SCCD: G. G.

AFRICAN DEVELOPMENT FUND Language: English Original: French

ISLAMIC REPUBLIC OF MAURITANIA

PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE OPERATORS (PRECAMF)

APPRAISAL REPORT

HUMAN DEVELOPMENT DEPARTMENT OSHD HEALTH DIVISION JANUARY 2007

TABLE OF CONTENTS Page

PROJECT INFORMATION SHEET, MONETARY EQUIVALENTS, MEASURES, FISCAL YEAR, LIST OF TABLES, LIST OF ANNEXES, LIST OF ABBREVIATIONS, EXECUTIVE SUMMARY, PROJECT LOGICAL FRAMEWORK i-x

1. ORIGIN AND HISTORY OF THE PROJECT..............................................................1 2. FINANCING THE ECONOMIC ACTIVITIES OF THE POOR .................................2 2.1 Poverty in Mauritania ..........................................................................2 2.2 Economic Activities of the Poor ..........................................................................3 2.3 Financial Sector in Mauritania ..........................................................................4 2.4 Legal and Institutional Framework of Microfinance ......................................................7 2.5 Government Policies and Strategies …………………………………………………..8 2.6 Financing of the Sector and Operations of the Government and TFPs ........................ 9 2.7 Constraints on Microfinance Development ..................................................................10 3. PROJECT AREAS .......................................................................................................11 3.1 Legal Framework Conducive to Microfinance Development ......................................11 3.2 Capacities of Microfinance Supervisory Structures ...................................................11 3.3 Operational and Organizational Capacities of MFIs ....................................................12 3.4 Extension of MFI Services to Rural Areas ...................................................................13 3.5 Financing of MFIs .......................................................................13 3.6 Building the Capacities of IGA and MSE Promoters ...................................................14 4. THE PROJECT…….....................................................................................................14 4.1 Project Design and Rationale........................................................................................14 4.2 Project Area and Beneficiaries......................................................................................17 4.3 Strategic Context of the Project ....................................................................................19 4.4 Project Objectives .........................................................................................................20 4.5 Project Description .......................................................................................................20 4.6 Project Costs....................... ..........................................................................................24 4.7 Sources of Finance and Expenditure Schedule.............................................................25 4.8 Environmental Impact...................................................................................................27 5. PROJECT IMPLEMENTATION.................................................................................27 5.1 Project Executing Agency ……………………………………………...….........……27 5.2 Institutional Arrangements............................................................................................29 5.3 Implementation and Supervision Schedules .................................................................29 5.4 Procurement Arrangements...........................................................................................30 5.5 Disbursements ...............................................................................................................34 5.6 Monitoring and Evaluation ...........................................................................................35 5.7 Accounting and Auditing..............................................................................................35 5.8 Aid Coordination ..........................................................................................................36

6. PROJECT SUSTAINABILITY AND RISKS..............................................................36 6.1 Recurrent Costs ............................................................................................................36 6.2 Project Sustainability ...................................................................................................37 6.3 Project Risks and Mitigating Measures……………………..……………………… 38 7. PROJECT BENEFITS..................................................................................................38 7.1 Economic Benefits of the Project ................................................................................38 7.2 Social Impact Analysis .................................................................................................39 7.3 Analysis of Impact on Women .....................................................................................39 8. CONCLUSIONS AND RECOMMENDATIONS .......................................................40 8.1 Conclusions ...............................................................................................................40 8.2 Recommendations and Loan Conditions ....................................................................40

------------------------------------------------------------------------------------------------------------------- This project was prepared following appraisal and update missions to Mauritania in April 2006 by Ms. G. Nzau-Muteta, Socio-Economist, OSHD.1, Ms. J. Nzeyimana, Micro-Finance Expert, OSHD.0, and Ms. H. Mrabet, Architect, OSHD.3, and in January 2007 by Ms. Nzau-Muteta. For further information, please contact the authors or Mrs. A. Hamer, Director, OSHD (Extension 2046) or Mr. J. E. Porgo, Acting Division Manager, OSHD.1 (Extension 2173). -------------------------------------------------------------------------------------------------------------------

AFRICAN DEVELOPMENT FUND 01 B.P. 1387 ABIDJAN 01 Temporary Relocation Agency TEL: (225) 20 20 48 12 / 20 20 54 47 B.P. 323 1002 TUNIS BELVEDERE FAX (225) 20 20 57 10 TEL: (216) 71 333 511; FAX: 71 352 933

PROJECT INFORMATION SHEET

Date: January 2007 The information given hereunder is intended to provide guidance to prospective suppliers, contractors, consultants and all persons interested in the procurement of goods and services for projects approved by the Boards of Directors of the Bank Group. More detailed information may be obtained from the Executing Agency of the Borrower. 1. COUNTRY : Mauritania 2. PROJECT NAME : Project to build the capacities of

Microfinance Stakeholders (PRECAMF) 3. LOCATION : Nouakchott, Gorgol, Guidimaka, Assaba,

Brakna, Hodh El Gharbi, Hodh EchChargui, Trarza, and Tagant

4. BORROWER : Islamic Republic of Mauritania 5. EXECUTING AGENCY : Direction de l’Insertion du Commissariat aux Droits de l’Homme, à la Lutte Contre la Pauvreté et à l’Insertion (CDH/LCP/I) Tel:(222) 529 19 95/Fax: 529 62 23/09 60 B.P. 6808 Nouakchott Email: commissaire@cdhlcpi.mr 6. PROJECT DESCRIPTION:

The sector goal is to improve access by the working poor to viable and sustainable financial services, with a view to reducing poverty. The specific objective of the project is to build the capacities of stakeholders with respect to the supply and demand of microfinance services.

The project, which will be implemented over a five-year period, comprises the following three components: (i) Improvement of supply of microfinance services; (ii) Improvement of demand for financial services; and (iii) Project management. 7. TOTAL PROJECT COST i) Foreign exchange costs : UA 3.38 million ii) Local currency costs : UA 4.59 million iii) Total cost : UA 7.97 million

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8. BANK GROUP LOAN ADF LOAN : UA 5.98 million 9. OTHER SOURCES Government : UA 1.99 million 10. LOAN APPROVAL DATE : February 2007 11. ESTIMATED PROJECT START-UP DATE AND DURATION : June 2007; for 5 years 12. PROCUREMENT OF GOODS AND SERVICES:

Goods, development works, and services financed by the ADF will be procured in

accordance with the Bank Group’s Rules of Procedure as follows: Goods: Furniture and computer and office equipment will be procured through local competitive bidding. Teaching aids will be procured through local shopping.

Services: The services of consultants, consulting firms, specialized firms, and NGOs will be procured on the basis of a short list, in accordance with the Bank’s Rules of Procedures, to implement different activities; in particular (i) studies, assessments, appraisals, monitoring and supervision; (ii) information, education, communication (IEC) campaigns; (iii) trainer and supervisor services for retraining and training workshops; (iv) training abroad and study trips; (v) recruitment of more staff for project management; (vi) technical assistance for the implementation of the project; and (vii) auditing of microfinance institutions (MFI), project accounts, and procurement. The recruitment of senior staff to support the Integration Department in project implementation will be done through direct negotiations with existing staff. Consultancy services in new technologies relating to housing and the maintenance and update of the website on microfinance in Mauritania will be procured from the designer of the site.

Operating Costs: The operating resources of the project (office supplies, fuel, etc.) will be procured through (i) shopping among suppliers for amounts lower that UA 20,000, and (ii) competitive bidding for contracts valued at more than UA 20,000.

Miscellaneous (Credit fund and institutional support): The credit fund will be made available to MFIs selected on the basis of criteria determined by the Government and the ADF, and confirmed by the recommendations of the MFI audit. Institutional support will be provided to selected MFIs willing to expand to rural areas, according to the process described above. The goods, works, and services relating to the establishment of MFIs in rural areas will be procured in accordance with the procedures defined in the Project’s Manual of Accounting, Administrative, and Financial Procedures, which will be aligned with the Bank Group’s Rules of Procedure for Procurement.

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CURRENCY EQUIVALENTS (January 2007)

Currency Unit: Ouguiya (MRO)

UA 1 = MRO 400.332

MEASURES

Metric system

FISCAL YEAR

1 January – 31 December

LIST OF TABLES Page

2.1 Performance Indicators for the four most Representative Microfinance Networks 6 2.2 Financing of the Sector by the Government and TFP Operations 9 4.0 Presentation of MFIs targeted by the Project 19 4.1 Project Cost by Component 25 4.2 Project Cost by Expenditure Category 25 4.3 Project Cost by Source of Finance 25 4.4 Project Cost by Component and Source of Finance 26 4.5 Project Cost by Expenditure Category and Source of Finance 26 4.5.b Project Cost by Component, Expenditure Category, and Source of Finance 26 4.6 Expenditure Schedule by Component 26 4.7 Expenditure Schedule by Expenditure Category 27 4.8 Expenditure Schedule by Source of Finance 27 5.1 Summary of Projected Schedule of Activities 30 5.2 Supervision Schedule for Activities 30 5.3 Procurement Arrangements 31 5.4 Other Methods of Procurement 31

LIST OF ANNEXES Number of pages 1. Administrative Map of Mauritania and Project Areas 1 2. Presentation of Performance of MFIs Pre-selected to manage the

Credit Fund 8 3. Assessment of Financing Requirements of MFIs 2 4. Performance of the Poverty Reduction Project (PRP) and the PIU 3 5. Project Organization Chart 1 6. List of Goods and Services 1 7. Detailed Project Costs 3 8. Project Implementation Schedule 1 9. IGA and MSE Operating Accounts 3 10. Appraisal Report Preparation Process 2 11. Training Themes 1

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LIST OF ABBREVIATIONS

ADB : African Development Bank ADF : African Development Fund AFESD : Arab Fund for Economic and Social Development AFRITAC : Africa Regional Technical Assistance Centre AMINA : African Development Bank Initiative for Microfinance ANAPEJ : National Agency for the Promotion of Youth Employment APME : Association for the Promotion of Micro-Enterprise APROMI : Association of Microfinance Professionals and Stakeholder BCM : Central Bank of Mauritania BDFG : Banque des femmes du Gorgol CAPAF : Programme to Build the Capacities of MFIs in Francophone Africa CAPEC : Credit and Savings Association CAS : Country Assistance Strategy (World Bank) CDH/LCP/I : Commission on Human Rights, Poverty Reduction and Integration CECA : Craft Workers Savings and Credit Association CIDA : Canadian International Development Agency CSP : Country Strategy Paper (Bank Group) GAFIF : Groupements Association de Femmes pour l’Initiative Féminine (Mutual Association for Women’s Initiatives) GFEC : Women’s Savings and Credit Association HIPC : Heavily Indebted Poor Countries IEC : Information, Education, Communication IFAD : International Fund for Agricultural Development IGA : Income-Generating Activities ILO : International Labor Organization IMF : International Monetary Fund MAED : Ministry of Economic and Development Affairs M-AFEC : Mutuelle de l’Association Féminine d’Epargne et de Crédit (Women’s Savings and Credit Association) MDG : Millennium Development Goals MFI : Microfinance Institution MICO : Mutuelle d’Investissement et de Crédit Oasien (Oasis Investment and Credit Mutual Benefit Society) MIS : Management Information System MRDE : Ministry of Rural Development and the Environment MRO : Ouguiya (Mauritanian Currency) MSC : Microfinance Steering Committee MSE : Micro and Small Enterprises NGO : Non-Governmental Organization NMFS : National Microfinance Strategy NSMSE : National Strategy for the Promotion of Micro and Small-scale Enterprises ONS : National Statistics Authority PIU : Project Implementation Unit (Poverty Reduction Project) PNIME : National Integrated Micro and Small-scale Enterprises Programme PNLCP : National Poverty Reduction Programme PROCAPEC : CAPEC Promotion Agency PRP : Poverty Reduction Project PRSP : Poverty Reduction Strategy Paper SECF : Ministry of Women’s Affairs SNFO : Bank’s Regional Office in Dakar TFP : Technical and Financial Partners UA : Unit of Account UDP : Urban Development Programme UNCACEM : Union des Coopératives Agricoles d’Epargne et de Crédit de Mauritanie (Union of Agricultural Credit and savings Cooperatives of Mauritania) UNCDF : United Nations Capital Development Fund UNDP : United Nations Development Programme WAEMU : West African Economic and Monetary Union

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EXECUTIVE SUMMARY 1. Origin and History of Project 1.1 In spite of development efforts, poverty in Mauritania is still a major concern, with 46.7% of the population considered as poor. It was against this backdrop that the Government prepared its 2001-2015 Poverty Reduction Strategy Paper (PRSP); the second action plan of the PRSP, covering the 2006-2010 period, seeks to reduce the proportion of the poor from 46.7% in 2004 to 35% in 2010 and 25% in 2015, in line with the Millennium Development Goals (MDGs). One of the pillars of the PRSP is to develop the growth and productivity potential of the poor, notably by developing the microfinance sector. In this perspective, in 2003 the Government prepared and adopted its National Microfinance Strategy (NMFS) aimed at improving access by the poor to sustainable financial services. However, the weak operational and organizational capacities of microfinance institutions (MFI), created only recently in Mauritania, and their limited financial autonomy, impede the development of microfinance in the country. 1.2 The combined support of several partners, the Bank Group in particular, through the Poverty Reduction Project (PRP) financed by the ADF from 1998 to 2004 and the African Development Bank Initiative for Micro-Finance in Africa (AMINA) from 1998 to 2000, have contributed significantly to the emergence of microfinance in Mauritania. The satisfactory performance of the PRP, confirmed by the completion reports prepared by the Government and the Bank, led the Government to seek ADF assistance for the development of microfinance in Mauritania. This project was identified in July 2001, prepared in June 2002, appraised in February and June 2005, re-appraised in April 2006, and updated in January 2007 (see details in Annex X). This time lag is due to the fact that resources could not be mobilized under ADF IX to finance the project. Furthermore, the project could not be presented to the Boards of Directors of the Bank in 2005 because the preparation of the Country Strategy Paper (CSP) was delayed in order to ensure consistency with the second phase of the 2006-2010 PRSP; a semi-final version only became available in May 2006. Lastly, following the reduction of ADF X resource allocation, the available resources for financing the project, initially UA 8 million, were reduced to UA 5.98 million. Consequently, presentation of the project to the Board was delayed by four months.

1.3 This project takes into account the MDGs, the Government’s strategies in poverty reduction and microfinance development, and the interventions of other donors. It is also consistent with the first pillar of the Bank’s 2006-2007 CSP for Mauritania relating to microfinance development. The political and economic context in which it will be implemented is characterized by a transition Government, the start of oil production, the normalization of relations between the country and the Bretton Woods institutions, and Mauritania’s eligibility for the Multilateral Debt Relief Initiative. 2. Purpose of the Bank Group Loan

The ADF loan, in the amount of UA 5.98 million, will cover 75.03% of total project cost, and will be used to finance 100% of foreign exchange costs and 56.68% of the local currency costs of the project.

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3. Project Objective

The sector goal of the project is to improve access by the working poor to viable and sustainable financial services, with a view to reducing poverty. The specific objective of the project is to build the capacities of stakeholders with respect to the supply and demand of microfinance services. 4. PROJECT DESCRIPTION

To attain the stated objectives, the project, which will be implemented over a five-year period, comprises the following three components: (i) improvement of supply of microfinance services; (ii) improvement of demand for financial services; and (iii) project management. 5. PROJECT COSTS

The total project cost, net of taxes and customs duties, is estimated at UA 7.97

million, comprising UA 3.38 million in foreign exchange and UA 4.59 million in local currency. The estimates also include an average provision of 5% for contingencies as well as annual inflation rates of 3% for foreign exchange and 5% for local currency. 6. SOURCES OF FINANCE

The project will be financed jointly by an ADF loan and the Mauritanian Government. The ADF loan, in the amount of UA 5.98 million, represents 75.03% of total project cost, which includes 100% of foreign exchange costs and 56.68% of local currency costs. The Government’s contribution (UA 1.99 million), including UA 1.4 million from repayments for the Poverty Reduction Project credit fund, represents 43.32% of the total project cost in local currency. It will cover expenditures relating to transport equipment, leasing of the project office, and 69.43% of the “Miscellaneous” category, including the credit fund and institutional support to MFIs. 7. PROJECT IMPLEMENTATION The project will be implemented by the Integration Department of the Commission on Human Rights, Poverty Reduction, and Integration (CDH/LCP/I), which will be strengthened with staff from the previous poverty reduction project completed in June 2004 and whose performance was deemed satisfactory. This staff will be retained, and additional staff will be hired for the implementation of this project.

8. CONCLUSIONS AND RECOMMENDATIONS 8.1 This project falls within the framework of the implementation of the national poverty reduction strategy, which identifies microfinance as an essential tool for reducing poverty, thus contributing to the achievement of the MDGs. The project will help to improve the supervision and control framework for microfinance, making it more conducive to the development of MFIs. The capacities of the main Government structures responsible for microfinance will be strengthened. Thanks to the project, 245,000 people, of whom 147,000 women, will have access to viable and sustainable microfinance services. At the end of the project, 10 MFI networks representing about 60 funds will be professional and close to

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financial autonomy, and will help increase coverage of demand for quality microfinance services in the whole country by at least 5% by 2011. 8.2 It is therefore recommended that an ADF loan of UA 5.98 million be granted to the Government of the Islamic Republic of Mauritania for the purpose of implementing the project, as described in this Appraisal Report.

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MAURITANIA - PROJECT TO BUILD THE CAPACITIES OF MICROFINACE STAKEHOLDERS RESULTS-BASED PROJECT LOGICAL MATRIX

OBJECTIVES EXPECTED OUTCOMES BENEFICIARIES PERFORMANCE INDICATORS LEVEL OF INDICATOR TO BE

ATTAINED - SOURCES ASSUMPTIONS/RISKS

SECTOR GOAL Impact Indicator Improve access of the working poor to viable and sustainable financial services, with a view to reducing poverty.

The incidence of poverty is reduced

Mauritanian population Proportion of the population living in poverty

From 46.7% in 2004 to 35% in 2010 Source: Report on the implementation of the PRSP and on progress in the implementation of the MDGs

The implementation of the poverty reduction strategy paper continues

PROJECT OBJECTIVE Intermediate Outcome Indicators Build the capacities of stakeholders with respect to the supply and demand for microfinance services

1.1 The supervision and control environment is made conducive to microfinance development 1.2 The supply of financial services is extended to the majority of the population in the project area. 1.3 The demand for the financial services of IGA and MSE promoters is improved

Microfinance stakeholders MFIs and the working poor and the MSEs in the project area MFIs and the working poor and the MSEs in the project area

1.1.1. Increase in the number of MFIs constituted into networks, legally exercising their activities and managed according to best practices. 1.2.1 Increase in the number of MFI customers, 60% of whom are women 1.2.2 Increase in loan portfolio of MFIs and in the savings they collect 1.3.1 Increase in the number of IGAs and MSEs financed Source: Data from the BCM; MFI reports; quarterly project reports, and, mid-term and end of project appraisals

1.1.1.1 This figure rose from 5 in 2006 to about 7 in 2009 and about 10 in 2011 1.2.1.1 From 139 000 in 2006 to 180 000 in 2009, and 200 000 in 2011 1.2.2.1 The amounts of UA 2.5 million (loans) and of UA 4.9 million (savings) in 2006 increase by 10% and 8%, respectively, per year until 2011. 1.3.3.1 From 40 000 IGAs in 2006, this number increases by 10% per year until 2011. From 5 000 MSEs in 2006, this number increases by 5% per year until 2011.

Assumptions 1. The Mauritanian Government remains determined to implement national strategies related to microfinance and MSEs 2. The environment is conducive to the development of MFIs, IGAs, and MSEs

ACTIVITIES Output Indicators (outputs) I. Component 1: Improvement of supply of microfinance services (resources: UA 5.03 million) Sub-Component 1.1 Improvement of the legal and supervisory framework of microfinance 1. Design and implementation of the accounting plan, and preparation of modules for training staff and elected officers of MFIs

1.1 MFI monitoring and control framework and tools conducive to microfinance development

The BCM and MFIs 1.1.1 New accounting plan adapted to microfinance

1.1.1.1 The plan is produced in 2009, and used by all MFIs in 2011

2. Coaching of inspectors, training of BCM senior staff, and study trips

2.1 Capacity to supervise and control the sector strengthened

The BCM and the microfinance sector

2.1.1 Number of MFIs inspected

2.1.1.1 From 35% in 2006, to 60% in 2009, and 100% from 2011

Risk of mobility of staff of supported structures Mitigating measures: Training of a large number of senior staff, and implementation of incentive benefits and measures to retain the staff trained

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OBJECTIVES EXPECTED OUTCOMES BENEFICIARIES PERFORMANCE INDICATORS LEVEL OF INDICATOR TO BE ATTAINED - SOURCES

ASSUMPTIONS/RISKS

3. Training, study trips, equipment, furniture, 02 impact assessments of MFI activities on poverty reduction and support for monitoring and evaluation of the NMFS

3.1 Capacities to supervise as well as monitor and evaluate actions in the sector are strengthened 3.2 Monitoring and evaluation of the NMFS is improved

CDH/LCP/I Integration Department, including the microfinance service and the microfinance sector

3.1.1 Number of CDH/LCP/I senior staff with knowledge of microfinance and skills in monitoring and evaluation tools 3.2.1.1 Quarterly report on the implementation of the NMFS

3.1.1.1 This number increases from 1 person in 2006 to 3 in 2009 3.2.1.1 Six reports are produced and disseminated in 2009 and 10 in 2011

4. Establishment and management of a database on MFIs and MSEs for the dissemination of the code of ethics among MFIs and for the management of the MFI web site

4.1 Better information on the sector 4.2 Microfinance sector cleaned up

CDH/LCP/I Microfinance sector

4.1.1 Microfinance data base 4.1.2 Number of MFIs applying the code of ethics

4.1.1.1 It is available and is used by at least 80% of stakeholders in 2009 and it is updated annually 4.1.2.1 Thirty percent in 2006, 60% in 2009, and 100% in 2011

5. Equipment and training of SECF senior staff who are responsible for microfinance

5.1 Support to women’s MFIs will be professionalized and in accordance with best practices

SECF and two women’s networks (GFEC and Nissa Bank)

5.1.1 SECF withdraws from management of the two networks

5.1.1.1 From 2009, SECF activities are limited to the supervision of their activities; in 2011, they are fully autonomous

Sub-Component 1.2: Building the capacities of MFIs 1. Conduct of a study on the development of MFI services and products

1.1 Services and products better adapted to the needs of MFI customers

MFI clients 1.1.1 Increase in range of financial services and products offered by MFIs

1.1.1.1 In addition to savings and credit, money transfer, insurance, etc. as from 2011

2. Procurement of computer and office equipment, training of staff and fund management bodies, coaching of MFIs, exchange visits and training abroad on specialized themes

2.1 Communication of operational and financial information improved 2.2 Operational and organizational capacities of MFIs improved

The 50 MFIs (32 existing ones and 16 to be created)

2.1.1 Number of MFIs that own reliable MIS and that transmit financial statements that respect sector norms 2.2.1 Operational and financial efficiency of MFIs

2.1.1.1 This figure rises from 5 networks in 2006 to 7 in 2009, and 10 in 2011 2.2.1.1 In 2009, the existing MFIs and those created cover 60% and 20%, respectively, of their operating costs, and 100% and 50 % in 2011

Sub-Component 1.3: Support for establishment of MFIs in rural areas 1. Institutional support to MFIs interested in expanding to rural areas

1.1 Offer of quality microfinance services in rural areas increased

The 16 MFIs, of which 6 women’s, and the promoters of IGAs and MSEs

1.1.1 Number of MFIs established and developed in rural areas 1.1.2 Number of MFIs that have attained financial autonomy

1.1.1.1 This figure rises from less than 10 in 2006 to more than 25 as of 2009 1.1.2.1 In 2011, 30% of these MFIs

2. Study on promoting the establishment and development of MFIs in rural areas.

2.1 Better understanding of constraints on the establishment of MFIs in rural areas and more suitable support

The MFIs, guidance and supervisory structures, TFPs and the rural populations

2.1.1 Report of the study and incentive measures of the Government and TFPs

2.1.1.1 The report is produced and disseminated in 2009, and in 2011, incentive measures refer to it

Sub-Component 1.4: Financing MFIs 1. Credit Fund 1.1 Access of MFIs to improved

source of finance 1.2 Replenishment of the credit fund is improved

50 MFIs, of which 31 women’s

1.1.1 Rate of absorption of credit fund by MFIs 1.1.2 Recovery rate of credit fund

1.1.1.1 Fifty percent of the credit fund is absorbed in 2009 and 100% in 2011. 1.1.2.1 More than 95% for the whole period

Risk of non-repayment of loan by customers and MFIs Mitigating measure: Sensitization and training of customers; rigorous selection of MFIs; close monitoring by the Monitoring Committee; contract includes a suspensive clause

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OBJECTIVES EXPECTED OUTCOMES BENEFICIARIES PERFORMANCE INDICATORS LEVEL OF INDICATOR TO BE ATTAINED - SOURCES

ASSUMPTIONS/RISKS

II. Component 2: Improvement of demand for financial services (Resources: UA 3.54 million) Sub-Component 2.1: Improvement of information for promoters of IGAs and MSEs 1. Update, validation, and dissemination of the results of the study on growth-oriented niches, IEC campaigns, and acquisition of documentation for the 13 Wilayas

1.1 Improved access to information on microfinance, IGAs and MSEs, and themes relating to the improvement of living conditions

Target population in Nouakchott and in the 9 regions

1.1.1 Number of IGAs or MSEs in areas identified as growth-oriented

1.1.1.1 20% in 2009 and 35% in 2011

Sub-Component 2.2: Building the Capacities of Promoters of IGAs and MSEs 1. Training in management, specific technical training for MFI customers and coaching of MSEs

