. Manila. 23

ADB. 2011. Country Assistance Program Evaluation for Uzbekistan. Manila. p. vi. 24

Government of Uzbekistan. 2006. Law of the Republic of Uzbekistan on Microfinance. http://www.lex/uz.

11

C. Efficiency in Achieving Outcome and Outputs

45. The project was efficient in achieving outcome and outputs. Efficiency was impacted by (i) a delay in the declaration of loan effectiveness due to the late submission of SLAs, legal opinions, and the notices of PIU establishment by Agrobank and Hamkorbank; (ii) restrictions on disbursement (para. 6), which continued mainly via funds transfers; (iii) lack of clarity with regard to submitting loan withdrawal applications (which was resolved after an ADB review mission that guided PCBs on the methodology and procedures for submitting loan withdrawal applications, and clarified issues on subloan disbursements); (iv) the problems with Agrobank, and the reallocation of its remaining loan balance to the other PCBs;25 and (v) the setting of overly ambitious performance targets.

D. Preliminary Assessment of Sustainability

46. The project is likely to be sustainable. MSE operations have strong support from the government and have been viewed as a priority as part of accelerated private sector development and inclusive growth since 1999. Special programs have been initiated for SMEs. Microcreditbank was set up in 2006 with government involvement. Laws on MCOs and microfinancing, adopted in September 2006, create the foundations for the emergence of a new microfinance segment of the financial market, aside from credit unions, which were closed nationwide in 2011. In June 2007, the government adopted the Microfinance Development Program.26 The government declared 2011 the year of MSE development. With regard to the Second SMDP, the PCBs find the operations profitable (with manageable risk), and the sector will continue to grow.27 The Second SMDP, based on feedback from subborrowers and other stakeholders during review missions, (i) helped provide access to cash; (ii) improved access to medium-term financing of up to 3 years; (iii) supported women-owned and rural businesses; and (iv) helped improve borrowers’ capacity in management skills, financial literacy, and awareness of financial products.28

E. Impact

47. The impact of the project is likely to be significant. Under the project, 21,968 jobs were created through PCB subloans, 37% of which were filled by women, well above the GAP target of 25%. While the total number of jobs created fell short of the targeted 30,000 jobs as indicated in the DMF, that target established during loan processing can be considered overly ambitious, and the results are substantial.

48. The impact on gender is likely to be significant. As indicated in para. 8, capacity building objectives were achieved or exceeded based on the number of loan officers and subborrowers trained. The GAP targets were substantially achieved, with more than 25% women loan officers and about 38% of women subborrowers trained. About 37% of individual microfinance loans opened were accounted for by women. The following were carried out by the TA consultants: (i) data collection on gender impact monitoring data from the PCBs; (ii) review of public information materials for women and enterprises; (iii) review of credit products, policies, and procedures, and existing financial products and services, with the aim of recommending modifications and improvements in products and delivery mechanisms to enhance outreach to women micro and

25

PricewaterhouseCoopers Uzbekistan, the external auditor, issued an unqualified opinion on the 2009 financial statements of Agrobank.

26 International Monetary Fund. 2008. Republic of Uzbekistan: Poverty Reduction Strategy Paper. Washington, DC.

27 Discussions with the government point toward a third SMDP.

28 Midterm review (with attachments), Attachment 2, para.3. November 2012. BTOR L2634-UZB Loan.

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small entrepreneurs; (iv) preparation of gender-sensitive MSE credit appraisal guidelines; and (v) a train-the-trainers workshop on gender-sensitive microfinance practices for overall financial inclusion for the three PCBs.

49. The impact on the PCBs is likely to be significant, as the TA concluded that there is a high need and demand for training even on a basic level, including for subborrowers. There is also a need to intensify training in selected core areas when there is limited training.29 The PCBs have implemented environmental and social management systems (para. 25). The PCBs received several trainings from ADB staff and a consultant on environmental and social safeguards standards, their environmental and social management systems (ESMS) were reviewed and they were provided recommendations on how to strengthen their ESMS further.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

50. The project was successful. Given the feedback from subborrowers, the project (i) made positive contributions in meeting requirements as indicated in para. 35 (except the provision of subloans in US dollars and in cash due to the CBU restriction); (ii) helped fill the credit gap for MSE loans in Uzbekistan; (iii) helped generate employment (although not to the extent envisioned at appraisal); and (iii) made positive contributions to capacity building and institutional development, and introduced requirements for greater and more intensive support in these areas in the future. The PCBs have gained practical experience in project implementation techniques and procedures as well as project monitoring.

51. The project was not implemented as planned, as disbursements to Agrobank were discontinued and reallocated to Ipak Yuli Bank and Hamkorbank. There was a substantial delay before the reallocation of unused funds became effective due to the delay in countersigning the SLAs.

52. While the DMF was generally well designed, three performance targets were overly ambitious; this was also true of some of the GAP targets. Both the DMF and the GAP would have benefited from a more rigorous analysis of macroeconomic, financial sector, and gender developments. Despite three DMF targets not being met, other targets were exceeded.

B. Lessons

53. Promoting the success of MSE operations and helping PCBs fulfill their greater developmental functions would address existing constraints. Access to finance is just one constraint hindering the development of MSEs. In a 2003 survey of SMEs in Uzbekistan, the International Finance Corporation identified some of the negative factors hindering the operation of enterprises. These include administrative procedures, currency conversion, access to finance, taxation, and import and export restrictions (footnote 8). More effective consultation and dialogue among various market participants and government agencies regarding proposed reforms can limit inconsistencies between government policies and the formulation and implementation of rules and regulations.

54. Monitoring and analysis of the MSE sector would benefit from estimates of the credit gap to confirm additionality of ADB FILs. This could also help ensure that private sector funds are

29

ADB. 2012. Capacity Building for Microfinance Development. Consultant’s report. Manila (TA 7523-UZB).

13

not displaced given the features of sovereign loans. How FILs catalyze the entry of new funds into the market needs to be better documented, and FILs’ ability to move participants to more market-based finance needs to be improved.

C. Recommendations

55. ADB has supported MSMEs in Uzbekistan through four FILs, including the Second SMDP (footnote 5). Lessons from these FILs point to a need to (i) engage in policy dialogue on regulatory and other impediments to SME development; (ii) set up a prudential supervisory and regulatory infrastructure for banks and other finance institutions with the capacity and commitment to reform; (iii) build capacity in participating commercial banks to ensure sound appraisal and supervision of subprojects, credit and risk management policies, and corporate governance and financial disclosure policies; (iv) strengthen monitoring by requiring participating commercial banks to provide quarterly progress reports; (v) limit the maximum subloan size to $1 million in future SME FILs; (vi) rigorously review subloans financed by ADB and PIUs to ensure that subborrower and subloan criteria are achieved; (vii) ensure that project design is realistic and relevant; and (viii) include covenants allowing ADB to suspend loan disbursements.30

1. Project Related

56. Future monitoring. ADB should continue to pay close attention to (i) the performance of subloans; (ii) the characteristics of subloans (e.g., geographic distribution, gender, sector classification, loan tenors, interest rates, terms) and the nature of market demand to improve targeting of future projects; (iii) indicated demand for MSE loans based on PCB projections and performance; and (iv) feedback from PCBs and subborrowers on problems encountered to determine the type of support that may be needed for future interventions.

57. Further action or follow-up. No further follow-up is required. A project completion report was requested from the executing agency but was not provided to ADB.

