inclusive micro, small, and medium-sized enterprise development project: project ... · 2019. 7....

Completion Report

Project Number: 43566-013 Loan Number: 2867 Grant Number: 0290 July 2019

Maldives: Inclusive Micro, Small, and Medium-Sized

Enterprise Development Project

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – rufiyaa (Rf)

At Appraisal At Project Completion (23 April 2012) (8 April 2019)

Rf1.00 = $ 0.06493 $ 0.06493 $1.00 = Rf 15.40 Rf15.40

ABBREVIATIONS

ADB – Asian Development Bank BCC – Business Center Corporation Limited BDS – business development services BDSC – business development service center BML – Bank of Maldives BOLI – means “shell” in Maldivian (also known as Dhivehi), name of the online

MSME business portal CGS – credit guarantee scheme CIB

CPS – –

Credit Information Bureau country partnership strategy

CSC – citizen service center CSF – cost-sharing facility DMF – design and monitoring framework FGIA – first-generation imprest account GAP – gender action plan GOM – Government of Maldives IDB – Islamic Development Bank IMSMEDP – Inclusive, Micro, Small, and Medium-Sized Enterprise Development Project IT – information technology LCF – Line of Credit Facility LOF – Line of Finance MED – Ministry of Economic Development MIRA – Maldives Inland Revenue Authority MMA

MOFT – –

Maldives Monetary Authority Ministry of Finance and Treasury

MSME – micro, small, and medium-sized enterprise NDP – National Development Plan PMU – project management unit PSDP – Private Sector Development Project SDFC – SME Development Finance Corporation Limited SDR – special drawing rights SGIA – second-generation imprest account SLA – subsidiary loan agreement SME – small and medium enterprise STR – secured transaction registry WB EDBS – World Bank Ease of Doing Business Score WEL – Women Entrepreneurs Loan

NOTES

(i) The fiscal year (FY) of the Government of Maldives and its agencies ends on 31 December. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 31 December 2018.

(ii) In this report, “$” refers to United States dollars. Vice-President Shixin Chen, Operations 1 Director General Hun Kim, South Asia Department (SARD) Director (Officer-in-Charge)

Diwesh Sharan, Public Management, Financial Sector and Trade Division, SARD

Team leader Çiğdem Akın, Senior Public Management Economist, SARD Team members Brenda Batistiana, Gender Consultant, SARD Adelita June P. Gacutan, Senior Operations Assistant, SARD Monica Mei V. Carino-Young, Project Analyst, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 1

A. Project Design and Formulation 1 B. Project Outputs 2 C. Project Costs and Financing 6 D. Disbursements 7 E. Project Schedule 7 F. Implementation Arrangements 7 G. Technical Assistance 8 H. Consultant Recruitment and Procurement 8 I. Gender Equity 9 J. Safeguards 9 K. Monitoring and Reporting 9

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10 B. Effectiveness 11 C. Efficiency 11 D. Sustainability 11 E. Development Impact 12 F. Performance of the Borrower and the Executing Agency 13 G. Performance of Cofinanciers 13 H. Performance of the Asian Development Bank 14 I. Overall Assessment 14

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14

A. Issues and Lessons 14 B. Recommendations 15

APPENDIXES

1. Revised Design and Monitoring Framework 16

2. Project Cost at Appraisal and Actual 25

3. Project Cost by Financier 28

4. Disbursement of ADB Loan and Grant Proceeds 31

5. Contract Awards of ADB Loan and Grant Proceeds 35

6. Status of Compliance with Loan Covenants 37

7. Implementation of Gender Action Plan and Achievements 72

8. Summary of Key Changes in Project Implementation Arrangements 89

9. Sustainability Assessment of Project's Key Achievements 103

BASIC DATA A. Loan Identification

1. Country Maldives 2. Loan/grant number and financing source

a. Loan number and financing source b. Grant number and financing source

2867 (concessional ordinary capital resources) 0290 (Asian Development Fund)

3. Project title

Inclusive Micro, Small, and Medium-Sized Enterprise Development Project

4. Borrower Republic of Maldives 5. Executing agency

Implementing agencies Ministry of Finance and Treasury Bank of Maldives Maldives Inland Revenue Authority Maldives Monetary Authority Ministry of Economic Development

6. Amount of loan SDR3,622,000.00 ($5,570,000.00) Amount of grant $4,450,000.00

7. Financing modality Project loan

B. Loan and Grant Data 1. Appraisal1

– Date started not applicable – Date completed not applicable

2. Loan negotiations – Date started 25 March 2012 – Date completed 26 March 2012

3. Date of Board approval 25 May 2012 4. Date of loan and grant agreement 20 September 2012 5. Date of loan and grant effectiveness2

– In loan agreement 19 December 2012 – Actual 21 December 2012 – Number of extensions 1

6. Project completion date – Appraisal 31 December 2016 – Actual 30 June 2018

7. Loan and grant closing date3 – In loan agreement 31 December 2016 – Actual 30 June 2018 – Number or extensions 2

8. Financial closing date – Actual loan 11 January 2019 – Actual grant 8 April 2019

9. Terms of loan – Interest rate 1% per annum during the grace period and 1.5%

per annum thereafter – Maturity (number of years) 32 – Grace period (number of years) 8

1 Staff review meeting was conducted on 3 February 2012. The loan negotiation mission was conducted during 25‒28

March 2012. No separate appraisal activity was recorded following the staff review meeting. 2 The executing agency requested an extension of the deadline to comply with the conditions for effectiveness. 3 The loan closing date was extended twice (first until 31 December 2017 and second until 30 June 2018) for a

cumulative period of 18 months.

ii

10. Terms of relending4 – Interest rate 9% – Maturity (number of years) 8 – Grace period (number of years) 1 – Second-step borrower not applicable

11. Disbursements 1. Loan dates

Initial Disbursement Final Disbursement Time Interval 3 March 2014 16 August 2018 53 months Effective Date Actual Closing Date Time Interval

21 December 2012 11 January 2019 73 months

2. Grant dates

Initial Disbursement Final Disbursement Time Interval 24 September 2013 10 August 2018 59 months

Effective Date Actual Closing Date Time Interval 21 December 2012 8 April 2019 76 months

3. Loan amount (SDR’000)

Category

Original

Allocation (1)

Increased during

Implementation (2)

Canceled during

Implementation (3)

Last Revised Allocation (4=1+2–3)

Amount Disbursed

(5)

Undisbursed Balance (6 = 4–5)

Equipment 98 218 316 0 0 0 Consulting Services System Development Consultancy (CIB and STR)

1,365

0

1,365

0

0

0 System Development Consultancy (MSME technologies)

813

0

813

0

0

0 Training, capacity development

0

33

33

0

0

0

Line of Credit Facility 975 882 0 1,857 1,061 796 Contingency 332 0 332 0 0 0 Interest Charge 39 0 18 21 21 0 Total 3,622 1,133 2,877 1,878 1,082 796

CIB = Credit Information Bureau; MSME = micro, small, and medium-sized enterprise; STR = secured transaction registry. Source: Asian Development Bank.

4. Grant Amount ($‘000)

Category

Original

Allocation (1)

Increased during

Implementation (2)

Canceled during

Implementation (3)

Last Revised

Allocation (4=1+2–3)

Amount

Disbursed (5)

Undisbursed

Balance (6 = 4–5)

Equipment 400 637 692 345 338 7 Consulting Services

4 The terms of sublending by the Bank of Maldives are from the subsidiary financing agreement signed on 25 June

2013, and subsequent addendums on (i) 25 August 2013, (ii) 19 January 2015, and (iii) 20 February 2018.

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Category

Original

Allocation (1)

Increased during

Implementation (2)

Canceled during

Implementation (3)

Last Revised

Allocation (4=1+2–3)

Amount

Disbursed (5)

Undisbursed

Balance (6 = 4–5)

Project Management (PMU Consultancy)

2,440

24

1,990

474

396

78

BDSC institutional and legal framework

0

2,200

0

2,200

2,131

69

Access to Finance (CGS, CIB, and STR)

700

189

0

889

843

46

MSME portal, judgment debt database and CSCs

300

1,081

1,113

268

279

(11)

Training, capacity development

160

114

153

121

35

86

Civil works 0 90 0 90 81 9 Miscellaneous administrative and support costs

0

60

0

60

56

4 Contingency 450 210 657 3 0 3 Total 4,450 4,605 4,605 4,450 4,159 291

BDSC = business development service center; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; MSME = micro, small, and medium-sized enterprise; PMU = project management unit; STR = secured transaction registry. Source: Asian Development Bank.

12. Local costs (financed): not applicable

Amount ($) Percent of local costs Percent of total costs

C. Project Data 1. Project cost ($‘000)

Cost Appraisal Estimate Actual Foreign exchange cost 20,320 16,061 Local currency cost 700 700 Total 21,020 16,761 Source: Asian Development Bank.

2. Financing plan ($‘000)

Cost Appraisal Estimate Actual Implementation cost

Borrower-financed 700 700 ADB-financed – Loan 5,570 1,602 – Grant 4,450 4,159 Islamic Development Bank 10,300 10,300

Total implementation cost 21,020 16,761 Interest during construction costs

Borrower-financed - - ADB-financed - - Other external financing - -

Total interest during construction cost - - ( - ) = not applicable. Source: Asian Development Bank.

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3. Cost breakdown by project component ($’000)

a. Appraisal estimate ($‘000)

Item

ADB Loan

ADB Grant

IDB

GOM

Total

Component 1: Business Support Infrastructure Built 1. Equipment 150 400 0 0 550 2. Consultants

a. Project Management Unit 0 2,440 0 0 2,440 b. Capacity Development 0 160 0 0 160

3. Cost-Sharing Facility 0 0 2,000 0 2,000 A. Subtotal (Component 1) 150 3,000 2,000 0 5,150 Component 2: Access to Finance Improved for Private Sector MSMEs 1. Consultants

a. System Development Consultancy (CIB and STR) 2,100 0 0 0 2,100 b. Capacity Development 0 0 180 0 180 c. Access to Finance (CGS, CIB, STR) 0 700 0 0 700

2. Line of Credit Facility 1,500 0 7,000 0 8,500 B. Subtotal (Component 2) 3,600 700 7,180 0 11,480 Component 3: Technologies for MSME Development Established 1. Consultants

a. MSME technologies 1,250 300 0 0 1,550 C. Subtotal (Component 3) 1,250 300 0 0 1,550 D. Contingencies 510 450 920 0 1,880 E. Financial Charges during Implementation 60 0 200 0 260 F. Taxes and Duties 0 0 0 700 700

Total Project Cost (A+B+C+D+E+F) 5,570 4,450 10,300 700 21,020 ADB = Asian Development Bank; CGS = credit guarantee scheme; CIB = Credit Information Bureau; GOM = Government of Maldives; IDB = Islamic Development Bank; MSME = micro, small, medium-sized enterprise; STR = secured transaction registry. Notes: Data sources are provided in Appendix 3. Source: Asian Development Bank.