1.1 Profitability of IGAs and MSEs increased

MFI customers, 60% of whom are women

1.1.1 Number of IGAs keeping accounts 1.1.2 Number of IGAs that are upgraded to MSEs

1.1.1.1 50% in 2009 and 80% in 2011 1.1.2.1 At least 30% in 2011

Sub-Component 2.3: Institutional support to PNIME and ANAPEJ 1. Technical assistance, equipment, and training 2. Technical assistance

1.1 Capacity to monitor and evaluate MSEs and coordinate actions 2.1 Capacity to select young promoters, and help them compile their documents is improved

PNIME, MSE targets, 20% of whom are women ANAPEJ, MSE targets, 20% of whom are women

1.1.1 Data on MSE and actions that promote MSEs

1.2.1 Number of youths supervised by ANAPEJ

1.1.1.1 Data available in 2009 and updated annually 1.2.1.1 20% increase per year

III. Component 3: Project Management (Resources: UA 1.43 million) 1. Strengthen CDH/LCP/I Integration Department (staff, equipment, furniture; training) responsible for implementing the project

Transparent, efficient and effective management of project activities

CDH/LCP/I Integration Department

1.1.1 Compliance with implementation schedule

1.1.2 Submission of activity and audit reports within the prescribed time frame

1.1.1.1 100% project physical implementation rate in 2011

1.1.1.2 100% disbursement rate in 2011

1.1.2.1 20 quarterly reports submitted in 2011 on time

1.1.2.2 5 audit reports submitted on time in 2011

1.1.2.3 1 mid-term review report submitted in 2009 and 1 completion report at end 2011

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1 ORIGIN AND HISTORY OF PROJECT 1.1 In spite of development efforts, poverty in Mauritania is still a major concern. Indeed, 46.7% of the population was considered as poor in 2004, and the per capita GDP stood at US$ 398, ranking Mauritania 154th out of 175 countries on the Human Development Index. It was against this backdrop that the Government prepared its 2001-2015 Poverty Reduction Strategy Paper (PRSP). Its 2006-2010 Action Plan seeks to reduce the proportion of the poor from 46.7% in 2004 to 35% in 2015. To achieve this ambitious objective, one of the pillars of the PRSP is to develop the growth and productivity potential of the poor, notably by developing the microfinance sector. In this perspective, in 2003 the Government prepared and adopted its National Microfinance Strategy (NMFS) aimed at improving the access by the poor to sustainable financial services. 1.2 However, the fragility of Mauritanian microfinance institutions (MFI), coupled with their weak operational and organizational capacities, and their limited financial autonomy, impede the development of microfinance in the country. They only cover a low proportion of the needs of the population. Indeed, at end-2004, the 67 MFIs authorized by the Central Bank of Mauritania (Banque Centrale de Mauritanie - BCM) covered, in terms of members/subscribers, less than 10% of the working poor in Mauritania, compared to an average of 15% for the West African Economic and Monetary Union (WAEMU) countries. 1.3 The Bank Group plays a predominant role in the microfinance sector in Mauritania, complementing the interventions of several other partners, including CIDA, UNDP, the World Bank, UNICEF, and GTZ. Indeed, the Poverty Reduction Project (PRP) financed by the African Development Fund (ADF) from 1998 to 2004 and the African Development Fund Micro-Finance Initiative for Africa (AMINA) from 1998 to 2000 have made significant contributions to the emergence of micro-finance in Mauritania. The main activities of the PRP were extensive sensitization among poor and vulnerable groups, including women, to savings and to credit, financing their economic activities through the intermediary of 35 microfinance institutions (MFIs), building the capacities of the latter in partnership with the AMINA programme, and opening seven savings and credit associations (Caisses populaires d’épargne et de credit - CAPEC). 1.4 The satisfactory performance of the PRP, confirmed by the completion reports prepared by the Government and the Bank, as shown in Annex 4, led the Government to submit two financing requests to the Bank for the development of micro-finance and the participation of the Bank in the financing plan for the CAPEC network. These requests were underpinned by the need to consolidate the outputs of the PRP, given the fragility of the MFIs, which were all created towards the end of the 1990s. 1.5 This project, identified in July 2001 during the PRP midterm review, was prepared in June 2002, appraised in February and June 2005, and re-appraised in April 2006 (see details in Annex X). This time-lag is due to the fact that resources could not be mobilized under ADF IX to finance the project, and to the fact that the project was not presented to the Boards of Directors of the Bank in 2005 because the Country Strategy Paper (CSP) had not been finalized, so as to maintain consistency with the second phase of the 2006-2010 PRSP, a semi-finalized version of which was obtained only in May 2006. Lastly, following the reduction of ADF X resource allocation, the available resources for financing the project, initially UA 8 million, were reduced to UA 5.98 million. Consequently, presentation of the project to the Board was delayed by four months.

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1.6 The project also falls within the framework of the Bank’s 2006-2005 CSP for Mauritania, currently under consideration, in particular, its first pillar concerning the development of microfinance. It is in keeping with the Bank’s 2006 Microfinance Policy and Strategy Paper. It builds on the gains of the PRP completed in June 2004 and on other Bank operations that have microfinance components, such as the livestock-breeding project and the artisanal fishing project, as well as on interventions by the government, NGOs, and technical and financial partners in the area. Moreover, the project will make a significant contribution to the achievement of the objectives of the 2003-2006 action plan of the national microfinance strategy. Indeed, the project comprises 37 of the 97 actions that remain to be achieved, and its budget is four times higher than that of the strategy. 1.7 The current political and economic climate is characterized by three significant events. First, in August 2005, the Military Council for Justice and Democracy seized power and established a transition government. The latter has launched a democratization process that is receiving increasing support from the international community, with, notably, the organization of the Referendum on the Amendment of the Constitution in June 2006, parliamentary and council elections which took place in November 2006 and the presidential elections scheduled for March 2007, and the establishment of a new parliament and government, scheduled for May 2007. Second, the launching of oil production since February 2006 has opened up the perspective of Mauritania becoming a middle-income country by 2007 with an estimated per capita GDP of more than US$1,000 as of that year. Third, the normalization of relations between Mauritania and the Bretton Woods Institutions, after the suspension of the implementation of the second phase of the 2003-2006 Poverty Reduction and Growth Facility (PRGF) on the grounds of transmission of incorrect data by Mauritanian authorities. With support from the transition government, economic and financial data for the 1992-2004 period have been revised. Moreover, as a result of the macro-economic performance recorded by Mauritania in 2005, the progress made in the implementation of the 2001-2004 PRSP, and the completion of the new PRSP, as well as the rehabilitation of the country’s financial situation, Mauritania has just qualified for Multi-lateral Debt Relief Initiative from the IMF, the World Bank, and the ADF. 2. FINANCING THE ECONOMIC ACTIVITIES OF THE POOR 2.1 Poverty in Mauritania 2.1.1 According to the 2004 Permanent Survey on the Living Conditions of Households, Mauritania recorded a net decline in the number of poor people in recent years. Indeed, the percentage of individuals living below the poverty line fell from 51.0% in 2000 to 46.7% in 2004, a 4.3 point decline in four years, while extreme poverty declined by more than 6 points, dropping from 34.1% in 2000 to 27.9% in 2004. The decline in poverty at the national level was accompanied by a near stagnation in inequality, measured by the Gini coefficient, which rose from 39 % to 39.3% over the same period. In fact, poverty could have declined further over the 2000-2004 period considering the growth recorded during this period (4.6% on average over the 2001-2004 period), but this trend was hampered by the persistence of inequalities. 2.1.2 Poverty is also reflected in the precarious living conditions, particularly with respect to access to water and sanitation. In fact, in 2004, close to 47 % of households had no access to drinking water and 33 % of the population had no access to a sanitary facility within

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a 5-km range. Considerable progress has been recorded in basic education: the gross enrollment ratio (GER) rose from 88.4 % in 2001-2002 to 95 % in 2005; and, for the third consecutive year, the GER for girls was higher than that for boys (97.9 % compared with 94.1 %). However, the education system is still characterized by inefficiency and the poor quality of education, regional and gender disparities at the secondary and tertiary levels, and a persistent high rate of illiteracy among adults, estimated at 42.5 % in 2005. The HIV/AIDS problem, which still has a relatively low prevalence rate—estimated at less than 1 %—should not be ignored because of the presence of multiple risk factors such as poverty, promiscuity, lack of information, particularly among illiterate people, and migration between high risk countries. 2.1.3 Poverty in Mauritania, as in several African countries, remains, above all, a rural phenomenon; the incidence of poverty stands at 59 % in rural areas and at 28.9 % in urban areas. Close to three-quarters (74.8 %) of the poor in Mauritania live in rural areas. These overall means mask geographic disparities: in 2004, the poverty index stood at 25.9 % for Nouakchott, 33.4 % for the other cities, 66.3 % for the “Rural fleuve” area (Senegal River Valley), and 57.2 % for the “Rural autre” (other rural) area. Peri-urban areas are severely affected by poverty, which is characterized by precarious housing, unemployment, and underemployment. 2.1.4 Poverty is also a female phenomenon. By and large, in recent years there have been positive changes in the condition of Mauritanian women, who accounted for 51.2 % of the population in 2004. However, efforts must still be made to close the gap between the conditions of women in relation to that of men. In fact, the incidence of poverty among female-headed households rose from 40 % in 2000 to 45 % in 2004; the participation rate of women (39.1 %) is far below that of men (91.9 %); and the female literacy rate is 49.5 %, compared with 66.5 % for males. With respect to participation in politics, only 3 % of women are present in Parliament and in the municipal councils. However, women are very active in civil society: there are more than a thousand women’s cooperatives; more than 60 % of MFIs are female-owned; and women represent more than 60 % of the clients of all MFIs. 2.1.5 The causes of poverty in Mauritania are related to several factors, including the sustained rate of demographic growth (2.4 %) in view of the inadequate growth rates recorded during 2001-2004 (4.6 %); high rates of inflation, with an annual average of 6.5 % over the 2001-2004 period, and non-distributive growth. In particular, poverty in rural areas is related to the almost total dependence of the populations on agro-pastoral activities, which are dependent on weather conditions, the lack of water resources, the low level of access of the poor to land, the landlocked nature of production areas, and the absence of infrastructure that can facilitate the marketing of produce. 2.2 Economic Activities of the Poor 2.2.1 In Mauritania, almost all working poor people are involved in agriculture, fishing, or livestock breeding in rural areas, or in the informal sector in urban areas. Since most of them are not educated, are unskilled, and have no capital, the majority of them are often engaged in precarious informal sector activities, which are characterized by lack of capital accumulation and a high level of poverty. The entities that comprise this sector are mixed in terms of the volume of their activities and their mode of operations. These criteria underpin the distinction in Mauritania between micro-activities, commonly known as “income-generating activities” (IGA) and micro and small enterprises (MSE). These activities are

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dominant in the business sector (81%), followed far behind by the craft industry and services; 82% of them are individual/private enterprises. Because of the constraints facing them (low level of education, confinement to less profitable activities, in saturated sectors, and so on), the majority of women remain at the level of IGAs and only 20 % progress to MSEs. 2.2.2 According to the inventory of MSEs conducted in 2001 by the Mauritanian Government, in partnership with the ILO and the UNDP, the informal sector accounts for 70% of people employed in urban areas. It is the main source of employment, with 4.2 informal jobs for 1 formal job, and grows at a rate of 8.5% per year. It employs 80% of working women. However, these jobs remain unstable, unskilled, are most often developed in a sporadic manner, and lack security. Approximately 75 % of micro-enterprises go out of business after 3 to 5 years. 2.2.3 These shortcomings are attributable notably to the discrepancy between education, training, and employment and to the constraints of the informal sector. Indeed, the current environment in Mauritania is not conducive enough to the development of MSEs, which are in most cases distrustful of the Taxation Services, often forcing them to seek refuge in the informal sector. In addition to these constraints, there is lack of information about their tax and administrative obligations. 2.3 Financial Sector in Mauritania Overview of the Financial Sector 2.3.1 The financial sector in Mauritania comprises the Central Bank of Mauritania (la Banque Centrale de Mauritanie - BCM), 9 commercial banks, 7 insurance firms, 2 financial institutions specialized in agriculture and fisheries, 67 microfinance institutions authorized at the present time, as well as a leasing company. Three specialized financial institutions provide access to bank credit for small and medium-sized enterprises: UNCACEM, for the financing of agriculture; maritime credit for the financing of fisheries; and the leasing firm created in 1999 to provide financial products that are better adapted to the needs of small and medium-sized enterprises. 2.3.2 The sector presents the following characteristics, confirmed by the findings of the evaluation of the financial sector in Mauritania, conducted by the World Bank and IMF in 2005-2006: (i) underdeveloped financial services, with 88% of the sector’s assets held by commercial banks, while bank loans and deposits represent less than 20% of GDP; (ii) acceptable profitability of banks despite insufficient provisions for non-performing loans; (iii) monopoly of the capital of commercial banks by a limited number of shareholders, resulting in a high concentration of risk, which weakens the sustainability of the system and its effective participation in the financing of economic activity; (iv) the lack of diversification in products and services offered by banks, resulting in high sensitivity of their financial performance to interest rates, as the products generated by the latter constitute their primary source of income; and (v) the concentration of commercial bank transactions in import-export and short-term financing. Consequently, the promoters of income-generating activities and of micro and small enterprises (MSE) are virtually excluded from bank financing.

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2.3.3 The Central Bank of Mauritania (BCM) has launched reform aimed at reviewing the legal and regulatory framework, improving the accounting framework and the reliability of economic information and, consequently, the consistency and quality of its audits. Despite these efforts, while waiting for the real reform of the financial sector, scheduled since the end of the 1990s, economic operators continue to suffer from weak financial intermediation and from difficulties gaining access to credit. The World Bank has planned, for 2007, a project to support the financial sector that will seek to address some of the constraints mentioned above. Microfinance 2.3.4 Microfinance in Mauritania is characterized, on the one hand, by the fact that it is relatively young--the first experiences date back to the 1990s-- and, on the other hand, by the absence of reliable data on the sector that accurately indicates the market share of microfinance in the financial sector. However, it is estimated that microfinance stakeholders account for only 1% of the assets of the financial sector. Microfinance is also characterized by the presence of a multitude of stakeholders, the majority of whom are small in size and comprise less than 300 members, use different approaches and mechanisms, and are concentrated in Nouakchott and in some secondary towns. 2.3.5. At the present time, there are 67 cooperative-style MFIs, registered by the BCM, some of which are grouped in savings and loans networks; the most significant are the following: savings and credit associations (CAPEC) network, Mutuelle Association des Femmes pour l’Epargne et le Crédit (M-AFEC), Mutuelle de Groupements des Femmes pour l’Epargne et le Crédit (GFEC), the mutuelle de Groupements Association de Femmes pour l’Initiative Féminine (GAFIF) (see presentation of MFIs in Annex II). As well as these institutions, there are non-mutual benefit institutions that could be registered, with the adoption of the new ordinance governing microfinance which recognizes this type of institutions (see 2.4.1 below). This is the case, for example, of the Nissa Banks with one of the highest outreach with more than 60,000 members. The formalities for its registration are underway. Moreover, there are thirty or so microfinance experiences which fall under two types: (i) development projects or programmes that comprise a micro-credit component, and (ii) NGOs and associations operating in the microfinance area. 2.3.6 In Mauritania, each association (or window) is considered an MFI that needs to be registered before it becomes operational. At the present time, 50 of these associations are grouped in networks. In 2004, the 67 authorized MFIs had close to 139,000 members, of whom 82,913, or 60%, were women. Their equity capital stood at MRO 374 million (UA 0.93 million), or 15% of deposits, valued at more than MRO 2.5 billion (UA 6.3 million) and outstanding credit equivalent to MRO 932 million (UA 2.3 million), or 37.3% of deposits. They offer savings and credit services. Non-interest-bearing demand savings/deposits constitute the largest share of mobilized resources, while the interest rate on term deposits is 3 to 6% per year by some MFIs. At 31 December 2004, the total amount of savings stood at MRO 1.9 billion (UA 4.8 million). The accumulated volume of distributed credits stood at MRO 5 billion (UA 12.5 million) with a risk portfolio that stood at an average of 8%. 2.3.7 The amount of credit granted by MFIs varies from UA 50 to UA 1,000 and, in the majority of cases, serves to finance activities in the commercial and productive trades sectors, although some credit is granted to meet social or consumption needs. The guarantees required by the MFIs are essentially blocked or secured savings, joint and several guarantee, and, for relatively large financing, physical guarantees. With respect to interest rates, the refinancing rate at the BCM is currently 14 % and the exit rate of primary institutions is capped at 24 %.

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This ceiling will be lifted to a level to be determined in the implementing instruments of the new ordinance so as to fight against usury. Given the absence of data on all MFIs, performance indicators for the four most representative MFI networks are presented in the table below.

Table 2.1 Performance Indicators for the four Most Representative Microfinance Networks

INDICATOR PROCAPEC MAFEC GFEC GAFIF 2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004 Recovery Rate 99 % 97% 98% 99% 98% 98% 81% 81% 76% 100% 100% 99% Operational Efficiency 176% 232% 167% 23% 47% 97% 69% 111% 52% 16% 50% 76% Financial profitability 23% 37% 8% 72% 55% 82% 9% 66% 155% 22% 37% 51% Financial Autonomy 5% 6% 5% 5% 14% 8% 45% 36% 71% 91% 9% 13% Equity capital (MRO million) 66 91 114 1.9 8.8 5.8 14 10 44 1.1 1.7 2.5 Profit (MRO million ) 15 33 9.3 1.4 4.7 4.7 0.09 0.901 3.4 0.239 0.617 1.3 Total Assets (MRO million ) 1260 1654 2222 38 63 71 31 29 62 1.2 17 18 Number of clients Of which % of women

21260 (33)

27993 (34)

37952 (40)

2500 (100)

3000 (100)

3400 (100)

- (100)

- (100)

33295 (100)

- (100)

- (100)

876 (100)

2.3.8 These indicators should be interpreted with caution. On the one hand, the quality and reliability of data are not guaranteed because of weak information and management systems and of the inability to properly use management tools. On the other hand, there are wide gaps in terms of the financial ratios of structures, depending on whether or not they received institutional support. This is the case with the PROCAPEC and GFEC networks, whose operating costs are covered by the government or the donors who supported their creation. In general, all these structures recorded positive results with respect to loan portfolio management, except for the GFEC whose repayment rate fell from 81% in 2002 and 2003 to 76% in 2004 because of the rapid and uncontrolled growth of the network due to the absence of appropriate management information systems (MIS) and of support measures. A repayment plan is in operation to improve the performance of the GFEC loan portfolio with support from the SECF. Overall, the operational and financial efficiency rates are satisfactory. However, their financial autonomy remains low because of the floating structure of their social capital, which is composed of the contributions of members. 2.3.9 The informal financial system, which gave rise to some MFIs, developed outside the traditional financial circuits in response to the specific needs of the different categories of clients or economic operators who are active in the society but are dissatisfied with the formal system. Its size is not well known, but it is generally known that the amounts handled are considerable and far exceed those handled in formal microfinance, or even the entire official financial system. The operating rules of this system are based on proximity and simplicity. In informal savings and loans institutions, each member is, in turn, lender and borrower. There are many types: traders’ or usurers’ credit with interest rates that may reach 600% per year, intermediaries who keep and sometimes invest the funds of emigrants, exchange dealers and a multitude of community-based financial systems. 2.3.10 Mauritanian commercial banks have little to do with microfinance. The Banque Mauritanienne pour le Commerce et l’Industrie, the Générale de Banque de Mauritanie, the Banque Nationale de Mauritanie and the Bcim Bank have some experience in this area--the management of credit lines ranging from MRO 5 to 50 million (about UA 12,000 to UA 125,000) aimed at financing unemployed graduates and craftsmen. However, these experiences were not conclusive since, in general, these commercial banks prefer that the project providing resources completely supports the risks and the major operating costs related to the pre-selection of MFIs and to repayment. These banks would also prefer that these beneficiary MFIs be grouped into networks that would act as the intermediaries and clients of the banks, which doesn’t yet correspond to the current situation of all MFIs.

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2.4 Legal and Institutional Framework of Microfinance 2.4.1 Like all other financial institutions in Mauritania, MFIs are under the supervisory authority of the Central Bank of Mauritania (BCM). In this regard, the BCM is vested with the authority to define regulations, grant and withdraw licenses, as well as supervise and monitor MFIs, pursuant to the provisions of Law No. 98-008 of 28/01/1998 to regulate mutual benefit societies or thrift and loan cooperatives; this law was repealed by Ordinance No. 2007-005 of 12 January 2007 issued following broad consultations with all the actors and technical and financial partners. Ordinance No. 2007-005 introduced a diversity of MFI statutes with the following three categories: mutual benefit thrift and loan institutions, limited liability companies, and NGOs and projects. This innovation eliminates the constraint relating to restrictive nature of the former law which recognized only the first category. The implementing texts, being finalized, are also based on consultations with the actors of the profession in a workshop organized on 20 and 21 December 2006. The new ordinance provides for a transition period of six months after which MFIs are expected to comply with the provisions. 2.4.2 Within the BCM, the Banking and Financial Supervision Department (Direction de la supervision bancaire et financière) is responsible for microfinance. It comprises a General Inspection Sub-Division, with a corps of 14 inspectors who carry out onsite inspections, and an Off-Site Inspection Sub-Division comprising four services in charge of: (1) desk supervision of banks (3 employees); (ii) desk supervision of financial and cooperative institutions (2 employees); (iii) credit reporting and payment incident (4 employees); and (iv) liaison with banking sector users (3 persons). All these senior staff, including those of the MFI desk supervision division, are not specialized in microfinance. Moreover, their numbers are not sufficient for them to carry out supervision as prescribed by the regulations. 2.4.3 There are complementary legal dispositions to those mentioned above, in particular, Article 28, paragraph 3 of Decree No. 094-2000 of 28/09/2000 concerning the reorganization of the Commission on Human Rights, Poverty Reduction, and Integration (Commissariat aux Droits de l’Homme, à la Lutte Contre la Pauvreté et à l’Insertion - CDH/LCP/I). By virtue of this decree, the mission of the CDH/LCP/I, among others, is to promote the emergence of a decentralized financing system with a view to fighting poverty and to improving the microfinance environment. It plays an important role in the implementation of national strategies related to microfinance and to the development of MSEs, of which it is the institutional anchor, and in the mobilization of financing earmarked for them. It supports MFIs primarily by building their capacities. 2.4.4 The Secretariat of State for Women’s Affairs (Secrétariat d’Etat à la Condition féminine-- SECF) intervenes in the microfinance area in the context of the implementation of the National Strategy for the Promotion of Women (Stratégie nationale de promotion féminine -- SNPF) prepared in 1995 and updated for the 2005-2008 period. The strategic pillars of the SNPF include strengthening the economic participation of women, notably through activities aimed at improving access of the economic activities of women to financing. 2.4.5 The sector has a professional association, APROMI, which was created in 1997 with a view to building a framework for consultation and exchange among microfinance stakeholders, building the capacities of its members and representing them in dealings with

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public authorities and donors on all questions related to microfinance. This MFI coordination structure currently comprises 59 members. It was supported by the UNDP for 5 years and currently receives support from CDH/LCP/I and OXFAM. 2.4.6 With respect to its activities, APROMI has organized about two dozen training sessions for MFIs, including general and thematic training, in partnership with the programme to strengthen the capacity of MFIs in Francophone Africa (Programme de renforcement des capacités des IMF en Afrique francophone - CAPAF). It has also helped about 40 MFIs prepare documents for their registration. However, it is plagued by the absence of resources for its operations, the lack of a clear vision of its role in the microfinance sector, and institutional problems, prompting the association to act in an opportunistic manner depending on the financing available. Consequently, the sector does not really have a framework for consultation and interface in the dialogue with the government and with technical and financial partners (TFP). To remedy this situation, the association is being restructured with support from the UNDP. 2.5 Government Policies and Strategies 2.5.1 Poverty Reduction Strategy Paper: In January 2001, the Mauritanian government adopted a Poverty Reduction Strategy Paper (PRSP) covering the 2001-2015 period. In June 2001, the Mauritanian parliament passed a framework law establishing the PRSP as the framework for all development actions planned in the country. The first implementation phase of the PRSP lasted from 2001 to 2004; the country is currently completing the preparation of its action plan for the 2006-2010 period. Its main objective is to reduce poverty from 46.7% in 2004 to 35% in 2010 and 15% in 2015, and to achieve the MDGs in advance of 2015.

2.5.2 The development of microfinance falls under the second pillar of the PRSP, which seeks to anchor growth in the economic sphere of the poor and represents a central theme of the government’s strategy and an essential vehicle for the reform undertaken to strengthen and diversify the national financial system. Indeed, by developing a culture of savings and the financing of MSEs and income-generating activities (IGA) for poor populations, who have no access to banking services, microfinance helps eliminate a major constraint to the access of the poor to means of production. 2.5.3 National Microfinance Strategy (NMFS)) and National Strategy for the Promotion of MSEs (NSMSE): These two strategies, prepared by the government and its technical and financial partners, in particular the UNDP and ILO, were adopted in November 2003. The NMFS aims to allow poor populations access to sustainable basic financial services, to coordinate the development of MFIs, to improve their management tools and their operational capacities and to effectively ensure the control and supervision of their activities. Such actions will guarantee the security of depositors’ savings and will increase MFIs’ capacity to support the development of micro and small enterprises. However, the strategy does not provide for an in-depth analysis of the sector, and especially of its shortcomings and of real demand, which seems largely underestimated with respect to the number of working poor in the country. The result is a very weak budget of MRO 3.5 million, and quantitative objectives for 2008 (137,000 MFI members, MRO 4.5 billion in credit granted, and MRO 3 billion in savings collected), which are sometimes, lower than actual data. 2.5.4 The NSMSE seeks to develop MSEs and its implementation is underpinned by the PNIME, whose main objectives are: (i) to support the creation and development of MSEs;

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(ii) to put in place a financing system adapted to the sector; and (iii) to develop adequate production, marketing, and management techniques. All this, in order to create synergies for promoting the development of a base of MSEs integrated with the productive sector. 2.6 Financing of the Sector and Operations of the Government and Technical and

Financial Partners 2.6.1 The microfinance sector is financed primarily by technical and financial partners (TFP) who have injected about US$ 25.5 million into the sector since 1997, compared to about US$ 6 million in Government contributions (Table 2.2 below).