58. Additional assistance. Depending upon the availability of funding, ADB should continue to provide support for capacity building, including for the executing agency and other relevant government agencies to strengthen internal capacity and to improve understanding of critical policy issues.

59. Timing of the project performance evaluation report. As there are no outstanding issues on project performance, evaluation could be conducted as soon as practically possible.

2. General

60. During project appraisal, ADB should consider other PCBs for its FILs to disperse assistance, but should weigh carefully if such assistance should be provided to state-owned entities or to private sector financial institutions. Through more rigorous analytics during appraisal, the DMF can be more comprehensive, complete, and relevant.

30

ADB. Financial Sector Development in Central and West Asia. Consultant’s report (Uzbekistan Country Assessment, Sector Assessment [Summary]: Micro, Small, and Medium-size Enterprise Development). Manila (TA 7709-REG). Unpublished.

14

61. Better assessment of the regulatory environment and monitoring during project implementation, are required to address lessons learned. Acceptable indicators, estimation tools, means for measuring impact and outcome, and the collection of baseline data and monitoring need to be further developed. Both PCBs and subborrowers have to have a better understanding of the MSE. Target indicators in the DMF and GAP need to better developed through (i) more rigorous analytics during the design stage, and (ii) consultation with gender experts who have expertise in FILs and in working with financial institutions.

62. The selection of PCBs needs to be carefully reviewed. ADB currently lacks a consistent approach in establishing eligibility criteria and conducting financial analysis of financial institutions, assessment of financial management systems, and integrity due diligence. ADB internal guidelines for due diligence lack consistency, and there are no established templates for due diligence, which compounds the problem.

63. Monitoring of participating financial institutions needs to be broadly discussed in the ADB, and sharing of information between regional departments and private sector operations needs to be clarified. This becomes crucial when both a regional department and private sector operations are engaged with, for example, the same PCB(s) as in this case with Ipak Yuli Bank. A coordinated and consistent approach is important, especially when problems arise in an institution.

64. Issues related to reporting and auditing need to be broadly discussed within ADB to ensure a cohesive and consistent understanding and approach. Audit requirements need to be consistently addressed in the loan and project agreements and in the PAM, and detailed terms of reference need to be provided and explained to the PCBs to ensure their understanding of reporting requirements.

65. More economic and sector work is needed to guide policy discussions, to better understand the policy considerations, and to help reach common ground on policy issues. A systemic approach seems to be indicated, not just project or investment related, if a long-term view is to be taken towards development of the sector. The International Finance Corporation survey was conducted in 2003; it may be timely to review the conditions and survey the market on the ground, to review factors impeding further MSE development.

66. ADB should remain actively engaged in the MSE sector, as ADB’s presence has contributed to PCBs remaining focused on providing continuing assistance to the MSME sector and improving the quality of such assistance. Future assistance could be predicated on the government continuing or even accelerating reforms in the MSE sector and in the financial sector, if possible and warranted; ADB could also provide support. A clear-cut, publicly enunciated strategy with a road map and defined timelines, and with broad-based support (discussed extensively with stakeholders), may be useful in advancing sector reforms. Moreover, the reform process needs to be institutionalized under transparent procedures and a clear consultative process. 67. During project implementation, TA to align the reform agenda and enhance the capacity of the implementing agency and other relevant agencies, including the CBU, would help enhance project impact and overall project assessment. ADB TA should be continued for capacity building and institutional development to deepen knowledge and ensure sustainability of the intervention.

Appendix 1 15

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DESIGN AND MONITORING FRAMEWORK

Design Summary

Performance Targets and Indicators Actual Outcomes and Outputs

Impact More individuals earn their livelihood in the formal private MSE sector

30,000 new jobs created by the end of 2013 through activities financed by the ADB loan (Baseline: 8.4 million had jobs in MSE sector in 2009) ADB will monitor the number of new jobs created for women (there will be no gender discrimination in employment opportunities)

Partially achieved. 21,968 jobs created

Achieved. ADB monitored number of new jobs created for women through progress reports

Outcome Expanded, viable and sustainable MSE finance operations

Outstanding PCBs' microfinance loans increase from $75 million at the end of 2009 to $360 million at the end of 2013 (Baseline: $75 million in 2009) At the end of each year, and with respect to the total loan portfolio, PCBs have a delinquency and write-off ratio not exceeding 5% (Baseline: 2.5% in 2009)

Partially achieved. $127 million outstanding microfinance loans

Achieved. NPLs for 2010-2013 were respectively: Agrobank 3.7, 4.6, (..), (..) Hamkorbank 4.8, 3.1, 1.0, 1.0 Ipak Yuli Bank 2.0, 1.8, 2.2, 1.6

Outputs Delivery of training to improve entrepreneurial capacity of subborrowers, including women and MCOs

Number of potential subborrowers under the project trained: Men: 1,000 Women: 1,000 At least 500 persons or 25% of those trained have access to micro and small business credit (Baseline: 0)

Achieved. 9,347 subborrowers trained (5,910 men and 3,437 women) Achieved. 7,500, or 80%, of those trained have access to micro and small business credit, of which 38% are women

Increase in microfinance loans to financially viable subborrowers (men and women)

30% of PCBs microcredit loan officers (employed in 2010) will be trained in microcredit appraisal by 2013

2,750 microfinance loan accounts opened under the project in 2010; 11,750 in 2011; 20, 500 in 2012; and 25,000 in 2013:

$5.5 million disbursed under the project in 2010; $23.5 million in 2011; $41.0 million in 2012; and $50 million in 2013

Achieved. 819 loan officers trained or 100% have been trained, of which 18% were women. Partially achieved. 1,287 in 2010 5,672 in 2011 11,311 in 2012 18,646 in 2013, of which 37% were women Achieved. $5.8 million disbursed in 2010; 26.9 in 2011; $36 million in 2012; and $50 million in 2013

16 Appendix 1

Activities with Milestones

1. Increase in microfinance loans to financially viable subborrowers (men and women)

1.1 PCBs to adapt their current systems for credit appraisal and monitoring to ADB loan requirements (July 2010)

1.2 PCBs to display the subloans procedures on their websites (July 2010)

1.3 PCBs to adapt their current system for recovery of microcredit to ADB loan requirements (August 2010)

1.4 Government to implement enabling conditions to allow borrowers to withdraw sum loan funds in any legal form, including cash, throughout the implementation period

1.5 PCBs to assess their small and microcredit appraisal skills, select the staff who will be trained, and communicate the results of the assessment to ADB (by the end of July 2010)

1.6 ADB to hire TA consultants (by July 2010) 1.7 ADB and consultants to create PCBs’ staff training

programs (by August 2010)

1.8 Consultants to conduct PCBs’ staff training programs (August 2010–May 2011)

1.9 PCBs market microfinance after careful scrutiny of borrowers’ applications (July 2010–June 2013)

1.10 Central Bank of Uzbekistan to provide statistics of bank sector lending to ADB, through the Ministry of Finance (within the first month from the close of each fiscal year).

1.11 PCBs provide (i) quarterly reports to ADB (by the end of each quarter), (ii) annual evaluation and monitoring report, and (iii) annual audited financial statements and audited project account.