b. Actual ($‘000)

Item

ADB Loan

ADB Grant

IDB

GOM

Total

Component 1: Business Support Infrastructure Built 1. Equipment 0 338 330 0 668 2. Consultants

a. Project Management Unit 0 396 0 0 396 b. BDSC Institutional and Legal Framework 0 2,131 0 0 2,131 c. Capacity Development 0 35 0 0 35

3. Cost-Sharing Facility 0 0 88 0 88 4. BDSC Staff and Operating Costs 0 0 2,582 0 2,582 5. Miscellaneous Administration and Support Costs 0 56 0 0 56 A. Subtotal (Component 1) 0 2,956 3,000 0 5,956 Component 2: Access to Finance Improved for Private Sector MSMEs 1. Consultants

a. System Development Consultancy (CIB and STR) 0 0 0 0 0 b. Capacity Development 0 0 270 0 270 c. Access to Finance (CGS, CIB, STR) 0 843 0 0 843

2. Line of Credit Facility 1,572 0 6,000 0 7,572 B. Subtotal (Component 2) 1,572 843 6,270 0 8,685 Component 3: Technologies for MSME Development Established 1. Consultants

a. MSME technologies 0 279 0 0 279 2. Civil works (CSC) 0 81 0 0 81 C. Subtotal (Component 3) 0 360 0 0 360

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Item

ADB Loan

ADB Grant

IDB

GOM

Total

D. Contingencies 0 0 1,030 0 1,030 E. Financial Charges during Implementation 30 0 0 0 30 F. Taxes and Duties 0 0 0 700 700

Total Project Cost (A+B+C+D+E+F) 1,602 4,159 10,300 700 16,761 ADB = Asian Development Bank; BDSC = business development service center; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; GOM = Government of Maldives; IDB = Islamic Development Bank; MSME = micro, small, medium-sized enterprise; STR = secured transaction registry. Notes: Data sources are provided in Appendix 3. Source: Asian Development Bank.

4. Project schedule

Item Appraisal Estimatea Actualb

Date of Contract with Consultants Component 1: Business Infrastructure Built A. Project Management Unit G01 PMU - Project Manager/PMU Head (Ibrahim Firushan, G12816) Q2 2012 03/02/2015 G01 PMU - Project Manager/PMU Head (Uzma Abdul Latheef, G16238 [replacing Ibrahim Firushan])

04/08/2016

G01 National Project Manager (Ahmed Munawar, G10834) 08/12/2013 G01 National Project Manager (Haifa Naeem, G12074) 26/08/2014 G02 BDSC Coordinator (Lamya Ibrahim, G10833) 13/12/2013 G03 Economic Associate - Procurement (Aminath Maleela Solih, G10786) 13/12/2013 G04 Economic Associate - Disbursement (Fathimath Thasneem, G10785) 13/12/2013 G04 Economic Associate - Disbursement (Mariyam Nasha, G14135) 05/11/2015 G04 Economic Associate - Disbursement (Aishath Sobaha, G13749) 12/08/2015 G05 Graphic and Information Designer (Faruhad Mohamed, G16114) 26/08/2016 G05 Graphic Consultant (Ahmed Shafy, G19579) 28/04/2018 G05i Public Relations Officer (Ali Zayan Fayaz, G17527) 31/05/2017 G14 Consulting services for CSC (design and creation of BOQ) (Mohamed Yoosuf, G18710)

15/11/2017

B. BDSC Institutional and Legal Infrastructure G06A Consultancy package for MSME institutional and legal enhancement (E.Gen Consultants Ltd, G12875)

Q2 2012 15/01/2015

G06B Microfinance Specialist (A2f Consulting [Modibo Camara], G11907) 08/07/2014 G07 Audit Firm (FJS Associates LLP, G13071) 16/02/2015 Component 2: Improved Access to Finance (Strengthening CIB and STR) G08A Establishment of Secured Transaction Registry (Vinstar Consulting International, New Zealand, G16023)

Q2 2012 08/08/2016

G08B CIB Legal Specialist (Michelle Parnell, G11718) 01/06/2014 G08C CIB Operational Specialist (Jeffrey Major, G11849) 03/07/2014 G10 CIB Enhancement (Dunn and Bradstreet Technologies and Data Services Pvt. Ltd., India, G15976)

11/08/2016

Component 3: Technologies for MSME Development Established A. MSME Portal, CSCs G09A Enhancement of BOLI software and rollout in CSCs (Programmers: Hamdhulla Umar G13179; Imthihan Farooq G13198; and Ibrahim Nashwan M. Shahid G13205)

Q4 2012 04/05/2015

G09C SAP EHP upgrade package (Invenio Business Solutions, G18956) NA 24/04/2018 B. Civil Works Contract G14ii Development of CSC (Mirza Maldives, G19006) Date of award NA 22/05/2018 Completion of work 30/06/2018

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Equipment and Supplies (Dates) Component 1: Business Infrastructure Built A. Project Management Unit G12A Hardware requirements for PMU First procurement NA 29/12/2014 Last procurement 30/06/2018 Completion of equipment installation 30/06/2018 G12B Hardware requirements for PMU printer First procurement NA 06/01/2015 Last procurement 30/06/2018 Completion of equipment installation 30/06/2018 B. BDSC Institutional and Legal Infrastructure G13 Hardware requirements for MED enhancement and business center connectivity First procurement Q1 2012 13/06/2017 Last procurement Q4 2016 04/08/2017 Completion of equipment installation Q4 2016 04/08/2017 Component 2: Improved Access to Finance (Strengthening CIB and STR) G12Di CIB system reconfiguration First procurement Q4 2012 23/10/2016 Last procurement Q4 2016 25/05/2017 Completion of equipment installation Q4 2016 25/05/2017 G12Dii CIB system reconfiguration First procurement Q4 2012 26/10/2016 Last procurement Q4 2016 25/05/2017 Completion of equipment installation Q4 2016 25/05/2017 G12Diii CIB system reconfiguration First procurement Q4 2012 05/04/2017 Last procurement Q4 2016 30/06/2018 Completion of equipment installation Q4 2016 30/06/2018 G12Div Development of software and procurement of hardware for STR system development

First procurement Q2 2014 08/11/2017 Last procurement Q4 2016 23/11/2017 Completion of equipment installation Q4 2016 23/11/2017 Component 3: Technologies for MSME Development Established A. MSME Portal G11 Hardware requirements for BOLI enhancement First procurement Q4 2012 13/11/2017 Last procurement Q4 2016 30/06/2018 Completion of equipment installation Q4 2016 30/06/2018

B. CSC G14i Development of CSC procurement of goods First procurement Q4 2012 22/05/2018 Last procurement Q4 2016 30/06/2018 Completion of equipment installation Q4 2016 30/06/2018 Start of Operations A. Launch of Upgraded CIB Software Beginning of start-up Q2 2014 06/02/2019 B. Installation of STR System Software Completion of tests and commissioning Q4 2016 27/06/2018 C. Establishment of MSME portal Beginning of start-up Q1 2015 30/06/2016 D. Other Milestones Launch of Line of Credit Facility Q3 2012 06/01/2014 Launch of Women Entrepreneurs Loan NA 13/02/2018 Launch of CGS Q1 2013 07/08/2016

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Training, capacity development (International) Start Date End Date MED, Maldives Cooperative Society, Hithadhoo BDSC visit to Thailand to discuss trade promotion opportunities (6 participants)

22/03/2016 30/03/2016

MED visit to SME Corporation Malaysia and Spring Singapore to study MSME promotion models and institutions (6 participants)

15/04/2017 22/04/2017

MED, regional BDSCs and BOLI team visit to SME Corporation and SME Bank and other MSME promotion institutions in Malaysia (14 participants)

04/06/2018 06/06/2018

MMA visit to Ministry of Business Innovation and Employment in New Zealand and Financial Services Commission in Vanuatu to study operation of STR system.

17/06/2018 23/06/2018

SME and BML participation in a training course “Financing SME: Islamic Perspective” organized by Islamic Research and Training Institute in Pakistan (4 participants)

24/11/2018 28/11/2018

BDSC = business development service center; BML = Bank of Maldives; BOLI = means “shell” in Maldivian (also known as Dhivehi), name of the online MSME business portal; BOQ = bill of quantities; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; MED = Ministry of Economic Development; MMA = Maldives Monetary Authority; MSME = micro, small, and medium-sized enterprise; NA = not applicable; PMU = project management unit; Q = quarter; SAP EHP = System Applications and Products Enhancement Package; SME = small and medium-sized enterprise; STR = secured transactions registry. a The dates are based on ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed

Loan and Grant to the Government of Maldives for the Inclusive Micro, Small, and Medium-Sized Enterprise Development Project. Project Administration Manual, Appendix 4 (first procurement plan is dated March 2012).

b Actual dates are based on contract award date for consultants as indicated in version 12 of the revised procurement plan dated December 2018.

5. Project performance report ratings

Dates Single Project Rating From 21 December 2012 to 31 December 2012 Not available From 1 January 2013 to 31 December 2013 On track From 1 January 2014 to 31 December 2014 On track From 1 January 2015 to 31 December 2015 On track From 1 January 2016 to 31 December 2016 Potential problem From 1 January 2017 to 31 December 2017 Potential problem From 1 January 2018 to 31 December 2018 On track From 1 January 2019 to 30 April 2019 On track

Source: Asian Development Bank.

D. Data on ADB Missions

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of

Members Loan Negotiations 25–28 March 2012 3 4 f, q, r Inception Mission 24–27 September 2012 2 4 a, c Special Review Mission 1 12–13 December 2012 2 2 b, f Tripartite Portfolio Review Meeting 1 12–13 December 2012 4 2 b, f, h, i Review Mission 1 18–21 February 2013 2 4 b, c Special Review Mission 2 1–4 July 2013 2 4 b, f Tripartite Portfolio Review Meeting 2 3–4 July 2013 5 2 b, f, m, n, o Review Mission 2 24–27 February 2014 2 4 b, c Review Mission 3 13–17 October 2014 2 5 b, c Review Mission 4 3–9 December 2014 1 7 b Tripartite Portfolio Review Meeting 3 30 November–

4 December 2014 5 5 b, e, k, l, m

Mid-term Project Review Mission 16–19 February 2015 2 4 b, c Review Mission 5 8–10 September 2015 2 3 b, c Tripartite Portfolio Review Meeting 4 18–19 October 2015 NA 2 NA Review Mission 6 26–28 January 2016 2 3 b, c Review Mission 7 11–13 July 2016 2 3 c, d Tripartite Portfolio Review Meeting 5 12–14 July 2016 6 3 c, e, m, l, j, k

viii

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of

Members Review Mission 8 20–23 April 2017 1 4 c Tripartite Portfolio Review Meeting 6 23–24 April 2017 6 2 c, d, e, k, m, n Review Mission 9 22–23 August 2017 2 2 a, c Country Consultation Mission 1–5 December 2017 4 5 d, e, h, k Review Mission 10 3–10 December 2017 3 8 c, j, o Review Mission 11 8–10 April 2018 3 3 c, f, g Review Mission 12 1–2 July 2018 1 2 c Tripartite Portfolio Review Meeting 7 1–3 July 2018 8 3 c, d, e, k, m, n, p, r Review Mission 13 5–6 February 2019 1 2 c Project Completion Report Mission 24–28 March 2019 5 5 f, g, j, s, t

NA = not available. Notes: a = portfolio management specialist, b = financial sector specialist, c = financial sector officer, d = director, e = country team leader, f = economist, g = project analyst, h = urban development specialist, i = programs officer, j = gender consultant, k = consultant, l = economics officer, m = energy specialist, n = transport specialist, o = social development specialist, p = procurement specialist, q = counsel, r = assistant, s = videographer, t = videographer’s assistant. Source: Asian Development Bank.

