Date of Submission to Coordination Unit:

A. GENERAL INFORMATION

1. Activity Name

Promoting financial inclusion via mobile financial services in the Southern and Eastern Mediterranean countries - activities in Jordan.

2. Requestor Information Name: HE Dr. Saleh Al-Kharabsheh Title: Secretary General

Organization and Address: Ministry of Planning and International Cooperation

Telephone: +962 6 4634511 Email: saleh.kh@mop.gov.jo

3. Recipient Entity Name: HE Dr Ziad Fariz Title: Governor of the Central Bank of Jordan

Organization and Address: Central Bank of Jordan

Telephone: +962 799059767 Email: governor@cbj.gov.jo

4. ISASC RepresentativeName: Timothy WINTERS Title: Policy Officer

Organization and Address: European Investment Bank, 98 boulevard Konrad Adenauer, L-2950 Luxembourg

Telephone: +352 4379 88332 Email: t.winters@eib.org

5. Type of Execution (check the applicable box)√ Type Endorsements Justification

Country-Execution Attach written endorsement from designated ISA

√ Joint Country/ISA-Execution

Attach written endorsement from designated ISA

Due to its regional dimension and approach, which includes two other countries in addition to Jordan, the need for an ISA to execute in coordination with the national authorities is essential. EIB will carry out procurement and financial management. It will also help to coordinate between the three targeted countries to ensure sharing of progress and expertise. The country will be responsible for local coordination and monitoring and evaluation, through the project management team within the Central Bank. The country also directly executes the workshop component. To

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ensure country ownership of all components of the project, the ISA execution will be closely coordinated with the country activities.

ISA-Execution for Country

Attach written endorsement from designated ISA

ISA-Execution for Parliaments

Attach written endorsements from designated Ministry and ISA

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6. Geographic FocusIndividual country (name of country): Jordan

√ Regional or multiple countries (list countries):

This particular request focuses on Jordan.

This request is part of a programme which has a regional scope across the Middle East and North Africa (MENA) region; as such the Transition Fund is also being requested to finance related activities in Morocco and Egypt.

The regional aspect of this project is found particularly in the potential for information sharing and common capacity building activities across the region. Although the countries are all at different stages in developing responses to the challenges of promoting and regulating the provision of mobile financial services, the needs-based approach taken in each country proposal provides ample scope for regional sharing of results and best practices in different areas of the mobile finance field. More specifically, the studies to be carried out under some of the proposals are likely to be of use for other countries, and could form the basis for dissemination and collaboration events (workshops, conferences) as well as ad hoc sharing. It is expected that one aspect of this regional sharing would be implemented in the context of an umbrella project for which a request for a Union for the Mediterranean (UfM) label is under consideration, and which would provide a framework for future initiatives to promote other aspects of mobile financial services in the region.

7. Amount Requested (USD) Amount Requested for direct Project Activities1:(of which Amount Requested for direct ISA-Executed Project Activities):

USD 835,000(USD 800,000)

Amount Requested for ISA Indirect Costs: 56,000Total Amount Requested: USD 891,000

8. Expected Project Start, Closing and Final Disbursement DatesStart Date: January 1st,

2014Closing Date: December 31st,

2014End Disbursement Date:

April 30th, 2015

9. Pillar(s) to which Activity Responds

Pillar Primary(One only)

Secondary(All that apply)

Pillar Primary(One only)

Secondary(All that apply)

Investing in Sustainable Growth. This could include such topics as innovation and technology policy, enhancing the business environment (including for small and medium-sized enterprises as well as for local and foreign investment promotion), competition policy, private

√ Enhancing Economic Governance. This could include areas such as transparency, anti-corruption and accountability policies, asset recovery, public financial management and oversight, public sector audit and evaluation, integrity, procurement reform, regulatory quality and administrative simplification,

√

1 The CBJ will make an in-kind contribution in the form of staff provided to the project; as such, these staff positions do not require additional financing.

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sector development strategies, access to finance, addressing urban congestion and energy intensity.

investor and consumer protection, access to economic data and information, management of environmental and social impacts, capacity building for local government and decentralization, support for the Open Government Partnership, creation of new and innovative government agencies related to new transitional reforms, reform of public service delivery in the social and infrastructure sectors, and sound banking systems.