1.12 National Statistics Committee to provide annual employment statistics to ADB, through the Ministry of Finance (within the first 3 months from the close of each fiscal year)

2. Delivery of training to improve entrepreneurial capacity of subborrowers, including women and MCOs

2.1 ADB and TA consultants to create training programs for PCBs’ subborrowers, including women and MCOs (by September 2010)

2.2 Consultants to conduct training programs for PCBs’ subborrowers, including women and MCOs, in business plan preparation, credit application, basic accounting, and other business related skills (October 2010–May 2011)

2.3 Consultants to provide sensitization training of PCB staff together with activity no. 1.8

Funding ADB loan $50.00 million Commercial banks’ funds $50.00million Subborrowers’ (equity) funds $42.85million $142.85million Technical Assistance ADB TA grant $0.60million

Appendix 1 17

17

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2.4 Consultants to conduct a baseline, sex-disaggregated survey of sample PCBs’ and MCOs’ subborrowers at the time of commencing their enterprises (by May 2011), for future assessment of the poverty reduction impact of the project

2.5 Consultants to submit an evaluation report of TA activities, achievements, and recommendations (by June 2011)

ADB = Asian Development Bank, MCO = microcredit organization, MSE = micro and small enterprise, PCB = participating commercial bank, PCR = project completion report, TA = technical assistance. Sources: Agrobank; Asian Development Bank; Central Bank of Uzbekistan; Hamkorbank, Ipak Yuli Bank.

18 Appendix 2

GENDER ACTION PLAN: IMPLEMENTATION STATUS

Rationale/Objectives Activities Relevant Performance Indicators Target Accomplishment

Component 1: Collection and Updating of Relevant Sex-Disaggregated Data

1.1. To establish baseline data that will be used as a basis for planning and the monitoring progress and measuring impact of the project to women and men

1.1.1. Collection of sex-disaggregated data

Number of jobs created 21,968

Number of jobs created: female (%)

25% 35%

Number of microfinance loan accounts opened male and female

18,646

Number of microfinance loan accounts opened: female (%)

25% 37%

Component 2: Strengthening technical appraisal capacity of PCBs in assessing sustainable lending to viable MSEs

2.1. To enhance the capacity of PCBs to incorporate gender mainstreaming concepts into MSE collateral-less credit appraisal

2.1.1. Develop program and conduct training on gender-sensitive MSE credit appraisal for PCBs staff

Number of potential subborrowers (MSEs) trained: male and female

9,347

Number of potential subborrowers (MSEs) trained: female (%)

50%

37% A total of 18 gender-sensitive MSE credit appraisal guidelines developed

Number of potential subborrowers trained that have accessed microfinance loans under the project: male and female

7,500

Number of potential subborrowers trained that have accessed microfinance loans under the project: female (%)

50% 38%

Number of microcredit loan officers trained in microcredit appraisal: male and female

819

Number of microcredit loan officers trained in microcredit appraisal: female (%)

25% 18%

Number of PCB staff trained on Gender and development mainstreaming: male and female Number of PCB staff trained on Gender and development mainstreaming: female (%)

372

13%

Appendix 2 19

Rationale/Objectives Activities Relevant Performance Indicators Target Accomplishment

Component 3: Improving entrepreneurial capacity of women subborrowers and MCOs

3.1. To upgrade business skills of MSE women entrepreneurs

3.1.1. Training for MCOs and women subborrowers on gender-sensitive business planning and management

Number of gender-sensitive business planning and management training

12

Number of subborrowers trained in gender-sensitive business planning and management

2,681

Component 4: Increasing PCBs outstanding loans to financially viable women subborrowers

4.1. To improve MSE women entrepreneurs’ access to credit

4.1.1. Develop and offer new women-friendly financial products and banking procedures 4.1.2. Public awareness campaign to promote women entrepreneurship

Outstanding microfinance loans to individuals (end of period)

33,641

Outstanding PCB microfinance loans taken out by women (%) (end of period)

25% 33%

Component 5: Plan Implementation and Monitoring

5.1. To establish a working structure and process that will ensure implementation of this gender action plan

5.1.1. Recruitment of a gender specialist 5.1.2. Incorporation of the indicators in this gender plan to the regular project monitoring tools and/or formats 5.1.3. Conduct regular monitoring and reporting on the implementation of the gender action plan

Number of project gender specialists and/or focal points hired and/or identified

3 4 TA consultant report includes (i) discussion on summary of key constraints to the development of women MSEs, and (ii) recommendations for improving products and new product development

MCO = microcredit organization, MSE = micro and small enterprise, PCB = participating commercial bank, TA = technical assistance. Source: Agrobank, Asian Development Bank, Hamkorbank, Ipak Yuli Bank

20 Appendix 3

STATUS OF COMPLIANCE WITH PROJECT COVENANTS (LOAN AGREEMENT)

Loan 2634-UZB: Second Small and Microfinance Development Project

Covenant

Reference in Loan

Agreement

Status of Compliance

Particular Covenants In the carrying out of the Project, the Borrower shall perform, or cause to be performed all the obligations set forth in Schedule 3 to this Loan Agreement and the Schedule to the Project Agreements.

Section 4.01

Complied with.

The Borrower shall promptly take all action, including the provision of funds and other resources, which shall be necessary on its part to enable the PCBs to perform its obligations under the Project Agreements, and shall not take or permit any action which would interfere with the performance of such obligations.

Section 4.02 Substantially complied with. The MOF was 13 months delayed in effecting ADB’s recommended reallocation of the unused allocation by Agrobank to other PCBs. ADB recommended the reallocation June 2012, and it was effected in July 2013.

The Borrower shall exercise its rights under the Subsidiary Loan Agreements in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan.

Section 4.03. (a)

Complied with.

No rights or obligations under the Subsidiary Loan Agreements shall be assigned, amended, abrogated or waived without the prior concurrence of ADB.

Section 4.03. (b)

Complied with.

Procurement All Goods, Works and consulting services to be financed out of the proceeds of the Loan shall be subject to and governed by applicable provisions of the Procurement Guidelines, and the Consulting Guidelines, respectively.

SCHEDULE 2, para. 1

Complied with.

The Borrower, through the PCBs, shall ensure that each Qualified Subborrower undertake procurement of Goods, Works and consulting services with due attention to economy and efficiency and in accordance with private sector or commercial practices acceptable to ADB, and which are in compliance with the provisions of ADB's Anti-Corruption Policy (1998, as amended to date).

SCHEDULE 2, para. 2

Complied with.

The Borrower, through the PCBs, shall ensure that all Goods and Works procured by the Qualified Subborrower (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial

SCHEDULE 2, para. 3.

Complied with.

Appendix 3 21

Covenant

Reference in Loan

Agreement


property or intellectual property right or claim of any third party.

The Borrower, through the PCBs, shall ensure that all contracts entered into by the Qualified Subborrower for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in paragraph 3 of this Schedule.

SCHEDULE 2, para. 4

Complied with.

The Borrower shall ensure that all ADB-financed contracts with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party.

SCHEDULE 2, para. 5

Complied with.

Execution of Project; Financial Matters Project Management and Implementation The Borrower shall designate the Ministry of Finance as the Project Executing Agency with responsibility for overall Project implementation and coordination with the PCBs.

SCHEDULE 3, para. 1

Complied with.

The PCBs shall each be an implementing agency of the Project for the portion of the Loan proceeds that is relent to it. Each PCB shall establish a PIU.

SCHEDULE 3, para. 2

Complied with. The PIUs in each PCB were identified at the loan fact-finding stage. Each PCB formally notified ADB of establishing its respective PIUs.