I. PROJECT DESCRIPTION 1. Maldives comprises 1,190 islands (of which only 200 are inhabited) grouped in 26 atolls and spread over 90,000 square kilometers in the Indian Ocean. In 2018, it had a population of 512,038, of which 143,000 lived in Malé, the capital city and main port. An enclave economy in the resorts-based tourism sector and capital inflows, including concessional aid, have led to economic growth of 6.4% per annum on average during 2010‒2019. In 2011, Maldives graduated to middle-income country status and, in 2017, reached the highest per capita income ($9,760) and human development index (0.72) in South Asia.1 Maldives transitioned to a parliamentary democracy in 2005 after 30 years of presidency, and a new constitution was ratified in 2008, paving the way for the first multi-party presidential elections. However, political instability with frequent and contested presidential and parliamentary elections, and public protests during changes in administration in 2013 and 2018 affected the business climate. 2. Although Maldives addressed its first-generation challenges in the provision of basic services, long-standing structural constraints have remained.2 These include (i) a small import-dependent economy with a narrow economic base due to the country’s archipelagic nature;3 and (ii) the high cost of inter-island transportation and provision of infrastructure, creating regional disparities in access to economic opportunities outside of Malé. To foster economic inclusion, the Government of Maldives (GOM) has recognized the potential of micro, small, and medium-sized enterprises (MSMEs) for economic diversification and thus supported the sector in overcoming its challenges. MSMEs in Maldives (i) operate on a small scale, including family-owned enterprises; (ii) engage in retail trade; and (iii) have remained unregistered in the informal sector.4 High start-up costs, imperfect market access, deficiencies in labor skills and business start-up experience, particularly among the youth and women, have hampered their development. Access to finance has been identified as a key challenge because of (i) limited banking facilities in outer atolls; (ii) restrictive credit policies; and (iii) the high cost of lending or collateral requirements. 3. In recognition of GOM’s efforts, the Asian Development Bank (ADB) approved a loan of $5,570,000 (SDR3,622,000) and a grant of $4,450,000 for the Inclusive Micro, Small, and Medium-Sized Enterprise Development Project (IMSMEDP) on 25 May 2012.5 The Islamic Development Bank (IDB) cofinanced the project with a $10,300,000 loan. The project’s intended impact was a more inclusive and broad-based MSME sector, achieved through expansion and strengthening of the sector by (i) building the business support infrastructure; (ii) improving access to finance for private sector MSMEs; and (iii) establishing technologies for MSME development.

II. DESIGN AND IMPLEMENTATION

A. Project Design and Formulation 4. Both at appraisal and design, the IMSMEDP was relevant and consistent with GOM’s objectives under the 7th National Development Plan (NDP), 2006‒2010, which prioritized (i) 1 Asian Development Bank (ADB). Asian Development Outlook 2019 and ADB Statistical Database System. The

human development index is from the United Nations Development Programme (UNDP). 2 ADB. 2015. Maldives: Overcoming the Challenges of a Small Island State. Country Diagnostic Study. Manila. 3 In 2015, tourism accounted for 27.1% of gross domestic product (GDP), followed by communication (11.2%),

government sector (10.8%), transportation (9.6%), construction (9.6%), real estate (7.8%) and fisheries (1.4%) (Government of Maldives. Maldives Monetary Authority. Monthly Statistics. March 2017. Volume 18. Malé).

4 Government of Maldives. Ministry of Economic Development. 2010. Small and Medium-sized Enterprise Mapping Survey of Sixteen Islands in the Maldives: An Assessment of the Findings. Malé. (in collaboration with UNDP).

5 ADB. 2012. Report and Recommendation of the President to the Board of Directors. Proposed Loan and Grant to Republic of the Maldives: Inclusive Micro, Small, and Medium-Sized Enterprise Development Project. Manila.

2

private sector development; (ii) infrastructure and transportation networks and consolidation of the highly-dispersed population on safer and larger islands; (iii) education, health, housing, and gender policies; and (iv) good governance and elimination of poverty and regional disparities.6 Aligned with the NDP, the Strategic Action Plan (also called the National Framework for Development, 2009–2013) identified private sector development, in particular MSMEs, as one of the major pillars to diversify the import-reliant economy and generate employment across seven provinces.7 The project was in line with ADB’s country partnership strategy (CPS), 2007‒2011, which addressed the factors, impeding private sector development such as access to finance.8 5. The IMSMEDP was designed in close consultation with the Ministry of Economic Development (MED), which was leading the MSME agenda, and based on the lessons from ADB’s Private Sector Development Project (PSDP).9 The success of the PSDP led to further demand from GOM for a follow-up project to (i) strengthen MSME legislation, (ii) enhance the Credit Information Bureau (CIB), (iii) set up a secured transaction registry (STR) and a credit guarantee scheme (CGS), (iv) expand the business development services (BDS) and strengthen the network of business development service centers (BDSCs) by leveraging information technology (IT), and (iv) increase the availability of low-cost lending for MSMEs under the Line of Credit Facility (LCF). While the IMSMEDP’s formulation built upon the achievements of the PSDP, additional due diligence was conducted through two technical assistance (TA) projects (para. 34). The key building blocks remained stable, but during implementation adjustments were made to the design and monitoring framework (DMF) and implementation arrangements to better align the scope of the project with the changing needs of the implementing agencies and the MSME sector. B. Project Outputs

6. The IMSMEDP had 3 components with 14 performance indicators in the DMF, of which 12 were fully achieved and 2 were partially achieved (Appendix 1).10 7. Component 1: Business support infrastructure built. This component aimed to (i) strengthen the project management units (PMUs); (ii) create an enabling environment for MSMEs; (iii) strengthen BDSCs and the business incubator program; and (iv) set up a CGS.

8. Strengthening PMUs. Separate PMUs were set up with project directors under each implementing agency, supported by consultants. ADB provided training on ADB’s financial management procedures and closely monitored PMUs to ensure adherence to ADB’s procurement plan and guidelines.

6 Government of Maldives. Ministry of Planning and National Development. 2007. Seventh National Development Plan

2006‒2010: Creating New Opportunities. Malé. 7 Government of Maldives. Ministry of Planning and National Development. “Aneh Dhivehi Raajj.” The Strategic Action

Plan National Framework for Development 2009‒2013. Malé. 8 ADB. 2007. Country Partnership Strategy: Maldives, 2007–2011. Manila. 9 Achievements of the PSDP included (i) establishment of five business development service centers (BDSCs), which

administered the cost-sharing facility (CSF) that was used by 500 MSMEs; (ii) provision of business development services (BDS) to 8,000 beneficiaries; (iii) capacity development of MSMEs through the Maldives National Chamber of Commerce and Industry; (iv) establishment of MSME and BDSC web portals; (v) piloting of the Line of Credit Facility (LCF), which provided 86 loans; (vi) establishment of the Credit Information Bureau (CIB); (vii) a feasibility study on a centralized movable asset registry (now referred to as secured transaction registry); and (viii) capacity building on legal, regulatory, and financial aspects of public‒private partnerships (PPPs), formulation of a PPP framework and piloting of three PPP initiatives in social infrastructure. (ADB. 2008. Report and Recommendation of the President to the Board of Directors. Proposed Technical Assistance Loan to the Republic of Maldives for the Private Sector Development Project. Manila).

10 The original DMF used the term “component” instead of “output,” which was later changed with the revision of the project’s DMF on 2 September 2016.

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9. Enabling environment for MSME development. To strengthen the legal framework for MSMEs, the project provided a legal consultancy to undertake a gap analysis and recommend amendments to the Small and Medium Enterprise (SME) Act, the Companies Act, and the Banking Act.11 The original DMF included drafting of the (i) civil procedure code to enhance enforcement of commercial contracts, and (ii) personal and corporate insolvency laws to streamline the bankruptcy process. However, following the gap analysis and given that MED prioritized other laws, the DMF was revised in September 2016 to keep only “drafting of the amendments to the SME Act” as a performance indicator.12 The SME Act had been ratified in April 2013, and the drafted amendments included measures to strengthen the lending and use of the CGS (also referred to as the Financial Assistance Facility), the operations of the BDSCs, and the flexible use of the SME fund to encourage women and youth participation.13 The amendments were sent to the Attorney General’s Office in April 2016 and are expected to be submitted to the Parliament by September 2019 once further revisions are finalized. 10. Business development service centers. The project supported institutional, operational, infrastructural, and human resource capacity enhancements of BDSCs in line with the SME Act (2013). Starting 2014, the geographical coverage of BDSCs was expanded to all seven provinces with two additional BDSCs opened under the project. Both ADB and IDB funded the capacity building, procurement of physical and IT infrastructure, and operational and staffing costs of BDSCs. MED and regional BDSC staff conducted visits to Malaysia and Singapore in April 2017 and June 2018 to study the institutional framework for MSME promotion in these countries.

11. The range of BDS was expanded to 32 services and products.14 A total of 532 training and technical programs were conducted, mostly on business start-up and business planning. These programs involved 3,525 business consultations and technical business visits with 17,465 participants (50% women and 60% youth), exceeding the DMF target of 4,000 beneficiaries trained under 300 training programs. The original IMSMEDP design envisaged turning BDSCs into a privately managed national BDS delivery network with a revenue stream based on fee-based services. However, MED took the policy decision to offer BDS free of charge to MSMEs to promote the sector’s development. GOM also established the Business Center Corporation Limited (BCC) in March 2017 as a state-owned enterprise to oversee the management of seven BDSCs (Appendix 9). The design of the BCC was supported by the visit to Malaysia and Singapore in April 2017 to learn international experience in MSME promotion models (para.10).

12. Business incubator program. Two BDSC-operated business incubator programs provided support for (i) product development, (ii) quality control on product standards, (iii) business management and skill development, and (iv) market research for value-chain MSMEs. The programs were covered under the cost-sharing facility (CSF) with cofinancing from IDB.15 In total, 71 youth-led businesses under the GetSet Scheme; 41 MSMEs under IDB’s Line of Finance

11 In consultation with MED, the (i) Competition and Fair Business Practices Act, (ii) Enterprise Start-up Act, and (iii)

Privacy and Personal Data Protection Act were drafted. Recommendations were provided in areas where currently no legislation exists such as (i) e-commerce, (ii) privacy and data protection, (iii) electronic and mobile payments, (iv) intellectual and industrial property, (v) competition and market conduct rules, (vi) trusteeship and beneficial interests, (vii) collective investments, and (viii) standards for goods and services.