Table 2.2 Financing of the Sector by the Government and TFP Operations

Institution Type of support Amount

US$ million Year BCM Banking supervision 0.25 2003-2006 Support for the putting in place of CAPECs (BCI financing) 4.01 1998-2005 CDHLCPI Operational subsidies to MFI 0.22 2001-2006 Support to APROMI 0.04 2001-2006 Audit of MFIs 0.11 2007 Celebration of International year of Micro-credit 0.02 2005 PNIME line of credit 0.15 2006

Building human resources capacity of MFIs 0.17 2001-2002

Coverage of operating costs of PIU of PRP pending start up of PRECAMF (June 2004-June 2007 0.53 2004-2007

Literacy programme for MFI members (PRP) 0.32 2001-2007

SECF Provision of premises and secondment of senor staff to programmes and MFIs financed by TFPs (GFEC, BDFG and Nissa Bank)

NA 1997-2005

Sub-total Gov. 5.82 AFRITAC Inspection guide for the BCM and design and use of standard analytical

tools for documentary audit N.A. Ongoing

UNDP Preparation and adoption of NMFS & NSMSE Finalization of Bill, implementing instruments, institutional support and credit fund for GFEC; support to PNIME; restructuring of APROMI; study on accounting plan specific to micro-finance and on the financing structure of MFIs

1.64

2002-2004 2006-2007

World Bank Credit fund in the Urban Development Programme Study on the financing structure of MFIs

1.90 0.05

Ongoing 2007

ADF Poverty Reduction Project, co-financed with CIDA and the World Bank

6.67 (ADF 5.45)

1998-2004

AMINA (ADF) Building the capacities of MFIs 0.21 1998-2000 UNDP-UNICEF Institutional support and credit fund to BDFG and Nissa Bank 0.24 1997-2005 UNDP-Oxfam GB Code of ethics, methodology guide, training 0.35 1998-2003 UNICEF and Oxfam GB

Support to Nissa Bank, including a credit fund 0.55 1997 2002-2005

GTZ Support to CECA NA. Since 1996 FENU Support to APME MFI 1.3 1997-2002 IFAD & AFESD OASIS project and support to MICO cooperative/union

New project NA. 2.75

1989-2002 2006-2010

Spain New project NA. 3.97 2006-2010 Sub-total TFP 19.63 TOTAL 25.45

2.6.2 Within the framework of government programmes, in particular, those supported by the CDH/LCP/I and the SECF, financing of MFIs is generally granted interest free; this

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creates distortions in the market and reflects these organizations’ poor knowledge of best practices in microfinance. However, as stipulated in the NMFS, the government has recognized the need to stop intervening in this type of activity and to entrust the management of all credit funds to professional and competent institutions. 2.6.3 The main TFPs that intervene in the microfinance sector in Mauritania are the ADF, at the top of the list, followed by the UNDP, and the World Bank. There is a tendency among TFPs to favor the provision of credit funds as opposed to the provision of support in the form of capacity building, whereas one of the challenges facing MFIs is to control growth. The financing and credit lines granted are generally short term (two to three years), whereas to achieve an adequate financing capacity, MFIs need credit lines over more or less long periods ranging from 5 to 10 years. 2.7 Constraints on Microfinance Development 2.7.1 Inappropriate Supervision Framework for the Development of the Sector: (i) the lack of training and experience of BCM staff responsible for MFI supervision, particularly in view of the diversification of MFI statutes introduced by the new ordinance; (ii) supervision, as envisaged, is difficult to implement given the discrepancy between, on the one hand, very detailed financial and accounting information that MFIs are expected to provide and the prudential management ratios that they have to respect, and on the other hand, the weak organizational capacities of most MFIs; (iii) the 5-year tax exemption period that most MFIs benefit from, as of the date of their authorization, is deemed insufficient given that, in general, an MFI only achieves its financial balance after 7 to 10 years of operation; (iv) the setting by the BCM of an interest-rate ceiling, to be revised periodically for bank and MFI credit operations, in order to avoid the application of the usury rate, could have a negative incidence on the capacity of MFIs to achieve financial autonomy. 2.7.2 Weak Capacities of MFIs: Without specific support, most MFIs are not able to prepare reliable accounting and financial statements. Their information management systems tend to be limited to the management of statistics on loans granted, the number of customers served, the volume of savings collected, amounts collected, and the monitoring of outstanding debts to the detriment of analysis of financial statements and ratios to measure performance in terms of operational effectiveness and financial viability. With the exception of CAPECs, which received international technical assistance for several years as well as deficit subsidies, in general, the other MFIs do not have adequate human resources, they have no reliable accounting and information systems and insufficient planning capacities. Moreover, because of the small size of a good number of these MFIs, perspectives for their financial self-sufficiency—coverage of their expenses by the products—are uncertain. Consequently, they depend on external financing for their lending activities, but also to finance their operating costs. 2.7.3 Weak monitoring and Evaluation Systems: This is related to the absence of reliable and comprehensive data, which makes it difficult to perceive real demand (nature, quality, and volume) for microfinance services, which appear to be largely underestimated with respect to the number of poor. This shortcoming also stems from the weak capacities of MFI personnel, the technique used to process data (manual entry or Excel spreadsheet) and inadequate information on the target customers of the MFI, notably their socio-economic characteristics, and their distribution by gender.

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2.7.4 Lack of resources to finance MFIs over the medium and long terms: the existing resources, which are generally provided for a 5-year period, are provided primarily by donors in the context of projects or programmes. Given the insufficiency of stable financial resources, the credits granted by the MFIs to their customers are generally of short duration (less than 24 months, with a high proportion of credits that are less than 12 months), thus penalizing medium-term investment credits. 2.7.5 Poor Quality of the MFI Portfolio: The quality of the MFI portfolio depends on that of the promoters of IGAs and MSEs. Yet, the latter face the following difficulties, which limit their profitability: (i) poor qualifications of IGA promoters and MSE managers in the management of their business, as well as outdated and ill-adapted technology used despite their often indisputable basic know-how, inevitably affecting their productivity and competitiveness; (ii) narrowness of the MSE market attributable to the customers’ low purchasing power, to the limited diversity of their products and services, and to the competition of imports products due to low trade barriers at the borders; and (iii) their ignorance or poor notion of credit, which causes them not to repay the credit obtained, even though they have no collateral. 3. PROJECT AREAS 3.1 Legal Framework Conducive to Microfinance Development As mentioned in Paragraph 2.4.1, the legal framework has been revised with the promulgation of Ordinance No. 2007-005 and the ongoing finalization of the implementing instruments, and the preparation of an accounting plan specific to MFIs and an inspection guide with the support of UNDP and AFRITAC. Nevertheless, in order to ensure that they can effectively apply their training to field work, the corps of inspectors need coaching for the application of its new MFI auditing guide. Moreover, BCM auditing tools (accounting framework and reporting documents) must be improved and adapted to the reality of the MFI. Finally, the 12 senior staff of the desk supervision sub-department and the 14 inspectors who are not specialized in microfinance need to be trained and introduced to microfinance experiences to allow them to better audit and supervise MFIs. 3.2 Capacities of Microfinance Supervisory Structures 3.2.1 The Integration Department in CDH/LCP/I includes a “Microfinance Service” whose mission is to promote the development of microfinance. However, its human, material, and financial resources are largely insufficient for the achievement of its mission. Indeed, this service comprises only four persons, who do not have much experience in the microfinance sector and who lack the logistic and financial means to carry out their mission. 3.2.2 It emerges from the preceding paragraph that the CDH/LCP/I Integration Department needs technical assistance, logistical training, and support (computer equipment, vehicles) in order to develop the capacities of its microfinance service, develop a databank on MFIs and MSEs, ensure monitoring and evaluation of the NMFS implementation and measure the impact of MFI activities on poverty reduction. This support will also introduce the said CDH/LCP/I Department to best practices in microfinance with respect to its role, which should be limited to creating favorable conditions, monitoring and measuring the impact of microfinance actions on poverty reduction. Study tours to countries in the sub-region that are more advanced in the development of microfinance will give these services

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the opportunity to learn lessons of experience from elsewhere. Finally, given the ongoing restructuring of APROMI, which prevents it from playing its role, the CDH/LCP/I Integration Department will take over temporarily, disseminating among the MFIs the microfinance code of ethics produced by the APROMI and hosting the microfinance website. 3.2.3 The departments of Cooperation and of Project Planning at the Secretary of State for Women’s Affairs have set up networks of women’s savings and credit associations that they manage, sometimes through direct credits. However, these departments do not have qualified personnel in the area of microfinance and lack resources to correctly monitor the activities of MFIs and harmonize them with the support of the other stakeholders. Their capacities need to be strengthened to professionalize their support to women’s MFIs by adopting best practices, notably by using professional MFIs to manage the credit funds, and with a view to promoting better collaboration with the other MFI support structures. 3.3 Operational and Organizational Capacities of MFIs 3.3.1 The situation of MFIs can be extrapolated from that of MFIs with the most significant experience, namely, the CAPEC, GFEC, GAFI, M-AFEC and Nissa bank networks. A description of these networks and an analysis of their performance during the past few years are presented in Paragraphs 2.3.6. to 2.3.9 and in Annex II. These results suggest a promising future provided that these associations are supervised to strengthen their institutional, operational, and financial capacities for a while. All these structures have less than 10 years’ experience, which explains their fragility in terms of financial viability. They show weaknesses at the organizational, capitalization, information systems, and internal control levels. These shortcomings hinder development and the promotion of the sector. They highlight the vulnerability of the sector and the need to strengthen its professionalism and to increase its control of risks. 3.3.2 The PRP supported 35 MFIs by financing their activities and providing institutional support. It financed the establishment and equipment of 7 CAPECs. The capacities of these MFIs were also strengthened under the AMINA programme. Thanks to this support, several MFIs were created. Forty-three of them formed networks and succeeded in growing, although none of them has achieved financial self-sufficiency. The system put in place should therefore be strengthened and extended to other regions in order to extend the coverage of financial services to badly served areas, in particular, rural areas. 3.3.3 To improve this situation, MFIs need to train their staff in the use of management tools, the preparation and implementation of business plans as well as information and management systems, gradual empowerment plans, regulation, accounting plans and reporting. However, beyond this training, which is generally offered over a short period and outside their workplace, it is important to envisage coaching. This consists of very close monitoring, for a year or two, to help MFIs capitalize on information received. It is also indispensable that their bodies (board of directors, credit committee and control and inspection) have basic notions of governance, internal control and credit to ensure that management of MFIs is transparent and democratic, reflecting the concerns of the majority of members.

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3.4 Extension of MFI Services to Rural Areas 3.4.1 The majority of institutions are concentrated in urban areas, which are economically more viable, while supply of this type of service is not very widespread in rural areas, with some areas not covered at all. Some programmes operate exclusively in rural areas, such as the FENU project in the Assaba, executed by APME, or the MICO financed by the IFAD and the AFESD for the Ministry of Rural Development (Ministère du Développement Rural -MDR). 3.4.2 This disparity in supply between rural areas and urban areas is attributable to the low population density, difficult weather conditions in some areas, remoteness and landlocked nature of rural areas, scarcity of productive infrastructures, and the lack of private investments which constitute obstacles to the establishment of sustainable MFIs in the said areas because of the high costs of transportation, and so on. Consequently, the capacity of populations to engage in profitable productive activities is limited by the inadequate supply of financial services adapted to their needs. Indeed, the level of local savings is low and the existing financing mechanisms (rotating credit associations, usurers, or agricultural banks) are not adapted to the promotion of income generating activities (IGA). 3.4.3 However, these areas are among the poorest and are the primary target of the government’s poverty reduction strategy. This is why the government and TFPs recognized the need for incentive measures to promote the establishment and development of MFIs in rural areas. These measures include coverage of the cost of expansion to rural areas, consisting of logistics, the cost of training more staff, as well as the assumption of the operating costs of these new structures on a declining scale for a period ranging from 5 to 10 years. This is the period deemed necessary to allow a new MFI to cover its operating costs with the benefits from its operations. The granting of this type of support is justified by the significance of imperfect market conditions in rural areas, which result in transaction costs that prevent private structures from voluntarily expanding to these areas. 3.5 Financing of MFIs 3.5.1 Current resources for financing MFIs are generally provided by the government or by TFPs in the context of projects or programmes, for a period of about 5 years. According to the NMFS, to date, the PRP has acted like the main structure for refinancing MFIs in Mauritania through the PRP credit line of a total amount of MRO 568 million (about UA 1.4 million) granted to 35 MFIs, including 20 CAPECs. Thanks to these resources, more than 4,800 loans, for a total amount of MRO 109 million were granted, with a reimbursement rate varying between 86 and 98%. More than 60% of the loan amount, or MRO 245 million, served to finance income-generating activities for women. 3.5.2 In addition, the Urban Development Project, financed by the World Bank, has also contributed to the financing of the sector with a MRO 500 million (about UA 1.25 million) line of credit; a guarantee or risk insurance fund has also been set up within this framework to encourage the MFIs concerned to finance the creation of micro-enterprises considered too risky. With the end of the PRP and taking into account the limitations of their equity capital, MFIs experience cash flow problems in financing the activities of their customers. While emphasizing the promotion of savings, it is essential to grant resources for credit in the medium term. Indeed, the current savings of MFIs stand at MRO 1.9 billion (UA 4.75 million), the majority of which consists of demand deposits, whereas the credit needs of MFIs

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are estimated at MRO 4.7 million, or UA 11.74 million (see calculation method in Annex III). With the expected effect of oil production on economic growth, the demand for financial services is expected to increase as a result of the emergence of new IGA and MSE activities. 3.5.3 The NMFS attaches great importance to the creation of a sustainable MFI financing mechanism and the professionalization of MFI refinancing. To compensate for the lack of sustainable and professional financing for MFIs with longer term resources, the government, through the BCM, and with the support of donors, including the UNDP and World Bank, has launched a feasibility study on putting in place a mechanism that would address the needs identified in relation to MFI financing and refinancing. 3.6 Building the Capacities of IGA and MSE Promoters 3.6.1 The development of IGAs and MSEs calls for actions that target the constraints related to the regulatory and incentive framework that the government should make conducive to the development of MSEs. These elements should be part of the dialogue that the Bank should hold with the government. In particular, given the illiteracy of most of the IGA and MSE promoters, it is important that the government pursue its MFI literacy programme, which has a budget of MRO 17 million per year that makes it possible to reach 1,000 persons per year; the programme is implemented by the PIU of the PRP pending the launching of the PRECAMF. 3.6.2 Apart from improving the environment, support should be envisaged in relation to improving information on IGAs and MSEs, as well as on opportunities for diversifying their other activities, building the capacities of MSE promoters through training, and coaching these promoters to ensure that training themes are effectively applied in the daily management of the activity. 3.6.3 In addition, support should be provided for the main structures that serve as relays between the supply of microfinance services from MFIs and the demand from MSEs. This concerns (i) the PNIME whose mission is to monitor and evaluate MSEs and support activities for them; and (ii) the National Youth Employment Agency (Agence Nationale de Promotion de l’Emploi des Jeunes -ANAPEJ) created in 2005 to develop the capacities of youths and to promote self-employment activities, through a job promotion fund, in particular. Given their limited resources and their recent creation, the capacities of these two structures need to be built up to allow them to fulfill their respective missions in relation to the development of microfinance. 4. THE PROJECT 4.1 Project Design and Rationale 4.1.1 This project was designed to capitalize on the gains achieved under the Poverty Reduction Project (PRP), whose success led to the emergence and development of microfinance in Mauritania, as attested by the NMFS paper. In fact, the PRP was initiated at a time when microfinance was practically nonexistent in Mauritania, with high hoarding rates, and where there was some reluctance towards micro-credit due to poor loan repayment performance in the past. The remarkable results of the PRP lie in the transformation of the population’s mentality towards savings and loans and the revitalization of microfinance in the country by building the capacity of microfinance institutions, the expansion of microfinance

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structures all over the country, the focusing of policy dialogue on issues of microfinance, micro enterprise and the regulatory framework, and on the access of target groups to financial services in the community, enabling these groups to develop their IGAs. 4.1.2. Since support to MFIs should be conceived to cover a period of 7 to 10 years, especially for young MFIs like the ones in Mauritania, this project will sustain and strengthen the support given within the framework of the PRP. The PRECAMF lays more emphasis on streamlining the sector and controlling the growth of certain MFIs with a view to professionalizing and sustaining financial services to the poor. In this light, the adoption of the new law to regulate microfinance, which corrects the shortcomings of Law No. 98/008 of 28/01/19981998, was a key element in dialogue with the Government during the preparation of this project. In view of the objective of building the capacities of all microfinance stakeholders, training and technical assistance account for nearly 40% of the total project cost. The training themes are presented in Annex XI. This approach is aimed at ensuring microfinance viability and its effective integration into the financial sector in Mauritania. It also emphasizes the role of financial services in improving the income of the vulnerable groups targeted by the project, notably rural women and children, with a view to reducing poverty. Of the 46 MFIs shortlisted to benefit from project support, 31 are women’s. Furthermore, of the IGA and MSE promoters benefitting from the project, at least 60% must be women, which is currently the case, with more than 60% of MFI customers being women. 4.1.3 A participatory approach was adopted in the design of the project. It was implemented after individual and group discussions with supervisory authorities and regulatory structures for the sector, TFPs, MFIs, notably those that cater to women and their customers, including women’s groups. These microfinance stakeholders were associated in the definition of priority activities to be included in the project and its execution mechanisms. All these stakeholders will be involved in project implementation through their representatives on the Steering Committee of the project. 4.1.4 Since MFIs do not have enough funds of their own, and considering the efforts aimed at promoting the mobilization of savings, their financial base should be increased to enable them to fund their customers’ needs and attain operational efficiency. Consequently, the project envisages a credit fund, 70% of which comes from the repayment of loans granted within the framework of the Poverty Reduction Project (PRP), which the government has decided to put back into this project. Various options were envisaged for the management of the credit fund, but were immediately discarded due to the lack of interest on the part of commercial banks to manage this fund, the absence of an MFI with the capacity or will to manage it for the other MFIs, and the decision of the Bank to no longer entrust the management of the fund to another structure of the project, in accordance with its microfinance policy. 4.1.5 Consequently, the option envisaged is to grant the management of the fund to 5 MFI networks selected on the basis of criteria that focus on their legality and their ability to manage according to best practices (see 4.5.15). This selection will be confirmed on the basis of results of the ongoing technical and financial audit under the joint supervision of BCM and CDH/LCP/I. This mechanism is, of course, transitional pending the setting up of a permanent mechanism for the credit fund which may support the MFI funding structure, whose feasibility studies are about to be launched by the BCM, in consultation with the CDH/LCP/I. Depending on the results of the studies, a mechanism to transfer the project’s credit funds to the structure will be set up if the criteria on governance and efficiency are met. If need be, an

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alternative formula to sustain the credit funds will be examined, at the latest, during the mid-term review of the project, with a view to maintaining these resources for the microfinance sector. This is another loan condition. Lessons Learned from Experience 4.1.6 To date, within the framework of the AMINA programme, the ADF has funded an institutional support to MFIs in Mauritania in the form of computer equipment and training for 8 MFIs and APROMI, amounting to US$210,000 for the 1998-2000 period. It has also funded three loan-related operations. The first operation is the Poverty Reduction Project (PRP) completed in 2004 and whose completion report has been prepared. Several other positive aspects of the implementation of the microfinance component include: (i) the ADF’s leading role in the development of microfinance in Mauritania, recognized in the NMFS, giving it special weight in the dialogue with the government; (ii) harmonious co-financing, with CIDA and the World Bank, of the component on setting up CAPEC and the participation of the UNDP in the project steering committee as ADF’s representative; (ii) emphasis on capacity building for MFIs; and (iii) the contribution of the project to the improvement of the legal framework and the design of microfinance strategies. 4.1.7 In terms of results and impact, Annex IV shows the following PRP outcomes: (i) quantitative objectives have been exceeded in terms of membership levels, amount of savings collected, number of loans granted, training of MFI staff and bodies; (ii) qualitatively, the living conditions of MFI customers has improved as a result of PRP actions (increased income, children’s education, improved living environment and better health conditions, and reduced vulnerability for the family), according to information provided mostly by women; (iii) the implementation of the microfinance component in about 36 months compared to other projects funded by the Bank, which are unable to start implementing this component or whose disbursement rates are very low. According to the clean-up exercise of the Bank’s project portfolio comprising a credit component finalized in 2005, the PRP recorded satisfactory results. 4.1.8 However, the implementation of this project encountered a number of difficulties, including: (i) collaboration difficulties between the PIU and the PROCAPEC agency that was responsible for implementing one of the components of the project; (ii) delays of more than two years in the auditing of project accounts due to inadequate terms of reference, which led to incompatible activities (auditing and accounting assistance); (iii) inadequate project monitoring by the Bank during recent years due to the absence of specialists in the supervision missions; and (iv) the lack of an appropriate monitoring and evaluation system of the project’s impact. To avoid these problems, the institutional mechanism in this project clearly defines the duties of each stakeholder and provides for a monitoring and evaluation expert in the PIU and a coaching mechanism for MFIs. Furthermore, a mechanism will be put in place to ensure the sustainability of the credit fund, at the latest, during the mid-term revue scheduled for the first quarter of 2009 in order to avoid the problem of shortage of funds at the end of the project. This mechanism will be linked to the MFI funding structures, whose implementation is being studied by the government with the support of the UNDP and World Bank. Lastly, project monitoring by the ADF will be boosted by the presence of the Bank’s office in Dakar, which has a microfinance expert. 4.1.9 The other two ADF operations are related to one agricultural project and one fishing project which are both under way. In both cases, the implementation of the loan

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component was delayed due to financial difficulties in the institutions identified during appraisal to administer the loan. To overcome this problem, the projects have set up institutions to specifically meet their needs. To avoid encountering the same problems, this project will first select MFIs that will benefit from its support. 4.1.10 The latest reviews of the Bank’s portfolio in Mauritania, carried out in February/March 2004 and in March 2006, indicate that portfolio performance is satisfactory with an overall rating of 2.12 on a scale of 3; physical implementation of projects and the disbursement rate improved in the last few years due to the cancellation of loan balances for completed operations; more frequent supervision missions; and better monitoring of the recommendations made in supervision and audit reports. Besides, the reduction in the deadlines for implementing loan agreements in recent years is attributable to the realism which prevailed during the definition of conditions and which should continue. However, some loan operations still experience persistent delays in meeting general loan conditions (transmission to the Bank of quarterly status reports, audit reports, fulfillment of specific conditions) and some shortcomings in the design and preparation of certain projects due to lack of prior sectoral studies. 4.1.11 The lessons to be drawn from the experience of other TFPs relate to the need to ensure better focus of support on the requirements of the microfinance sector, greater consultation and coordination among TFPs to avoid multiplicity of procedures, and emphasizing longer-term support to ensure sustainability. These aspects were taken into account by designing the project with the participation of the Bank in the TFP round table on NMFS and in World Bank workshops on the CAS. Working sessions were also organized with TFPs to support the sector (World Bank, UNDP, AFRITAC, Spanish Cooperation) with a view to ensuring consistency of respective actions, especially with respect to improving the legal framework and funding of MFIs. Lastly, the setting up of a microfinance funding structure by the government to handle all the credit funds of the sector will make it possible to resolve the problem of shortage of funds for short term projects. 4.2 Project Area and Beneficiaries Project Area 4.2.1 The project will be implemented in Nouakchott and in the regions of Assaba, Gorgol, Guidimakha, Hodh Gharbi, Hodh Echchargui, Trarza, Tagant and Brakna, depending on the location of the MFIs which it will support. Rural areas were specifically targeted because of the virtual absence of MFIs there to meet the needs of IGA and MSE promoters and because of their higher level of poverty. About 75% of the country’s poor live in rural areas. With the exception of Nouakchott and Hodh Gharbi, all the other areas targeted in the project are among the poorest. Poverty rates in the regions of Assaba, Gorgol, Guidimakha, Brakna, Trarza and Tagant exceed 70%. 4.2.2 Access to basic social services in rural areas is clearly lower than that in urban areas because of disparities in the distribution of resources, which have always been in favor of cities. The gross school enrollment rate in urban areas is about 101.6%, compared with 62.4% in rural areas, with large disparities between regions: less than 50% in the Guidimakha, Gorgol, and Assab regions. The health situation is more alarming in rural areas and in landlocked areas, where accessibility rates of health facilities within a 5 km radius fell from 55% in 2000 to 34% in 2004, compared with 73% and 58.2%, respectively, for urban

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areas. As for drinking water, wells remain the main source of supply in rural areas. Inadequate transport infrastructure in the country, especially in rural areas, also constitutes a serious challenge in the development of job-creation and value-added sectors. To address this issue, the government has given priority in its PRSP to making rural areas more accessible. Project Beneficiaries 4.2.3 The project beneficiaries are classified in two categories: final beneficiaries and intermediate beneficiaries. Final beneficiaries are poor people operating income-generating activities (IGA) and micro- and small enterprises (MSE), with special emphasis on women and youths in rural areas, whose income may increase through financial support (loans, savings and other financial services such as insurance) and non financial support (sensitization, training, coaching of their activities), that they will receive from the project in order to make their IGAs and MSEs profitable. 4.2.4 The project primarily targets the working poor, including at least 60% women, who have the potential to develop MFIs. However, considering the amount of loans granted by most of the target MFIs (UA 50), even the poorest people may also participate in the project to develop their IGAs. In spite of the low demand for IGA and MSE products, real opportunities exist in the areas of agriculture, processing and marketing of fishing and livestock products, and handicraft. The operating accounts of some activities in the above-mentioned sectors are presented in Annex IX. 4.2.5 Intermediate beneficiaries comprise (i) MFIs which will benefit from various trainings and support-counseling and which may have access to sustainable sources of funding (see presentation in Table 4.0 below); (ii) supervisory, management, and institutions representing microfinance such as BCM, CDH/LCP/I and SECF, which will each benefit from the strengthening of their capacities to enable them play their respective roles in the sector; and (iii) two IGA support institutions and MSEs: ANAPEJ and PNIME, which will guide IGA and MSE operators and which will also benefit from institutional support. 4.2.6 MFIs benefiting from project support were pre-selected based on criteria agreed by BCM, CDH/LCP/I, CEP, PRP, and ADF and discussed with APROMI and its members. These criteria focus on (i) registration by BCM; (ii) total reimbursement of PRP credit funds; (iii) existence of operational management bodies with good governance in the structure; (iv) proof of activity in 2006; (v) significant membership; (vi) targeting of poor and vulnerable groups, especially women; (vii) the capacity to mobilize savings. This pre-selection will be validated on the basis of the results of an MFI audit jointly supervised by BCM and CDH/LCP/I; the results are expected at the end of February 2007. The selected MFIs are presented in Annex II. As for the other MFIs that do not meet these criteria, another pre-selection will take place during the mid-term review, at the latest, to enable four additional MFIs to benefit from project support. 4.2.7 As indicated in Table 4.0, project support targets 50 MFIs, including 31 for women. Of the 50 MFIs, 34 will benefit from capacity building in the form of training, coaching, and a reliable MIS, while the other 16 (including 4 for women) will receive support to extend their activities to rural areas.