The Borrower shall, and shall cause the PCBs to, ensure that the Project is implemented in accordance with the detailed arrangements set forth in the PAM. Any update to the PAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the PAM and this Loan Agreement and the Project Agreements, the provisions of this Loan Agreement and the Project Agreements shall prevail.

SCHEDULE 3, para. 3

Substantially complied with. There was delay in the project schedule partially due to a delay in the drafting and signing of the SLAs between the Government of Uzbekistan and the three PCBs (main text, para. 15). The PCBs incurred delays in establishing their PIUs and in processing and providing the SLAs and legal opinions (main text, para. 30). There were inconsistencies in CBU restrictions and the ADB project design with regard to daily cash balance and other documentary requirements (main text, para. 6), which slowed down the loan disbursement for this project. The project was not implemented as

22 Appendix 3

Covenant

Reference in Loan

Agreement


planned. Deviations included the following: (i) Agrobank breach of ADB financial covenants, which led to unused funds being reallocated to remaining PCBs, and (ii) lack of clarity on the project's actual contribution to the agenda of improving the MSE financial sustainability and administrative capacity.

Subloans The Borrower shall cause the PCBs to ensure that each Subloan: (a) carry interest at an appropriate rate that takes into account the cost of funds, administrative costs and credit and foreign exchange risks, have a repayment period not exceeding 3 years and be made on terms whereby a PCB shall obtain, by a written agreement with the Qualified Subborrower in form acceptable to ADB, rights adequate to protect the interests of the Borrower, the PCB and ADB;

SCHEDULE 3, para. 4 (a)

Complied with. PCB’s sum-denominated subloan interest rates range from around 16% to 36% per year, depending on whether the loan is in cash or noncash, loan maturity, and use of funds. The interest rates include the weighted average cost of capital and a risk premium that reflects the average rate of currency depreciation (10%). The CBU refinancing rate is 12.0%; and the inflation rate is 12.9% according to International Monetary Fund estimates for 2012, and about 7.0% according to the CBUs methodology.

(b) does not exceed the maximum Subloan amount of $40,000 equivalent;

SCHEDULE 3, para. 4 (b)

Complied with.

(c) is denominated and withdrawn in Dollar or Sum, such denomination shall be determined at the time the Subloan is made. Sum-denominated Subloans shall be withdrawn in any legal form, including in cash. Dollar-denominated Subloans shall be withdrawn by way of fund transfers.

SCHEDULE 3, para. 4 (c)

Complied with. All subloans were denominated in local currency (sum) and were loaned either in cash or fund transfers.

The Borrower shall cause the PCBs to ensure that at least 50% of all Subloans made by each PCB shall be for loan amounts not exceeding $10,000 equivalent each, with the exception of Subloans to Microcredit Organisations as set forth in paragraph 10 of this Schedule. Each Qualified Subborrower may receive more than 1 Subloan provided that the criteria set forth in paragraphs 8 to 11 of this Schedule are complied with.

SCHEDULE 3, para. 5

Complied with. The PCBs did not extend subloans to microcredit organizations (main text, para. 19).

The Borrower shall cause the PCBs to ensure that for each Qualified Subproject, at least 30% of the subproject costs shall be met by equity contribution from the Qualified Subborrower. The remainder of such costs shall be financed by way of a Subloan. Each such Subloan shall

SCHEDULE 3, para. 6

Complied with.

Appendix 3 23

Covenant

Reference in Loan

Agreement


comprise 50% of its loan amount from the PCB's funds and 50% of its loan amount from the proceeds of the Loan relent by the Borrower to the PCB.

Financial Covenants The Borrower shall cause the PCBs to ensure that they remain financially sound throughout the Project implementation period. Specifically, each PCB shall:

SCHEDULE 3, para. 7

Complied with. Agrobank’s, Hamkorbank’s, and Ipak Yuli Bank’s financial performance per the loan covenants for 2010-2013 are provided in Appendix 4. Ipak Yuli Bank and Hamkorbank were in compliance with financial covenants. Disbursement of the loan to Agrobank was discontinued after failing to meet the covenant on a return on assets in 2010. The undisbursed amount of $14 million was reallocated to Ipak Yuli Bank and Hamkorbank.

(a) maintain a capital adequacy ratio of not less than 12%. For the purpose of this subparagraph, capital adequacy ratio means the ratio of regulatory capital to risk assets, expressed as a percentage. Regulatory capital means the aggregate of equity share capital, general reserves and subordinate debt. Risk assets mean the aggregate of total assets less risk-free assets (i.e. cash in hand, with the CBU and other banks, and holdings of securities issued by the Borrower and by governments of countries of the Organisation for Economic Cooperation and Development) plus off-balance sheet contingencies;

SCHEDULE 3, para. 7(a)

Complied with.

(b) maintain a return on assets ratio of not less than 1%. For the purpose of this subparagraph, return on assets ratio means the division of net profit by the sum of the total assets at the end of the year in issue and the total assets at the end of the previous year, expressed as a percentage;

SCHEDULE 3, para. 7(b)

Substantially complied with. Agrobank failed to meet ADB’s financial covenant for ROA in 2010, after which time ADB discontinued the allocation of the remaining $14 million to Agrobank. The remaining unused funds were reallocated to Ipak Yuli Bank and to Hamkorbank in equal amount of $7 million. The SLAs between the MOF and the two PCBs were countersigned by the MOF on 11 July 2013. Following this approval, the PCBs were each requested to submit monthly disbursement projections for their respective new $7 million allocations. The funds were fully disbursed by the end of December 2013.

24 Appendix 3

Covenant

Reference in Loan

Agreement


Ipak Yuli Bank and Hamkorbank were in compliance with financial covenants (Appendix 4).

(c) maintain a loan to deposit ratio of under 100%. For the purpose of this subparagraph, loan to deposit ratio means the ratio of total net loans to customers divided by total customer deposits, expressed as a percentage. Subloans under the Project and other specific non-deposit sources of funds to finance policy lending shall not be treated as loans for the calculation of this ratio;

SCHEDULE 3, para. 7(c)

Complied with.

(d) maintain an intermediation cost ratio of under 15%. For the purpose of this subparagraph, intermediation cost ratio means the ratio of non-interest expenses to average total assets, expressed as a percentage; and

SCHEDULE 3, para. 7(d)

Complied with.

(e) ensure that its loan delinquency does not exceed 5% of its total loan portfolio. For the purpose of this subparagraph, loan delinquency means the aggregate of loans classified as "loss" in the CBU definition of "loss" and loans written-off in a year (even if not classified as "loss" in the particular year's financial statement).

SCHEDULE 3, para. 7(e)

Complied with.

For Subloan amounts from $1,000 equivalent to $20,000 equivalent, the Borrower shall cause the PCBs to ensure that each Qualified Subborrower meet and maintain the following criteria:


Complied with. The minor change in implementation arrangements also increased the subloan ceiling from $20,000 to $40,000. Agrobank disbursed $6 million of its $20 million allocation. Subsequently, an amendment to the project agreement was made on 29 January 2013 reflecting the new ceiling.

(a) a debt to equity ratio not higher than 70:30 for the project which the Subloan is financing;

Schedule 3, para. 8(b)

Complied with.

(b) a debt service coverage ratio not lower than 1.25 times;


Complied with.

(c) a proven track record (i.e. no past default).


Complied with.