12 A revised DMF was approved with a memo for minor change in implementation arrangements on 2 September 2016. 13 Until the SME Act (2013), Maldives had no specific law, governing MSME-related policies and lending. 14 Major BDS include (i) training on business start-up and business counseling; (ii) product development and marketing

support; (iii) legal, tax, and accounting advice; (iv) facilitating access to trade networks; (vi facilitating access to finance; and (vi) government services such as access to online MSME portal and business registration (Appendix 1).

15 The CSF funded BDSC program grants, which supported marketing, business planning, training, business incubator projects and MSME technologies on a cost-sharing basis with beneficiary contributions reaching 20%.

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(LOF) facility; and 66 women entrepreneurs under ADB’s LCF Phase II (Women Entrepreneurs Loan [WEL]) received business incubator support, exceeding the DMF target of 20 MSMEs.

13. Credit guarantee scheme. To share the credit risk of the financial institutions and reduce collateral requirements, the Credit Guarantee Unit was established under the Maldives Monetary Authority (MMA). The CGS was launched on 7 August 2016 with capital contributions from the Ministry of Finance and Treasury (MOFT) and MMA. The scheme supports MSMEs in applying for commercially-viable loans between Rf100,000 to Rf1,000,000 without collateral at favorable interest rates, with a maximum tenure of 5 years. The credit guarantee is issued for an annual premium of 1% of the outstanding loan. As a policy, five times the leverage provision amount for default was set as the limit of CGS loans (Rf125 million). As of 30 June 2018, out of 92 loan applications processed, 68 CGS applications were approved. Further details on the CGS are provided in Appendix 9.

14. Component 2: Access to finance improved for private sector MSMEs. The project (i) introduced the LCF to meet the demand for credit from MSMEs, (ii) expanded CIB services to reduce credit risk, and (iii) set up an STR on fixed and movable assets for securing loans.

15. Line of Credit Facility. The project provided $1.5 million (Phase I), supplemented by IDB’s LOF ($6 million).16 MOFT relent $1.5 million to Bank of Maldives (BML) through a subsidiary loan agreement (SLA) for onlending to eligible MSMEs on a commercial basis.17 The LCF (Phase I) was launched on 6 January 2014 and implemented until the end of 2017. BML received 172 applications, of which 100 were approved (Rf21,843,500), and disbursed 98 loans (Rf21,743,500), with 37 youth- and 30 women-led MSMEs benefiting. The LCF (Phase II), WEL, was launched on 13 February 2018 for women-led MSMEs. The total BML lending was increased by $1.2 million to $2.7 million following an addendum to the SLA on 20 February 2018 to maximize the loan utilization and to further promote gender equality. Between 25 February and 1 March 2018, 364 applications were received, of which 74 were approved (Rf3,680,000) and 66 loans (15 for the youth) were disbursed (Rf3,280,000) (Appendix 9). Overall, LCF (Phases I and II) strengthened the inclusion of women, by providing 96 out of 164 loans (58%) to women-led MSMEs, exceeding the DMF target of 15% mandatory allocation for women.

16. IDB’s LOF provided 37 new loans (Rf10.8 million) out of 119 applications under Phase I, of which 5 were for women and 23 for youth. However, the IDB’s LOF fell short of the DMF target of 160 new loans with 15% going to women-led MSMEs. MED and BML staff were trained on Islamic MSME finance in Pakistan in November 2018.

17. BML, with a dedicated development banking unit, played a critical role as a partner financial institution, given its branch network, customer relationships, and trained loan officers capable of inspecting loan applications and monitoring loan performance. BML collaborated effectively with MED and major BDSCs on loan due diligence. The beneficiaries were selected based on credit assessment, business feasibility, repayment capacity, and supporting documents.

18. Starting in 2014, GOM also introduced various MSME-related loan schemes in collaboration with BML. In total, 147 MSMEs benefited from the SME Loan Scheme (Rf50 million a year) during 2016‒2018. In addition, the GetSet Scheme for youth entrepreneurs (Rf25 million)

16 Introduced by MED, Faseyha Madhadhu was the first shariah compliant Islamic finance scheme in Maldives through

Islamic Development Bank’s financial support administered by BML. This first phase was launched on 23 August 2015 and the second phase was launched during the 3rd quarter of 2018 and completed on 31 December 2018.

17 The details of lending arrangements are in Appendixes 6 and 9.

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supported 70 MSMEs, of which 33 were led by women. Through MED’s Enterprise Development Finance Scheme, 628 entrepreneurs, of which 349 were women or youth, received loans. Through these schemes and the improved business support infrastructure, 678 women- and youth-led businesses were created, exceeding the DMF target of 300, representing a 45% increase over the baseline of 1,500 businesses. The loan processing time declined to 3-4 months, exceeding the DMF target of a 30% reduction from the 2011 baseline of 6 months.

19. Credit Information Bureau. As part of the PDSP, the CIB (under MMA) was established in February 2011 as the central repository of the credit histories of borrowers. To further strengthen the CIB’s utilization and data quality, under the IMSMEDP, a legal CIB expert supported the revision of the CIB Bill in 2017, and the software and hardware infrastructure was enhanced. The system upgrades were released on 6 July 2017. In addition to eight banks, CIB membership was expanded to Maldives Financial License Company and Housing Development Finance Corporation. Furthermore, the system has become ready to include the insurance and telecommunications companies once the CIB Bill gets approved. The CIB Bill, which is currently with the Attorney General’s Office for submission to the Parliament, was delayed because of other legislative priorities and the presidential and parliamentary elections. Although the inclusion of utility companies under CIB membership was envisaged at project design, this will not be pursued because securing utilities data is difficult given that timely utility bill payments are not the norm and clear ownership of utility subscribers among tenants or landlords is not always documented. 20. One of the initial DMF indicators was credit scoring services, but the DMF was revised in September 2016 to change the language to expansion of CIB membership and provision of new reporting services. Following the amendment of the CIB regulation in July 2018, the self-inquiry of credit reports by individuals and corporations was launched in February 2019. New value-added products such as portfolio monitoring, account monitoring, and mobile applications were introduced. Credit scoring products require a minimum of 5 years of data before they can be used. 21. With awareness on maintaining good credit, usage of CIB reports has increased from 523 in 2012 to 10,055 in 2017, exceeding the DMF target of 2,500 reports per year. CIB was keeping credit history of 76,223 individuals and 1,629 corporations in June 2018. Although decoupling was initially considered, CIB services would best be provided under MMA given the size of Maldives. 22. Secured transaction registry. To reduce dependence on real estate and expand the use of movable assets as collateral, in line with the PSDP’s feasibility study, establishment of an online and publicly accessible STR under MMA, along with a regulatory framework was targeted. Accordingly, STR hardware and software were installed and user acceptance testing was completed in June 2018. MMA also visited agencies operating STR systems in New Zealand and Vanuatu during 17‒23 June 2018. The implementation of STR, however, was only partially achieved since the system required legislation of the STR Bill by Parliament, which was delayed because of additional revisions of the STR Bill and elections affecting the legislative process.18

23. Component 3: Technologies for MSME development established. This component facilitated the use of IT systems to improve the delivery of vital BDS and overcome barriers to markets and access to finance across geographically dispersed islands in Maldives.

24. MSME business portal. A web-based MSME business portal was developed based on MED’s existing Trade Information System and key modules were launched in 2016. The MSME

18The Mortgage and Security Interest Bill, drafted in 2011 under the PSDP, was revised by MMA with new inputs from

the World Bank and consultants, delaying the finalization. It was submitted to the Attorney General’s Office in 2017.

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portal functions as the main hub for BDSCs. The portal includes (i) BOLI (means “shell” in Maldivian [also known as Dhivehi]), name of the online MSME business portal), providing company registration, central business registry, issuance and renewal of trade permits and licenses, partnership seals, payments, and taxpayer integration; (ii) a public MSME information portal with client management and training systems; (iii) an enterprise development finance system for loan management, evaluation, disbursement, and business profiling; (iv) sales and inventory management under expo system, enabling management of exhibition events for display of industrial goods; and (v) a human resource system. In September 2016, Maldives Inland Revenue Authority (MIRA) was added as a new implementing agency to develop financial record-keeping software for MSMEs to obtain real-time data on business classification, revenues, and employment status. The integration of the business registration modules of the MSME portal with MIRA has been completed and payments can be processed through the MIRA payment gateway.

25. Judgement database. The original project design included establishment of a centralized and computerized database on judgement debt awarded by the courts to help commercial banks and investors have a fair assessment of the financial health of MSMEs. However, this was found to be redundant and was removed from the DMF in September 2016, as the Department of Judicial Administration had already developed a judgement database, enabling the access of financial institutions to judgements passed on individuals and businesses for risk management. 26. Citizen service center. The project design initially planned for seven solar-powered citizen service centers (CSCs), at least two of which would be set up through a public‒private partnership. However, solar-powered CSCs were found to be redundant and removed from the DMF in September 2016 as this was already being undertaken by the Ministry of Environment and Energy under ADB’s Sustainable Energy Development Project.19 The IMSMEDP supported the construction and enhancement of the infrastructure of MED’s CSC in Malé. C. Project Costs and Financing 27. At appraisal, the loan was $5,570,000 (SDR3,622,000). The allocations were revised four times: (i) an amendment to the financing agreement on 20 February 2014 cancelled $2,651,762.01 (SDR1,744,098.35) because of savings from the reduced consultancy and equipment inputs for MED, and a more cost-effective solution for CIB and STR development; however, additional funds were allocated to BML’s LCF equipment and training budgets; (ii) an amendment to the financing agreement on 13 April 2018 increased the LCF from $1,500,000 (SDR987,000) to $2,700,000 (SDR1,857,000) to utilize the loan for women-led MSMEs under WEL with reallocations from equipment, consulting services, and the training budget as they were completed using the grant; (iii) since WEL was launched only a few months before project closure, the unutilized LCF of $1,077,861.07 (SDR778,166) was cancelled in December 2018; and (iv) for project closure, the additional unutilized LCF of $25,325.30 (SDR18,173.75) was cancelled in January 2019. Final loan utilization was $1,601,858 (SDR1,081,561.90). 28. At appraisal, the grant was $4,450,000, of which (i) $2,440,000 was allocated to the MED’s PMU; (ii) $700,000 for CGS, CIB, and STR; (iii) $300,000 for the MSME portal, judgement debt database, and CSCs; (iv) $400,000 for equipment; and (v) $160,000 for training. The allocation was revised five times during implementation and twice for project closure.20 The final grant utilization was $4,158,806.65. While costs for equipment ($338,000), consultancy support for

19 ADB. 2014. Grant to Maldives for Preparing Outer Islands for Sustainable Energy Development. Manila. 20 Unutilized grant funds of $146,794 were cancelled on 6 December 2018, and a further $144,399 on 8 April 2019.