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Table 4.0 Presentation of MFIs Targeted by the Project

Number of MFIs Number of MFIs to support and type of support Name Urban Rural Total Capacity Building Extension to rural areas* Total

Pre-selected MFIs CAPEC 23 0 23 0 10 10 M-AFEC ** 2 2 4 4 2 6 GFEC** 7 0 7 7 0 7 GAFIF** 7 0 7 7 2 9 Nissa Bank** 4 5 9 9 0 9 CECA Kaédi 1 0 1 1 0 1 CECD Mutuelle 2 0 2 2 2 4 Total 46 7 53 30 16 46

Other MFIs to be pre-selected TBD - - 4 4 - 4 TOTAL - - 57 34 16 50

• * New MFIs to be established in rural areas as a result of PRECAMF support • **Women’s MFIs 4.3 Strategic Context of the Project 4.3.1 The project falls within the context of preparation of the action plan for Mauritania’s 2006-2010 Poverty Reduction Strategy Paper (PRSP). It identifies microfinance as an essential instrument for poverty reduction and as a means of reducing the proportion of Mauritanians living below the poverty line from 46.7% in 2004 to 35% in 2010 and 25% in 2015. This goal is more ambitious than the first MDG of reducing the incidence of poverty to 28.5% by 2015. The political and economic context of the project is characterized by on-going democratization, the beginning of oil production, the normalization of relations with the Bretton Woods institutions, which has led to Mauritania’s eligibility to the Multilateral Debt Relief Initiative. This context is conducive to the growth and development of microfinance as it favors good governance and transparency in financial transactions. 4.3.2 The project is based on the general principles of the national microfinance strategy, i.e.: (i) the role of the private sector in the supply of financial products and services; (ii) the absence of direct government involvement in microfinance operations; (iii) the creation of a legal and regulatory environment conducive to the development of the sector; and (iv) the long run orientation towards a financial market. It is in line with the strategy on MSEs and the national integrated programme to support MSEs (PNIME), which focuses on microfinance as the main tool in the fight against poverty. 4.3.3 The project falls under the Bank’s 2006-2007 Country Strategy Paper (CSP) for Mauritania and is in line with the first CSP pillar on the development of microfinance. In a context of new oil production, where experience from other countries shows that people tend to abandon traditional activities for oil-related activities, this project will help to prevent this situation in Mauritania. It is in conformity with ADF X’s policy on poverty reduction and with the Bank’s poverty reduction policy, which considers microfinance as an effective instrument in the fight against poverty. 4.3.4 It is also in line with the Bank’s Policy and Strategy Paper on microfinance, approved on 12 June 2006. Pursuant to Section 6.3.8, the project includes best practices, notably by emphasizing management and execution of the credit fund by financial intermediation structures with the requisite competence and performance. It is aligned with the first strategic thrust relating to institutional capacity building and the special emphasis on assistance to rural MFIs through institutional and financial support. It further provides for the

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extension of financial services to the rural people and the setting up of sustainable local institutions, in accordance with Sections 4.3.1 and 4.5.1 of the Policy. 4.4 Project Objectives The sector goal is to improve access by the working poor to viable and sustainable financial services, with a view to reducing poverty. The specific objective of the project is to build the capacities of stakeholders with respect to the supply and demand of microfinance services. 4.5 Project Description 4.5.1 The project, which will be implemented over a five-year period, comprises the following components: (i) improvement of supply of microfinance services; (ii) improvement of demand for microfinance services; and (iii) project management. Component I: Improvement of Supply of Microfinance Services 4.5.2 This component aims to harmonize the instruments governing microfinance and the bodies responsible for their effective implementation, to build the organizational and operational capacities of MFIs and ensure their funding in order to boost the supply of diversified financial products and services, extended to uncovered rural areas, and adapted to the needs of customers, promoters of IGAs and MSEs Sub-Component 1.1: Improvement of the legal and supervisory framework of microfinance 4.5.3 The project will improve the framework and monitoring tools of the BCM and will strengthen the regulatory, supervisory and control capacities of its Banking Supervision Department in charge of microfinance. Consequently, this department will receive technical assistance from an accounting firm in order to design and put in place the accounting framework and reporting documents, including reconciliation tables, organize an outreach workshop on this accounting framework, and prepare modules for the training of three MFI staff members and representatives per month on this framework; over a 12-month period, coaching services will be provided to inspectors in the use of the new inspection guides drawn up with the support of AFRITAC. 4.5.4 Specific training sessions on microfinance will be organized by specialized firms for senior officials of the Sub-Department of General Inspection (14 inspectors) and Desk Supervision (12 people) of the BCM, for a total of 26 people. They will focus on the compilation and analysis of financial documents, the analysis of registration files, accounting, prudential rules, and portfolio evaluation. The project will also fund study trips to countries of the sub region for 13 persons (7 inspectors and 6 controllers) to expose them to best microfinance practices. 4.5.5 Support will be provided for the CDH/LCP Integration Department, which is home to the microfinance service that is responsible for evaluating, monitoring, and guiding MFIs, IGAs, and MSEs, putting in place a data bank, and evaluating the impact of microfinance activities on poverty. Within the framework of the project, two studies will be carried out at mid-term and at the end of the project on the impact of MFI activities on poverty reduction, for which the services of 8 persons per month will be required. The project will fund the training of 6 senior officials of the Integration Department, including three from

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the Microfinance Service, on the evaluation of operational feasibility and impact of microfinance activities. The three officials will also take a month-long staff development course on microfinance in an institution of the sub-region to enable them to prepare a monitoring-evaluation mechanism for the implementation of the microfinance strategy. 4.5.6 Furthermore, a study tour in the sub-region will be funded for three senior officials of the Integration Department to familiarize them with the successful experiences of other countries. To help the Microfinance Service carry out monitoring and evaluation of MFI and MSE activities, the project will supply the service with computer equipment, furniture, and a vehicle. Finally, the project will provide assistance for the establishment and management of a data bank on MFIs and MSEs, the coaching of the implementation of NMFS (6 persons per month), the dissemination of the code of ethics on microfinance for MFIs and for hosting, maintaining and updating a web site on MFIs. 4.5.7 The project will also support the Department of Cooperation and Planning of the SECF project so as to professionalize their assistance to women’s MFIs by adopting best practices, with a view to boosting collaboration with MFI support structures. It will receive office and computer equipment as well as training for four SECF senior officials on best practices in financial management and on the supervision and coaching of MFIs. Sub-component 1.2: Building the capacities of MFIs 4.5.8 For the MFIs selected, the project will fund the purchase of computer equipment to improve their information and management systems. These will comprise a full computer set, a photocopying machine and a fax machine per institution, where there is a demonstrable need. The project will also fund staff training for 50 MFIs: seven persons per institution (manager, credit officer, accountant, cashier and one representative for each of the following: credit committee; supervision committee, and oversight committee), for a total of 350 people on the following topics: (i) accounting framework, (ii) management tools, (iii) design and implementation of business plans, (iv) good governance, and (v) internal monitoring and control. 4.5.9 The MFI training will focus on building the capacities of national service providers with a view to creating a pool of qualified trainers with proven expertise as proposed by CAPAF, which cooperates with APROMI in Mauritania. Besides, technical assistance for MFI coaching will be funded for 12 months so as to guide them in the daily application of the concepts learned in training, including the preparation of business plans and the implementation of related information systems. 4.5.10 Study tours to the countries of the sub-region will be organized for two persons per MFI network to exchange experiences, as well as training abroad for two persons per network on specialized topics that will have been identified in the study on new financial services. Lastly, given the specific nature of the CAPEC network, the project will organize a specialized training for the staff and elected officials of CAPEC and of those at the headquarters of the PROCAPEC agency on topics related to inspection and the computerization of the network.

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4.5.11 The project will also fund specialist services to carry out studies on new financial services, especially on medium-term funding and more adapted savings products (one person per month), as well as a diagnosis of the other MFIs not selected in order to identify the additional four MFI to be supported (one person per month). Sub-Component 1.3: Support for the Establishment of MFIs in Rural Areas 4.5.12 The project will provide institutional support for the establishment and/or development of sixteen rural associations in the target areas of the project for MFIs which already have these activities in their development plans and which have carried out market studies to identify the existence of a critical mass of activities that warrants the creation of an association and/or have already set up these associations, which have real development potential. These include ten associations of the PROCAPEC network, to be set up in the moughataas of AMOURIJ (Hodh EchCharghi), Barkéwol and Kankossa (Assaba), M’bout (Gorgol), Babebe and Magtalhjar (Brakna), Keurmacene and R’kiz (Trarza), Moudjeria (Tagant) and Ould Yenge (Guidimaka; two associations of the M-AFEC women’s network, set up in the moughataas of (Brakna) and Kaédi (Gorgol); two GATIF associations and two CEC-D savings and credit associations. 4.5.13 The support will cover expansion and operating costs in rural areas on a declining scale (100% the first year, 80% the second year, and 60% the third year). Since a bank needs assistance for its operating costs for about 7 years, CDH/LCP/I will provide this assistance to selected MFIs at the end of project support for as long as it takes for the MFIs to achieve financial stability. This will constitute part of other loan conditions. 4.5.14 Two consultants per month will be hired to carry out a national study on the mechanisms for boosting the establishment and development of MFIs in rural areas with a view to developing microfinance in rural areas, which are poorly served and where most of the poor live. Sub-Component 1.4: Financing of MFIs 4.5.15 As stated in paragraph 4.1.4, the project will finance a credit fund for MFIs to the tune of UA 2.05 million, essentially from the repayment of the loan granted within the framework of the Poverty Reduction Project (PRP), which amounts to UA 1.4 million. It will be managed by the following MFI networks: PROCAPEC, M-AFEC, GFEC GAFIF and Nissa Banque, whose performance is outlined in paragraph 2.3.8 and detailed in Annex II. Eligibility criteria for the management of credit funds include: (i) selection criteria to obtain project support (see paragraph 4.2.6), as well as those related to (ii) financial and operational efficiency; (iii) repayment rate equal to or higher than 95%, and a total impaired portfolio rate of 5% at a maximum; and (iv) the existence of financial and accounting statements. The results of the ongoing MFI audit by a renowned firm will confirm the performance of the MFIs that will be responsible for managing the credit fund. 4.5.16 The selected MFI networks will be invited to present their business plans for the next five years. A credit management agreement, to be prepared in collaboration with the competent services of the Bank, will be signed between the Government and these networks for one year, renewable on the basis of successful results validated by a financial audit. They will be responsible for financing the credit needs of their funds and, if necessary, those of other MFIs with which they have signed agreements to this end, and whose funding needs

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have been included in the action plan submitted to the MFI monitoring committee. The credit funds will be disbursed by the project from the account of the MFI network managing the credit at an interest rate at least equivalent to the inflation rate. 4.5.17 Based on MFI experience and on the needs of target groups, the activities of this sub-component will make it possible to grant loans to more than 20,000 IGA operators, including 60% women and 1250 operators of MSEs, for an average amount of MRO 80,000 for IGAs and MRO 800,000 for MSEs. The MFIs will charge their customers real positive interest rates to cover their operating costs. The loans for IGAs and MSEs will allow the funding of working capital and/or equipment costs for any economically and technically profitable activity of groups or individuals targeted by the project. Handicraft and industrial ventures in profitable sectors (see 4.2.5 above) will be encouraged. 4.5.18 Each quarter, MFIs will prepare and submit to the project and the monitoring committee a quarterly report stating the amount disbursed, the number of borrowers, the outstanding loans granted from drawings, and the balance available for monitoring and evaluation. At the end of each accounting year, audit firms to be hired by the project will audit MFIs. The project’s microfinance expert will be required to know the status of the networks’ loan portfolio through the quarterly activity reports in order to monitor loan repayment and, in case of default, the project will suspend the agreement and demand a repayment plan from the MFI. Component II: Improvement of Demand for Financial Services 4.5.19 This component seeks to build the productive capacities of the poor, which, combined with better access to funding, will help them increase the profitability of their activities and evolve towards MSEs, thus improving their living conditions. Sub-component 2.1: Improvement of Information for IGA and MSE Promoters 4.5.20 The project will finance the acquisition of documentation on MSEs (financial, legal and organizational aspects, market studies) for the thirteen wilayas with a view to improving access to information for IGA and MSE promoters. 4.5.21 It will also finance the services of experts who will update, validate, and publish the results of surveys already conducted on profitable sectors within the framework of the PRP (4 persons per month). The project will finance 5 IEC campaigns per year in the target areas, on topics related to the development of IGAs and MSEs, microfinance, and the improvement of living conditions in general, including HIV/AIDS control and the environment. Sub-Component 2.2: Building the Capacities of IGA and MSE Promoters 4.5.22 The activities of the project in this sub-component cover the training of about 20,000 MFI customers involved in IGAs to introduce them to basic notions of accounting, commercial and financial management, credit, quality management, and other relevant topics. Through specialized structures, the project also intends to provide technical training on demand and coaching to 1,500 MSE promoters, including 50% women, on entrepreneurship as well as on the creation and management of an MSE.

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Sub-Component 2.3: Institutional Support to PNIME and ANAPEJ 4.5.23 As a bridging structure between MSEs and MFIs, PNIME will receive equipment (3 office desks and a computer station) and two motorcycles to monitor its activities in Assaba. It will also receive technical assistance to design mechanisms for MSE support and monitoring-evaluation of activities in support of MSEs (6 persons per month); and training in the countries of the sub-region for four senior officials of the PNIME management unit on evaluation and the management of MSE programmes. 4.5.24 The project will finance technical assistance to support the National Agency for the Promotion of Youth employment (ANAPEJ) to improve mechanisms for selecting youths, IGAs, and MSEs and to coach promoters (3 persons per month), and training for 4 Agency staff in the promotion of youth employment in the countries of the sub-region for one month. Component 3: Project Management 4.5.25 The project will be managed by the Integration Department of the Commission on Human Rights, Poverty Reduction, and Integration (Direction de l’Insertion du Commissariat aux Droits de l’Homme, à la Lutte Contre la Pauvreté et à l’Insertion -CDH/LCP/I) as explained in Section 5.1. This Department will be strengthened by staff from the previous project (PRP) and by additional staff that will be recruited to implement the project. It will comprise 1 coordinator; 1 manager specialized in procurement, 1 microfinance specialist; 1 specialist in the promotion of IGAs and MSEs; 1 monitoring and evaluation expert, 1 accountant, and support staff. The project will pay the compensation of this staff. 4.5.26 The project will finance equipment, furniture, and three vehicles needed to manage the project. Financing vehicles for the project management team is justified by the need to monitor all project activities among MFIs and IGA/MSEs, which will be dispersed in seven regions of the country, in addition to Nouakchott. 4.5.27 The services of specialists will be required to revise the procedures manual and the accounting system of the project, prepare the mid-term review, the project impact study, the annual audit of MFIs, project accounts and procurement, and the completion report. The project shall finance all operating costs (leasing of headquarters and expenses, fees of senior staff, salaries of support staff, and so on). 4.6 Project Costs 4.6.1 The total project cost, net of taxes and customs duties, is estimated at UA 7.97 million, including physical contingencies and price increases. The cost will be financed to the tune of UA 3.38 million in foreign exchange and UA 4.59 million in local currency. The estimates also include an average provision of 5% for contingencies as well as annual inflation rates of 3% for foreign exchange and 5% for local currency. The cost estimates were prepared during the re-appraisal mission based on information collected from the MAED services, the CDH/LCP/I, other development partners, local suppliers, and consulting firms as well as the Investment Procurement Board (Commission des Marchés d’Investissement) of the CDH/LCP/I. The detailed project costs are presented in Annex VII of this report. Tables 4.1 and 4.2 below summarize the breakdown of project costs by component and expenditure category.

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Table 4.1 Project Costs by Component

MRO Million UA Million

COMPONENT Foreign Exchange

Local Currency Total Foreign

Exchange L.C. Total

% Foreign

Exchange

1 Improvement of supply of microfinance services 568.08 1 282.34 1 850.42 1.42 3.20 4.62 58.00

2 Improvement of demand for financial services 409.22 215.84 625.06 1.02 0.54 1.56 19.59

3 Project management 284.54 240.82 525.36 0.71 0.60 1.31 16.47 Total Base Cost 1 261.84 1 739.00 3 000.84 3.15 4.34 7.50 94.05

Physical contingencies 63.09 86.95 150.04 0.16 0.22 0.37 4.70

Price escalation 26.26 13.49 39.75 0.07 0.03 0.10 1.25

Total Project Cost 1 351.19 1 839.44 3 190.63 3.38 4.59 7.97 100

Table 4.2

Project Costs by Expenditure Category

MRO Million UA Million EXPENDITURE CATEGORY Foreign

Exchange Local

Currency Total Foreign Exchange

Local Currency Total

% Foreign

Exchange

B Goods 174.77 43.69 218.46 0.44 0.11 0.55 80.00 C Services 1 058.57 570.00 1 628.57 2.64 1.42 4.07 65.00 D Operating cost 28.50 114.00 142.50 0.07 0.28 0.36 20.00

E Misc.(Institutional support, MFI and credit) 0.00 1 011.31 1 011.31 0.00 2.53 2.53 0.00

Total Base Cost 1 261.84 1 739.00 3 000.84 3.15 4.34 7.50 42.05

Physical contingencies 63.09 96.95 150.04 0.16 0.22 0.37 42.05

Price escalation 26.26 13.49 39.75 0.07 0.03 0.10 66.06

Total Project Cost 1 351.19 1 839.44 3 190.63 3.38 4.59 7.97 42.35

4.7 Sources of Finance and Expenditure Schedule 4.7.1 The project will be financed by an ADF loan and a Government contribution, according to the financing plan presented in the following tables:

Table 4.3 Project Costs by Source of Finance (in millions of UA)

Source Of Finance Foreign Exchange

Local Currency Total %

ADF 3.38 2.60 5.98 75.03 GOVERNMENT 0.00 1.99 1.99 24.97

TOTAL 3.38 4.59 7.97 100

4.7.2 The ADF loan (UA 5.98 million) represents 75.03% of total project cost, and will finance expenditure categories relating to goods (83.1%), services (100%), operating costs (84.2%), and miscellaneous (30.94%). The Government’s contribution (UA 1.99 million), which represents 24.97% of the total project cost, will cover local currency expenditures relating to transport equipment, leasing of the project office, and 69.43% of the “Miscellaneous” category, including credit funds and institutional support to MFIs. Financing of the project by source of finance and by component and category of expenditure, respectively, is summarized in Tables 4.4 and 4.5 below:

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Table 4.4 Project Cost by Component and By Source of Finance (in UA million)

ADF GVT TOTAL

Component Foreign Exchange

Local Currency Total Local

Currency Foreign

Exchange Local

Currency Total %

Comp.

1 Improvement of supply of microfinance services 1.52 1.52 3.04 1.86 1.52 3.38 4.90 61.46

2 Improvement of demand for financial services 1.09 0.58 1.67 0.00 1.09 0.58 1.67 20.97

3 Project management 0.76 0.51 1.27 0.13 0.76 0.64 1.40 17.57

Total project cost 3.38 2.60 5.98 1.99 3.38 4.59 7.97 100

Table 4.5

Project Cost by Expenditure Category and by Source of Finance (in UA million)

ADF GVT TOTAL Expenditure Category Foreign

Exchange Local

Currency Total Local Currency

Foreign Exchange

Local Currency Total

% Categ.

B Goods 0.47 0.02 0.49 0.10 0.47 0.12 0.59 7.36 C Services 2.83 1.52 4.35 0.00 2.83 1.52 4.35 54.64 D Operating costs 0.08 0.25 0.32 0.06 0.08 0.30 0.38 4.72

E Misc. (institutional support, MFIs and credit fund) 0.00 0.82 0.82 1.84 0.00 2.65 2.65 33.28

Total project cost 3.38 2.60 5.98 1.99 3.38 4.59 7.97 100

Table 4.5.b

Project Costs by Component, Expenditure Category, and Source of Finance (in UA Million)

Component I Component II Component III Expenditure Category

ADF GVT Total ADF GVT Total ADF GVT Total TOTAL

B Goods 0.38 0.03 0.41 0.05 0.00 0.05 0.06 0.07 0.13 0.59 C Services 1.84 0.00 1.84 1.62 0.00 1.62 0.90 0.00 0.90 4.35 D Operating costs 0.00 0.00 0.00 0.00 0.00 0.00 0.32 0.06 0.38 0.38

E Misc. (Institutional support to MFIs and credit fund) 0.82 1.84 2.65 0.00 0.00 0.00 0.00 0.00 0.00 2.65

Total Project Cost 3.04 1.86 4.90 1.67 0.00 1.67 1.27 0.13 1.40 7.97

4.7.3 The project will be implemented over a five-year period, in accordance with the list of goods and services presented in Annex VI, and with the expenditure schedules by component and category presented in Tables 4.6 and 4.7 respectively:

Table 4.6 Expenditure Schedule by Component (in UA million)

Component 2007 2008 2009 2010 2011 2012 Total

1 Improvement of supply of microfinance services 0.81 1.58 1.12 0.75 0.30

0.34 4.90

2 Improvement of demand for financial services 0.21 0.48 0.48 0.40 0.02 0.09 1.67

3 Project management 0.17 0.31 0.30 0.25 0.30 0.07 1.40

Total project cost 1.18 2.37 1.89 1.40 0.61 0.51 7.97

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Table 4.7 Expenditure Schedule by Expenditure Category (in UA million)

Category 2007 2008 2009 2010 2011 2012 Total

B Goods 0.08 0.17 0.14 0.10 0.05 0.04 0.59 C Services 0.64 1.29 1.04 0.77 0.34 0.28 4.35 D Operating costs 0.06 0.11 0.09 0.07 0.03 0.02 0.38

E Misc. (institutional support, MFI and credit fund) 0.39 0.79 0.63 0.47 0.20 0.17 2.65

Total project cost 1.18 2.37 1.89 1.40 0.61 0.51 7.97

4.7.4 The project expenditure schedule by source of finance is presented in Table 4.8 below:

Table 4.8 Expenditure Schedule by Source of Finance (in UA million)

Source of Finance 2007 2008 2009 2010 2011 2012 Total ADF 0.89 1.78 1.42 1.05 0.46 0.38 5.98 Government 0.29 0.59 0.47 0.35 0.15 0.13 1.99 Total 1.18 2.37 1.89 1.40 0.61 0.51 7.97

4.8 Environmental Impact The project is classified under Environmental Category III since it will have no impact on the environment. As was the case with the PRP, thanks to the incorporation of this criterion as a condition for the approval of IGA and MSE requests for financing, the production activities that will be financed by the project will respect and help protect the environment. The IEC component will sensitize the populations on the need to protect the environment, in particular keeping the environment clean, treatment of household waste and waste produced by economic activities, and fighting against excessive deforestation. V. PROJECT IMPLEMENTATION 5.1 Project Executing Agency 5.1.1 The project will be implemented by the Integration Department of the Commission on Human Rights, Poverty Reduction, and Integration (Direction de l’Insertion du Commissariat aux Droits de l’Homme, à la Lutte contre la Pauvreté et à l’Insertion - CDH/LCP/I), which satisfactorily implemented the preceding poverty reduction project. The mission of this Integration Department includes promoting microfinance and micro enterprises. It played a major role in the preparation of the National Microfinance Strategy (NMFS) and in the organization of the donor roundtable on this strategy. In addition, it co-chairs the NMFS Steering Committee and coordinates different MFI support programmes. Under the PRECAMF, it will be responsible for supervising the implementation of the project, defining and monitoring performance indicators in relation to the objectives of the project, strategies related to microfinance and micro enterprise, and to those of the PRSP. It will organize consultations with public and private structures, and with similar sector programmes and projects. Finally, it will seek to develop synergies between this project and those already underway.