For Subloan amounts not exceeding $1,000 equivalent, the Borrower shall cause the PCBs to determine the eligibility of a prospective Qualified Subborrower through assessing its track record, cash flow, third party guarantees (i.e. guarantees from third parties to the PCBs) and existing debt obligations.

SCHEDULE 3, para. 9

Complied with.

Where Subloans are made by the PCBs SCHEDULE 3, Complied with. Subloans were not

Appendix 3 25

Covenant

Reference in Loan

Agreement


to Microcredit Organisations (i.e. the Microcredit Organisations are Qualified Subborrowers), the Borrower shall cause the PCBs to ensure that:

para. 10 provided to microcredit organizations (main text, para. 19).

(a) each Microcredit Organisation meet and maintain the criteria set out in paragraph 8 of this Schedule;


Complied with. PCBs did not provide subloans to microcredit organizations.

(b) each Subloan made to a Microcredit Organisation does not exceed $40,000 equivalent;



(c) each loan made by a Microcredit Organisation does not exceed $1,000 equivalent;



(d) each Microcredit Organisation maintains records on their borrowers and loans and furnish to ADB information concerning such borrowers and loans as ADB may require.

SCHEDULE 3, para. 10(d)


Criteria for Qualified Subprojects The Borrower shall cause the PCBs to ensure that Qualified Subprojects, for which the PCBs provide Subloans to the Qualified Subborrowers (including the Microcredit Organisations set forth in paragraph 10 of this Schedule), shall be for activities that:

SCHEDULE 3, para. 11

Complied with. This condition was emphasized during inception and review missions, and monitored in the quarterly reports.

(a) are excluded in the list of prohibited investment activities set out in the table to this Schedule; and


Complied with.

(b) have minimal or no adverse environmental or social risks. Activities that fall under categories A or B of ADB's Safeguard Policy Statement (2009) and/or require environmental assessment clearance by the Borrower shall not be financed under the Project.


Complied with.

The Borrower shall cause the PCBs to ensure that the Qualified Subborrowers (including the Microcredit Organisations set forth in paragraph 10 of this Schedule) comply with ADB's Safeguard Policy Statement (2009) and applicable environmental, health and safety and social laws and regulations of the Borrower. This includes ensuring that the Qualified Subborrowers are not in breach of, or subject to any pending claim with respect to, any of the foregoing laws and regulations.


Substantially complied with. This condition was emphasized during inception mission and monitored in the quarterly reports and review missions. During the loan review mission in July 2013, it was identified that not all subloans issued by Ipak Yuli Bank were in compliance with subloan criteria. A full compliance review was undertaken for all subloans issued by Ipak Yuli Bank from 10 May 2013 to 10 July 2013. The review established that 97.5% of the subloans were in compliance.

26 Appendix 3

Covenant

Reference in Loan

Agreement


Policy Dialogue In support of the Project, the Borrower shall: (a) implement enabling conditions to allow the Qualified Subborrowers to withdraw Sum-denominated Subloans in any legal form, including cash;


Complied with.

(b) continue policy dialogue with ADB to maintain prudent macroeconomic policies.


Complied with. The borrower communicated with each mission team during review missions.

Gender The Borrower shall cause the PCBs to implement the gender action plan for the Project.


Substantially complied with. This condition was emphasized during inception mission and monitored in the quarterly reports and review missions. A review of the gender action plan was undertaken by consultants. The PCBs provided ADB with regular updates. Hamkorbank and Ipak Yuli Bank established gender focal points to support their gender-sensitizing capacity; PCB staff members (113 male and 10 female) were trained on gender and development mainstreaming. The gender action plan under the project was monitored and implemented.

Disbursement Except as ADB may otherwise agree, the Loan proceeds shall be disbursed in accordance with the Loan Disbursement Handbook.


Complied with.

Except as ADB may otherwise agree, each PCB shall establish immediately after the Effective Date, an imprest account at the CBU. The imprest account shall be established, managed, replenished and liquidated in accordance with the Loan Disbursement Handbook and detailed arrangements agreed upon between the Borrower and ADB. The currency of the imprest account shall be Dollar. The aggregate initial amount to be deposited into the imprest accounts shall not exceed the lower of: (i) the estimated expenditure to be financed from the imprest accounts for the first 6 months of Project implementation; or (ii) the equivalent of 10 percent of the Loan amount.


Complied with.

The statement of expenditures procedure may be used for reimbursement of eligible expenditures and to liquidate advances provided into the imprest accounts for individual payments not exceeding the


Complied with.

Appendix 3 27

Covenant

Reference in Loan

Agreement


equivalent of $100,000, in accordance with the Loan Disbursement Handbook and detailed arrangements agreed upon between the Borrower and ADB.

Good Governance and Anticorruption The Borrower and the PCBs acknowledge that ADB, consistent with its commitment to good governance, accountability, and transparency, reserves the right to investigate directly, or through its agents, any possible corrupt, fraudulent, collusive, or coercive practices relating to the Project. In support of these efforts and pursuant to ADB's Anti-Corruption Policy (1998, as amended to date), the Borrower shall cause the PCBs to: (a) ensure that all contracts financed by ADB in connection with Project include provisions specifying the right of ADB to audit and examine the records and accounts of the PCBs and the Qualified Subborrowers as they relate to the Project; and (b) cooperate fully with any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, for the satisfactory completion of any such investigation.


Complied with.

Anti-Money Laundering and Financing of Terrorism The Borrower shall cause the PCBs to comply with applicable laws and regulations in Uzbekistan and international standards (i.e. the Financial Action Task Force Recommendations on Money Laundering and Financing of Terrorism) on anti-money laundering and financing of terrorism. This includes ensuring that the PCBs undertake customer due diligence, report suspicious transactions and maintain internal control and procedures. The PCBs acknowledge that ADB may disclose to any competent national or international authority any information obtained by ADB in relation to the PCBs' level of compliance with such laws and regulations and international standards.


Complied with. PCBs concurred with the matters raised by the loan processing mission in the financial management assessment questionnaire. This was followed up on during review missions and also when processing the UZB Small Business and Entrepreneurship Development Project for which both PCBs were approved.

ADB = Asian Development Bank, AFS = Audited Financial Statement, APFS = Audited project Financial Statement, CBU = Central Bank of Uzbekistan, FY = fiscal year, PAM = project administration manual, PCB = participating commercial bank, PIU = project implementation unit, SLA = subsidiary loan agreement

28 Appendix 3

STATUS OF COMPLIANCE WITH PROJECT COVENANTS (PROJECT AGREEMENT)

Loan 2634-UZB: Second Small and Microfinance Development Project

Covenant

Reference in Project

Agreement


Particular covenants (a) PCBs shall carry out the Project with

due diligence and efficiency and in conformity with sound banking, administrative, financial, engineering, environmental and business practices.

ARTICLE III Particular

Covenants, Section 3.01.(a)

Complied with.

(b) In the carrying out of the Project, PCBs shall perform all its obligations set forth in the Loan Agreement and in the Schedule to this Project Agreement.

Section 3.01(b) Complied with.

PCBs shall at all times make adequate provision to protect itself against any loss resulting from changes in the rate of exchange between SUM and the currency or currencies in which PCBs' outstanding money obligations will have to be met.

Section 3.02. Complied with.