Inclusive Development and Job Creation. This could include support of policies for integrating lagging regions, skills and labor market policies, increasing youth employability, enhancing female labor force participation, integrating people with disabilities, vocational training, pension reform, improving job conditions and regulations, financial inclusion, promoting equitable fiscal policies and social safety net reform.

√

Competitiveness and Integration. This could include such topics as logistics, behind-the-border regulatory convergence, trade strategy and negotiations, planning and facilitation of cross-border infrastructure, and promoting and facilitating infrastructure projects, particularly in the areas of urban infrastructure, transport, trade facilitation and private sector development.

√

B. STRATEGIC CONTEXT

10. Country and Sector Issues

Macroeconomic situationOne of the greatest challenges, and also among the largest opportunities, facing Jordan today is the need to improve competitiveness and create adequate conditions for increased private investment. With the government increasingly financially constrained, there are high expectations that SMEs and micro-enterprises can contribute more to private sector job creation in Jordan and the whole region. Improving the business environment will help deliver the sustainable growth which is needed to meet the challenge of high unemployment and consequent dependency on remittances from Gulf economies, and which can in turn lead to reduced poverty. The CBJ deems this particular project, and the CBJ’s payments program as a whole, to be an integral part of the improvements required to achieve these goals.

Access to financeThe World Bank’s 2011 financial sector flagship report showed that access to finance is a key constraint in areas and at income levels underserved by conventional banks, including in the informal sector of the economy. The relationship between development in the finance sector and a country’s economic development has been demonstrated in a number of studies that show a high correlation and causality

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between increases in the rate of financial deepening and increases in GDP per capita.

Despite CBJ’s efforts to date, Jordan faces an important challenge in terms of access to finance that jeopardizes its economic development and equality. Low levels of financial access in Jordan need solutions that address the costs of financial services, the low banking density, the inappropriate risk methodologies and the inadequate regulatory framework. Financial and economic research undertaken by the EIB as well as by institutions including the UNCDF, GSMA (MMU), WB, CGAP and the Gates Foundation shows that business models based on prepaid electronic payments systems, the use of agents and cellular technology (i.e. mobile financial services) can help address the problem of lack of access to financial services observed in the vast majority of developing countries. These solutions address the fact that lack of access is a supply based problem, which can therefore be solved by the development of alternative financial service distribution models at low costs in order for providers to be able to serve low income segments profitably. The CBJ’s proposal also addresses the demand side, with a program of financial literacy building for Jordanians.

According to the Financial Inclusion Data produced by Gallup Inc. for the World Bank, in 2011 only 26% of the population of Jordan older than 15 had a bank account (compared to figures over 90% for countries in the EU).2 On the other hand, by the end of June 2011, total mobile-cellular subscriptions stood at 7.2 million, translating into a penetration rate of 117%. This combination of high mobile penetration and low access to financial services means that there is a potentially great opportunity for mobile financial services in Jordan (as in most other countries of the region). In this context, the current project aims at helping the Central Bank of Jordan develop the ecosystem required that will allow new providers to implement alternative business models based on mobile financial services/mobile money in order to promote financial inclusion.

Credit bureauThere is currently no operational private credit bureau in Jordan and the coverage of the public registry is extremely low. The CBJ expects a new credit bureau to begin within the next year. This new credit bureau is expected to help the banking industry serve low income customers and micro-entrepreneurs. The credit bureau is expected to be fully interconnected with the country’s new payments system, including the mobile payments switch, meaning that even customers without bank accounts will be able to begin developing a credit history which will increase access to finance in the longer term.

Payment networksThe number of payment cards and their usage is growing rapidly. There are three point of sale (POS) networks in the country totaling nearly 28,200 POS terminals, but they are not interoperable. CBJ wishes to encourage greater interoperability among POS Networks, although card systems are not under CBJ’s supervision. Regarding ATMs, the banking community set up a national switch (JO-NET), owned and operated by a company called EMP Middle East (previously Visa Jordan Card Services) since 1997, in order to facilitate interoperability among the various networks.

Retail payments in Jordan are processed by banks and systems are neither interoperable nor capable of making real time settlement, which leads to public concern over meeting payment deadlines. As a result bill payment through banks faces strong competition by non-bank service providers playing an especially significant payment role for unbanked and low income people. Furthermore, although in Jordan the ratio of bank branches to population is relatively high, the commercial banking sector has thus far shown limited appetite to expand its services to low-income customers.