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5.1.2 This provision is in conformity with the alignment and harmonization principles of the Paris Declaration on Aid Effectiveness. In fact, most technical and financial partners (TFP) that intervene in microfinance, such as the UNDP and AFRITAC, work directly with Government structures (CDH/LCP/I or BCM) to implement their operations. The World Bank, for its part, entrusted the implementation of its urban development project to an NGO; however, the Poverty Reduction Department of the CDH/LCP/I is responsible for the said project. The World Bank’s decision is based on the fact that the main activity of the project is social housing. The implementation of this ADF project by the Integration Department is justified by the fact that microfinance is within its prerogatives. 5.1.3 The implementation of this project will create more tasks for the said Department, requiring specific complementary skills. Consequently, this Department will be strengthened by staff from the previous poverty reduction project (PRP), who will be retained. This decision is justified by the following reasons: (i) the staff was recruited from shortlists under the PRP; (ii) they have gained much field experience, mastered the Bank’s Rules of Procedure, and received a lot of training from the PRP that should be capitalized on to implement this project, which seeks to strengthen the microfinance activities of the PRP; (iii) their performance was deemed satisfactory by the Government and by the Bank, notably with respect to the timely implementation of project activities and the achievement of project objectives (see Annex IV); and (iv) the desire to avoid the delay experienced in launching the PRP, primarily because of the delay in recruiting its staff. These last three reasons underpinned the Government’s decision to continue paying this staff during the transition period, which stretches from the end of the PRP in June 2004 to the start of this project, planned for June 2007. 5.1.4 The personnel selected include support staff and the following two senior staff: the coordinator and the microfinance specialist. Other staff to be recruited include: (i) an accountant; (ii) a manager specialized in procurement; (iii) an IGA and MSE promotion specialist; (iv) a monitoring and evaluation expert; and (v) an operations’ assistant. The contracts of the senior staff selected and of those to be recruited will be one-year contracts renewable on the basis of satisfactory performance as determined by the government and the Bank. 5.1.5 Under the supervision of the Integration Department, the project coordinator will be responsible for the following tasks: (i) managing project activities on a daily basis; (ii) preparing and implementing work plans and budgets; (iii) managing the procurement process, in line with the revised manual of procedures; (iv) signing contracts and cheques, in the capacity of the official with the power to authorize project expenses; and (v) producing technical and financial project progress reports and transmitting them to the Project Steering Committee and the ADF. 5.1.6 A Steering Committee will supervise the project at the national level and ensure consistency in activities with respect to the objectives of the project, those of the PRSP, and of the NMFS and NSMSE. The committee will also establish major operational guidelines and supervise the monitoring and evaluation of the project. The NMFS Consultative Committee (Comité de Concertation de la SNMF), which already exists, will act as the project steering committee. The committee is jointly chaired by the director of Bank and Financial Supervision at the BCM and the Integration Department. In addition to these co-presidents, this committee comprises the president of APROMI, the director of Agence PROCAPEC and the coordinator of the NMFS monitoring group. It will be responsible for approving the

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project’s annual budget and its programme of activities, and will meet twice per year, more often if necessary, to review annual programming, financial statements, and monitoring and evaluation of project activities. One of the meetings will be dedicated to coordination with the government, technical and financial partners, and the different stakeholders. For project monitoring activities, this committee will be expanded to include two representatives of women’s groups and one representative of donors. 5.2 Institutional Arrangements 5.2.1 Committee to Monitor MFIs that Manage the Credit Fund: This committee will be created within the Integration Department of the CDH/LCP/I to monitor and ensure--through monthly activity reports and financial statements validated by accounting firms--that MFIs respect the terms of their loan agreement with the Integration Department. In the case where an MFI is no longer in compliance with its selection criteria (see para. 4.5.15), this committee could decide, at any moment, to suspend the agreement with the structure that is in default, following a no-objection by the ADF. The committee will comprise four representatives from the Integration Department of the CDH/LCP/I (the director, the head of the microfinance unit, the project coordinator, and the microfinance expert), two representatives from the Bank and Financial Supervision Department of the BCM (the director and the head of the microfinance unit) and two representatives of professional associations in the sector, a total of eight members. The chair of the committee will be assumed by the CDH/LCP/I and the vice-presidency by the BCM. The creation of this committee will constitute a loan condition. 5.2.2 Executing Partners: Technical assistance to support the BCM, ANAPEJ, and PNIME, and also for training, studies, audits, coaching of IGA, MSE, MFI promoters, and BCM inspectors will be provided by specialized firms and consultants. The sensitization campaigns will be carried out by NGOs. A performance clause will be included in the contracts with each of these partners. 5.2.3 Implementation partner: The PNIME will be the implementation partner for activities aimed at promoting IGAs and MSEs. It will help organize target groups, identify their capacity building needs and guide them towards intermediary operators, in collaboration with the project coordinator. 5.3 Implementation and Supervision Schedules 5.3.1 The project will be implemented over a five-year period, as of the date of effectiveness of the loan, planned for June 2007. The implementation and supervision schedules of activities are summarized in Tables 5.1 and 5.2 below and the details are presented in Annex VIII.

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Table 5.1 Summary of Projected Schedule of Activities

Activity Date Responsible

Audit of MFIs January-February 2007 Firm supervised by BCM Approval of loan February 2007 ADF Board of Directors Recruitment of additional management staff January-April 2007 CDH/LCP/I Loan effectiveness and project start up June 2007 Government/ADF Start of credit activities September 2007 CDH/LCP/I/-MFI Training, technical assistance, study trips Sept. 2007 – June 2012 CDH/LCP/I/ - stakeholders Studies September – November 2007 CDH/LCP/I – consultants Supervision/Monitoring of activities Fourth quarter 07– 2011 Government/ADF Mid-term review Second quarter 2009 Government/ADF Project completion June 2012 Government/ADF Government’s project completion report July 2012 Government Bank’s project completion mission Fourth quarter 2012 ADF

5.3.2 The project’s procedures and implementation manual will be revised by the project team, with support from a consultant. This manual should be approved by the Fund and adopted by the government within three months of loan effectiveness.

Table 5.2

Activity Supervision Schedule

Period Activity Skills Required Structure 2nd Quarter 2007 Launching of project Socio-economist, Microfinance (MF)

expert, disbursement and procurement officers, SNFO

OSHD, OPSM, FFCO.3, ORPU, Government

4th Quarter 2007 Supervision Socio-economist, MF Expert OSHD, Government 2nd Quarter 2008 Supervision Socio-economist, MF Expert SNFO Government 4th Quarter 2008 Supervision Socio-economist, MF Expert OSHD, Government 2nd Quarter 2009 Mid-term review Socio-economist, MF Expert, SNFO,

disbursement and procurement officers OSHD, OPSM, FFCO.3, ORPU Government

4th Quarter 2009 Supervision Socio-economist, MF Expert OSHD, Government 2nd Quarter 2010 Supervision Socio-economist, MF Expert SNFO Government 4th Quarter 2010 Supervision Socio-economist, MF Expert OSHD, Government 2nd Quarter 2011 Supervision Socio-economist, MF Expert SNFO, Government 4th Quarter 2011 Supervision Socio-economist, MF Expert OSHD, Government 2nd Quarter 2012 Supervision Socio-economist, MF Expert SNFO, Government 4th Quarter 2012 Completion Socio-Economist, MF Expert and

procurement officer OSHD, SNFO, Government

5.4 Procurement Arrangements 5.4.1 Provisions relating to the procurement of goods, works and services are summarized in Table 5.3 below. Any Bank-financed procurement will be done in accordance with the Bank Group’s Rules of Procedure for the Procurement of Goods and Services, or, as the case may be, for the Use of Consultants, using the Bank’s appropriate standard bidding documents. Other methods of procurement of goods are presented in Table 5.4 below.

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Table 5.3 Procurement Arrangements (in UA million)

In UA Thousand Expenditure Category

LCB Short list Other F.O.B Total 2. Goods 0.59 (0.49) 2.1 Office and computer equipment and furniture 0.44 (0.44) 0.44 (0.44) 2.2 Rolling stock 0.10 (0.00) 0.10 0.10 (0.00) 2.3 Teaching aids 0.05* (0.05) 0.05 (0.05) 3. Services 4.35 (4.35) 3.1 Various local training courses, with the exception of training of MFI customers 1.52 (1.52) 1.52 (1.52)

3.2 Training abroad (in the sub-region)Studies, diagnoses, coaching, and monitoring and evaluation 0.22 (0.22) 0.22 (0.22)

3.3 Study trip 0.09 (0.09) 0.09 (0.09) 3.4 Audit of MFIs, project accounts and procurement 0.25 (0.25) 0.25 (0.25) 3.5 TA finalization of the accounting plan, PNIME & ANAPEJ, coaching of MFIs and inspectors, monitoring-evaluation of SNMF implementation, IEC campaigns

0.83 (0.83) 0.83 (0.83)

3.6 CDH training on database and MFI customers 0.52 (0.52) 0.52 (0.52) 3.7 Studies, diagnoses, procedures manual, mid-term review, completion report, CT consultations, code of ethics and management of database

0.33 (0.33) 0.33 (0.33)

3.8 Technical Assistance to project (senior staff) 0.36 (0.36) 0.21** (0.21) 0.57 (0.57) 3.9 Hosting of MFI website 0.02** (0.02) 0.02 (0.02) 4. Operating Costs 0.38 (0.32) 4.1 Per diem and mission allowance 0.14** (0.14) 0.14 (0.14) 4.2 Operating Costs 0.24* (0.18) 0.06 0.24 (0.18) 5. Miscellaneous 2.65 (0.82) 5.1 Institutional support to MFIs 0.60*** (0.24) 0.36 0.60 (0.24) 5.2 Credit fund 2.05*** (0.58) 1.47 2.05 (0.58) Total Cost of Project (in UA million) 0.44 (0.44) 4.12 (4.12) 3.41 (1.42) 1.99 7.97 (5.98)

LCB: Local Competitive Bidding; * Local Shopping: Shopping among Suppliers at the National Level; ** Direct Procurement; *** Procurement on the basis of the project’s operations manual ( ) ADF financing; F.O.B: Financing other than the Bank’s - Procurements with counterpart funds according to national procedures Goods (UA 0.59 million) 5.4.2 Contracts for the procurement of computer and office equipment and furniture (UA 0.44 million) will be awarded in accordance with procedures for local competitive bidding in four (4) packages with average individual values of UA 65,000. These are small contracts that are hardly of interest to international firms. Besides, there is a sufficient number of qualified local suppliers to guarantee competition. 5.4.3 Other goods, as presented in Table 5.4, with an estimated value of less that UA 0.05 million per contract, will be obtained through other methods of procurement, as indicated below:

Table 5.4 Other Modes of Procurement (UA)

Procedure Activity/Expenditure Category Maximum per contract Total max.

Local Shopping Teaching aids for the 13 regional headquarters 10 000 50 000

5.4.4 Teaching aids for the 13 regional headquarters--with an estimated value of UA 0.05 million--to be used for the different trainings, will be procured through local shopping among suppliers at the national level, for a total of five (5) contracts with average individual values of UA 10,000. These goods are standard locally available products, of little commercial value and are so diversified that it will be of no commercial interest for a single

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bidder to bid for the whole contract. Moreover, there is a sufficient number of qualified national suppliers and representatives of foreign suppliers to guarantee competitive prices. Services (UA 4.35 million) 5.4.5 The procurement of consultancy services and technical assistance, as presented in Table 5.3, estimated at a total value of UA 4.35 million, will be done in accordance with the Bank’s Rules of Procedure for the Use of Consultants. To that end, the consultancy services required for: (i) the different local training activities, except the training of MFI customers (UA 1.52), and (ii) training abroad (UA 0.22 million) and study trips (UA 0.09 million) will be procured on the basis of shortlists. The selection procedure will be based on comparability of technical proposals and selection of the lowest financial bid. 5.4.6 In addition, consultancy services required for: (i) technical assistance for finalizing the accounting plan, the PNIME and ANAPEJ, coaching of MFIs and BCM inspectors, monitoring and evaluating the implementation of the NMFS and IEC campaigns estimated at UA 0.83 million; and (ii) the audit of MFIs, project accounts and procurements estimated at UA 0.25 million, will be procured on the basis of shortlists. The selection procedure will be based on an evaluation of the technical proposals and taking into account their prices. 5.4.7 The consultancy services required for conducting: (i) the training of senior staff of CDH/LCP/I in database management as well as the training of MFI customers (UA 0.52 million); (ii) studies, diagnosis of MFIs, revision of the procedures manual, mid-term review and preparation of the completion report, short-term consultancies, dissemination of the code of ethics and management of database on MFIs (UA 0.33 million); and (iii) technical assistance services required for project implementation (1 accountant, 1 manager specialized in procurement, 1 IGA and MSE promotion specialist, and 1 monitoring and evaluation expert), estimated at UA 0.36 million, will be procured on the basis of a shortlist, in accordance with the Bank’s Procedures for the Use of Individual Consultants by Borrowers. Since the amounts of all the different service contracts (paragraphs 5.4.5, 5.4.6, and 5.4.7) are lower than UA 350,000, advertisements for these contracts will be placed only in national and regional newspapers. However, any eligible consultants, whether or not from the region, may express interest in being included on the shortlist. 5.4.8 The recruitment of support staff for the Integration Department for the implementation of the project, comprising a coordinator and microfinance expert, with a total estimated contract value of UA 0.21 million, will be done through direct negotiation. The performance of these two (2) experts, recruited as consultants from shortlists under the previous Poverty Reduction Project financed by the ADF, was deemed satisfactory by the government and the different Bank missions. To ensure service continuity, a Board waiver is required to extend the contracts of these consultants who were recruited under the PRP. Under the current project, these consultants will be offered annual contracts renewable on the basis of satisfactory performance of the experts concerned. 5.4.9 The procurement of consultancy services for new technologies related to the hosting, maintenance, and update of the website on microfinance in Mauritania (UA 0.02 million) will be done through direct negotiation with the designer of this site, who developed it in 2004 and has hosted it for 2 years, to ensure service continuity. In addition, the

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performance of this consultant, who has all the basic information required to update the site, was deemed satisfactory by the CDH/LCP/I. Operating Costs (UA 0.38 million) 5.4.10 Procurement in relation to project operations (operating costs), for a total value of UA 0.38 million, concerns per diems that are paid directly to project staff (UA 0.14 million), travel allowances, upkeep and maintenance costs for office equipment, travel costs as well as operating costs (UA 0.24 million). The procurement of goods (office supplies and accessories, and so on) for operations will be done in accordance with local shopping procedures, for amounts lower than UA 20,000, and competitive bidding for contracts worth more than UA 20,000. Miscellaneous (UA 2.65 million) 5.4.11 Institutional Support: The procurement of goods, rehabilitation works, and services related to the establishment of MFIs in rural areas (UA 0.60 million) will be done in accordance with procedures defined in the project’s manual of administrative, financial, and accounting procedures, which will be aligned with the Bank’s Rules of Procedure for Procurement. This manual will be approved by the Bank prior to its utilization. These procedures will be based on the Bank’s Guidelines for Procurement under Community-based Investment Projects (September 2000 version). Procurement of goods and works needed for the establishment of MFIs in rural areas and of services is described in the next two paragraphs.

5.4.12 Procurement of rehabilitation works for the 9 rural CAPECs and for goods that will be used in this context, and to diligently execute these activities, depending on the value of the contract and taking into account local economic capacities, will be done through: (i) negotiated contract for goods or works contracts valued at less than UA 500, (ii) shopping among suppliers/businesses at the national level for goods or services contracts valued at between UA 500 and UA 2,000, and (iii) local competitive bidding for goods or services contracts valued at more than UA 2,000 but lower than UA 10,000. These procurement modes will require (i) preparation of long lists of suppliers and businesses under a Bank-approved process (invitation for expressions of interest), and (ii) local advertising in regional headquarters using standard templates contained in the procurement guidelines for community-based projects. 5.4.13 Consultancy services needed to set up MFIs in rural areas (training of personnel and representatives, auditing and inspection of activities) will be procured through shortlists. The selection procedure will be based on comparability of technical proposals and selection of the lowest financial bid. 5.4.14 Credit Fund: In the context of implementation of micro-credit activities, the credit funds (UA 2.05 million) made available to MFIs will be granted in accordance with well-established practices relating to credit and with procedures that will allow the sustainability of operations. The MFIs will be selected on the basis of direct negotiations. Five (05) MFIs were chosen from among the MFIs that benefited from the first Poverty Reduction Project in Mauritania, based on selection criteria agreed among the BCM, the Integration Department of the CDH/LCP/I, the PIU of the PRP, and the ADF (good operational, organizational, structural, and financial capacities, deemed satisfactory by the government and donors operating in the

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sector). This choice will be confirmed by the audit of MFIs, the results of which are expected at the end of February 2007. The selection of these MFIs will help ensure efficient continuity of PRP actions in relation to microfinance and guarantee an extension of quality financial services similar to those provided under the PRP in the new areas of this project. National Laws and Regulations 5.4.15 National laws and regulations concerning procurement in Mauritania, in particular those of the CDH/LCP/IL were reviewed and deemed acceptable. Executing Agency 5.4.16 The Integration Department will be responsible for procuring goods and services for the project as presented in Section 5.4. A procurement expert with good knowledge of national procedures and practices as well as of the Bank’s Rules of Procedures, will be recruited for the said team. He/she will be responsible for preparing and monitoring the procurement plan. Appropriate material resources, such as a system for archiving project contracts and ad hoc consulting services in the area of procurement will be provided to make procurement adequate under the project. General Procurement Notice 5.4.17 The text of a General Procurement Notice (GPN) will be discussed and adopted during negotiations and will be published in the UN Development Business, upon approval by the Board of Directors of the project loan. Procurement Review Procedures 5.4.18 The following documents will be submitted for review and approval by the Bank prior to publication: (i) the Specific Procurement Notices; (ii) the bidding documents, the terms of reference, and invitation letter to consultants; (iii) the bid evaluation reports, including recommendations on the award of contracts; and (iv) draft contracts in case the standard contracts included in the bidding documents have been modified. 5.5 Disbursements 5.5.1 Loan resources will be disbursed according to the expenditure schedule by component and expenditure category presented in Tables 4.6 and 4.7. All disbursements will be conducted in accordance with relevant Bank Group rules and procedures. The following disbursement methods will be used: (i) the special account method, and (ii) the direct payment method. 5.5.2 With respect to project management, no later than the launching of the project, the following four (04) accounts will be opened in Nouakchott, in the name of the project: (i) a special account, opened in the name of the project in a commercial bank acceptable to the Bank, to receive loan resources, except for resources earmarked for MFIs; (ii) a special “credit fund” account opened in the name of the project in a commercial bank, to receive funds to finance MFIs; (iii) a “repayment” account in the name of the project, also opened in a commercial bank to receive all loan repayments made by MFIs; and (iv) an account opened at the Treasury to receive the Government’s counterpart funds.

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5.5.3 Requests to replenish the special account aimed at financing project activities, in particular, its operating costs, will be prepared on the basis of an annual programme and estimates for four months of activity. The revolving fund will be replenished upon justification of the use of at least 50% of the previous allocation and of all previous advances. During the first quarter of each year, the Government will pay its contribution for the funding of activities programmed for the year. Disbursement for contracts relating to transport equipment, furniture and equipment will be made directly to contractors and suppliers according to the direct payment method. The same method of payment will be used for contracts related to specialized services, short-term consultants and training within the framework of agreements 5.6 Monitoring and Evaluation 5.6.1 Within 30 days to the end of each quarter, the project will submit quarterly and annual activity reports on the status of the project using the Bank’s standard format. These reports will be based on the evolution of the indicators defined in the project matrix, and on the achievements of the different partners involved in the implementation of the project. These reports should contain in their annexes, the minutes of Steering Committee Meetings. The project should also submit to the Bank a completion report at the end of the project, in accordance with Bank standards. 5.6.2 Under the supervision of the coordinator, project experts will be responsible for monitoring, managing, and supervising all project activities. The Steering Committee will coordinate the project. In particular, they will ensure regular collection of statistics and monitoring of project indicators related to the project logical framework. The Bank Group will conduct a project launching mission, two supervision missions on average per year, a mid-term review to verify the achievement of project objectives based on the intermediary indicators of the project matrix, as well as a project completion mission. This last mission will take place after the preparation by the government of its project completion report. The reports and conclusions of these missions will be transmitted to the Steering Committee, which will take the appropriate measures to resolve problems identified during the implementation of the project. 5.6.3 With help from the specialized services of the CDH/LCP/I, the monitoring and evaluation expert will set up a monitoring and evaluation system based on the analysis of the initial situation, the mid-term and end-of-project reviews, and on specific indicators that all project partners should provide and monitor, and which will be compared with those in the project logical framework. The initial data will be culled from a reference situation that each stakeholder in the project should prepare for activities it is responsible for and with respect to targeted groups. The project will produce quarterly and annual reports on the implementation of the project and the outcomes achieved, which will help measure the development of the main indicators and of the impact of the project. This information will be transmitted to the ADF. 5.7 Accounting and Auditing 5.7.1. A consultant will be recruited to revise the manual of administrative, financial, and accounting procedures of the PRP to adapt it to the management of the PRECAMF. To this end, the same consultant will support the implementation of the computerized accounting

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system. This activity will be carried out as soon as the project is launched to ensure that the accounting system is adapted to the efficient management of the project. The project will keep an accounting system by source of finance, expenditure category, and component. 5.7.2. Project accounts and MFIs will be audited and verified each year by independent international audit firms, which will also audit procurement. The different audit reports will be regularly transmitted by the Integration Department to the ADF for consideration. TORs will be prepared by the Integration Department, in consultation with the ADF and the consultants will be selected from shortlists previously approved by the ADF. 5.8 Aid Coordination 5.8.1 In Mauritania, aid is coordinated by the MAED through the Economic and Financial Cooperation Department (Direction de la Coopération Economique et Financière). The PRSP is the only reference framework for all interventions. It will serve as a consultative framework for bilateral and multilateral agencies as well as for national and local institutions and structures. Furthermore, the institutional framework put in place within the NMFS and NSMSE is the ideal framework for coordinating donor actions in these areas. The Bank’s Regional Office in Dakar (SNFO), which covers Mauritania, will participate in the coordination meetings organized to monitor the implementation of these strategies. The different TFPs have expressed a desire to create a formal consultation framework of TFPs in the area of microfinance, with the UNDP as lead agency, in order to strengthen coordination of interventions. The SNFO will closely monitor this issue. 5.8.2 Special attention was paid to coordination with donors and development partners during the identification, preparation, appraisal, and re-appraisal missions of the project. In particular, during the re-appraisal mission in April 2006 and update mission in January 2007, the matrices of support actions to the microfinance sector by different partners, particularly those of the joint ADF-World Bank CSP, were jointly reviewed with a view to harmonizing interventions. Thanks to this close collaboration, actions already financed and their orientations were taken into account. These meetings also helped validate the central themes and intervention areas of the project, the institutional set-up, management tools, and intervention areas of the project. 6. PROJECT SUSTANIABILITY AND RISKS 6.1 Recurrent Costs 6.1.1 During the implementation phase, the project will help finance recurrent costs on a declining scale. The project was designed to minimize recurrent costs for the government. All operating costs are covered by the project during the implementation period. Senior project personnel are or will be recruited as contract staff and their contracts will end at project completion at the latest. 6.1.2 Vehicles, equipment (office and computer equipment) and furniture acquired under the project will be handed over to the Government at the end of the project. The estimated maintenance cost of the equipment is about UA 14,000 per year. This maintenance concerns mostly computer and office equipment for MFIs and management structures; it will be borne by the concerned structures. The establishment of MFIs in rural areas will incur annual expenses to the tune of UA 195,000. The recurrent costs of the project absorb an annual

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amount of UA 0.34 million. This amount represents 0.19% of the Government’s operating budget in 2006 and 2.17% of the budget allocated to CDH/LCP/I. The PRP experience shows the Government’s willingness and capacity to bear the recurrent expenses of the project, including the salaries of staff, which it has continued to pay since the end of the project in June 2004. 6.2 Project Sustainability 6.2.1 The sustainability of the impact of the project resides primarily in the strengthening of the capacities of a large number of microfinance stakeholders. This will help increase and disseminate in a sustainable manner, national expertise on best practices in microfinance in different areas of intervention. Indeed, the training activities and other support will be beneficial to 26 senior BCM staff charged with supervision and control, 6 senior staff from the CDH/LCP/I Integration Department and 4 from the SECF responsible for managing the sector, the staff and representatives of 50 MFIs, or 350 people in total, and to 20,000 MFI customers. Certified trainers could, in turn, build the capacities of more than 400 MFI technicians. 6.2.2 The project will encourage the setting up of MFI networks in order to create economies of scale in their development process, and will support existing networks with a wide range of support (training, support for the development of a reliable MIS, the preparation of realistic business plans, the extension of services to rural areas, coaching, and credit funds). It will thus contribute to their institutional, operational, and financial autonomy and to their effective integration into the financial sector. It is planned that in 2011, ten MFI networks, 6 of which are women’s, representing about 60 grassroots associations, will be managed according to best practices, and 35% will have achieved financial autonomy. The performance of MFIs will guarantee the continued availability of resources to meet the demands of target groups. Monitoring the results of MFIs on the basis of a performance sheet will help maintain the quality of outcomes. 6.2.3 Raising the awareness of more than 250,000 persons, of whom more than 60% are women, on microfinance as a tool for increasing income, training and monitoring 20,000 IGA promoters and 1,500 MSEs on managing their activities and loans will enhance the profitability of their activities, making them more viable than similar institutions in the informal sector which go out of business after 2 years. Consequently, the demand for financial services will be of better quality, thus improving the quality of the MFI portfolio. 6.2.4 The sustainability of the project also resides in its contribution to the improvement of the supervision and control framework for microfinance, which will be made more conducive to the development of MFIs. It is expected that at the end of the project, a dozen MFI networks will be legally recognized, managed according to best practices and regularly inspected. The credit fund for the project will be secured through close monitoring by the project’s microfinance specialist, the MFI monitoring committee managing the credit fund, and the strengthened control and supervision of the BCM. Its sustainability will be ensured through the creation of a sustainable professional MFI financing mechanism, which the government, with support from TFPs, in particular the UNDP and World Bank, has started reflecting on. If this facility is not created by the midterm review at the latest, the ADF and the government will identify an alternative mechanism which will ensure the availability of financial services for the target groups of the project.