PCBs shall not make a Subloan to any Qualified Subborrower unless such Qualified Subborrower has at its disposal, or has made appropriate arrangements to obtain as and when required, all local currency funds, including adequate working capital, and other resources which are required by such Qualified Subborrower for the carrying out of its Qualified Subproject in respect of which the Subloan is to be made.


PCBs shall maintain records and accounts adequate to record the progress of the Project and of each Qualified Subproject (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, the operations and financial condition of PCBs.


(a) ADB and PCBs shall cooperate fully to ensure that the purposes of the Loan will be accomplished.

Section 3.05.(a) Complied with. The 2010 AFS was submitted to ADB on 21 December 2011, at which time ADB discontinued the allocation of the remaining $14 million to Agrobank, as its 2010 AFS showed noncompliance with the financial covenant stipulating that the return on assets ratio not be

Appendix 3 29

Covenant


Agreement


less than 1%, and a delay in the submission of the AFS.

(b) PCBs shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the PCBs Subsidiary Loan Agreement, or the accomplishment of the purposes of the Loan.

Section 3.05.(b) Complied with.

(c) ADB and PCBs shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, PCBs and the Loan.

Section 3.05.(c) Complied with.

(a) PCBs shall furnish to ADB all such reports and information as ADB shall reasonably request concerning: (i) the Loan and the expenditure of the proceeds thereof; (ii) the Project; (iii) the Qualified Subborrowers, the Qualified Subprojects and the Subloans; (iv) the administration, operations and financial condition of PCBs; and (v) any other matters relating to the purposes of the Loan.

Section 3.06.(a) Substantially complied with. Agrobank did not provide an APFS. ADB discontinued the allocation to Agrobank in 2010, as Agrobank was not in compliance with all the covenants. Ipak Yuli Bank and Hamkorbank were delayed by an average of 16.9 months in submitting their annual APFSs and related audit reports. In 2013, both PCBs submitted their consolidated APFS for FY2010–FY2012, including audit opinions on the use of loan proceeds and compliance with financial covenants. The delay was because APFS submissions were never instituted in any financial sector division, and this requirement became mandatory only in late 2012. The project agreement is also not clear on reporting requirements, and it does not specify APFS. Both Ipak Yuli Bank and Hamkorbank were required to submit a consolidated APFS. Agrobank did not provide any APFS. The project team encountered difficulties in providing the PCBs with clear guidance on reporting requirements for APFS due to ADB internal inconsistencies that were not fully resolved.

(b) Without limiting the generality of the foregoing, PCBs shall furnish to ADB quarterly reports on the execution of

Section 3.06(b) Substantially complied with. Agrobank did not provide ADB

30 Appendix 3

Covenant


Agreement


the Project and on the operation and management of PCBs. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

progress reports. ADB discontinued the allocation to Agrobank in 2010, as Agrobank was not in compliance with all covenants. Ipak Yuli Bank and Hamkorbank provided ADB with progress reports.

(c) Promptly after the closing date for withdrawals from the Loan Account, but in any event not later than 3 months after the said closing date or such later date as ADB may agree for this purpose, PCBs shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the utilization of the Loan, the execution of the Qualified Subprojects, their costs, the performance by PCBs of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

Section 3.06(c) Substantially complied with. Agrobank did not provide an APFS. ADB discontinued the allocation to Agrobank in 2010, as Agrobank was not in compliance with all the covenants. Ipak Yuli Bank and Hamkorbank were delayed by an average of 16.9 months in submitting their annual APFSs and related audit reports. In 2013, both PCBs submitted their consolidated APFS for FY2010–FY2012, including audit opinions on the use of loan proceeds and compliance with financial covenants. The delay was because APFS submissions were never instituted in any financial sector division, and this requirement became mandatory only in late 2012. The project agreement is also not clear on reporting requirements, and it does not specify APFS. Both Ipak Yuli Bank and Hamkorbank were required to submit a consolidated APFS. Agrobank did not provide any APFS. The project team encountered difficulties in providing the PCBs with clear guidance on reporting requirements for APFS due to ADB internal inconsistencies that were not fully resolved.

(a) PCBs shall have its accounts and financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with international auditing standards consistently applied, by independent

Section 3.07.(a) Complied with.

Appendix 3 31

Covenant


Agreement


auditors whose qualifications, experience and terms of reference are acceptable to ADB, and shall, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, furnish to ADB: (i) certified copies of such audited accounts and financial statements; and (ii) the report of the auditors relating thereto (including the auditors' opinion on the use of Loan proceeds and compliance with the covenants of this Project Agreement as well as on the use of the procedures for imprest account and statement of expenditures), all in the English language. PCBs shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

(b) PCBs shall enable ADB, upon ADB's request, to discuss PCBs' financial statements and its financial affairs from time to time with the auditors appointed by PCBs pursuant to hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of PCBs unless PCBs shall otherwise agree.

Section3.07.(b) Complied with.

PCBs shall enable ADB's representatives to inspect any Qualified Subborrower, any Qualified Subproject, the Goods and Works financed out of the proceeds of the Loan, and any relevant records and documents.


(a) PCBs shall, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business.

Section 3.09.(a) Complied with.

(b) PCBs shall at all times conduct its Section 3.09.(b) Complied with.

32 Appendix 3

Covenant


Agreement


business in accordance with sound banking, administrative, financial, environmental and business practices, and under the supervision of competent and experienced management and personnel.

(c) Except as ADB may otherwise agree, PCBs shall not sell, lease, transfer or otherwise dispose of any of its assets, except in the ordinary course of its business.

Section 3.09.(c) Complied with.

PCBs shall cause each of its subsidiaries (if any) to observe and perform the obligations of PCBs under this Project Agreement to the extent to which such obligations may be applicable thereto, as though such obligations were binding upon each of such subsidiaries.


Except as ADB may otherwise agree, PCBs shall duly perform all its obligation under the PCBs Subsidiary Loan Agreement and shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the PCBs Subsidiary Loan Agreement.

Section 3.11. Complied with. Following Agrobank’s failure to meet ADB’s financial covenants for ROA in 2010, ADB discontinued the allocation of the remaining $14 million to Agrobank. At this time, the SLA was revised to reflect the reallocation of the unused $14 million in funds to Ipak Yuli Bank and to Hamkorbank in equal amounts of $7 million. The SLAs between the MOF and the two PCBs were countersigned by the MOF on 11 July 2013.

Project Management and Implementation PCB shall be an implementing agency of the Project. It shall establish a PIU.

Schedule, para. 1 Complied with. Loan effectiveness could not be declared, as the SLAs and legal opinions as well as the notices of PIU establishment by the PCBs, except for Ipak Yuli Bank, were not ready.

PCBs shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the PAM. Any update to the PAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the PAM and the Loan Agreement and the Project Agreements, the provisions of the Loan Agreement and the Project Agreements shall prevail.

Schedule, para. 2 Substantially complied with. There was a delay in the project schedule due to, among other reasons, a delay in the drafting and signing of the SLAs between the Government of Uzbekistan and the three PCBs (main text, para. 15). The PCBs incurred delays in establishing their PIUs and in processing and providing the SLAs and legal opinions (main text, para.

Appendix 3 33

Covenant


Agreement


30). There were inconsistencies in CBU restrictions and the ADB project design with regard to daily cash balance and other documentary requirements (main text, para. 6), which slowed down the loan disbursement for this project. The project was not implemented as planned: Deviations included the following: (i) Agrobank breach of ADB financial covenants, which led to unused funds being reallocated to remaining PCBs, and (ii) lack of clarity on the project's actual contribution to the agenda of improving the MSE financial sustainability and administrative capacity.