Details for the loan and grant allocations are provided in Appendix 2 and Appendix 4.

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CGS, CIB, and STR ($843,000), and the MSME portal and CSC ($279,000) were aligned with the original budget, PMU support ($396,000) and training ($35,000) were overestimated. Consulting services for the BDSC institutional and legal framework ($2,131,000), civil works ($81,000), and administrative support ($56,000) were new budget items.

29. At appraisal, the cost of the IMSMEDP was $21,020,000, of which IDB would cofinance $10,300,000 as a loan and GOM would provide $700,000 as counterpart financing. IDB-financed components comprised (i) LOF facility through BML ($7,000,000 at appraisal and $6,000,000 at completion); (ii) capacity development and management information system for Islamic microfinance ($180,000 at appraisal and $270,000 at completion); (iii) marketing and incubator program, covering staff, equipment, and operating costs of BDSCs ($0 at appraisal and $2,912,000 at completion); and (iv) CSF ($2,000,000 at appraisal and $88,000 at completion). The allocation of IDB funds was revised twice to provide more resources to BDSCs (Appendix 3). At completion, the cost of the IMSMEDP was $16,761,000.

D. Disbursements 30. The disbursement projections were unrealistic and were revised 14 times for the loan and 13 times for the grant because of numerous changes in the consultancy and procurement packages and the reallocations and cancellations of the loan and grant proceeds (Appendix 4). The final net loan disbursement was $1,601,858 (SDR1,081,561.90) out of $5,570,000 (SDR3,622,000) at appraisal. Because of delays in project start-up and changes in the consulting and procurement packages, disbursement under the grant reached only 60% by the end of 2016 and 84% by the end of 2017. Thus, the IMSMEDP was rated as a potential problem in 2016 and 2017. The final net grant disbursements were $4,158,806.65 out of $4,450,000 at appraisal. E. Project Schedule 31. The project was designed for 43 months from approval on 25 May 2012 to the original completion date of 31 December 2016. The financing and project agreements were signed on 20 September 2012. The implementation was delayed by 7 months as the project became effective on 21 December 2012, and LCF disbursements were delayed by more than a year because the SLA between BML and MOFT was signed only on 25 June 2013 (para. 54) and the SLA between MMA and MOFT on 22 September 2013. In February 2016, the project closing date was extended 12 months until 31 December 2017. By end-2017, as projected contract awards and loan disbursement targets were not achieved, the project was extended in February 2018 by 6 more months until 30 June 2018 to get the delayed procurement back on track and to increase BML’s LCF. The winding-up period was extended from 30 October 2018 to 31 January 2019 to allow time for implementing agencies to (i) submit withdrawal applications, (ii) allow BML and MED to process the refunds of their unutilized fund balances, and (iii) complete the project’s final audit for FY2018. The loan was financially closed on 11 January 2019 and the grant on 8 April 2019. F. Implementation Arrangements 32. MOFT was the executing agency responsible for coordination among the implementing agencies and liaising with ADB and IDB. Three implementing agencies had dedicated PMUs: (i) MED was responsible for components 1 and 3; (ii) MMA was responsible for CGS, CIB, and STR under component 2; and (iii) BML was responsible for LCF under component 2. The project steering committee was chaired by the MED deputy minister and comprised executive directors from MOFT, MED, and MMA, BML’s general manager, and PMU directors. MIRA was added as a new implementing agency on September 2016 for the MSME financial record-keeping software.

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33. At appraisal, five first-generation imprest accounts (FGIAs) in dollars were established by MED (loan and grant), MMA (loan and grant), and MOFT (loan), and one second-generation imprest account (SGIA) in rufiyaa by BML at MMA. At completion, these were reduced to 4 FGIAs by MED and MMA, and one SGIA by BML following the modifications in fund flow arrangements.21 G. Technical Assistance 34. Two project preparatory TAs contributed to the IMSMEDP’s design. The TA for Preparing the Small and Medium-Sized Enterprise Development Project helped prepare the PSDP by (i) formulating an MSME development strategy in the atolls; (ii) assessing the policy and legal environment, and business opportunities for MSMEs; (iii) designing technical support for BDSCs; (iv) designing the structure of the CGS and CSF; (v) surveying entrepreneurial opportunities for vulnerable groups in the atolls; and (vi) preparing an assessment for state-owned enterprises.22 35. Building on this, the TA for Supporting Inclusive MSME Development Project helped formulate the IMSMEDP through (i) interventions to strengthen BDSCs; (ii) the design of the LCF, CGS, CIB and STR systems and their regulatory framework; (iii) the drafting of a legal and institutional framework for MSMEs; (iv) a capacity development plan for women- and youth-led MSMEs; (v) development of the project’s schedule, procurement plan, and cost estimates; and (vi) safeguard due diligence and review.23 H. Consultant Recruitment and Procurement 36. The consultancy and procurement packages were administered by PMUs using the country’s system in consultation with the National Tender and Evaluation Board. At appraisal, the project envisaged four consultancy packages, comprising 230 person-months of international and national consultants, five procurement packages, and one capacity building and training package based on quality- and cost-based selection. The original procurement plan was revised 12 times and at completion, there were 32 consultancy and procurement packages. Significant delays occurred in the signing of consultancy and procurement contracts by PMUs and several variations were made afterwards by PMUs, leading to consulting services starting at the end of 2013 and IT-related procurement in 2015.24 The contract award projections were unrealistic given (i) the narrowing of the scope of the loan to only BML’s LCF, and (ii) the delays in the utilization of funds. While the projections estimated that 60% of contract awards would be completed by 2014, only 12% were completed under the grant. By the end of 2016, only 85% of contract awards were completed, so the project closure was extended twice by a total of 18 months (Appendix 5). While the implementing agencies and ADB found the general performance of consultants satisfactory, MMA reported glitches in the CIB software, which were later resolved by the developer’s IT support. MMA was concerned that maintenance costs for the CIB software would be expensive and they would not be fully covered by user fees given the volume of credit reports in Maldives.25

21 The details of the changes in fund flow arrangements are in Appendix 8. 22 The TA, approved on 19 December 2005 and completed on 31 January 2010, provided a grant of $600,000 for 14

person-months (PMs) of international and 27 PMs of national consultancy services. (ADB. 2005. Technical Assistance to the Republic of Maldives: Preparing the Small and Medium-Sized Enterprise Development Project. Manila.)

23 The TA, approved on 6 December 2010 and completed on 31 May 2012, provided a grant of $650,000 for 23 PMs of international and 10 PMs of national consultancy services (ADB. 2010. Technical Assistance to the Republic of Maldives: Supporting Inclusive Micro, Small and Medium-Sized Enterprise Development Project. Manila.)

24 The summary of changes in procurement packages is in Appendix 4 and a list of consultancy services, goods, and works contracts at appraisal and completion is in Appendix 8.

25CIB has started charging (i) Rf50,000 as a joining fee, (ii) Rf150 per comprehensive credit report, (iii) Rf100 per compact credit report, and (iv) Rf100 per self-inquiry report after one free report each year to cover operational costs.

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The contract of the CIB operational specialist was terminated as MMA found the quality of inputs unsatisfactory and the final report was not delivered. I. Gender Equity 37. The IMSMEDP was categorized as effective gender mainstreaming and a gender action plan (GAP) was developed. MED was responsible for its implementation while the MED’s PMU provided monitoring support through gender and MSME experts. In March 2016, the original GAP, encompassing GOM’s broader gender objectives, was modified to narrow its scope in line with the project’s DMF. In December 2017, five activities and two performance targets were rephrased to make them more specific, measurable, attainable, realistic, and time bound. 38. Overall, the GAP implementation was successful with 21 out of 22 activities (95%) fully completed and 100% of ten quantitative targets fully achieved (Appendix 7). Key achievements included (i) gender- and youth-related inputs for amendments of the SME Act (2013) and drafting of the National Gender Policy based on a study on the barriers to and opportunities for women’s engagement in MSMEs; (ii) an increase in business loans to women and youth through BDSCs; and (iii) partnerships with women associations, educational institutions, and business networks. Testimonials of six women entrepreneurs that benefited from ADB’s LCF were collected from the site visits to Hulhumale, Malé, Naifaru, and Thinadhoo in March 2019 as further evidence of the GAP’s success. The testimonials show that women, assessed during the IMSMEDP’s preparatory phase as having greater constraints than men in venturing into MSMEs, have benefited in terms of economic empowerment, human development, decision-making, and leadership. Recommendations to further strengthen women and youth inclusion include (i) continuation of the WEL Scheme with higher lending limits for start-ups; (ii) promotion of cooperatives and business associations; (iii) stronger links between MSMEs and the tourism sector; (iv) skill development of women entrepreneurs; and (iv) use of technology for improving productivity and connectivity.

J. Safeguards 39. The IMSMEDP remained as “financial intermediation category treated as C” for safeguards with no adverse effects for the environment, indigenous peoples and involuntary resettlement. Awareness building of BML ensured that the subloans were mostly given to sectors with small, retail-based, family-owned businesses in compliance with the national environmental laws and ADB’s safeguards policies (Appendix 9). Annual safeguard reporting was not required. K. Monitoring and Reporting 40. The IMSMEDP’s complex legal framework comprised (i) a financing agreement with the MOFT, signed on 20 September 2012; (ii) a project agreement with MMA, signed on 28 September 2012; (iii) a project agreement with BML, signed on 20 September 2012; and (iv) the SLA between MOFT and BML, signed on 25 June 2013 (Appendix 6). The covenants of the project agreements were fully complied with. The covenants of the financing agreement were also complied with except those related to (i) the expansion of the CIB membership to include insurance and telecommunications companies; (ii) the launch of new credit scoring products, which was partially complied with; and (iii) a project website at MED. The financing agreement was amended three times to reflect (i) partial cancellation of the loan on 20 February 2014; (ii) reallocation of the grant on 16 October 2014; (iii) a change in the loan closing date to 30 June 2018; and (iv) an increase in BML’s onlending and reallocation of the grant on 13 April 2018. Three addendums were made to the SLA related to (i) audit of BML’s SGIA in MMA on 25 August

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2013, (ii) collateral requirements of BML subloans on 19 January 2015, and (iii) an increase in the amount of BML’s onlending on 20 February 2018. 41. ADB regularly monitored activities, procurement, compliance with covenants, and DMF and GAP targets through an inception mission, 15 review missions, including site visits, one mid-term project review mission, seven tripartite portfolio review missions, and one country consultation mission. PMUs submitted quarterly and annual progress reports as per ADB’s project performance reporting system. ADB received MOFT’s completion report in March 2019.