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6.3 Project Risks and Mitigating Measures 6.3.1. The major assumptions underlying the project’s design are the Mauritanian Government’s determination to pursue implementation of its national microfinance strategy (NMFS) and NSMSE, and to maintain a favorable environment for the development of MFIs, IGAs, and MSEs. These assumptions are realistic with respect to ongoing reforms and actions and to monitoring by TFPs, as well as to the expected gains from financial operations. 6.3.2 Two main risks have been identified: The first relates to the mobility of persons who will be trained, which would weaken the expected impact of building the capacities of the targeted structures, notably, the BCM, the CDH/LCP/I Integration Department, the SECF, the PNIME and the MFIs. This risk can be mitigated by implementing incentive measures and training a large number of persons in these structures. 6.3.3 A second risk concerns the non-repayment of credit by MFIs and their customers. Indeed, the credit is intended for marginalized groups, who have little experience using this type of service; this could lead to misunderstanding about how credit works, particularly with respect to timely repayment. This risk could compromise the sustainability of credit operations. To mitigate this risk, the project is counting on raising awareness and training customers, applying rigor in selecting MFIs responsible for managing the credit fund, monitoring repayments, and including a suspensive clause in the agreements that will be signed with the MFIs in case of poor performance. 7. PROJECT BENEFITS 7.1 Economic Benefits of the Project 7.1.1 The project will make a significant contribution to the development of the microfinance sector. Indeed, it will help increase the number of MFI customers from the current 139,000 to 200,000 in 2011, a 43% increase. The savings mobilized by the MFIs and their loan portfolios will increase from UA 4.9 million and UA 2.5 million to UA 6.86 million and UA 3.75 million, respectively. At the end of the project, 10 MFI networks representing 60 associations will have functional structures, a reliable information and management system, realistic business plans, and diversified products, and they will be close to financial autonomy. They can thus, through the sustainable refinancing structure, and the 16 associations established in rural areas, increase the coverage of demand for quality microfinance services in the whole country by at least 5% by 2011. 7.1.2 Microfinance activities will help facilitate the access and integration of target groups (women and youths in particular) into the modern economic process. It is estimated that by 2011, thirty-six percent of IGA promoters will be in a profitable sector and that at least 20% of the 20,000 IGAs, of which 60% are women, or 2,400 women, will have progressed to MSEs. Thus, by supporting microfinance and MSEs, the project is contributing to the creation and development of a network of MSEs integrated in the economic sector and, consequently, creating jobs. Building the capacities of MFIs will help consolidate the microfinance sector and better integrate it into the financial market, thus allowing the poor to benefit from the economic boom expected from oil production.

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7.1.3 In addition, the different studies (diversification of financial services, assessment of MFIs, promotion of the opening of MFIs in rural areas, profitable markets), the data base on MFIs, and the study on the impact of microfinance activities on poverty will help improve information on MFIs, IGAs, and MSEs. The other TFPs will be encouraged to intervene to support the development of the sector. 7.2 Social Impact Analysis 7.2.1 The project will affect more than 200,000 persons, about 20% of the poor in the country. The actions envisaged will thus contribute to national efforts aimed at reducing the proportion of poor in the whole country from the current 46.7% to 35% by 2010. 7.2.2 The project will help improve access by the poor to viable and sustainable financial services. Indeed, coverage of the needs of IGAs and MSEs will increase from less than 10% to more than 15% by 2011, with more than 66,000 activities financed. In particular, the rural areas, which are currently badly served with less than 10 MFIs, will see the number of MFIs increase to more than 25 at the end of the project. 7.2.3 Building the capacities of IGA and MSE promoters, encouraging them to diversify their activities to profitable sectors with higher returns, and financing their activities will increase their incomes and, consequently, improve the living conditions of their families and structure of their enterprises. The credit fund earmarked for the working poor will have a direct impact on the improvement of incomes in the project areas. About 200,000 customers, 60% of whom are women, will have access to micro-credit to finance their income-generating activities, of which more than 20% will progress to the MSE level. 7.2.4 The IEC activities relating to credit, components relating to gender and the environment will help increase the number of MFI members from 140,000 to 200,000 by 2011, and establish more egalitarian relationships that will promote the development of women, better schooling for girls and protection of the environment. 7.3 Analysis of Impact on Women 7.3.1 The project encourages the participation of women in all project activities. In fact, 31 of the 50 MFIs that will benefit from the project are women’s MFIs. In addition, 6 of the 16 MFIs that the project will help establish in rural areas are women’s MFIs. The project will ensure that, with respect to credit, the different types of training and coaching, women comprise at least 60% of the final project beneficiaries. The project will also ensure that women constitute 20% of the MSE targets to be achieved through support to PNIME and ANAPEJ. It will thus help reduce gender disparities, notably with respect to access to resources. 7.3.2 Through IEC training, the project will improve the conditions of about 150,000 women in the following areas: training in business start-up, professional techniques, and management; thus increasing women’s income and saving capacity, their access to credit and the development of IGAs and MSEs.

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8. CONCLUSIONS AND RECOMMENDATIONS 8.1 Conclusions 8.1.1 This project falls within the framework of the implementation of the national poverty reduction strategy, which identifies microfinance as an essential tool for reducing poverty, thus contributing to the achievement of the MDGs. The project will help to improve the supervision and control framework for microfinance, making it more conducive to the development of MFIs. The capacities of the main Government structures responsible for microfinance, namely the BCM, CDH/LCP/I, and the SECF, will be strengthened. Thanks to the project, 245,000 people, of whom 147,000 women, will have access to viable and sustainable microfinance services. At the end of the project, 10 MFI networks, representing about 60 associations will be professional and close to financial autonomy, with a 50% increase in mobilized savings and a loan portfolio. Through the sustainable MFI refinancing mechanism and the 16 associations established in rural areas, these networks will increase coverage of demand for quality microfinance services in the whole country by at least 5% by 2011. 8.1.2 The project concretely supports the implementation of two strategies relating to the promotion of microfinance and MSEs. It will help to improve the supervision and control framework, professionalize and make sustainable the offer of MFI financial services in response to the needs of MSEs and promoters of IGAs, thus contributing to the development of these activities. In this way, the project will help to increase the incomes of the poor populations, and reduce disparities between regions and social groups by targeting rural areas and disadvantaged groups, in particular, women and youths. By increasing the incomes of 20% of the poor population in the country, the project will contribute to national efforts aimed at reducing the proportion of poor in the whole country to 35% by 2010, compared with the current 46.7%. 8.2 Recommendations and Loan Conditions It is recommended that an ADF loan of UA 5.98 million be granted to the Government of the Islamic Republic of Mauritania for the purpose of implementing the project, as described in this Appraisal Report. The effectiveness of this loan will be subject to the general conditions of the Bank and to the following special conditions: A. Conditions Precedent to Loan Effectiveness 8.2.2 Effectiveness of the Loan Agreement is subject to fulfillment, by the Borrower, of the provisions stipulated in Section 5.01 of the General Conditions.

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B. Condition Precedent to First Disbursement

8.2.3 As a condition precedent to the first disbursement of loan resources, the Borrower shall:

(i) Provide evidence of the establishment of the MFI Monitoring Committee to

manage the credit fund within the CDH/LCP/I Integration Department, comprising four representatives of this department, two representatives of the BCM Banking and Financial Supervision Department, and two representatives of professional associations in the sector (para. 5.2.1).

C. Other Conditions

8.2.4 In addition, during the implementation of the project, the Government shall:

(i) no later than 30 January 2009, provide evidence of an irrevocable undertaking by CDH/LCP/I to provide, upon project completion, institutional support to the MFIs supported by the project over a period of four (4) years (Paragraph 4.5.13); and

(ii) no later than 30 June 2009, provide evidence of the establishment of the

MFI-financing facility or of an alternative mechanism to guarantee the continued availability of credit fund resources for the microfinance sector (4.1.5).

ANNEX I Page 1/1

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS

(PRECAMF)

ADMINISTRATIVE MAP OF MAURITANIA AND PROJECT AREAS

This map has been provided by the staff of the African Development Bank exclusively for the use of readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank and its members any judgment concerning the legal status of a territory nor any approval or acceptance of these borders.

PROJECT AREA

ANNEX II Page 1 of 8

ISLAMIC REPUBLIC OF MAURITANIA

PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

PRESENTATION OF PERFORMANCE OF MFIs PRESELECTED TO MANAGE

THE CREDIT FUND

Introduction Mauritania’s experience in microfinance is recent and limited. Its first experiences date back to the 1990s, according to information on MFIs with the most significant experience, namely CAPEC, GFEC, NISSA BANQUE, GAGIF and MAFEC. An analysis of the performance of these institutions during the 2001-2004 period reveals an average stock of mobilized savings of MRO 350 million, compared with outstanding loans of MRO 190 million, with a risk portfolio that varies between 24 and 1.6%. They served an average of 38,197 customers, of whom 25,945 women. These results suggest a promising future provided these networks are supervised for some time (from 3 to 5 and from 5 to 7 years) to build their institutional, operational, and financial capacities based on business plans drawn up by these networks. The table below presents the progress of the main indicators achieved by 4 networks.

INDICATOR PROCAPEC MAFEC GEFEC GAFIF 2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004

Persons affected 21260 27993 37952 2500 3000 3400 33295 876 Recovery Rate 99 % 97% 98% 99% 98% 98% 81% 81% 76% 100% 100% 99% Operational Efficacy 176% 232% 167% 23% 47% 97% 69% 111% 52% 16% 50% 76% Financial profitability 23% 37% 8% 72% 55% 82% 9% 66% 155% 22% 37% 51% Financial Autonomy 5% 6% 5% 5% 14% 8% 45% 36% 71% 91% 9% 13% Equity ( millions of MRO) 66 91 114 1.9 8.8 5.8 14 10 44 1.1 1.7 2.5 Profit ( millions of MRO) 15 33 9.3 1.4 4.7 4.7 0.09 0.901 3.4 0.239 0.617 1.3 Total Assets ( millions of MRO) 1260 1654 2222 38 63 71 31 29 62 1.2 17 18

The interpretation of these performances must be qualified because of the quality and reliability of information that is difficult to use, the poor mastery of management tools with inadequate MIS, and depending on whether the structures in question were major beneficiaries of institutional support from the government and/or donors such as PROCAPEC, GEFEC, and NISSA Bank. The financial situation varies from one structure to another, with wide gaps in terms of financial ratios. These gaps are attributable to the fact that the operating costs of the three networks were covered by the government or by the donors who supported their creation. Such financing is justified by the desire to ensure the financial viability of these structures. In general, all these structures have recorded positive results, and their operational and financial efficacy rates have been satisfactory. Overall, management of the loan portfolio of these institutions is satisfactory. However, the level of their financial autonomy remains low because the structure of their equity capital (highly fluctuating) comprises shares.

1. Agence de promotion des caisses populaires d’épargne et de crédit (PROCAPEC)

1.1 Status and mission: PROCAPEC (Savings and Loans Promotion Agency) is an agency of the network of credit and savings associations set up in 1997 by the State, with support from donors, notably the Bank, through the Central Bank of Mauritania (BCM). Its mission is to promote credit and savings associations (CAPEC) throughout the national territory, ensure their technical management and supervise their operations. The mission of CAPECs is to offer their members financial services adapted to their needs.

1.2 Network Coverage and service offerings: The network currently comprises 23 operational CAPECs. Since their modest beginnings in 1997, PROCAPEC and the CAPECs have enabled more than 11,500 borrowers or micro-entrepreneurs to obtain more than MRO 2.5 billion in credit. More than one third of these loans have been given to women. Each CAPEC is managed in accordance with

ANNEX II Page 2 of 8

the norms, policies, and procedures contained in the manual prepared and disseminated by PROCAPEC. The operations of CAPECs are regularly monitored by the credit service, the auditing service, and the PROCAPEC inspection service.

Key Performance Indicators

Heading 2001 2002 2003 2004 Expansion of network Number of banks 12 18 20 23 Number of members 14459 21260 27993 37952 Outstanding credit (in millions of MRO) 320.61 607.44 769.01 838.06 Volume of savings (in millions of MRO) 521.25 909.78 1 114.25 1 685.81 Average credit granted /customer (thousands of UA) 205.48 254.55 282.08 220.82 Average savings / customer (thousands of UA) 36.09 42.64 37.88 44.42 % of women 35% 33% 34% 40% Total Assets (millions of MRO) 779.86 1 260.45 1 654.63 2 222.23 Financial Viability Operational efficacy 165% 176% 232% 167% Number of customers / Agents N/D 153 187 450 Financial profitability 13% 23% 37% 8% Results (MRO) 6.10 15.11 33.43 9.31 Equity (MRO) 46.54 66.09 91.53 114.06 Risk portfolio + than 90 days 3.6% 1.9% 3% 1.6%

1.3 Performance of network: As at 31/12/2004, PROCAPEC had close to 37,900 members and held more than MRO 1.7 billion in members’ savings, with an average savings balance per member of MRO 44,000. These results show the strong growth of the network in terms of expansion. Membership growth is significant. It rose from 12 institutions in 2001 to 20 in 2003 (a 40-% increase) to 23 in 2004. During the same period, the volume of outstanding credit stood at MRO 835 million with a risk portfolio of + than 90 days and a rate between 3 and 1.6%. The operational and financial autonomy rates are satisfactory, operating costs are fully covered by the operating income, which continued to rise until 2003, climbing from 165% in 2001 to 176% in 2002 and 232% in 2003, then dropping to 167% in 2004 due to the expenses incurred for the implementation and recruitment of staff for the new associations opened at the beginning of 2004. In spite of these encouraging results, the level of financial autonomy remains low and the portfolio risk has increased somewhat while remaining within acceptable limits. 1.4 Prospects for PROCAPEC: The 2004-2008 network development plan aims to strengthen PROCAPEC and CAPECs in order to enhance their offerings of savings and credit services to a larger number of borrowers, especially in rural areas. After implementation, the agency is expected to achieve the following objectives:

- wider national coverage, that is, at least one CAPEC in each of the 36

Moughatans; these Moughatans account for more than 85% of the Mauritanian population;

- A membership of more than 87,500, with savings of more than MRO 4 billion in the network;

- More than 15,000 members with credit, or 20 000 loans granted on an annual basis;

- Outstanding credit of nearly MRO 3 billion; - A well-managed, secure network, with capitalization of more than 10%.

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Projected Operating Accounts 2006/2010 MRO)

2004 2005 2006 2007 2008 Financial Income (in MRO) 342711 447771 591193 743769 898949 Finance costs 66575 84793 111671 140461 170778 Gross operating margin 276136 362978 478522 603218 728171 Excess payment received before subsidies

-11855 -55458 -57616 -4001 49959

Operational subsidy 7199 33093 6371039288 21930 Depreciation subsidy 12083 26375 29520 29520 17127 Excess payment received after subsidy

7427 4010 35615 64808 89016

Projected Income Statement Expenses (MRO) 354566 503229 648808 747679 848990 Excess payment received 7427 4010 35615 64808 89016 Total 361993 507239 684424 812487 938006 Income Interest / credit and investment 291448 383214 508050 643813 785632 Commission/other income 51263 64556 83143 99866 113317 Subsidies 19282 59468 93231 68808 39057 Total 361993 507239 684424 812487 938006

1.5 This development is in line with the desire to consolidate and strengthen the structures set up since the start of the network. It takes into account actions that will help strengthen the management of CAPECs, especially with respect to loans and internal control and the organizational capacity of the agency, mainly in relation to human resources.

2. Mutuelle Association des femmes d’épargne et de crédit “MAFEC”

2.1 Status and mission: The MAFEC (women’s mutual savings and loans association) is a microfinance institution that has been providing financial services to women in both rural and urban areas since 1994. Its mission is to offer needs-based financial services to its customers and to provide technical training, education and social assistance services to its members.

2.2 Coverage and service offerings: MAFEC has 3,400 members, of which 400 direct members and 3000 indirect service customers (financial and non financial). In terms of financial services and products, it grants loans and mobilizes members’ savings; it also offers micro-insurance in the form of solidarity, whose goal is to help members in difficulty, notably in instances of unexpected misfortune. 2.3 Performance of MAFEC: The operations of the association are regularly monitored by its audit and inspection services. It is managed in accordance with the norms, policies, and procedures contained in the manual prepared and disseminated by M.AFEC. As at 31/12/2004, the association had close to 3,400 members and held MRO 39 million in members’ savings, with an average savings balance of MRO 11,470 per member. Savings mobilized during the period 2001-2004 show a steady increase from MRO 12 million in 2001 to MRO 13 million in 2002, MRO 31.2 million in 2003, and MRO 39 million in 2004. During the same period, the stock of outstanding credit stood at MRO 49.1 million with a risk portfolio of + than 90 days of 1.5%. The structure shows steady growth, testifying to the improvement of its operational and financial efficacy rates and of its own funds.

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Key Performance Indicators HEADING 2001 2002 2003 2004 Expansion of network Number of associations 2 2 2 2 Number of members 1950 2500 3000 3400 Outstanding credit (MRO) 18118077 15669937 39702004 49129366 Volume of savings (MRO) 12120986 13722186 31240392 39076332 Average credit granted / customer (MRO) 9300 7470 13235 14450 Average savings/ customer (MRO) 6215 5488 10413 11500 % of women 100% 100% 100% 100% Total assets 24895638 38852347 63564976 71316798 Financial Viability Operational efficacy 36% 23% 47% 97% Number of customers /Agents N/D 153 187 450 Financial profitability 71% 72% 55% 82% Results (MRO) 1291716 1398060 4718118 4694028 Equity (MRO) 1825716 1938060 8813255 5843028 Risk portfolio + than 90 days 2.6% 0.2% 1.6% 1.5% 2.4 Medium and long-term prospects: The 2006-2010 network development plan aims to increase and strengthen the supply of savings and loan services to a larger number of borrowers, especially in rural areas. After implementation, the network is expected to achieve the following objectives:

- An increase in the number of associations, from 4 to 10, of which 4 in rural areas, notably in the Brakna and Gorgol regions where the most underprivileged sections of the population are located;

- An increase in membership, with 1,600 additional members (membership rising from 3400 to 5,000 in 2008), whose savings in the network will exceed MRO 150 million;

- More than 5,000 women borrowers, an annual base of nearly 3,842 loans granted; - Pre-tax earnings of MRO 1.5 million.

Projected Operating Account 2006 / 2010 (in MRO)

Item 2006 2007 2008 2009 2010 Financial Income 10,631,250 12,600,000 15,300,000 19,507,500 22,376,250 Capital costs 4,252,500 3,937,500 5,100,000 7,803,000 8,950,500 Net financial Income 6,378,750 8,662,500 10,200,000 11,704,500 13,425,750 Personnel costs 7,087,500 7,875,000 7,200,000 6,885,000 7,458,750 Other general costs 2,551,500 2,835,000 3,240,000 3,786,750 4,102,313 Other operating income 1,063,125 1,260,000 1,530,000 1,950,750 2,237,625 Gross operating income before depreciation -2,197,125 -787,500 1,290,000 2,983,500 4,102,313 Accumulated depreciation 531,563 630,000 765,000 975,375 1,118,813 Allocation for provisions 1,701,000 1,890,000 2,160,000 2,524,500 2,734,875 Net earnings after depreciation -3,898,125 -2,677,500 -870,000 459,000 1,367,438 Operational subsidy 8,372,109 6,821,719 4,590,000 2,926,125 1,790,100 Non-recurrent income 425,250 504,000 612,000 780,300 895,050 Non-recurrent expenditure (MRO) 212,625 252,000 306,000 390,150 447,525 Earnings before taxes (MRO) 3,729,797 3,262,219 2,649,000 2,019,600 1,591,200

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3. Groupement des femmes d’épargne et de crédit “ GFEC”

3.1 Status and mission: GFEC is a savings and loan cooperative for women’s groups, initiated by the Secretary of State for Women’s Affairs in cooperation with UNDP and UNICEF. Its objective is to create savings and loan cooperatives to facilitate the promotion and insertion of women in the economic development process. It became operational in 1996.

3.2 Coverage and service offerings: The GFEC women’s network has set up 7 cooperatives in the following localities: Nouakchott, Kaédi, Mbout, Tintane and Aioune, Moughata and Monghol. It has a membership of 33,295 women in these localities. Generally, in rural areas, customers are individuals, whereas in semi-urban areas, they organize themselves into cooperatives. GFEC grants loans and raises savings from its members and also offers them basic training services.

Key Performance Indicators

HEADING 2001 2002 2003 2004 Indicator Expansion of network Number of banks 3 5 6 7 Number of cooperatives/ groups 300/56 397/56 485/85 885/85 Outstanding credit 14115260 17816472 26771884 32042972 Volume of savings 4072680 5942127 7528327 8071097 Number of customers / Agent 62 150 330 450 Average credit granted / customer 78 985 98 140 149 197 204 690 % of women 100% 100% 100% 100% Total Assets 22 364 442 31 077 444 29 228 360 62 233 841 Financial Viability Operational efficacy 68,7% 111,4% 52,5% Number of customers / Agent 62 150 330 450 Financial profitability 14% 9% 66% 155% Results 116610 95760 901300 3455611 Equity 10460802 14037718 10588475 44061900 Risk portfolio + than 90 days 6% 19% 19% 24%

3.3 Performance of GFEC: As at 31/12/2004, the network had granted 1,455 loans amounting to MRO 1.4 billion, 46% of which was granted by the Nouakchott branch and 25% by the Kaédi branch; the branches in Monguel, Mbout, Maghama, Aioum and Tintane granted loans in varying proportions of 3 to 12%. For the cooperatives as a whole, loan operations began more than three years ago. The Nouakchott branch is at its 16th loan operation, while the others are only at their 4th credit committee. Loans granted vary from one structure to another. Loans are granted to women individually or through their cooperatives. The loan repayment rate in the various branches varies from 74% to 97%. In Nouakchott, it stands at 92%, compared with 97% in Kaédi, 94% in Monguel, 85% in Mbout, 74% in Maghama, 80% in Aïoun and 84.8% in Tintane. The rate of portfolio risk has increased from 6% in 2001 to 19% in 2002 and to 24% in 2004. The operational and financial efficiency rates have shown the same trend, although within acceptable limits. This is due to the rapid growth of the network, the setting up of new branches and the recruitment of staff, the number of people reached without MIS and appropriate accompanying measures. These results notwithstanding, the level of financial autonomy is still within acceptable limits, with a drop in 2002. Indeed, it fell from 45% in 2001 to 36% in 2002, and then rose to 71% in 2003 and reached 91% in 2004 following an increase in equity. 3.4 Medium and long-term prospects: UNICEF’s June 2005 impact assessment report presented an action plan with a focus on consolidating the existing structures, creating a higher-level structure in the form of a UNION, bringing together the existing GFECs as a network and, possibly, those to be created under a network, and finally, gradually extending the experience to other localities. As for the portfolio at risk, the report emphasized recovery through a local mechanism with a view to improving the quality of the portfolio.

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4. NISSA BANQUE 4.1 Status and mission: The Nissa Banque network was created by SECF with the support of UNICEF and OXFAM. It is a micro-credit institution modeled on the Grahmeen Bank, and has been providing financial services to women in both rural and urban areas since 1997. It also provides technical training, education and social assistance services to its members. All Nissa Banque branches currently have management bodies: a 9-member board, a 5-member loan committee, and a 3-member monitoring committee.

4.2 Coverage and supply of services: The network has set up 9 Nissa Banque branches in the Moughataas in Aleg, Bababé, Mbagne, Magta Lahjar, and Boghé in the Wilaya of Brakna, Ould Yengé and Sélibaby in the Wilaya of Guidimakha, Nouadhibou in the Wilaya of Dakhlet Nouadhibou, and El Mina. On the whole, the network has a membership of 60,709 women. Generally, in rural areas, customers are individuals whereas in semi-urban areas, they organize themselves in cooperatives. Cooperatives grant loans to and raise savings from their members, and also offer them basic training services.

4.3 Performance of the Cooperative: The information and performance presented were extracted from the impact assessment report commissioned by UNICEF, one of the network’s main donors. The table below shows the loans granted by each of the 9 branches and by the network as a whole. From 1997 to 2002 there was sustained growth in the loans granted, as shown in the table below. Thereafter, the volume of loans dropped to nearly half in 2003 and slightly in 2004. This drop resulted from the measures taken to accelerate the recovery of arrears by temporarily suspending loan operations. In some cases, the drop was due to the often long periods granted for the repayment of the loan capital.

Loan Amounts Granted per Year and per Nissa Banque branch

Year Mbagne Boghe Babade Nouadh Elmina Aleg M.Lahjar Selibaby O.yenge

Total 1997 - 990.00 0 824.00 0 800.00 0 0 0 2 614.00 1998 910.00 1 267.00 1 040.00 0 0 1 760.00 1920.00 0 0 6 897.60 1999 1 220.00 2 580.00 1 570.00 0 0 2 090.00 2710.00 0 0 10 170.00 2000 3 792.00 0 3 030.00 960.00 0 0 2210.00 4570.0 0 14 562.00 2001 1 450.00 2 660.00 3 230.00 4450.00 2 020.00 2530.00 1250.0 0 17 590.00 2002 4 758.00 7 450.00 2 880.00 4 000.00 13.630.00 3 990.00 2540.00 1200.0 3300.00 43 748.00 2003 5 090.00 4 152.00 3 810.00 2 400.00 0 0 3290.00 0 1950.00 20 692.00 2004 1 600.00 3 370.00 4 650.00 0 0 5 650.00 2080.00 0 0 17 350.00 Total 18 820.00 19 809.600 19640000 11 414.00 18080.00 16 310.00 17280.00 7020.0 5250.00 133 623.60

4.4 In all, the 9 Nissa Banque branches have financed 1,255 projects. The Boghe branch financed the highest number of projects (227), or 15% of the total. It was followed by Magta Lahjar: 198 projects, or 16%, Aleg: 190 projects, or 15%, Mbagne: 176 projects, or 14%, Bababe: 156 projects, or 12%, El Mina: 126 projects, or 10%, Nouadhibou: 82 projects, or 7%, Selibaby: 65 projects, or 5%, and Ould Yenge: 35 projects, or 3% of the total. The repayment rate varies from one Nissa Banque to another. The best rate of 96% was recorded by the Mbagne and Bababé branches, followed by Aleg and Sélibaby (93% each), Magta Lahjar (92%), Boghe (90%), Nouadhibou (85%), El Mina (82%), and Ould Yenge, with the lowest rate of 74%. Therefore, 3 branches fall below the baseline of 95%. On the whole, arrears stand at MRO 12,951,376 on an expected total of MRO 133,33,600.