Subloans PCBs shall ensure that each Subloan: (a) Carry interest at an appropriate rate that takes into account the cost of funds, administrative costs and credit and foreign exchange risks, have a repayment period not exceeding 3 years and be made on terms whereby PCBs shall obtain , by a written agreement with the Qualified Subborrower in form acceptable to ADB, rights adequate to protect the interests of the Borrower, PCBs, and ADB;

Schedule para. 3(a)

Complied with. PCBs’ sum-denominated subloan interest rates range from around 16% to 36% per year, depending on whether the loan is in cash or noncash, loan maturity, and use of funds. The interest rates include the weighted average cost of capital and a risk premium that reflects the average rate of currency depreciation (10%). The CBU refinancing rate is 12.0%, and the inflation rate is 12.9%, according to International Monetary Fund estimates for 2012, and about 7.0%, according to the CBU methodology.

(b) Does not exceed the maximum Subloan amount of $40,000 equivalent; and

Schedule para. 3(b)

Complied with.

(c) Is denominated and withdrawn in Dollar or Sum, such denomination shall be determined at the time the Subloan is made. Sum-denominated Subloans shall be withdrawn in any legal form, including in cash. Dollar-denominated Subloans shall be withdrawn by way of fund transfers.

Schedule para. 3(c)

Complied with. All subloans were denominated in local currency (sum) and were loaned either in cash or fund transfers.

4. PCBs shall ensure that at least 50% of all Subloans made by it shall be for loan amounts not exceeding $10,000 equivalent each, with the exception of Subloans to Microcredit Organizations as set forth in paragraph 9 of this Schedule. Each Qualified Subborrower may receive

Schedule para. 4 Complied with. The PCBs did not extend subloans to microcredit organizations (main text, para. 19).

34 Appendix 3

Covenant


Agreement


more than 1 Subloan provided that the criteria set forth in paragraphs 7 to 10 of this Schedule are complied with.

5. PCBs shall ensure that for each Qualified Subproject, at least 30% of the subproject costs shall be met by equity contribution from the Qualified Subborrower. The remainder of such costs shall be financed by a Subloan. Each such Subloan shall comprise 50% of its loan amount from its funds and 50% of its loan amount from the proceeds of the Loan relent by the Borrower to it.

Schedule para. 5 Complied with.

Financial Covenants 6. PCBs shall ensure that it remain financially sound throughout the Project implementation period. Specifically, PCBs shall:

Agrobank’s, Hamkorbank’s, and Ipak Yuli Bank’s financial performance per the loan covenants for 2010-2013 are provided in Appendix 4. Ipak Yuli Bank and Hamkorbank were in compliance with financial covenants. Disbursement of the loan to Agrobank was discontinued after it failed to comply with the financial covenant on maintaining a minimum return on assets ratio in 2010.

(a) maintain a capital adequacy ratio of not less than 12%. For the purpose of this subparagraph, capital adequacy ratio means the ratio of regulatory capital to risk assets, expressed as a percentage. Regulatory capital means the aggregate of equity share capital, general reserves and subordinate debt. Risk assets mean the aggregate of total assets less risk-free assets (i.e. cash in hand, with the CBU and other banks, and holdings of securities issued by the Borrower and by governments of countries of the Organisation for Economic Cooperation and Development) plus off-balance sheet contingencies;

Schedule para. 6(a)

Complied with.

(b) maintain a return on assets ratio of not less than 1%. For the purpose of this subparagraph, return on assets ratio means the division of net profit by the sum of the total assets at the end of the year in issue and the total assets at the end of the previous year, expressed as a percentage;

Schedule para. 6(b)

Substantially complied with. Agrobank failed to meet ADB’s financial covenant for ROA in 2010, at which time ADB discontinued the allocation of the remaining $14 million to Agrobank. The remaining unused $14 million in funds was reallocated to Ipak Yuli Bank and to Hamkorbank in equal amounts of $7 million. The SLAs between the MOF and the two PCBs were countersigned by the MOF on 11

Appendix 3 35

Covenant


Agreement


July 2013. Following this approval, the PCBs were requested to submit monthly disbursement projections for their respective new allocations of $7 million. The funds were fully disbursed by the end of December 2013. Ipak Yuli Bank and Hamkorbank were in compliance with financial covenants (Appendix 4).

(c) maintain a loan to deposit ratio of under 100%. For the purpose of this subparagraph, loan to deposit ratio means the ratio of total net loans to customers divided by total customer deposits, expressed as a percentage. Subloans under the Project and other specific non-deposit sources of funds to finance policy lending shall not be treated as loans for the calculation of this ratio;

Schedule para. 6(c)

Complied with.

(d) Maintain an intermediation cost ratio of under 15%. For the purpose of this subparagraph, intermediation cost ratio means the ratio of non-interest expenses to average total assets, expressed as a percentage; and

Schedule para. 6(d)

Complied with.

(e) ensure that its loan delinquency does not exceed 5% of its total loan portfolio. For the purpose of this subparagraph, loan delinquency means the aggregate of loans classified as “loss” in the CBU definition of “loss” and loans written-off in a year (even if not classified as “loss” in the particular year’s financial statement).

Schedule para. 6(e)

Complied with.

Criteria for Qualified Subborrower 7. For Subloan amounts from $1,000 equivalent to $20,000 equivalent, PCBs ensure that each Qualified Subborrower meet and maintain the following criteria:

Schedule para.7 Complied with. The minor change in implementation arrangements also increased the subloan ceiling from $20,000 to $40,000. Agrobank disbursed $6 million of its $20 million allocation. Subsequently, an amendment to the project agreement was made on 29 January 2013 reflecting the new ceiling.

(a) A debt to equity ratio not higher than 70:30 for the project which the Subloan is financing;

Schedule para.7(a)

Complied with. Verified during the subloan review and revised during review missions.

(b) A debt service coverage ratio not lower than 1.25 times; and

Schedule para.7,(b)


36 Appendix 3

Covenant


Agreement


(c) A proven track record (i.e. no past default)

Schedule para., 7(c)


8. For Subloan amounts not exceeding $1,000 equivalent, PCBs shall determine the eligibility of a prospective Qualified Subborrower through assessing its track record, cash flow, third party guarantees (i.e. guarantees from third parties to Ipak Yuli Bank) and existing debt obligations.

Schedule para. 8 Complied with. Verified during the subloan review and revised during review missions.

9. Where Subloans are made by Ipak Yuli Bank to Microcredit Organisations (i.e. the Microcredit Organisations are Qualified Subborrowers), it shall ensure that: (a) each Microcredit Organisation meet and maintain the criteria set out in paragraph 7 of this Schedule; (b) each loan made by a Microcredit Organisation does not exceed $20,000 equivalent; (c) each loan made by a Microcredit Organisation does not exceed $1,000 equivalent; and (d) each Microcredit Organisation maintain records on their borrowers and loans and furnish to ADB information concerning such borrowers and loans as ADB may require

Schedule para. 9(a-d)

Not complied with. Subloans were not provided to microcredit organizations (main text, para. 19).

Criteria for Qualified Subprojects 10. PCBs shall ensure that Qualified Subprojects, for which it provides Subloans to the Qualified Subborrowers (including the Microcredit Organisations set forth in paragraph 9 of this Schedule), shall be for activities that:(

Schedule, Para. 10

This condition was emphasized during inception and review missions, and monitored in the quarterly reports.