42. The financial management arrangements were complied with. The imprest accounts and the implementing agencies’ financial statements, including components financed by IDB, were audited by an independent audit firm recruited by ADB in compliance with the international public sector accounting standards under the cash basis. Audit reports, including a separate auditor’s opinion on the use of proceeds and expenditures, were submitted for FY2013–FY2018. However the submission of audit reports were delayed beyond 6 months because each implementing agency maintained its own records for disbursements separately and expenditures were not regularly consolidated, leading to delays in reconciliation of accounts during the audit and with ADB’s own project records.26 The list of LCF borrowers were included in the FY2018 audited financial statement. BML, MIRA, and MMA had independent annual audit reports as well.

III. EVALUATION OF PERFORMANCE

A. Relevance 43. The project is rated relevant. At the time of appraisal, the IMSMEDP was consistent with both GOM’s goals for the MSME sector and ADB’s CPS. The project’s GAP was designed based on the project preparatory TA’s social and poverty analysis and aligned with GOM’s gender goals. Since MSME reforms continue to be essential, the project remains relevant at completion. It is also aligned with GOM’s SME Policy;27 ADB’s country operations business plan for Maldives (2019-2021), which targets improvements in the ease of doing business; 28 and ADB’s Strategy 2030.29 At appraisal and completion, ADB’s project modality was appropriate. It built on the synergies of ADB and IDB support and complemented the earlier PSDP in strengthening (i) the legal and regulatory framework, (ii) the operational capacity of financial institutions and BDSCs, (iii) the procurement of IT applications, and (iv) PMU capacity. 44. While the IMSMEDP’s key building blocks and DMF targets were appropriate, ADB responded to operational challenges through minor changes in scope and implementation arrangements (Appendixes 4, 6, and 8) and revisions in DMF indicators (Appendix 1), which did not undermine the overall relevance. Building on the PSDP, the IMSMEDP introduced transformative initiatives that can be replicated in other geographically dispersed small island economies. The gender-inclusive LCF improved access to finance and developed GOM’s and BML’s capacity to launch new market-oriented credit schemes. Leveraging technologies for MSME development and strengthening the network of BDSCs were innovative features.

26 It was also documented that (i) the asset register was not well maintained; (ii) project files were not backed up

regularly; (iii) statements on budget vs. actual expenditures were not submitted; and (iv) financial statements omitted expenditures expressed in local currency. These issues were addressed by the final audit report in FY2018.

27 The MED’s SME Policy is accessible at http://www.trade.gov.mv/page/sme-development 28 ADB. 2018. Country Operations Business Plan Maldives, 2019-2021. Manila. 29 ADB’s Strategy 2030 prioritizes the private sector and gender equity as key drivers of growth. ADB. 2018. Strategy

2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila.

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B. Effectiveness 45. The IMSMEDP was effective. All DMF outcome indicators and 12 out of 14 output indicators were achieved (Appendix 1), along with 21 out of 22 gender-related activities and all quantitative targets under GAP (Appendix 7). As of June 2018, 967 active MSMEs were registered, corresponding to a fivefold increase over the baseline. The range of BDS was expanded through seven BDSCs and the business incubator program. During April 2015–June 2018, 3,525 MSME business consultations and visits were made, exceeding the DMF target of 1,500 MSMEs receiving BDS. Access to credit has increased through the MSME schemes offered by ADB, IDB, BML, and GOM. As of March 2019, 201 MSMEs have benefited from both ADB’s LCF and IDB’s LOF, representing a 235% increase over the DMF baseline of 60. C. Efficiency 46. The project is rated less than efficient. It was delayed by 18 months because of (i) changes in government and elections; (ii) turnover in PMU staff and consultants; (iii) delays in the signing of financing agreements and project effectiveness; (iv) delays in the establishment of PMUs; and (v) cumbersome management of consultancy and procurement packages. Of the original amount, loan utilization reached only 29% because of cancellations, while grant utilization was 93.5%.30 D. Sustainability 47. The project is likely sustainable. All project components were largely non-revenue generating and GOM, as a policy decision, opted for free provision of BDS as a public good. ADB’s LCF was designed following a detailed MSME survey. BML’s credit due diligence expertise was used in selecting beneficiaries based on business feasibility, financial statements, collateral quality, business registration, and tax clearance record from MIRA. This has contributed to LCF’s strong performance and financial sustainability (Appendix 9).31 ADB’s LCF, IDB’s LOF, and GOM’s MSME loans improved the institutional capacity of BML to (i) design MSME lending schemes with lower processing times, (ii) effectively manage lending risks, and (iii) collaborate with BDSCs to screen the borrowers. Appreciating the sector’s potential, BML launched new MSME products. Furthermore, CGS will contribute to a higher lending volume in recognition of the sector’s unmet credit demand. Following the completion of the IMSMEDP, GOM established the SME Development Finance Corporation (SDFC), a state-owned entity, in 2018 to manage GOM’s SME loan schemes (Appendix 9). The lending operations of SDFC started on 30 March 2019 that will likely create synergies with other financial institutions and the BDSCs. 48. With the IMSMEDP, the coverage of financial institutions, the use of credit reports, and the range of CIB services have increased, contributing to lower information asymmetry in access to finance. Based on the 2019 World Bank Ease of Doing Business Score (WB EDBS), credit registry coverage of the adult population rose from 17.7% in 2012 to 23.6% in 2019, higher than the South Asia average of 4.8%.32 The depth of credit information will improve once insurance and telecommunications companies are included upon passage of the CIB Bill. In addition, MMA has introduced user fees for operational costs to improve sustainability. The STR infrastructure

30 As the IMSMEDP had financial intermediation component with unknown subloans at appraisal and institutional

reforms similar to a policy-based lending, sector assessment and BML’s due diligence were made instead of quantitative economic analysis. At completion, process efficiency is assessed along with LCF’s beneficiary and sustainability analysis (Appendix 9).

31 Out of 98 subloans under Phase I, as of March 2019, non-performing loan ratio of the LCF was 7%, lower than BML’s 12.2% average ratio during 2014-2016. Of the 66 subloans under Phase II, only 3% had overdue payments.

32 World Bank. Doing Business 2019. Economy Profile of Maldives (accessible at http://www.doingbusiness.org/)

12

was completed to expand the range of movable collateral, although passage of the STR Bill is still awaited for full utilization. Once the unified collateral registry is functional, Maldives’ rank for access to credit (134th out of 190 countries in the 2019 WB EDBS) will likely improve.

49. Business registration has been streamlined through the MSME portal with fewer procedures (6), less time (12 days), and less cost (4% of income per capital) involved compared to the South Asia average (7.6 procedures, 13.7 days and 11% of income per capita). Maldives ranks 71st out of 190 countries in ease of starting a business based on the 2019 WB EDBS. The expanded coverage of business registration has helped formalize the sector. The portal facilitates business profiling for effective sectoral targeting and improves monitoring of lending. Ongoing development of the national single window and its integration with BOLI and the portal of the Maldives Customs Service will help reduce MSMEs’ transaction costs for international trade.

50. GOM established BCC in 2017 as a state-owned enterprise to oversee seven BDSCs, making the policy choice to opt out from the privately managed network of BDSCs as originally envisaged and offer BDS free of charge. BDSCs’ operational and staff costs will be covered by projected revenues of the SME Industrial Park in Hulhumale. Given the funding shortage for BCC in the medium term and lack of revenue stream from existing BDS, the financial sustainability of BDSCs will require budget support from GOM and/or aid from donors (Appendix 9). GOM is committed to providing the necessary support in the interim. To strengthen sustainability, BCC needs commercial orientation by offering fee-based services until projected revenues become a reality. BCC has already built ties with the educational institutions for vocational training programs.

E. Development Impact 51. The development impact is rated satisfactory because the IMSMEDP has helped to create a more inclusive and broad-based MSME sector. ADB’s LCF benefited 164 MSMEs and IDB’s LOF supported 37 MSMEs. Besides the IMSMEDP, BML introduced its own schemes, with 147 MSMEs benefiting from GOM’s SME loan schemes and 70 from the GetSet Scheme. Based on MED’s preliminary assessment, 1,182 jobs were created by these schemes. MED’s Enterprise Development Finance Scheme provided loans to 628 entrepreneurs (Appendix 1). 52. The results of MED and BML’s 2016 survey on 63 out of 98 MSMEs, financed by ADB’s LCF Phase I, confirmed the positive contributions to the sector’s growth, job creation, and regional economy (Appendix 9). The results indicated that (i) beneficiaries utilized the funds in acquiring assets; (ii) business continuity and repayment capacity remained strong; (iii) 60% of businesses experienced increases in sales volumes; and (iv) 38% of businesses created new jobs. Out of 98 loans, 80% were given to MSMEs in sectors other than fisheries and tourism, and 39 out of 94 loans (excluding agriculture) were given to MSMEs outside of Malé, contributing to diversification of the economy. Based on evidence from case studies collected by MED’s PMU, site visits to atolls in (i) Kulhuduffushi and Hoarafushi in 2014, (ii) Fonadhoo and Laamu in 2016, and (iii) Naifaru and Thinadhoo in 2019, and interactions with the beneficiaries of the LCF and BDSCs (Appendix 7), the IMSMEDP strengthened the ecosystem for MSMEs and self-reliance of communities in geographically segregated islands. The GAP improved women’s participation.

53. The project’s DMF impact indicators were achieved, indicating job creation and poverty reduction gains. Although not solely attributable to the IMSMEDP and strongly supported by overall economic growth in Maldives, the unemployment rate dropped to 6.1% in 2018 (5.7% for women and 6.2% for men) from 11.7% in 2010 (13.8% for women and 10.4% for men). The proportion of the employed population living below $1.9 a day (using purchasing power parity)

13

dropped to 2.7% in 2018 (3.6% for women and 2.4% for men) from 6.6% in 2012 (7.2% for women and 6.1% for men). Both indicators exceeded the DMF targets (Appendix 1). F. Performance of the Borrower and the Executing Agency 54. The performance of the GOM and the MOFT was less than satisfactory. Although GOM and MOFT showed genuine commitment to the IMSMEDP, the challenging political context resulted in reorganizations and staff changes in line ministries and new legislative priorities. Furthermore, the comprehensive nature of the IMSMEDP overwhelmed and stretched the capacity of MOFT and the implementing agencies, although ADB gave them support to overcome their limited project management experience. At design, the project incorporated the key lessons from the PSDP, including the need to create a dedicated PMU for each implementing agency. However, inter-agency coordination under this arrangement (paras. 32-33) turned out to be complex as responsibilities laid with several agencies and there were lapses in communication. While MOFT was the executing agency, MED’s central PMU had a stronger influence. While MED’s PMU staff composition was appropriate, at times they were assigned additional work not directly related to the IMSMEDP. Several factors related to GOM’s performance delayed implementation.33 Compliance with covenants were mostly achieved and counterpart financing was timely and adequate. Regarding utilization of funds, GOM made two requests to ADB that were not fully aligned with the project scope. In June 2017, GOM requested a one-year extension until end-2018 to bridge the funding gap for BCC, the new state-owned company for MSMEs and BDSCs, during its nascent stage. ADB declined this request as it was outside of the project’s scope. In September 2017, GOM requested LCF for SMEs in the construction industry. Following discussions, the unutilized loan balance was allocated for the WEL scheme, which was launched rather late in the project because of the time it took to reach a consensus on fund utilization. G. Performance of Cofinanciers 55. IDB’s cofinancing was provided under the loan agreement signed between GOM and IDB on 23 April 2013 and administered by IDB until 31 December 2018. There was no separate cofinancing agreement between IDB and ADB. IDB’s main value additions to the IMSMEDP were (i) covering the operating equipment and staff costs of seven BDSCs; (ii) establishing 41 MSMEs under the incubator mentoring program; (iii) providing 37 new loans under its LOF, which was the first Islamic finance scheme launched for MSMEs; and (iv) reducing loan turnaround time to 3.5 months. Providing Islamic finance to 24 women- and youth-led MSMEs met the GAP activity target. The LOF also contributed to the increase in business registrations. 56. For IDB’s LOF, implementation delays occurred because of the lack of knowledge on Islamic financing by BML and the rigid procedures for disbursement. Out of 119 applications, only 37 new loans were approved and out of Rf30 million for Phase I, only Rf10.8 million was disbursed. The loan applications were primarily received in the transport sector, although they were open for tourism, transport, construction, fisheries, agriculture, and an open category. The