Non-bank distribution networks of financial services are also relevant, including 250 Jordan Post outlets, 234 Money Business Exchange branches and approximately 60 MFI branches. Indeed, Jordan Post dominates bill payments: it currently offers a collection of bill payment services for private and public service companies (such as mobile network operators and utility companies) through its 350 post offices. Also, the current Mobile Payments Circular allows the MNOs to offer mobile financial services using the mobile wallet. This network includes some 150 storefronts and approximately 6000 points of sale for the three mobile operators. As such, mobile financial services offerings will be able to make use of a

2 http://datatopics.worldbank.org/financialinclusion/

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significantly larger network than traditional services, thus facilitating access to financial services.

Foreign nationals, mostly Palestinians, make up 39% of Jordan‘s population, one of the highest rates in the world. Inward remittance flows in 2011 totaled an estimated USD 3.5 billion, 12% of GDP. Remittances services in Jordan are currently provided by banks, money exchange companies, the postal service and international remittance companies like Western Union and MoneyGram. Money exchanges tend to be among the most attractive remittance networks because of their working hours, and better services (open on Saturdays and even Fridays, the religious day). It is expected that the development of mobile financial services could increase competition and efficiency in this sector and subsequently reduce costs to the consumer.

Mobile financial servicesMobile telecom operators, in particular Orange and Zain, are leading the development of mobile financial services in Jordan. These operators have partnered with two banks (Housing Bank with Orange, and Capital Bank with Zain), but the banks’ role is limited to providing and monitoring the settlement account.

Zain Jordan, part of the Kuwait based company Zain Group (formerly MTC) with a commercial presence in 7 countries across the Middle East, was the first operator launching a mobile financial services offering (branded E-Mal) in Jordan in 2010, shortly after CBJ issued the circular on mobile payments. The service is coupled with a free payment card, managed by MEPS. The service currently has approximately 40,000 registered customers, of which around 50% are active.

Orange Money is Orange’s mobile wallet solution, which was launched in Jordan in April 2012. Orange Money in Jordan follows the parent company’s business model already implemented in 9 countries in Sub-Saharan Africa, with more than 4.1 million subscribers. All these countries use the same platform, located at Orange’s headquarters in Paris. Orange Money Jordan expects to reach 250,000 customers in 5 years.

11. Alignment with Transition Fund Objective

The CBJ is convinced of the transformational impact that its new payment strategy will have not only on access to finance but also in terms of economic and social development. Mobile payment methods can facilitate international remittances, retail payments and microfinance services. The CBJ has explained that it views financial inclusion via mobile financial services as being one way of introducing people on the margins of society into mainstream life. By bringing more people into the financial system, this project supports the objective of the Transition Fund by fostering sustainable and inclusive economic growth through promoting access to finance by underserved households and micro and small enterprises as well as by improving regulation in Jordan. The objective is achieved through the development of capacity within the Central Bank of Jordan to monitor payments operations, including the enhanced electronic retail payment system (JoMoPay) for mobile financial services, which are intended to have a direct impact on increased financial inclusion and economic growth.

In addition to its alignment with the general objective of the Transition Fund, this project is aligned with each of its pillars. First, it is aligned with Investing in Sustainable Growth since retail payment solutions such as mobile money directly relate to topics such as innovation and technology policy, enhancing the business environment competition policy, private sector development strategies, and in particular access to finance. Second, the promotion of innovative retail payment solutions such as mobile money promote inclusive development and job creation by increasing financial inclusion. Third, this project enhances economic governance by improving the public financial management and oversight carried out by the Central Bank, in order to ensure a sound and reinforced banking system. Finally, the promotion of innovative retail payment solutions such as mobile money enhances competitiveness and integration since it facilitates trade and private sector development for the informal economy by providing reliable payment and financial services.

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Through the sharing of the outputs of different components of this regional project with other partners in the program, including under a foreseen UfM umbrella project, the impact under each of these pillars is intended to be heightened as participants all benefit from improved knowledge of regional and international strategies and best practices.

12. Alignment with Country’s National Strategy

The Central Bank of Jordan has embarked on a comprehensive reform process to enhance safety and efficiency of payment systems, increase access to financial services and to establish the oversight function over payments and securities settlement systems. The CBJ has assumed a leading role along with the National Payment Council to implement this reform. Reforms include the legal and regulatory framework, the modernization and integration of payment systems, the implementation of financial literacy programs, and the establishment of the oversight function for payments and securities settlement systems.