4.5 Medium and long-term prospects: Considering the performance of the network and with a view to strengthening the achievements, the UNICEF assessment report recommends the following actions:

- p

professionalize the Nissa Banque branches, taking into account their viability and the supply of services that are accessible and profitable to users;

- Envisage the creation of a Nissa Banque network that could be extended to GFECs given their similarities in structure and purpose;

ANNEX II Page 7 of 8

- Provide technical support to branches on the basis of two objectives: (i) ownership of the branches by women; (ii) acquisition and effective use of technical skills by staff and management;

- Design a savings, loan and recovery policy taking into account local specificities, women’s capacities and BCM requirements.

5. Groupement d’entraide pour les femmes Initiatives féminines “GAFIF” 5.1 Status and mission: The Groupement d’entraide pour les femmes Initiatives féminines was created in 1998 and licensed in 2000. Its objectives are to facilitate economic integration of its members and to promote entrepreneurship among women 5.2 Coverage and supply of services: GAFIF has developed its savings and loan activities in the two main towns of the country: Nouakchott, the administrative capital, and Nouadhibou, the economic capital. However, it operates in 5 administrative regions of the country (Brakna, Gorgol, Dakhlet, NDB, and Nouakchott) and includes 7 affiliated cooperatives with 876 members. The localities under Nouakchott (Aéré M’bar, Fimbo, Maghama, Kaédi and Daw, Dolol, Guiraye) have just established a compulsory savings system. 5.3 Performance of the Cooperative: Performance analysis for the 2001–2004 period shows sustained growth as illustrated by changes in its operational efficiency and financial profitability rates and in its equity. During the 2000–2005 period, the GAFIF granted 560 loans for a total of MRO 10,205,000 and collected MRO 5,134,648 in short-term deposits in Nouakchott. The overall balance sheet rose from MRO 4 million in 2001 to MRO 12 million in 2002, MRO 17 million in 2003, and to MRO 18.7 million in 2004 with net profits of MRO 0.75 million, MRO 1 million, MRO 1.7 million, and MRO 2.5 million, respectively. During the same period, the volume of outstanding loans stood at MRO 2.3 million, 4 million, 5.6 million, and 9 million, respectively, with a + 90 days portfolio at risk of 0% until 2002, which fell to 0.014% in 2003 and reached 0.45% in 2004.

Key Performance Indicators HEADING 2001 2002 2003 2004 Expansion of network Number of associations 02 03 04 07 Number of members 876 Outstanding credit 2349440 4010170 5675030 9058160 Volume of savings 524500 1077600 7440070 5134648 Average credit granted / customer 16175 Average savings/ customer 5860 % of women 100% 100% 100% 100% Total assets 4260450 1200935 17938699 18718696 Financial Viability Operational efficacy 75% 16.5% 50.4% 76.4% Number of customers / Agents N/D N/D 95 132 Financial profitability 18.8% 21.9% 37% 51.5% Results 135350 239255 617528 1299798 Equity 735950 1093005 1672978 2524148 Risk portfolio + than 90 days % % 0.014% 0,45%

5.4 Prospects (2006-2010 action plan based on the operating account below. The Group has two main objectives: (i) improving and consolidating achievements in the existing localities (increasing membership); improving management tools, strengthening management and staff capacities, etc.); (ii) extending its network to the Brakna, Gorgol and Guidimakha, Tagant, and Hodh El Chargui regions and to the suburbs of Nouakchott, where rural migrants are mostly concentrated. In 2010, GAFIF intends to reach, over the next five years, a membership of about 3000, including 1500 in

ANNEX II Page 8 of 8

Nouakchott (180 members per year and at least 15 members per month) and 500 new members in Kaédi at the rate of 100 members per year. In Maghama, the objective is to have 150 new members in addition to the current 15 members of the GAFIF group; in Daw, 200 members; in Aére M'bar, 157 members and in Fimbo, 95 members

Projected Operating Account for 2006/2010, in MRO 2006 2007 2008 2009 2010 Operating costs 1828728 2525556 2361880 2573660 2840370 Of which interests 29928 59856 57280 55460 52670 Income Financial income 960000 980000 980000 1000000 1200000 Fines 5000 6000 8000 5000 7000 Sale –books 100000 110000 112000 116000 120000 Membership dues 100000 110000 112000 116000 120000 Total Charges 1165000 1206000 1210000 1237000 1447000 Results (loss) 663728 1319556 1149880 1336660 1393370

Once implemented, the network will pursue the following objectives:

- additional membership of 3000 - progressive coverage of operating charges through financial income - pre-tax earnings of MRO 1.5 million.

ANNEX III Page 1 of 2

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS

(PRECAMF)

ASSESSMENT OF FINANCING REQUIREMENTS OF MFIs

According to the National Microfinance Strategy (NMFS) adopted by the Government of the Islamic Republic of Mauritania, MFIs will need a MRO 5 billion credit line over 5 years. The following two approaches were used to re-assess the requirement with respect to the 53 institutions that may benefit from PRECAMF: 1) Taking into account amounts estimated by each MFI in its business plan:

Within the framework of the PRECAMF re-appraisal mission, each potential beneficiary MFI presented its credit line requirements for the next three years or the next five years. The estimates are as follows:

Funding Needs of MFIs (in millions of MRO)

MFI Duration Amount

CAPEC network 5 years 3 000.00 Mutuelle AFEC 3 years 90.00 GFEC 5 years 150.00 AMIC 5 years 40.60 CECD-M 5 years 80.00 MFSEEC 5 years 50.00 MPFP 5 years 62.93 MECD 5 years 49.00 Mutuelle de Bougemme 5 years 376.00 CECA-Kaédi 5 years 60.00 GAFIF – Nouakchott 5 years 74.30 GAFIF – Nouadhibou 5 years 50.00 AGEC 5 years 53.00 Total 4 135,831

The total stands at MRO 4.14 billion. 2) Projections based on Assumptions Assumption:

- The 53 credit and savings associations expected to benefit from the project are all

created in 2008 at the latest; - Average funding for an IGA stands at MRO 80 000; - Average funding for an MSE stands at MRO 800000; - Each MFI holds on average two loan committee meetings per month for 6 loans granted

by the loans committee, or 1 MSE and 5 IGAs; - Loans are granted 10 months out of 12; - Pledged savings required of promoters = 20% of the loan.

ANNEX III Page 2 of 2

Forecasts

Year 1 Year 2 Year 3 Year 4 Year 5 Total No. of associations 40 48 53 53 53 53 No. of committees 800 960 1,060 1,060 1,060 4,940 No. of IGAs 4,000 4,800 5,300 5,300 5,300 24,700 No. of MSEs 800 960 1060 1060 1060 4940 IGA financing requirement (in MRO million ) 320 384 424 424 424 1.976 MSE financing requirement (in MRO million) 640 768 848 848 848 3,952 Total financing requirement (in MRO million) 960 1.152 1.272 1.272 1.272 5, 928 Contribution from own resources (20%) (in MRO million) 192 230 254.4 254.4 254.4 1,185.6 LC requirements (in MRO million) 768 921,6 1,017.6 1,017.6 1,017.6 4,742.4

According to these projections, the loan fund capital required would stand at MRO 4.74 billion.

Conclusion

Based on these two approaches, the requirements amount to more than MRO 4 billion, or MRO 4.7 billion if we consider the highest sum.

ANNEX IV Page 1 of 3

ISLAMIC REPUBLIC OF MAURITANIA

PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

Performance of the Poverty Reduction Project (PRP) and the Project Implementation Unit (PIU)

A. Performance of the PRP 1. Most of the quantitative objectives of the PRP were met or even exceeded. In fact, the seven savings and loans institutions (CAPEC) were set up, the number of loans increased by 20% on average per year, compared with the estimated 15%; the staff and structures of microfinance institutions (MFI) were fully trained; in March 2005, MFIs registered more than 37 000 members, compared with the estimated 13,000 and were collecting UA 4.7 million in savings, compared with the estimated MRO 500,000; and more than 20,700 loans were granted, compared with the estimated 7,500. In the absence of a real impact study on the project, the testimonies below show the impact that the loans granted within the framework of the project have had on MFI customers.

Testimonies of 3 APME Customers - Cooperative: Rokhiyatou Moctar Ndiaye: Tailor (Bedsheets, tablecloths, etc.); Fatimetou Ibrahim: Fruit trade and processing of cereals; and Fati DIACK: retailer. Rokhiyatou Moctar Ndiaye has been an AMPE member for 5 years, while the other two have been members for 7 years. Before joining AMPE, their living conditions were precarious and they faced difficulties meeting the daily needs of their families. Roukhiyatou, who had only one manual sewing machine at home, now has a well-equipped workshop and employs a full time tailor. She got to this level after going through a few phases centered on the loans she took from the AMPE. She used her first loan of 20,000 ouguiyas to buy a work table. Thus, instead of sewing by hand she had a pedal, which prevented her from stooping but enabled her to work faster. Her second loan enabled her to buy a dynamo for the machine, which allowed her to work with the help of electricity. With her third loan, she rented a workshop and employed a full time employee. With the income they earn from their respective activities, the women help feed their families and gain more respect from their husbands who no longer see them as dependents who only consume but as active producers who contribute to the well being of the family. Their contribution to the family is sometimes higher than that of the family head. The education of the children is their responsibility; they pay their school fees, buy their clothes and monitor their health. Women incur the expenses of this mission and through the meager income they earn through their activities, they are able to meet their needs. Fatimetou Ibrahim had a piece of land that she could not exploit, but two years ago, she built a hut and a one-bedroom house there for herself and her children. She no longer pays rents of 10,000 ouguiyas per month. The monthly income of these women varies between 15,000 ouguiyas and 40,000 ouguiyas. They have all saved in kind and their savings vary between 70,000 ouguiyas and 200,000 ouguiyas. For them, these savings constitute a safety net against any unforeseen circumstances and allow them to participate in community activities (feasts and others). 2. The IEC activities and the literacy programme, with a 100% completion rate, were a great success and have had a positive impact on beneficiaries, as demonstrated by the following cases.

The case of three women (Aminetou m/ Salifou Sakha, 39, Nouakchott; Kadia Sy, 34, Bababé; Tebiba m/ Hemet, 43, Nouakchott) members of GEFEC and CECA in Nouakchott who benefited from literacy classes in 2000 within the framework of the PRP. At the end of the 4- month literacy course, the three women were awarded literacy certificates. Under a pilot operation, they were sent to take computer training and they currently work as secretaries in the private sector.

The assessment forms completed by beneficiaries at the end of the literacy course show the main reactions from course participants interviewed:

- ''I can now write my name, my debts, I can calculate all by myself, I also know the meaning of cost price, selling price, etc....''

ANNEX IV Page 2 of 3

- ''Before the course, I was ashamed of myself, I used to put my thumb print on my membership card, my children used to laugh at me; I can now write my name and I know the importance of sending my children to school...''

- '' We were like animals; after the course, we have become human beings, we now know how to read and write and we understand the news...''

- Thanks to the IEC campaigns under the PRP, which include traditional communicators, political actors, authorities, and information technology in their teaching method, women’s groups have found an institutional opportunity to join the production process without breaking traditional principles. This evolution in mentalities has had positive results. Women’s participation within the framework of the PRP, targeted at 46% by the appraisal report, has largely exceeded this, and, after eight years, more than 70 %. In the Brakna community, where MFI Kewel operates, the IEC has contributed to a positive change in the behavior of girls who used to abandon school. This MFI has implemented a school electrification project that has made it possible for literates and small operators (farmers, cattle breeders, small vendors), who only return home in the evening, to read and attend literacy classes at night.

3. Despite the above, the loan repayment rate objective of 95% was not attained-- the rate stood at 91.7% in March 2005. Besides, objectives related to training of trainers within MFIs and management training for beneficiaries were not achieved because insufficient resources were earmarked for the activities. Lastly, it was not possible to estimate the percentage of MFI customers who had diversified their activities, although some diversifications were noted. 4. The project has had a significant impact on the environment and on the socio-economic situation of the target groups. In fact, the project was implemented at a time when micro-finance was virtually nonexistent in Mauritania and when the populations and donors were skeptical about microfinance because of unfortunate incidents involving unpaid loans in the past. Through the extensive sensitization and IEC programmes, the project has helped transform the mentalities of the people vis-à-vis savings and loans. It is now well understood by the populations that these loans must be reimbursed, which was not the case before. The project has also triggered a microfinance development process throughout the country, through the increase in the number of microfinance structures (from less than 10 institutions in 1998 to 67 in 2005), the increase in the membership of these MFIs (from less than 13,000 in 1998 to 37,348 in 2005), policy discussions on microfinance and micro-enterprise issues, which contributed to the elaboration of a regulatory framework and of micro-finance and micro and small enterprise strategies. 4. The project has significantly increased the access of poor groups to microfinance services. The MRO 1.8 million credit fund was granted to 35 MFIs, thus allowing 20,751 persons (4809 on ADF funds), of whom 12,450 women, to benefit from a loan. The average recovery rate of MFIs is 91.7%. The project has helped strengthen the capacities of micro-finance institutions through training and the supply of equipment with support from the AMINA programme. The case of the AFEC illustrates this situation: In 1998, the head office of MAFEC was under a tree in its president’s residence. With support from the PRP and the AMINA programmes (10 technical training activities, 1 participation at the world micro-credit summit, 2 study tours to Egypt and to Benin and one financial support through credit lines, for a total amount of MRO 41.4 million), it has built its own office and now has full time staff who are well-trained in MFI management. 5. The project has adequately addressed the gender issue. Women represented 80% of the beneficiaries of IEC activities; this is very satisfactory in relation to the objectives set at appraisal. With respect to credit activities, more than 60% of women have been granted loans by MFI partners, compared with the 46% objective. About 80% of the 4,835 literate persons are women.

ANNEX IV Page 3 of 3

B. Performance of the PIU

1. Considering the meager resources available to it and the difficult environment in which it evolved, the overall performance of the PIU is deemed satisfactory, given its satisfactory management of all project components and the attainment of most of the objectives.

2. Delays in conducting audits constitute one of the major weaknesses in the management of the project. However, this responsibility was shared in part by the Bank which requested that the terms of reference of the audit firm recruited include auditing of accounts and accounting assistance to the project; this was considered incompatible by the Bank’s Audit Department. Besides, the Bank experienced delays in processing the recruitment files of the audit firm during its relocation to Tunis. Shortcomings also include the supervision system, which involves the director and the accountant, that is, the officials in charge of commitments, disbursments and recording of operations. This situation does not allow for the necessary separation of incompatible functions in order to ensure the security of financial operations.

PROJECT IMPLEMENTATION PERFORMANCE

Component Indicator Score (1 to 4) Remarks 1. Adherence to the general schedule 2 Project implementation was scheduled for the 1998-2003

period. In spite of the 8-month delay in loan effectiveness--due to a change in the supervisory authority of the project--all project activities were implemented and the project, initially scheduled for completion in February 2003, was finally completed in June 2004, that is, 16 months later.

2. Adherence to the cost schedule 3 Project costs were contained in the budget. The financing of activities and of supplementary resources not provided for during appraisal was successfully done through re-allocations duly approved by the Bank. A balance of MRO 13, 413.77 is available and can be used to finance the transition phase with the next project.

3. Fulfilment of conditions precedent 3 All the conditions were fulfilled, although there was a one-year slippage on effectiveness

4. Compliance with procurement procedures

3 All procurements were done in accordance with the rules of the Bank.

Overall assessment of performance during implementation

2.6 The project may be considered a relatively successful test in the use of the two levers of micro-finance and micro-enterprise to fight poverty in Mauritania. Its implementation has resulted in significant achievements and lessons from which it is possible to build specific support for the micro-finance sector.

ANNEX V Page 1 of 1

ISLAMIC REPUBLIC OF MAURITANIA

PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

PROJECT ORGANIZATION CHART

BCM

Functional relationship

COMMISSION FOR HUMAN RIGHTS, POVERTY REDUCTION, AND INTEGRATION (CDH/LCP/I)

Hierarchical relationship

STEERING COMMITTEE

SECF ANAPEJ PNIME

MFI Network

MFI MONITORING COMMITTEE

INTEGRATION DEPARTMENT

ANNEX VI Page 1 of 1

ISLAMIC REPUBLIC OF MAURITANIA

PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

LISTOF GOODS AND SERVICES

MRO Million UA Million UA Million

ADF GVT EXPENDITURE CATEGORIES

F.E. L.C. Total F.E. M.L. Total M.L. Devises M.L. Total B. Goods BC 174.77 43.69 218.46 0.44 0.11 0.55 0.00 0.44 0.11 0.55

Physical contingencies 8.74 2.18 10.92 0.02 0.01 0.03 0.00 0.02 0.01 0.03

Price escalation 4.40 1.10 5.51 0.01 0.00 0.01 0.00 0.01 0.00 0.01 Total 187.91 46.98 234.89 0.47 0.02 0.49 0.10 0.47 0.12 0.59 Percentage 80.00% 20.00% 100.00% 80.00% 2.97% 82.97% 17.03% 80.00% 20.00% 7.36%

C. Services BC 1.058.57 570.00 1.628.57 2.64 1.42 4.07 0.00 2.64 1.42 4.07

Physical contingencies 52.93 28.50 81.43 0.13 0.07 0.20 0.00 0.13 0.07 0.20

Price escalation 19.98 10.76 30.74 0.05 0.03 0.08 0.00 0.05 0.03 0.08 Total 1.133.17 610.17 1.743.34 2.83 1.52 4.35 0.00 2.83 1.52 4.35 Percentage 65.00% 35.00% 100.00% 65.00% 35.00% 100.00% 0.00% 65.00% 35.00% 54.64%

D. Operating Costs BC 28.50 114.00 142.50 0.07 0.23 0.30 0.05 0.07 0.28 0.36

Physical contingencies 1.43 5.70 7.13 0.00 0.01 0.02 0.00 0.00 0.01 0.02

Price escalation 0.18 0.72 0.90 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 30.10 120.42 150.52 0.08 0.25 0.32 0.06 0.08 0.30 0.38 Percentage 20.00% 80.00% 100.00% 20.00% 65.26% 85.26% 14.74% 20.00% 80.00% 4.72%

E. Miscellaneous BC 0.00 1.011.31 1.011.31 0.00 0.78 0.78 1.75 0.00 2.53 2.53

Physical contingencies 0.00 50.57 50.57 0.00 0.04 0.04 0.09 0.00 0.13 0.13

Price escalation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 0.00 1.061.88 1.061.88 0.00 0.82 0.82 1.84 0.00 2.65 2.65 Percentage 0.00% 100.00% 100.00% 0.00% 30.81% 30.81% 69.19% 0.00% 100.00% 33.28%

Total Project Cost BC 1.261.84 1.739.00 3.000.84 3.15 2.54 5.70 1.80 3.15 4.34 7.50

Physical contingencies 63.09 86.95 150.04 0.16 0.13 0.28 0.09 0.16 0.22 0.37

Price escalation 26.26 13.49 39.75 0.07 0.02 0.09 0.01 0.07 0.03 0.10 Total 1.351.19 1.839.44 3.190.63 3.38 2.60 5.98 1.99 3.38 4.59 7.97 Percentage 42.35% 57.65% 100.00% 42.35% 32.68% 75.03% 24.97% 42.35% 57.65% 100.00%

ANNEX VII Page 1of 4

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

DETAILED PROJECT COSTS (UA 1 = MRO 400.332) Quantity U.P. MRO Total Total Government ADF MRO MRO

Million UA Million % MRO Million UA Million % MRO Million UA Million

COMPONENT I: STRENGTHENING OF THE MICROFINANCE SECTOR

B. Goods 1.1 BUILDING THE CAPACITIES OF MFIs Support for SIG of MFIs excl. CAPEC *Computer/printer/UPS unit + Photocopiers + Fax 50 2,020,000 101.000 0.25 0 0 0 100 101.000 0.5 1.2 SUPPORT FOR THE ESTABLISHMENT AND DEVELOPMENT OF MFIs IN RURAL AREAS Support for the PROCAPEC Network – Equipment for the Headquarters *8 computers/printer/UPS unit + 1 Photocopier + 1 Fax + 1 accounting software 12,020,000 12.020 0.03 0 0 0 100 12.020 0.03 Support for M-AFEC, GAFIF Nkchtt and CECD Networks- Equipment for the Central Associations * 6 computers/printer/UPS unit + 3 Photocopiers + 3 fax machines+ 3 accounting software sets 18.060.000 18.060 0.06 0 0 0 100 18.060 0.06 1.4 BUILDING THE CAPACITIES OF MF SUPERVISORY AND GUIDANCE STRUCTURES Integration Department CDHLCPI – Micro-finance Service * Furniture: Complete furniture set (1 writing desk + 3

chairs) 3 500,000 1.500 0.00 0 0 0 100 1.500 0

Equipment * Equipment: 3 computer/UPS unit + 1Photoc.+ 1 fax + 1 port comp.+1 overhead projector 5,320,000 5.320 0.01 0 0.000 0.00 100 5.320 0.1 * Rolling stock : 4X4 vehicle 1 10,000,000 10.000 0.02 100 10.000 0.02 0 0.000 0.00 Department of Cooperation and Planning /SECF Projects * Equipment: 1 computer/printer/UPS unit + 1 Photoc+ 1 fax +1 port.comp+1 overhead proj. 3,150,000 3.150 0.01 0 0 0.00 100 3.150 0.01

C1. Training 1.1 BUILDING THE CAPACITIES OF MFIs Training of MFI staff: session of 4 days for 25 pers. for 1 trainer * In existing management tools 7pers/assoc, for a total of 350 pers: 28 sessions 2,500,000 70.000 0.17 0% 0.000 0.00 100% 70.000 0.17 * In the preparation and implementation of business plans 7 pers/ass. or 280 28 sessions 2,500,000 70.000 0.17 0% 0.000 0.00 100% 70.000 0.17 * In the accounting law 7 pers/ass., or 280 persons 14 sessions 2,500,000 35.000 0.09 0% 0.000 0.00 100% 35.000 0.09 * In good governance, monitoring and internal control 7 pers./ass. or 280 pers 28 sessions 2,500,000 70.000 0.17 0% 0.000 0.00 100% 70.000 0.17 * In countries of the sub-region for 2 pers/network for 10 days 26 pers 1,800,000 46.800 0.12 0% 0.000 0.00 100% 46.800 0.12 * Study trips for 10 days maximum (1 person/network) 13 units 1,300,000 16.900 0.04 0% 0.000 0.00 100% 16.900 0.04 * Specialized training for CAPEC staff 10

lpsum/ass. 4,200,000 42.000 0.10 0% 0.000 0.00 100% 42.000 0.10

1.4 BUILDING THE CAPACITIES OF MF SUPERVISORY AND GUIDANCE STRUCTURES Support to BCM * Training of staff of documentary control and inspectors 26 pers 2,800,000 14.000 0.03 0% 0.000 0.00 100% 14.000 0.03 * Training of staff of the central risk service (2 pers) for one week 2 pers 1,350,000 2.700 0.01 0% 0.000 0.00 100% 2.700 0.01 * Study trips for 13 persons to countries of the sub-region 13 pers 1,300,000 13.000 0.03 0% 0.000 0.00 100% 13.000 0.03 Support to the Integration Department /CDHLCPI * Training of 3 senior staff in 1 sub-regional institution for 1 month 3 pers 2,800,000 8.400 0.02 0% 0.000 0.00 100% 8.400 0.02 * Study trips for 3 senior staff for 10 days maximum 3 pers 1,300,000 3.900 0.01 0% 0.000 0.00 100% 3.900 0.01 * Building the capacities of CDHLCPI staff responsible for microfinance 6 pers 1,350,000 8.100 0.02 0% 0.000 0.00 100% 8.100 0.02 * Training of 2 senior staff for database management 2 pers 300,000 0.600 0.00 0% 0.000 0.00 100% 0.600 0.00 Support to Cooperation and Planning Department/SECF * Training of 4 supervision officers in financial management, coaching of MFIs 4 pers 1,350,000 5.400 0.01 0% 0.000 0,00 100% 5.400 0.01

C2. Technical Assistance 1.1 BUILDING THE CAPACITIES OF MFIs

ANNEX VII Page 2of 4

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

DETAILED PROJECT COSTS (UA 1 = MRO 400.332) Quantity U.P. MRO Total Total Government ADF MRO MRO

Million UA Million % MRO Million UA Million % MRO Million UA Million

* Market study on demand for products and services 1 S/Month 1,650,000 1.650 0.00 0% 0.000 0,00 100% 1.650 0.00 * Diagnosis of MFIs 2 S/mths 5,200,000 10.400 0.03 0% 0.000 0.00 100% 10.400 0.03 * Monitoring and coaching of MFIs (12 months per 2 offices) 2 lump sum 60,000,000 120.000 0.30 0% 0.000 0.00 100% 120.000 0.30 1.2 ESTABLISHMENT OF MFIs IN RURAL AREAS

* Studies on constraints on MFI deployment in rural areas 2 S/mths 1,650,000 3.300 0.01 0% 0.000 0.00 100% 3.300 0.01