33 Following the project’s approval in May 2012, (i) the financing and project agreements were signed 4 months later;

(ii) IMSMEDP became effective 7 months later due to a delay in GOM’s legal opinion; (iii) LCF disbursements were delayed due to lengthy negotiations between BML and MOFT on the terms of the SLA, which was signed more than a year later; (iv) establishment of PMUs took time as implementing agencies had to familiarize themselves with ADB procedures; (v) turnover of staff and consultants was high, including the resignation of MED’s two project managers, which affected operations; and (vi) management of consultancy and procurement packages, and processing of their variations took time to reach consensus. Financial management was inadequate due to (i) the late submission of audit reports; (ii) decentralized maintenance of financial records, delaying reconciliation of accounts; and (iii) retention of funds until project closure, delaying the timely cancellation of unutilized balances.

14

loan scheme benefited existing businesses that could provide assets as security, rather than new businesses. Thus, IDB’s LOF fell short of the DMF target of 160 new loans with 15% earmarked for women. The direct interaction of IDB project officers with PMUs was less frequent compared to ADB although their consultants were available to support BML and MED. The IDB’s overall performance was satisfactory as its contributions enabled synergy for complementary activities. H. Performance of the Asian Development Bank 57. ADB’s performance was satisfactory. In the absence of a resident mission in Maldives, the IMSMEDP was administered from headquarters and monitored through 25 missions. Despite three changes in ADB’s project officer, staff turnover at PMUs, and some design shortfalls, ADB’s timely engagement sustained progress. Updates to the scope, budget, financial and institutional arrangements, procurement plan, and disbursement projections were regularly discussed with the PMUs. ADB provided solutions and capacity support to the PMUs and demonstrated flexibility to accommodate requests for changes without compromising the original objectives. I. Overall Assessment 58. The IMSMEDP is successful with the following ratings.

Overall Ratings Criteria Rating Summary of reasons Relevance Relevant Alignment with GOM’s goals; innovative and

transformative elements; appropriate choice of project modality; and minor changes in scope

Effectiveness Effective Successful achievement of outcome and output indicators Efficiency Less than efficient 18 months delay in implementation Sustainability Likely sustainable Strong financial sustainability of the Line of Credit;

improved access to finance for MSMEs; and enhanced capacity of supporting institutions

Overall Assessment Successful Development impact Satisfactory Positive contributions to the MSME sector’s growth, job

creation, and regional development Borrower and executing agency Less than satisfactory Delays in signing of project agreements and procurement;

and inadequate project and financial management Performance of ADB Satisfactory Proactive engagement with GOM to meet objectives ADB = Asian Development Bank; GOM = Government of Maldives; MSME = micro, small, and medium-sized enterprise Note: Ratings are based on ADB. 2016. Guidelines for the Evaluation of Public Sector Operations. Manila. Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS A. Issues and Lessons 59. Meeting ambitious targets. While the IMSMEDP’s scope had multidimensional interventions, they were essential for addressing the sector’s bottlenecks in a comprehensive manner. The success critically hinged upon the GOM’s strong policy commitment for the MSME sector. The loan size however could have been more in tune with the actual absorptive capacity. 60. Consultancy and procurement. The large number of consultancy and procurement packages added to the complexity of the project. A smaller number of firms with a more realistic scope and costing would have been preferable.

15

61. Multiple implementing agencies. The project involved the creation of PMUs in each implementing agency. However, structure of PMUs, their shared responsibilities and coordination mechanisms, and financial management arrangements could have been more effectively specified at design. Staffing of each PMU with full-time consultants and officials, insulated from political changes, who were experienced with implementation of ADB projects and trained on ADB’s procurement guidelines, could have improved the efficiency of implementation.

62. Other lessons. The IMSMEDP could have been improved in the following ways:

(i) A better review of ongoing ADB projects and government activities could have avoided duplication and changes in scope;

(ii) Establishment of a formal coordination mechanism between ADB and IDB could have strengthened monitoring of targets that were dependent on IDB’s activities;

(iii) The dynamic political situation could have been factored in more realistically for the pace of reforms involving legislation for MSMEs, CIB, and STR; and

(iv) A detailed international comparison of MSME promotion at an earlier stage could have resulted in a more tailored institutional model for Maldives to ensure the financial and operational strength of BDSCs.

B. Recommendations 63. Maldives ranks 139th out of 190 countries in ease of doing business, based on the 2019 WB EDBS. Overcoming obstacles to private sector development, many of which are linked to the country’s geography, requires long-term engagement. Future interventions could prioritize (i) maritime and air transportation; (ii) agglomeration of the scattered population on the larger atolls; and (iii) trade facilitation and export orientation. Stronger links between local communities and tourism activities present an undertapped potential for MSME growth and job creation. 64. Future monitoring and additional assistance. A TA project can help improve BCC’s operational capacity to support MSMEs in (i) gaining access to BDS and finance; (ii) forming cooperatives; (iii) developing vocational skills; and (iv) acquiring financial literacy.

65. Covenants. All conditions and covenants of the IMSMEDP were relevant and in line with project requirements and should be maintained in their existing form.

66. Further action or follow-up. The legislation initiated under the project needs to be completed to strengthen property rights, contract enforcement, and investor protection. This would enhance the score on ease of doing business and improve women and youth inclusion.34

67. Timing of the project performance evaluation report. The project performance evaluation, along with a survey of MSMEs that benefited from ADB’s LCF, should be undertaken a year after the project’s closure to assess the interlinked impact of the PSDP and IMSMEDP.

68. General. For future projects, the political will and financial, technical, institutional, and human resource requirements should be carefully assessed. Addressing all major constraints in one project should be avoided. A phased and flexible programmatic approach, open to multisectoral collaboration under ‘One ADB’, will result in better outcomes in Maldives.

34 A recent study covering 180 countries during 2003–2013 showed that a 10-point improvement in business regulations

is linked to an increase of 0.5 new businesses per 1,000 working-age adults. Significant improvements in business regulations are associated with an increase in annual per capita growth of 0.8 percentage points. (Raian Divanbeigi and Rita Ramalho. 2015. Business Regulations and Growth. Policy Research Working Paper. No.7299. World Bank.)

16 Appendix 1

REVISED DESIGN AND MONITORING FRAMEWORK

Impact the Project is Aligned with: More inclusive and broad-based MSME sector achieved (Project Defined) By the end of 2020: (a) Reduction in unemployment by 1‒2 percentage points (2009 baseline: 15.4% of the population is

unemployed)a (b) Reduction in the proportion of population whose income is less than one dollar a day by 5%‒10% (2004

baseline: 1% of the population is below one dollar a day).b

Results Chain Performance Indicators

with Targets and Baselines Status of Achievement (as of 31 March 2019)

Outcome MSME sector further expanded and strengthened

By end 2017: a. MSME registration in the

MED registry system increased by 20% (2011 baseline: 180 MSMEs)

Exceeded. As of June 2018, 967 active MSMEs were registered in MED’s system. This corresponds to a fivefold increase in the MSME registration compared to 2011 baseline. During 2011–2018, on average, 121 active MSMEs were registered each year. The figure includes 175 women, 294 youth, and 40 women- and youth-owned MSMEs. Each year, following number of active MSMEs were registered in the system: 39 in 2011, 12 in 2012, 10 in 2013, 24 in 2014, 29 in 2015, 339 in 2016, 289 in 2017, and 225 in 2018.

b. BDS capacity enhanced and client fee-based BDS provided to 1,500 MSMEs (2011 baseline: none)

Exceeded. During April 2015–June 2018, 37 BDSC staff development training programs for 124 female and 137 male staff were completed. During the project, a total of 532 training and technical programs — mostly on business start-up and business planning, and 3,525 business consultations and technical business visits were held with a total number of 17,465 participants (50% women [8,729] and 60% youth [10,440]). 550 participants were enrolled in “Empowering the Next 1000 Photographers” scheme. 470 home-based workers were provided with trainings and consultations. 32 BDS have been offered to MSMEs. As a policy choice, MED has decided that BDS are provided free of charge to entrepreneurs to promote the MSME development.

c. 100% increase in MSME access to credit through LCF (2011 baseline: 60 MSMEs)

Exceeded. As of March 2019, a total of 201 MSMEs had access to credit through ADB’s LCF and IDB’s LOF, which is 235% increase over the baseline. ADB’s LCF Phase I: This facility was introduced on 6 January 2014. Out of 172 applications received, 98 loans were disbursed.

Appendix 1 17



ADB’s LCF Phase II (WEL): This facility was introduced on 13 February 2018. Out of 364 applications, 66 loans were disbursed. IDB’s LOF. This facility provided 37 new loans out of 119 applications under Phase I.

Outputsc By end 2017: 1. Business

support

infrastructure

built

1a. 20% increase in number of women and youth-owned and engaged businesses (2011 estimated baseline: 1,500)

Exceeded. As of June 2018

Women

Youth

ADB’s LCF Phase I

30 37

ADB’s LCF WEL Phase II

66 (includes 15

youth)

IDB’s LOF Phase I

5 23

GetSet Phase I

33

(includes 13 women

youth) GetSet Phase II

37

(includes 20 women

youth) SME Loan 2016 10

(22 minus 12 youth already

counted)

38 (includes

12 women)

SME Loan 2017 23 27 Total 134 195 Total women and youth-owned businesses

329 1,182 direct jobs were

created from all businesses established through these

financing schemes. Source: Data from Enterprise Development, Ministry of Economic Development. Notes: As of March 2018, 71 WEL applications were approved by BML. However as some of them could not provide required documents, only 66 loans were disbursed as of March 2019. Through the Enterprise Development Finance Scheme of MED, loans were provided to 628 entrepreneurs (306 were women and 322 were men), of which 349 were for women and/or youth. Overall: 678 women- and youth-engaged businesses were created, exceeding the DMF target of 300 (20% of 2011 baseline of 1500 businesses owned by women and youth).