Over the last decade, the CBJ has made significant progress in the implementation of the core infrastructure of the National Payments System (NPS). However, the usage of cheques and cash continues to grow while the usage of electronic payment mechanisms has not grown at the pace expected. In order to address the remaining needs for further improvement, the CBJ has developed a draft Payment Systems Strategy (2013-2016) that has the following main components:

(i) develop a national retail payments strategy to leverage innovation in payment systems to support expansion of financial inclusion and to further a rapid expansion of electronic payments;

(ii) strengthen legal and regulatory framework for payment and settlement systems;(iii) develop and institute payment and settlement system oversight arrangements; and,(iv) implement the new CPSS-IOSCO Principles for Financial Markets Infrastructure (PFMIs) as

the guiding framework for all payment and settlement systems policy formulation, and in light of these new standards review existing policies and infrastructure and identify gaps that are then to be implemented in the period 2013-2016.

CBJ already runs the Real Time Gross Settlement system (RTGS), and the Electronic Checks Clearing system (ECC). In June 2012, the National Payments Council of Jordan decided that the national switch for retail payments would be implemented and run by the CBJ. As a result CBJ is currently drafting regulations in order to implement such infrastructure. Mobile payments are the first type of retail payments to be integrated in the switch, since CBJ wants to be able to monitor mobile payments transactions managed by MNO’s. Indeed, CBJ’s inability to monitor the amount of e-money managed by the operator, and as result that it is equal to the balance of the settlement account, poses inflationary risks due to the potential creation of money. Besides, CBJ argues that since the settlement account pays interest, the money deposited in the settlement account is invested by the bank. As a result CBJ argues that each individual account should be individually insured, and not only the overall balance of the account since this is higher than the maximum amount insured by the deposit insurance system of Jordan 50,000 JD (approximately 5,657,773 000 EUR). Indeed, the average amount of the settlement account that Housing Bank managed for Orange was approximately of 200,000 JD just after launching the service.

In a second step, CBJ would like to offer direct debit, and direct credit through the retail switch. Currently since there is no Automated Clearing House (ACH) system, in order to pay utilities through banks customers have to have a bank account with the same bank as the utility company. Also, cards are to be integrated in the system later, although as of now card systems are not regulated by the Central Bank.

In terms of microfinance, the Ministry of Planning and International Cooperation (MPIC) is leading the development of the regulatory framework with German cooperation support. However, MPIC plans to have CBJ as the main regulator and supervisor of the microfinance sector and the analysis of the required additional capacities CBJ will need is currently being undertaken. MPIC considers that new technologies

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and capabilities such as mobile financial services could greatly benefit the development of the microfinance sector in Jordan, and this is why they want to leave that option available for willing MFIs in the new regulatory framework.

The present project, which has support from the highest levels in the Central Bank, is thus an integral part of the CBJ’s strategy to support financial inclusion. The CBJ has also been collaborating with various other government stakeholders in order to ensure the broadest impact. This collaboration includes:

- Ministry of Education: to introduce financial literacy into the education program (a demand side measure to complement the supply side measure regarding payments infrastructure)

- Ministry of Finance: this is the main government payments institution (85% of government payments either come from or go to the Ministry of Finance) and so the CBJ has been discussing ways to include government payments into the new payments system

- Ministry of Social Security: CBJ wishes to make it possible for voluntary social security contributions (e.g. for Jordanians who have the status of being self-employed) to be made electronically through this system; and also for benefit payments from the Ministry to be made electronically

It is also hoped that the project will help in the management of the influx of refugees into Jordan as a result of the conflict in Syria: the CBJ has been discussing with the UN to establish a mechanism whereby the new mobile payments switch would be used to disburse payments to refugees, thus reducing problems such as cash-related crime in refugee camps in the country. The proposed regulation, oversight and education campaigns must all be designed to permit, and indeed facilitate, such important functions.

C. PROJECT DESCRIPTION

13. Project Objective

This project aims to improve financial inclusion in Jordan through the provision of innovative mobile financial services, targeting particularly low-income Jordanians who do not use banking services.

The project aims to meet this overall aim by building the capacity needed within the Central Bank in order to adapt the regulatory framework for retail payment service providers, enhance the oversight function of CBJ, and enable the CBJ to carry out awareness campaigns to ensure the broad adoption of the new products.