(a) are excluded in the list of prohibited investment activities set out in the table to this Schedule; and

Schedule, Para. 10,(a)

Complied with.

b) have minimal or no adverse environmental or social risks. Activities that fall under categories A or B of ADB’s Safeguard Policy Statement (2009) and/or require environmental assessment clearance by the Borrower shall not be financed under the Project

Schedule para 10.(b)

Complied with.

11. PCBs shall ensure that the Qualified Subborrowers (including the microcredit organisations set forth in paragraph 9 of this Schedule) comply with ADB's Safeguard Policy Statement (2009) and

Schedule, para 11.

Substantially complied with. This condition was emphasized during inception mission and monitored in the quarterly reports and review missions.

Appendix 3 37

Covenant


Agreement


applicable environmental, health and safety and social laws and regulations of the Borrower. This includes ensuring that the Qualified Subborrowers are not in breach of, or subject to any pending claim with respect to, any of the foregoing laws and regulations.

During the loan review mission in July 2013, it was identified that not all subloans issued by Ipak Yuli Bank were in compliance with subloan criteria. A full compliance review was undertaken for all subloans issued by Ipak Yuli Bank from 10 May 2013 to 10 July 2013. The review established that 97.5% of the subloans were in compliance.

Gender 12. PCBs shall implement the gender action plan for the Project.

Schedule, para 12

Complied with. Hamkorbank and Ipak Yuli Bank implemented the gender action plan under the project.

Procurement 13. All Goods, Works and consulting services to be financed out of the proceeds of the Loan shall be subject to and governed by applicable provisions of the Procurement Guidelines, and the Consulting Guidelines, respectively.

Schedule, para 13.

Complied with.

14. PCBs shall ensure that each Qualified Subborrower undertake procurement of Goods, Works and consulting services with due attention to economy and efficiency and in accordance with private sector or commercial practices acceptable to ADB, and which are in compliance with the provisions of ADB's Anti-Corruption Policy (1998, as amended to date).

Schedule, para. 14.

Complied with.

15. PCBs shall ensure that all Goods and Works procured by the Qualified Subborrower (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party.

Schedule, para. 15.

Complied with.

16. PCBs shall ensure that all contracts entered into by the Qualified Subborrower for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in paragraph 15 of this Schedule.

Schedule, para. 16.

Complied with.

Disbursement 17. Except as ADB may otherwise agree,

Schedule, para. 17.

Complied with.

38 Appendix 3

Covenant


Agreement


the Loan proceeds shall be disbursed in accordance with the Loan Disbursement Handbook.

18. Except as ADB may otherwise agree, PCBs shall establish immediately after the Effective Date, an imprest account at the CBU. The imprest account shall be established, managed, replenished and liquidated in accordance with the Loan Disbursement Handbook and detailed arrangements agreed upon between the Borrower and ADB. The currency of the imprest account shall be Dollar. The initial amount to be deposited into the imprest account shall not exceed the lower of: (i) the estimated expenditure to be financed from the imprest account for the first 6 months of Project implementation; or (ii) the equivalent of 10 percent of the Loan amount relent by the Borrower to PCBs.

Schedule, para. 18.

Complied with.

19. The statement of expenditures procedure may be used for reimbursement of eligible expenditures and to liquidate advances provided into the imprest account for individual payments not exceeding the equivalent of $100,000, in accordance with the Loan Disbursement Handbook and detailed arrangements agreed upon between the Borrower and ADB. Good Governance and Anticorruption

Schedule, para. 19.

Complied with.

20. PCBs acknowledge that ADB, consistent with its commitment to good governance, accountability, and transparency, reserves the right to investigate directly, or through its agents, any possible corrupt, fraudulent, collusive, or coercive practices relating to the Project. In support of these efforts and pursuant to ADB's Anti-Corruption Policy (1998, as amended to date), PCBs shall: (a) ensure that all contracts financed by ADB in connection with Project include provisions specifying the right of ADB to audit and examine the records and accounts of PCBs and the Qualified Subborrowers as they relate to the Project; and (b) cooperate fully with any such investigation and to extend all necessary assistance, including providing access to all relevant books and records,

Schedule, para. 20.

Complied with.

Appendix 3 39

Covenant


Agreement


for the satisfactory completion of any such investigation.

Anti-Money Laundering and Financing of Terrorism 21. PCBs shall comply with applicable laws and regulations in Uzbekistan and international standards (i.e. the Financial Action Task Force Recommendations on Money Laundering and Financing of Terrorism) on anti-money laundering and financing of terrorism. This includes undertaking customer due diligence, reporting suspicious transactions and maintaining internal control and procedures. PCBs acknowledges that ADB may disclose to any competent national or international authority any information obtained by ADB in relation to PCBs' level of compliance with such laws and regulations and international standards.

Schedule, para. 21.

Complied with.

ADB = Asian Development Bank, AFS = Audited Financial Statement, APFS = Audited project Financial Statement, CBU = Central Bank of Uzbekistan, FY = fiscal year, PAM = project administration manual, PCB = participating commercial bank, PIU = project implementation unit, SLA = subsidiary loan agreement

40 Appendix 4

PARTICIPATING COMMERCIAL BANKS’ COMPLIANCE WITH THE FINANCIAL RATIOS

Financial Covenant

Agrobank

Hamkorbank

Ipak Yuli Bank

2010 2011 2012 2013

2010 2011 2012 2013

2010 2011 2012 2013

Maintain a capital adequacy ratio of not less than 12%

12.7% 13.7% (…) (…)

15.9% 16.5% 14.0% 20%

15.4% 14.5% 15.8% 16.2%

Maintain a return on assets ratio of not less than 1%

0.9% 0.1% (…) (…)

4.0% 3.8% 4.0% 4%

1.7% 2.2% 2.6% 2.3%

Maintain a loan to deposit ratio of under 100%

95.7% 93.4% (…) (…)

69.1% 82.1% 77.0% 72%

39.0% 46.4% 41.1% 54.2%

Maintain an intermediation cost ratio of under 15%

6.6% 8.0% (…) (…)

12.7% 10.3% 11.0% 10%

7.2% 7.6% 9.7% 11.0%

Source: Agrobank, Hamkorbank, Ipak Yuli Bank.

Appendix 5 41

CONTRIBUTION TO THE ADB RESULTS FRAMEWORK

No. Results Framework

Indicators Targets Methods Used

Targets Aggregate Output/Results

achieved

Methods / Comments

1 Microfinance loan accounts opened or end borrowers reached (number)

Male (M)

Female (F)

2010 2,750 2011 11,750 2012 20,500 2013 25,000

2010 M F

1,287 811 476

2011 M F

5,672 3,573 2,099

2012 M F

11,311 7,126 4,185

2013 M F

18,646 11,747 6,899

TOTAL M F

36,916 23,257 13,659

The targets were estimated based on: (i) the 2009 outstanding loan average size of the3 participating commercial banks (considering only loans up to $20,000), (ii) the expected loan average size under the Project, and (iii) the projected disbursements under ADB's loan.

Source: Asian Development Bank project records.

Documents

Uzbekistan: Second Small and Microfinance Development Project€¦ · SMDP – Small and Microfinance Development Project TA – technical assistance NOTES (i) The fiscal year (FY)