1.3 FINANCING OF MFIs * Audit of MFIs and evaluation of their performance 1 lump sum 13,000,000 13.000 0.03 0% 0.000 0.00 100% 13.000 0.03 1.4 BUILDING THE CAPACITIES OF MF SUPERVISORY AND GUIDANCE STRUCTURES Support to BCM * Coaching and assistance for inspectors on the new inspection guide Lump sum 30,000,000 30.000 0.07 0% 0.000 0.00 100% 30.000 0.07 * Finalization of accounting plan, doc. reporting & recon. tabl + training modules 3 S/mths 5,200,000 15.600 0.04 0% 0.000 0.00 100% 15.600 0.04 Support to CDHLCPI – Integration Department * Establishment and management of a database on MFIs and SMEs 1 lump sum 3,500,000 3.500 0.01 0% 0.000 0.00 100% 3.500 0.01 * Dissemination of microfinance code of ethics to MFIs 1 lump sum 3,500,000 3.500 0.01 0% 0.000 0.00 100% 3.500 0.01 * Hosting of website 5 lpsum/yr 1,500,000 7.500 0.02 0% 0.000 0.00 100% 7.500 0.02 * Monitoring and evaluation of SNMF implementation 6 S/mths 5,200,000 31.200 0.08 0% 0.000 0.00 100% 31.200 0.08 * 2 Impact assessment of MFI programmes on poverty reduction 8 S/mths 5,200,000 41.600 0.10 0% 0.000 0.00 100% 41.600 0.10

E. Miscellaneous 1.2 SUPPORT FOR ESTABLISHMENT AND DEVELOPMENT OF MFIs IN RURAL AREAS OPERATIONALSUBSIDY Support to PROCAPEC Network - 10 rural associations * Development of 9 rural CAPECs (85m2/CAPEC) 765 m2 28,000 21.420 0.05 100% 21.42 0.05 0% 0.000 0.00 * Complete office set (1 desk + 4 chairs) 2 complete office sets per assoc. 18 units 250,000 4.500 0.01 0% 0.000 0.00 100% 4.500 0.01 * Metallic cupboard 9 units 200,000 1.800 0.00 0% 0.000 0.00 100% 1.800 0.00 * Safe 9 units 200,000 1.800 0.00 0% 0.000 0.00 100% 1.800 0.00 * Training of staff and elected officials (monitoring, control and inspection missions) 10 assoc 1,100,000 11.000 0.03 0% 0.000 0.00 100% 11.000 0.03 * Allowances for credit officer (72 500), cashier (56 000):100% Yr1, 80% Yr2, 60% Yr3 10 assoc 6,580,000 65.800 0.16 100% 65.8 0.16 0% 0.000 0.00 * Expenses on inspect, control and works end yr, quart control, works end yr for 3 yrs digr.10 assoc 1,580,000 15.800 0.04 0% 0.000 0.00 100% 15.800 0.04 * Office supplies, water, electricity, telephone for 3 yrs digressive 10 lpsum/assoc 2,300,000 23.000 0.06 0% 0.000 0.00 100% 23.000 0.06 Sub-total 145.120 0.36 87.220 0.22 57.900 0.14 Support to networks (1) M-AFEC (2) GAFIF Nouakchott – (3)/ CECD - 2 secondary associations per network Cost of one network * Rent for 3 years digressive (65 000MRO/month) 2 lpsum/assoc 1,872,000 3.744 0.01 100% 3.744 0.01 0% 0.000 0.00 * Complete office set (1 desk + 4 chairs) 2 complete office sets per association 4 units 250,000 1.000 0.00 0% 0.000 0.00 100% 1.000 0.00 * Metallic cupboard 2 units 200,000 0.400 0.00 0% 0.000 0.00 100% 0.400 0.00 * Safe 2 units 200,000 0.400 0.00 0% 0.000 0.00 100% 0.400 0.00 * Training of staff and elected officials (monitoring, control and inspection missions 2 assoc 1,100,000 2.200 0.01 0% 0.000 0.00 100% 2,200 0.01 * Allowance credit officer (72500), cashier (56000) and manager (100000) for 3 yrs digr. 2 assoc 6,580,000 13.160 0.03 100% 13.16 0.03 0% 0.000 0.00 * Expenses on inspect., control & works end yr, quart control, works end year for 3 yrs digr.2 assoc 1,580,000 3.160 0.01 0% 0.000 0.00 100% 3.160 0.01 * Office supplies, water, electricity, telephone for 3 years digr. 2lpsum/assoc 2,300,000 4.600 0.01 0% 0.000 0.00 100% 4.600 0.01 Sub-total 1 network 28.664 0.07 16.904 0.04 11.760 0.03 Sub-total 3 networks 85.992 0.21 50.712 0.12 35.28 0.09 1.3 FINANCING OF MFIs

ANNEX VII Page 3of 4

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

DETAILED PROJECT COSTS (UA 1 = MRO 400.332) Quantity U.P. MRO Total Total Government ADF MRO MRO

Million UA Million % MRO Million UA Million % MRO Million UA Million

* Credit Fund 1 lump sum 780,214,000 780.214 1.95 72% 561.75 1.40 28% 218.46 0.55 TOTAL BASE COST OF COMPONENT I 1,850.42 4.62 709.69 1.77 1,140.74 2.85

Physical contingencies 92.52 0.23 35.48 0.09 57.04 0.14 Price escalation 17.89 0.04 0.25 0.00 17.64 0.04

TOTAL COST OF COMPONENT I (including contingencies and price escalation) 1,960.84 4.90 745.42 1.86 1,215.42 3.04

COMPONENT II: SUPPORT TO IGAs AND DEVELOPMENT OF MSEs

B. Goods 2.1 IMPROVEMENT OF INFORMATION FOR IGA AND SME PROMOTERS * Technical documentation for the 13 regional headquarters 13 units 1,250,000 16.250 0.04 0% 0.000 0,00 100% 16.250 0.04 2.2 INSTITUTIONAL SUPPORT TO PNIME Furniture: 3 office sets (1 writing desk + 3 chairs) 3 units 500,000 1.500 0.00 0% 0.000 0,00 100% 1.500 0.00 Equipment: Station (Complete computer + printer + UPS unit) 1 unit 1,000,000 1.000 0.00 0% 0.000 0,00 100% 1.000 0.00 Rolling stock: Moped 2 units 400,000 0.800 0.00 100% 0.800 0,00 0% 0.000 0.00 C. Training 2.3 INSTITUTIONAL SUPPORT TO PNIME AND ANAPEJ * Training of senior staff of PNIME Management Unit in the sub-region for 6 weeks 4 pers 3,200,000 12.800 0.03 0% 0.000 0,00 100% 12.800 0.03 * Training of ANAPEJ technical staff in the sub-region for 1 month 4 pers 2,800,000 11.200 0.03 0% 0.000 0,00 100% 11.200 0.03 2.4 BUILDING THE CAPACITIES OF IGAs AND SMEs * Training of 1,500 SMEs for three weeks 1500 pers 176,667 262.500 0.66 0% 0.000 0,00 100% 262.500 0.66 * Training of 20 000 MFI customers 20 000 customers 480,000 192.000 0.48 0% 0.000 0,00 100% 192.000 0.48

C2. Technical Assistance 2.5 IMPROVEMENT OF INFORMATION FOR IGA AND SME PROMOTERS * Update of study on growth-oriented niches 4 S/months 4,000,000 16.000 0.04 0% 0.000 0,00 100% 16.000 0.04 * IEC campaigns for 4 years 5 F/yr 15,000,000 75.000 0.19 0% 0.000 0,00 100% 75.000 0.19 2.6 INSTITUTIONAL SUPPORT TO PNIME AND ANAPEJ * Intern. Expert Spec. SME support to PNIME prep. support mech. MSE and S&e .6 S/Months 4,000,000 24.000 0.06 0% 0.000 0.00 100% 24.000 0.06 * Intern. Expert Micro-credit for support to ANAPEJ selection benef. and prep. project 3 S/months 4,000,000 12.000 0.03 0% 0.000 0.00 100% 12.000 0.03 Sub-Total 36.00 0.09 0.00 0.00 36.00 0.09

TOTAL BASE COST OF COMPONENT II 625.06 1.56 0.80 0.00 624.25 1.56 Physical contingencies 31.25 0.08 0.04 0.00 31.21 0.08

Price escalation 12.89 0.03 0.02 0.00 12.87 0.03 TOTAL COST OF COMPONENT II (including contingencies and price escalation) 669.20 1.67 0.86 0.00 668.33 1.67

COMPONENT III: PROJECT MANAGEMENT

Goods Furniture * 3 complete office sets (1 table + armchair + 2 chairs) 3 units 420,000 1.260 0.00 0% 0.000 0.00 100% 1.260 0.00

ANNEX VII Page 4of 4

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

DETAILED PROJECT COSTS (UA 1 = MRO 400.332) Quantity U.P. MRO Total Total Government ADF MRO MRO

Million UA Million % MRO Million UA Million % MRO Million UA Million

* Filing cupboards 4 units 240,000 0.960 0.00 0% 0.000 0.00 100% 0.960 0.00 Office and computer equipment * 3 air conditioners 1 Scanner 1 Photocopier 1 telephone switchboard 5 computer stations 4 portable computers 1 package of audio-visual equipment 1 colour network printer 1 project management software (including activities monitoring modules) + 5 documentation packages 19.24 0.05 0% 0.00 0.00 100% 19.24 0.05 Rolling stock: 2 4X4 vehicles 1 city vehicle 1 Moped 26.40 0.07 100% 26.40 0.07 0% 0.00 0.00 Technical Assistance * Consultant for revision of procedures manual 2 S/months 4,000,000 8.000 0.02 0% 0.000 0.00 100% 8.000 0.02 * Short-term Consultants 5 S/months 4,000,000 20.000 0.05 0% 0.000 0.00 100% 20.000 0.05 * Mid-term review mission (consultant + meetings) 1 lump sum 2,500,000 2.500 0.01 0% 0.000 0.00 100% 2.500 0.01 * Project impact study 1 lump sum 4,000,000 4.000 0.01 0% 0.000 0.00 100% 4.000 0.01 * Consultant for completion report 2 S/months 4,000,000 8.000 0.02 0% 0.000 0.00 100% 8.000 0.02 * Audit of MFIs 5 lpsum/yr 13,000,000 65.000 0.16 0% 0.000 0.00 100% 65.000 0.16 * Audit of project accounts 5 lpsum/yr 2,500,000 12.500 0.03 0% 0.000 0.00 100% 12.500 0.03 * Audit of procurements 5 lpsum/yr 1,000,000 5.000 0.01 0% 0.000 0.00 100% 5.000 0.01 * Director 60 S/mths 700,000 42.000 0.10 0% 0.000 0.00 100% 42.000 0.10 * Procurement Spec. – Management., Microfin Expert, IGA Expert, monitoring-

evaluation Expert. 240 S/mths 2,400,000 144.000 0.36 0% 0.000 0.00 100% 144.000 0.36

* Accountant 60 S/mths 400,000 24.000 0.06 0% 0.000 0.00 100% 24.000 0.06 D. Operating Costs

* Director’s secretary 60 S/mths 150,000 9.000 0.02 0% 0.000 0.00 100% 9.000 0.02 * Secretary telephone operator 60 S/mths 100,000 6.000 0.02 0% 0.000 0.00 100% 6.000 0.02 * Drivers (2) 120 S/mths 50,000 6.000 0.02 0% 0.000 0.00 100% 6.000 0.02 * Messenger 60 S/mths 50,000 3.000 0.01 0% 0.000 0.00 100% 3.000 0.01 * Security guards (2) 120 S/mths 50,000 6.000 0.02 0% 0.000 0.00 100% 6.000 0.02 * Leasing of headquarters 60 S/mths 350,000 21.000 0.05 100% 21.000 0.05 0% 0.000 0.00 * Consumables (office supplies, water, electricity) 5 lpsum/yr 5,500,000 27.500 0.07 0% 0.000 0.00 100% 27.500 0.07 * Maintenance of equipment 5 lpsum/yr 1,000,000 5.000 0.01 0% 0.000 0.00 100% 5.000 0.01 * Communication and transportation of mail 5 lpsum/yr 3,500,000 17.500 0.04 0% 0.000 0.00 100% 17.500 0.04 * Maintenance of premises 5 lpsum/yr 500,000 2.500 0.01 0% 0.000 0.00 100% 2.500 0.01 * Insurance vehicles and motorcycle 5 lpsum/yr 200,000 1.000 0.00 0% 0.000 0.00 100% 1.000 0.00 * Fuel vehicles and motorcycle 5 lpsum/yr 1,200,000 6.000 0.02 0% 0.000 0.00 100% 6.000 0.02 * Maintenance and repairs of vehicles and motorcycle 5 lpsum/yr 1,500,000 7.500 0.02 0% 0.000 0.00 100% 7.500 0.02 * Supervision missions for activities 5 lpsum/yr 4,000,000 20.000 0.05 0% 0.000 0.00 100% 20.000 0.05 * Missions to the headquarters (2 persons/year) 5 lpsum/yr 900,000 4.500 0.01 0% 0.000 0.00 100% 4.500 0.01

TOTAL BASE COST OF COMPONENT III 525.36 1.31 47.40 0.12 477.96 1.19 Physical contingencies 26.27 0.07 2.37 0.01 23.90 0.06

Price escalation 8.96 0.02 0.80 0.00 8.17 0.02 TOTAL COST OF COMPONENT III (including contingencies and price escalation) 560.59 1.40 50.57 0.13 510.02 1.27

TOTAL BASE COST OF PROJECT: COMPONENTS I+II+III 3,000.84 7.50 757.89 1.89 2,242.95 5.60 TOTAL PROJECT COST (including contingencies and price escalation) 3,190.63 7.97 796.85 1.99 2,393.78 5.98

MRO million

UA million MRO million UA million MRO million UA million

ANNEX VIII Page 1 of 1

ISLAMIC REPUBLIC OF MAURITANIA

PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

PROJECT IMPLEMENTATION SCHEDULE

ANNEX IX Page 1 of 3

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS

(PRECAMF)

IGA AND MSE OPERATING ACCOUNTS

I. Dyeing Workshop Fact Sheet I. Investment (in MRO) - Equipment 30,000 - Installations Improvements 50,000 - Other Investment 20,000 Total I 100,000 II. Input (in MRO) - Production Materials (Fabric: all qualities, dyes, soda, ammonia, etc.) 60,000 - Consumables 20,000 Total II 80,000 III. General Expenses (10% of input) 8,000 IV. Occasional Labor (in MRO) 30,000 Total Operating Costs (in MRO) 118,000 Total Financing Requirement 218,000

Amortization Schedule

Procurement Cost

(in MRO) Duration (years)

Accumulated Depreciation (in MRO)

- Equipment 30,000 2 15,000 - Installations Improvements 50,000 10 5,000 - Other Investment 20,000 2 10,000 Total 30,000

Revenue Forecast (in MRO) Potential Production Unit Price (in MRO) Valuation (in MRO) Dyeing Service 1,200 960 500 480,000 Orders for Dyeing 240 192 4,000 768,000 Total 1,248,000

Projected Operating Account (in MRO) Expenditure Yield Results Production Equipment 360,000 Consumables 120,000 Staff 360,000 General Expenses 48,000 Depreciation 30,000 Total Expenditure 918,000 Total Yield 1,248,000 Results 330,000

ANNEX IX Page 2 of 3

II. Retail Trade Fact Sheet

I. Investment (in MRO) - Equipment (refrigerator, balance, etc.) 120,000 - Installations Improvements Counters 80,000 - Deposit and Guarantee 10,000 Total I 210,000 II. Merchandise (in MRO) - Purchase of Merchandise 400,000 - Consumables - Total II 400,000 III. General Expenses (10% of Input) 40,000 IV. Occasional Labor 40,000 Total Operating Costs (in MRO) 480,000 Total Financing Requirement (in MRO) 690,000

Amortization Schedule Procurement Cost

(in MRO) Duration (years)

Accumulated Depreciation

(in MRO) - Equipment (refrigerator, balance, etc.) 120,000 4 30,000 - Installations Improvements Counters 80,000 10 8,000 - Deposit and Guarantee 10,000 - - Total 38,000 Revenue Forecast Potential Production Valuation Sale of Merchandise 7,680,000 6,912,000 6,912,000 Total 6,912,000 Projected Operating Account (in MRO) Expenditure Yield ResultsPurchase of Goods 4,800,000 Consumables - Staff 480,000 General Expenses 240,000 Depreciation 38,000 Total Expenditure 5,558,000 Total Yield 6,912,000 Results 1,354,000

ANNEX IX Page 3 of 3

III. Dairy Fact Sheet

I. Investment (in MRO) - Equipment (pasteurize, refrigerator, etc.) 400,000 - Installations Improvements 100,000 - Deposit and Guarantee 20,000 Total I 520,000 II. Direct Materials and Consumables - Purchase of unpasteurized milk 80,000 - Consumables 56,000 Total II 136,000 III. General Expenses (10% of input) in MRO 13,600 IV. Occasional Labor (in MRO) 70,000 Total Operating Costs (in MRO) 219,600 Total Financing Requirement (in MRO) 739,600

Amortization Schedule Acquisition Cost (in

MRO) Duration (years)

Accumulated Depreciation

(in MRO) - Equipment ((pasteurizer, refrigerator, etc.) 400,000 4 100,000 - Installations Improvements 100,000 10 10,000 - Deposit and Guarantee 20,000 -Total 110,000 Revenue Forecast Potential Production Unit Price Valuation

Sale of Pasteurized Milk 12,000 9,600 350 3,360,000

Total 3,360,000 Projected Operating Account (in MRO) Expenditure Yield ResultsPurchase of Goods 960,000 Consumables 336,000 Staff 840,000 General Expenses 81,600 Depreciation 110,000 Total Expenditure 2,327,600 Total Yield 3,360,000 Results 1,032,400

ANNEX X Page 1 of 2

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE STAKEHOLDERS (PRECAMF)

APPRAISAL REPORT PREPARATION PROCESS

Main Activity Date Completed Remarks

Identification July 2001 The microfinance development and MSE support project was identified during the Poverty Reduction Project (PRP) mid-term review mission in June 2001. The Government of Mauritania had requested assistance from the Bank to set up a microfinance support fund. In the context of PRP supervision missions and assistance under the AMINA programme, the Bank and the government held talks and exchanged ideas on a micro-finance support project. The different elements discussed were confirmed during the workshop on the capitalization of microfinance achievements held in Nouakchott in August 2001 and attended by the Bank.

Preparation June 2002 The mission comprised an education expert and a microfinance expert, who spent two weeks in the country. The project was prepared using a participatory approach, in close collaboration with donors, in particular, the UNDP, the German Cooperation, civil society organizations, especially those operating in the project area, and women’s and microfinance organizations. The key stakeholders were consulted at the central, regional, and local levels during working sessions. Associations of target beneficiaries participated in the preparation of the project. Thereafter, the government submitted two other applications for funding to the Bank—the first in August 2003 on microfinance development and the second in September 2004—requesting the Bank to participate in the financing plan of the savings and credit associations network (CAPEC).

Appraisal February 2005 The main objective of the mission was to update the information contained in the 2002 preparation report. The mission comprised a socio-economist, a micro-finance expert, and a micro-finance and MSE expert. During the appraisal mission, individual or group discussions were held with the relevant supervisory authorities, supervision and coordination structures, donors, civil society organizations operating in the area of micro-finance, NGOs, and MFIs, especially those involving women. The Senior Management Committee meeting to review the appraisal report, held on 20 April 2005, recommended that the project be reformulated to focus only on components relating to strengthening the capacities of MFIs and of micro and small enterprises (MSE). With respect to the setting up of a refinancing agency and related activities, the committee recommended that these activities be the subject of a feasibility study and that the agency be financed mostly by appropriate sources in the private sector. The government clearly indicated its disapproval of the proposed amendments, which, in its opinion, removed all substance from the support it expected from the Bank and nullified the expected gains from the project. In fact, without the refinancing of MFIs which, to date, have not yet attained their financial autonomy and, therefore, depend entirely on foreign financing, these institutions cannot survive. The government also noted that, considering the importance of the amendments proposed in the project, the project should be re-appraised. The round table conference of donors on strategies for micro-finance and micro and small enterprises, organized by the government, with support from the UNDP, in Nouakchott on 9 May 2005, at which the Bank was represented, provided an opportunity for all stakeholders to discuss the reformulation of the project

Re-appraisal 23-30 June 2005 The objective of the mission was to re-discuss, specify, and confirm the implementation of the project, especially the aspects that were reformulated. The mission comprised a socio-economist, an expert in micro-finance, and an expert in social infrastructure. During the mission, individual meetings were held with the main government services concerned: the National Agency for the Promotion of Youth Employment and the National Integrated Micro-finance Programme. Two group meetings were organized: with micro-finance institutions (17 MFIs) and with representatives of Mauritania’s main development partners involved in the micro-finance area (UNDP, the World Bank, the French Development Agency and the Great Britain NGO Oxfam, World Vision,

ANNEX X Page 2 of 2

Main Activity Date Completed Remarks and GRET). Nevertheless, the reformulated project was not presented to the Board in 2005 because the Bank was unable to complete its Country Strategy Paper (CSP). In fact, the Bank was waiting for the completion of the 2006-2010 Poverty Reduction Strategy Paper (PRSP). The government’s PRSP preparation process was delayed for close to one year for two main reasons: (i) the correction of macroeconomic data and medium term forecasts for 2002-2005, with support from the International Monetary Fund, and (ii) the taking into account of the government’s new orientations following the change in regime in August 2005.

Second re-appraisal Internal Working Group Interdepartmental Working Group High-Level Steering Committee Negotiations Update Internal review of the report after the mission

April 2006 13 June 2006 7 July 2006 1 August 2006 9-10 August 2006 14-19 January 2007

The mission worked in close collaboration with the Ministry of Economic Affairs and Development ( MAED ), the Commission for Human Rights, Poverty Reduction, and Integration (CDH/LCP/I) and the Central Bank of Mauritania (BCM), which are the main institutions directly concerned by the project. Working sessions were held, on the one hand, with micro-finance institutions (MFIs), about thirty of which attended and, on the other, with representatives of Mauritania’s main development partners operating in the microfinance area (UNDP, the World Bank, the IMF, the Spanish Cooperation, the regional center of the IMF’s AFRITAC, the West African Region, UNICEF and the CARITAS NGO). 13 persons attended the meeting. Remarks focused mainly on improving the logical framework, strengthening PRP performance analysis, and updating data, were taken into account in the version distributed to the interdepartmental working group. 9 persons attended the meeting. Detailed written remarks were received from GECL, OAGL, ORPU, ORPC.4, OPSM, and OSAN.1, and were used to substantially improve the document. The Senior Management Committee meeting, chaired by the Vice-President, OSVP, was held on 1 August with 15 participants in attendance. The main remarks focused on clarifying institutional arrangements for the implementation of the project, strengthening the links between the project and the CSP, and better justifying the project, considering the current particular context of Mauritania. The report, amended on the basis of the remarks from the CSD, was forwarded to the government in view of preparations for negotiations scheduled for 9 and 10 August in Tunis. The presentation of the project to the Bank’s Board of Directors is scheduled for October 2006, following the presentation of the 2006-2007 CSP. Following the reduction of ADF X resource allocation to Mauritania, the available resources for financing the project, initially UA 8 million, were reduced to UA 5.98 million. After consultation with the Government, the latter requested the Bank to revise the project costs to bring them within the limits of the available amount. An update mission of four days comprising only the Task Manager went to Nouakchott to (i) review the revised version of the report with the Government, MFIs and TFPs, and (ii) have it approved by the Government, as well as the related changes in the loan agreement signed during the negotiations. The revised report is distributed simultaneously to the country team and the Senior Management Committee for review, before transmission to the Board. The Government’s approval of this reduction of the ADF financing and the related changes in the loan agreement already signed during the negotiations was contained in the aide-memoire of the re-appraisal mission accompanied by a letter from the Government confirming its approval of the new financing plan.

ANNEX XI Page 1 of 1

ISLAMIC REPUBLIC OF MAURITANIA PROJECT TO BUILD THE CAPACITIES OF MICROFINANCE

STAKEHOLDERS (PRECAMF)

TRAINING THEMES

Beneficiaries Modules / Support Trainer I. Supervisory Structures 1.1. Central Bank of Mauritania 1.2 CDH/LCP/I 1.3 S ECF Cooperation and Planning

Department

1.1.1 Accounting for MFIs 1.1.2 Financial Analysis of MFI Accounting

and Financial Documents and of Microfinance Prudential Standards

1.1.3 Loan Portfolio Assessment and Management

1.1.4 Internal Audit of Operations 1.2.1 Evaluation and Operation ability of

Microfinance Activities 1.2.2 Monitoring and Evaluating the Activities

of MFIs 1.2.3 Assessing the Socio-Economic Impact of

MFIs on Poverty Reduction 1.2.4 Management of MFI Data Base 1.3.1 Project Planning 1.3.2 Management, Supervision and Coaching

of MFI Beneficiaries

The services of specialized bodies, such as the CAPAF, sub-regional or local trainer, will be needed in accordance with the Bank’s Rules of Procedure for the Procurement of Goods and Services.

II MFI 2.1 MFIs (50 institutions at the rate of

7 persons per institution)

2.2 MFI Representatives

2.1.1 Accounting Framework and Law 2.1.2 Management Tools 2.1.3 Preparation and Implementation of

Business Plans 2.1.4 Credit Management 2.1.5 Financial Management of Loan Portfolio 2.1.6 Monitoring and Collecting Loans 2.2.1 Good Governance 2.2.2 Credit Management 2.2.3 Managing Loan Portfolios

Specialized firms

III. Other Beneficiaries 3.1 PNIME 3.2 ANAPEJ

3.1.1 Evaluation and Management of MSEs

and IGAs 3.1.2 Monitoring and Evaluation of SMEs and

IGAs 3.2.1 Promotion and development of Youth

Employment 3.2.2 Monitoring and Evaluation of Youth

Employment

Specialized firms

IV. MFI customers 4.1 MFI customers

4.1.1 Basic Accounting 4.1.2 Basic Business Management 4.1.3 Credit Management

Individual consultants or resource persons specialized in this type of training.