14. Project ComponentsDespite CBJ’s efforts to date, Jordan still faces an important challenge in terms of access to finance that jeopardizes its economic development and equality. Access to quality financial services – including means of payments, savings, credit, insurance and money transfer systems – is crucial for low-income households to smooth consumption, manage risks, invest productively, and respond to financial shocks.

The Central Bank of Jordan has decided to build its own retail payments systems center in order to reap the benefits of using a centralized payments system. This system includes the Mobile Payments Application called JoMoPay. Centralizing mobile payments involves sending all electronic payments through a single platform connecting the Central Bank of Jordan with Jordanian Banks and service providers participating in the operations. The expected benefits that CBJ expects to gain from centralizing all mobile payments are:

Simplifying connections between all participants Monitoring mobile financial services providers Enabling additional processing functions to provide more sophisticated payment products

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or greater interoperability Minimizing Transaction Costs Improving Management Controls Increasing Reliability and Availability Enhancing Consistency Lowering Acquiring Costs Increasing the ability to Introduce New Payments Instruments Facilitating real-time or near real-time settlement of retail transactions

Prior to deciding to implement the new retail payments infrastructure, CBJ analyzed the retail payments architecture to be developed, and concluded that the following activities/policies were to be developed in parallel to the implementation of the retail payments infrastructure in order to make the new architecture successful in achieving its objectives:

Connect the mobile switch to all service providers and involved parties to ensure interoperability, transparency, and high level of security in order to bank the unbanked.

Enhance government transactions and remittances from cash to electronic payments. This is vital for enabling more efficiency in government payments and settlements. Infrastructure includes disaster recovery site for hosting these systems including servers, switches, and alarm system.

Establish an adequate subsidy management mechanism that enables the government to effectively manage distribution of subsidies in a timely manner through the new platform, in addition to managing and dispersing pensions payments and aid provided by different ministries to citizens.

Encourage mobile payments by enabling B2B, G2P, and G2B electronically. Constructing a financial literacy program in coordination with other parties, including

NGOs, to enhance Jordan’s financial inclusion indicators, as reported by the World Bank, and respond to labor market needs.

CBJ is establishing a National Mobile Payment Switch (JoMoPay) to provide control over the expected transactional financial operations among involved parties. CBJ wants to impose regulatory and monetary rules over the mobile payments process in the country. CBJ’s objective is to be in full control of the major actors in mobile financial services in Jordan by monitoring them, in order to be able to guarantee the finality of the payment transactions as well as the smoothness of all transaction clearing and settlement. This is expected to improve consumer confidence in the system, and hence expand its potential reach.

This component of the project, which is not part of the Transition Fund (TF) financed project, is implemented by the CBJ and the process is already well advanced. Procurement of the core components has been carried out, contractual negotiations are under way and in some cases contracts have already been signed. In order to capitalize on this significant infrastructure investment, CBJ wishes, under this TF-financed project, to build also the required regulatory, monetary, clearing, and settlement environment enabling a smooth establishment of a mobile payments infrastructure network. In doing this, it will try to benefit from synergies with all existing payments infrastructure in Jordan in order to reduce costs.

Component 1: Capacity building and support for adapting the regulatory framework for retail payment service providers and enhancing the oversight function of CBJ from practical and functional perspective (USD 800,000, ISA-executed)

The Central Bank of Jordan understands the need to adopt and observe the 24 Principles of Financial Market Infrastructure (PFMI) related to retail payments and specifically to mobile payments as produced by the Committee on Payment and Settlement Systems (CPSS)3. However, CBJ is also 3 CPSS. Principles for financial market infrastructures: Disclosure framework and Assessment methodology. December 2012.

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aware that it still lacks the capacity needed and the know-how in terms of implementation of these principles and methodology. This component therefore aims to support the Central Bank of Jordan by providing the assistance it requires in implementing the PFMI framework, so it can achieve its objectives and efforts in enhancing safety and efficiency of mobile payments and the retail payments system as a whole.

Sub component 1 – Capacity building for the oversight function:

CBJ believes that capacity building is required in order to learn how oversight is conducted in other countries in terms of payments systems, including by working with other central banks that are leaders in this regard. Witnessing on site overseeing and observing how it is conducted is vital to acquire necessary knowledge since it provides CBJ staff with the right capacity and perspective in knowing how, what, and where to exercise its oversight functions. Collaboration with other international relevant regulatory authorities, market regulators, and central banks is crucial to build an effective knowledgebase that will allow CBJ to implement best practices. Attending workshops that bring together relevant regulatory authorities and generate knowledge is fundamental as well to shape suitable oversight methodology for Financial Markets Institutions in Jordan. It is expected that this component will benefit from the findings of the study carried out in the context of the Moroccan proposal. The EIB, as ISA, will therefore work to boost the regional dimension of this project by supporting knowledge sharing between the countries. This component includes at least the following:

Assistance in designing a PFMI methodology that suits Jordan and its relevant institutions; Assistance in developing a legal framework that provides a robust legal base for the

oversight program; Developing a disclosure framework to ensure disclosure of relevant data by all relevant

participants and jurisdictions; Developing a balanced score card, and assisting in implementation; Assistance in the development and implementation of a risk management plan, and stress

testing procedures; Visits by Jordanian officials to foreign central banks that apply best practices in oversight

over mobile and retail payment systems and follow a PFMI methodology to see how it is conducted;

Twinning with other central banks to observe best practices and give exposure to CBJ personnel on how best practices are carried out.

Sub component 2 – Developing a methodology in processing statistical reports and data to produce concise reports in order to execute actionsThe CBJ has expressed its need to learn how best to conduct studies, and collect data to monitor the success of its project. The project therefore studies the design of a suitable data collection and monitoring framework for the CBJ, as well as capacity building to ensure the sustainable usage of this framework.

Sub component 3 – Development of public awareness / financial inclusion education strategyThe motivation and commitment of the CBJ is demonstrated, for example, by the fact that the central bank has already begun working on the question of financial literacy, for instance by approaching the Ministry of Education to have the topic including in the education curriculum, as well as by partnering with local universities to prepare instructional material (such as animated videos to be shared on social networks). The CBJ wishes however to have support in creating a fully developed strategy in this regard, in order to ensure that the potential of its infrastructure is fully realized in practice. The strategy must define the target audience and key informational messages, as well as a suitable dissemination strategy and the creation of educational materials to support the campaign.

This component will be ISA-executed in close coordination with the country.

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Component 2: Knowledge sharing workshop (USD 35,000, country executed)

In support of the regional dimension of this program, each country will organize a workshop to share experience and feedback from the activities it has carried out under the program. This is valuable because each country has requested assistance with different aspects of their mobile financial services and financial inclusion programs. By sharing this knowledge among the central banks and financial sectors of the three countries of this program, and potentially with other interested parties and countries, the impact of the program will be heightened.

This component will be executed by the country.

Component 3: Project Management, Coordination, Monitoring and Evaluation (80,000, country- executed)

CBJ will house a Project Management Team for activities associated with project coordination, including interfacing with the consultant team and implementing the required monitoring and evaluation (M&E) system. The Project Management Team will be located at the Central Bank of Jordan.

This component will be country-executed in close coordination with the ISA.

15. Key Indicators Linked to Objectives

At present, the CBJ does not have access to all the data which it considers suitable to assess the level of financial inclusion in the country. In the long term, therefore, the impact of this project on financial inclusion will therefore be measured on the basis of indicators which will be developed as part of the capacity building work of the project. For the purposes of this project, the CBJ has developed an indicator framework which is presented in section F.

This covers measurements of:- Access

o Indicator 1: number of accounts per 1000 adults- Transaction volumes

o Indicator 2: per capita cashless transactions- Infrastructure scope

o Indicator 3: agents, ATMs and POS terminals per 1000 inhabitantso Indicator 4: number of transactions per POS

- System safetyo Indicator 5: increased safety of the payment system

- Legal frameworko Indicator 6: number of new services developedo Indicator 7: enactment of new laws

The interim progress of Component 1, the program of capacity building for adapting the regulatory framework for retail payment service providers, enhancing the oversight function of CBJ, and developing a program of financial literacy will be assessed on the basis of reports from the implementing team (CBJ and consultants). Component 2 will be assessed by a report from the CBJ on the workshop produced. Component 3 will be monitored by reports from the CBJ on the progress made in the management team.

D. IMPLEMENTATION

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16. Partnership Arrangements (if applicable)

The Central Bank of Jordan will jointly implement the project with the European Investment Bank. Within CBJ the payment systems department will lead. Within the EIB, both the Economics department and the Policy and Business Development unit will be involved.

CBJ will be the primary local implementing agency and will work closely with other government stakeholders, regulatory entities and the private sector. The CBJ will be supported by a team of international experts, overseen by the European Investment Bank. The project’s progress will be associated with ministries in the government and regulatory bodies that oversee financial interaction in Jordan. Ministries that engage in money transfers and services will be involved in this project. In particular, the ministries of Finance and Social Security will be relevant players. In the private sector, mobile operators will be involved in this project to offer safe and efficient interactive interface schemes for JoMoPay. Their involvement will enhance cash inflows timing and ensure reliability accompanied with reducing costs of conventional means of payment. In addition, commercial banks will be central players in the whole process. Banks will have to comply with the regulations and directives emanating from the CBJ and follow the defined best practices for implementing these projects and ensuring the safety and efficiency of payments flowing. As a result they will have to adopt appropriate risks mitigation policies to meet the requirements of implementing the new retail payments architecture.

On a regional level, the involvement of the Union for the Mediterranean via a UfM label will be sought in order to promote regional partnership and the sharing of best practice among the countries participating in this program.

17. Coordination with Country-led Mechanism/Donor Implemented Activities

The project will be implemented in coordination with complementary projects to take advantage of synergies between different donor-funded activities. Consultations with donors active in mobile financial services and retail payments infrastructure have shown that this project has strong potential complementarities with ongoing and planned activities. In particular, the CPSS, IFC, CGAP, GSMA MMU, World Bank, FOMIN (IADB) and AFI have been analyzing mobile money initiatives in the region and elsewhere. The team of the Central Bank is highly involved in the financial inclusion sector in Jordan, and the fact that the CBJ has been closely involved in creating this request for assistance means that this proposal has expressly been designed to fill gaps, rather than duplicating on-going work.

Specific examples of on-going projects with which alignment will be sought include:- establishment of the credit bureau (a project being led by the CBJ)- on-going assistance with legal/regulatory frameworks (implemented in collaboration with

World Bank)- an on-going microfinance project (supported by GIZ)

The Local Capital Markets Needs Assessment, which takes place in the framework of the Deauville partnership under the lead of EBRD and AMF (with the participation of the EIB) is also of relevance. The idea is to identify shortcomings in the functioning of local capital markets in the Deauville Partnership countries and to come up with measures to be implemented by governments to reach improvements as well as to identify possible actions to be taken by IFIs and to coordinate possible IFI involvement.

Overall, the EIB will act as a facilitator to ensure that the implementation team is able to coordinate with relevant on-going programs and initiatives led by other IFIs. In addition, the on-going collaboration with other Jordanian ministries (see section 12 above) will make it possible to ensure that synergies are achieved with other country-led activities which may be of relevance.

On a regional level, the involvement of the Union for the Mediterranean via the UfM label will be sought in

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order to promote regional partnerships and the sharing of best practice among the countries participating in this program.

18. Institutional and Implementation Arrangements

The project will be executed under the joint responsibility of the EIB and CBJ. Component 1 will be ISA-executed, in close collaboration with the CBJ. Components 2 and 3 will be host-country executed.

Project Team: The Project will be implemented by leveraging CBJ’s in-house team with a team of international consultants.

Coordination Activities: A Steering Committee comprising representatives of the CBJ and of the EIB would be created to ensure the efficient operation of the project. The EIB and CBJ will coordinate with other IFIs throughout the implementation of the project. As outlined above, steps will be taken to identify synergies with other projects and to leverage linkages between them.

Ad-hoc Advisory Committee: An ad-hoc advisory committee comprising representatives from the Telecommunications Regulatory Commission, the Ministry of International Cooperation, the Ministry of Finance, the Ministry of Social Security, the Ministry of Education, the financial sector, payment service providers, the microfinance sector, remittances operators, mobile operators and potentially other key stakeholders will be convened to provide guidance to the project.

19. Monitoring and Evaluation of Results

The results framework for the project specifies indicators which will be monitored to evaluate project performance towards the objectives (see M&E framework below). Primary responsibility for results monitoring will be given to the Central Bank of Jordan (CBJ), which will present an M&E report to the EIB on an annual basis for five years after project completion (with the possibility of extension upon agreement of both parties). Periodic progress reports will be expected from the consultants to ensure that on-going activities are on track (see section F, intermediate results).

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E. PROJECT BUDGETING AND FINANCING

20. Project Financing (including ISA Direct Costs4)

Cost by ComponentTransition

Fund(USD Million)

Country 5

Co-Financing (USD Million)

OtherCo-

Financing (USD Million)

Total(USD

Million)

COMPONENT 1: Capacity building for adapting the regulatory framework for retail payment service providers and enhancing the oversight function of CBJ from practical and functional perspective (ISA-Executed)

0.8 0.8

COMPONENT 2: Knowledge-sharing workshop (TC-Executed) 0.035 0.035

COMPONENT 3: Project Management, Coordination, Monitoring and Evaluation (TC-Executed) 0.08 0.08

TOTAL 0.835 0.08 0.915

21. Budget Breakdown of Indirect Costs Requested

Description Amount (USD Million)For grant preparation, administration and implementation support:

Staff time and travel 0.056

Total Indirect Costs 0.056

4 ISA direct costs are those costs related to the ISA’s direct provision of technical assistance within the project.5 Costs related to the provision of CBJ staff will be the in kind contribution of CBJ to the project and as a result do not require financing.

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F. Results Framework and Monitoring

Project Development Objective (PDO): This project’s objective is to promote access to finance through the promotion of mobile financial services and retail payment infrastructure as a whole. This objective will be achieved through the required technical assistance aimed at supporting the new retail payments architecture of Jordan.

PDO Level Results Indicators*

Unit of Measure Baseline

Cumulative Target Values**Frequenc

y

Data Source/

Methodology

Responsibility for Data Collection

Description (indicator definition

etc.)YR 1 YR 2 YR3 YR 4 YR5

Indicator One: Access metrics

Number 430.8per 1000 as of 30-6-2013

+5% +10%

+15% 20% 25% Annual Reporting to CBJ

CBJ Number of accounts per 1000 adults

Indicator Two: Per capita cashless transactions

Number 66.5Per Capita as of Sept-2009

+10%

+20%

+30% 40% 50% Annual Reporting to CBJ

CBJ Per adult (>15) number of cashless transactions through debit and credit cards

Indicator Three: Infrastructure metrics

Number 3.5 ATMs and POS per 1000 inhabitant0.13 branch per capita as of Dec 2012

+5% +10%

+15% 20% 25% Annual Reporting to CBJ

CBJ Agents, ATMs and POS terminals per 1000 inhabitants and number of branches 1000 per capita

Indicator Four: Transactions per acceptance infrastructure

Number 12043 transaction per POS as of Dec. 2012

+10%

+20%

+30% 40% 50% Annual Reporting to CBJ

CBJ Number of transactions per POS

Indicator Five:Increased safety and efficiency of the Payment

Survey Low Low Medium-High

High Annual Global Payment Systems

CBJ Legal and Regulatory Score

15

System Survey, WB, every two years

Large Value Payment Score

Retail Payment Score

Oversight Score

Indicator Six:Number of private sector actors having created new, innovative payment products/services (as a measure of the success of creating a conducive legal and regulatory framework, allowing innovations in retail payments)

Number 0 1 5 Annual CBJ CBJ Number of institutions offering innovative payment services targeting at low income, unbanked segments

Indicator Seven:Strengthened laws and supporting regulations enacted

Legal and Regulatory Score

low low Low-medium

medium

Medium-high

high Annual Global Payment Systems Survey, WB

CBJ

CBJ Commitment from Government to implement the adopted NPS Strategy

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INTERMEDIATE RESULTS

Project Intermediate Result:

Intermediate Result 1: Periodical progress reports from program of capacity building for adapting the regulatory framework for retail payment service providers and enhancing the oversight function of CBJ from practical and functional perspective

Report n/a As defined with consultants

n/a

n/a n/a n/a Periodical during implementation (2014)

Reporting to the EIB

Consultants, CBJ

See section 14

Intermediate Result 2: Workshop for sharing of knowledge

Workshop

n/a 0 1 n/a n/a n/a Once, at project completion

Reporting to the EIB

CBJ Successful completion of a workshop to enable knowledge sharing of country experience between countries participating in the program.

Intermediate Result 3: Establishing an implementation structure in the CBJ

Report n/a 2 n/a n/a n/a n/a Six-monthly during implementation

CBJ reporting to the EIB based on observed progress in implementation unit

CBJ Establishment of a management team within the central bank

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