18 Appendix 1



1b. SME Act Amendment drafted (2011 baseline: none)

Achieved. The SME Act was ratified in April 2013. The amendments were drafted, including limit and controls on MSME lending and utilization of funds under CGS such as international standards in corporate governance, internal controls and audit, credit risk management, disclosure and transparency. The amendments were sent to the Attorney General’s Office on April 2016 and are expected to be submitted to the Parliament by September 2019 once new revisions are incorporated.

1c. Proposed amendments include measures to promote women in MSMEs (2011 baseline: none)

Achieved. The IMSMEDP consultants provided gender- and youth-related inputs for the amendment of the SME Act (2013) and participated in the drafting of the National Gender Policy of Maldives. The amendments are expected to be submitted to the Parliament by September 2019 once new revisions are incorporated. Working groups recommended that further gender-specific and women empowerment related measures need to be integrated in the implementation of rules and regulations of the amended SME Act (2013). The SME fund stated in the SME Act (2013) can be utilized in a flexible manner to allow for programs that encourage women and youth participation (see Appendix 7 for details).

1d. Two additional BC established to cover all seven provinces (2011 baseline: 5)

Achieved. As of June 2018, seven BDSCs established in Fonadhoo, Hanimadhoo, Kudahuvadhoo, Kulhudhuffushi, Malé, Naifaru, and Thinadhoo,

1e. 30 developed BDS products and services offered by BDSCs (2011 baseline: 10)

Exceeded. As of June 2018, 32 BDS products and services are offered by the BDSCs: Training and Awareness 1. Workshop on creating an entrepreneurship

mindset 2. Business information sessions (trends in

businesses) 3. Youth entrepreneurship for schools (business

sessions in public schools) 4. Training and workshops on business start-up 5. Training and/or workshop on business plan

development 6. Training in home-based entrepreneurship for

women and home-based workers 7. Business acceleration training 8. SME portal

BDS and/or technology support service 9. Youth Entrepreneurship Support (YES)

Scheme

Appendix 1 19



10. Women Entrepreneurship Support (WES) Scheme

11. Conducting a feasibility study 12. Developing a business plan 13. Developing a market plan 14. Business structuring 15. Product development and quality control 16. Product packaging and labelling 17. Financial planning 18. Business registration and/or licensing

assistance 19. Preparing a loan proposal 20. Linking with financial institutions (for loan

application) 21. Identifying technologies (tools and semi-

automated machines) that can streamline and accelerate production

22. Linking with technology providers 23. Business information sourcing 24. Assistance in marketing 25. Providing legal, tax, or accounting advice

and/or referrals 26. Engineering and/or environmental services

referrals 27. Business field visits and/or onsite

consultancy 28. Verification of weights, balances, and

measurement equipment Forums and Networking Platforms 29. Regional SME finance forums 30. Business networking 31. Facilitating participation in trade fairs and

trading hubs (processing and packaging services)

32. SME Industrial Park (bids for drawing and construction of the park was completed and the construction started in October 2017)

In addition, BDSCs have been assisting producers and entrepreneurs to develop value chains in priority sectors and organize as cooperatives to achieve economies of scale and qualify for funding support.

1f. 4,000 beneficiaries trained under 300 training programs (2011 baseline: 3,500 beneficiaries under 150 trainings)

Exceeded. A total of 532 training and technical programs, mostly on business start-up and planning, and 3,525 business consultations and technical business visits were held with a total number of 17,465 participants—50% women (8,729) and 60% youth (10,440).

1g. 20 MSME businesses established under business incubator program (2011 baseline: none)

Exceeded. A total 71 youth-led businesses were assisted under GetSet Business Incubator Mentoring Program (34 under Phase I and 37 under Phase II).

20 Appendix 1



41 MSMEs were approved under IDB’s LOF incubator mentoring program. ADB’s LCF Phase II (WEL) has provided support to 66 women-led MSMEs under the business incubator program.

1h. Credit Guarantee Unit set up in MMA (2011 baseline: not applicable)

Achieved. The Credit Guarantee Unit under MMA was established and the CGS was launched on 7 August 2016. The CGS funding sources were initial capital of Rf15 million from MOFT and additional Rf10 million from MMA budget in 2017. As a policy, five times the leverage provision amount for default was set as the limit of CGS loans (Rf125 million). MMA has signed MOUs with seven banks for inclusion in CGS. The banks are Bank of Ceylon, BML, Commercial Bank of Maldives, Habib Bank Limited, Maldives Islamic Bank, Mauritius Commercial Bank, and State Bank of India. The CGS will provide Maldivian-owned MSMEs to apply for commercially viable loans between Rf100,000 to Rf1,000,000 with no collateral. The loans will be at favorable interest rates, with up to 5 years for repayment. As of 31 March 2018, 65 loan applications have been approved with a total value of Rf41 million. 90% of the loan value (Rf37 million) was guaranteed by MMA and 26 applications were processed at the banks. Commerce sector had the largest share of CGS-approved loans followed by construction and restaurants and cafés. 72% of CGS-approved loans were in micro enterprise category, followed by small enterprises (26%) and medium-sized enterprises (2%). CGS-approved loans were geographically dispersed across Maldives with only 32% from Malé. As of 30 June 2018, out of 92 loan applications processed, 68 CGS applications were approved.

2. Access to

finance improved

for private sector

MSMEs

2a. 40 new loans through ADB’s LCF and 160 new loans from IDB with mandatory 15% for women MSMEs (2011 baseline for MSMEs: 100, no mandatory allocation)

Exceeded for ADB’s LCF. As of March 2019, ADB’s LCF Phase I: Of 98 approved and disbursed loans under LCF, 30 were for women-led MSMEs. ADB’s LCF Phase II (WEL): 66 women-led MSMEs were approved and disbursed. Of the total 164 loans under ADB’s LCF, 58% were given to women MSMEs. Partially Achieved for IDB. IDB’s LOF (BML) Phase I: Of 37 approved loans, 24 were for women- and youth-owned MSMEs.

Appendix 1 21



IDB’s LOF (BML) Phase I: Out of 119 applications (12 women [5 youth, 7 non-youth] and 74 youth) received, 37 loan applications (5 women and 23youth) were approved with one loan cancelled. IDB’s LOF Phase II was announced during the third quarter of 2018 and the target is expected to be reached. From 2014 onwards, GOM has introduced SME Loan Scheme (Rf50 million) and GetSet Scheme for youth entrepreneurs (Rf 25 million) in collaboration with BML to assist MSMEs. A total of 147 MSMEs benefited from SME Loan Schemes in 2016, 2017 and 2018, of which 59 were for the youth. 70 MSMEs benefited from the GetSet Scheme. Through the Enterprise Development Finance Scheme of MED, loans were provided to 628 entrepreneurs (306 were women and 322 were men), of which 349 were women and/or youth.

2b. Turnaround time for processing MSME loan applications reduced by 30% (2011 baseline: 6 months for 100 loans)

Exceeded. Loan processing time for ADB’s LCF Phase I was 3 months. Processing time for IDB’s LOF loans was 3.5 months. For SME loan program clients, from application submission to approval, loan processing time is 4 months. For youth loans under the GetSet Scheme, processing time from approval to disbursement is 3.5 months. This corresponds to 33%‒50% reduction in loan processing time.

2c. CIB membership expanded (2011 baseline: only banks included) and CIB system provides new reporting and credit scoring services (2011 baseline: none)

Achieved. MMA’s CIB self-inquiry services were launched for public use on 6 February 2019. The IT enhancements of the system was released on 6 July 2017. In addition to 8 banks, CIB membership expanded to Maldives Financial License Company and Housing Development Finance Corporation. Inclusion of insurance and telecommunications companies could be done after the Parliament’s approval of the CIB Bill. Utilities will not be included as it is not practical in the Maldivian context. The new system enables self-inquiry of credit report by individuals and corporations following amendment to CIB regulation on 13 July 2018 and includes new value-added products such as portfolio monitoring, account monitoring, and mobile applications. Credit scoring service will not be introduced under the IMSMEDP as it requires a minimum of 5 years of complete data.

2d. CIB generates more than 2500 CIB reports per annum

Exceeded. Aggregate usage of credit information reports has increased from 523 in 2012 to 10,055

22 Appendix 1



(2011 baseline: 400 reports during February–October)

in 2017. Data for 76,223 individuals and 1,629 corporations (a total of 77,852) are available at credit information system as of June 2018.

2e. Implementation plan and regulatory framework for establishing STR completed (2011 baseline: none)

Partially achieved. The STR system software has been installed and was ready to go live as of 27 June 2018 following user acceptance testing. However, its implementation can only commence upon passing of the STR Bill. MMA has been coordinating with the Attorney General’s Office in finalizing the drafting of the Bill and its translation and it is currently waiting to be submitted to the Parliament.

3. Technologies for

MSME

development

established

MSME portal established and fully functioning (2011 baseline: none)

Achieved. The MSME business portal has been established in 2016 and are accessible to the public via https://business.egov.mv/ with the following: (i) BOLI, which includes the key modules such

as online company registration, central business registry, renewal of trade permits, partnership seal, online payment, and MIRA taxpayer integration, among others;

(ii) Public SME information portal; (iii) Enterprise development finance system,

which is a loan management, evaluation, disbursement, and business profiling module;

(iv) Expo system, which includes modules such as registration, user management, point of sale, sales management, inventory management, reporting; and

(v) Human resource system, which includes modules such as personal information, job details, training, attendance, assets and grievance.

Integration with MIRA has been completed for online services such as business registration and payment could be processed through MIRA payment gateway. The portal of the Maldives Customs Service was integrated with BOLI for processing import- and/or export-related queries. ADB will support the integration with national single window under South Asia Subregional Economic Cooperation National Single Window Project, approved on 17 June 2019. MED’s CSC in Malé was enhanced with more automation as a first point of interaction for MSMEs to improve the efficiency of MSME services.

Appendix 1 23

Key Activities with Milestones—Status of Achievement 1. Business support infrastructure built 1.1 Establish BDSC consultants and procure office equipment (by month 6)

Completed. The activity was achieved on August 2014. 1.2 Design BDSC network monitoring and evaluation framework (by month 8)

Completed. The activity was achieved on June 2015. 1.3 Conduct market demand gap survey and analysis to determine MSME growth opportunities (by

month 8) Completed. A report on resource mapping and secondary data survey for atoll socioeconomic and demographic profiles was submitted to MED on February 2016.

1.4 Select priority sector value chains and MSME partnership businesses under business incubator program (by month 12) Completed. A study on value-chain interventions by sector submitted on 30 June 2015.

1.5 Carry out a study to design the CGS model covering shortfall in collateral related to viable business entities and rules of CGS business (by month 4) Completed. Feasibility Report on the CGS and operating instructions were prepared by the credit guarantee specialist and submitted to MMA and MED on 30 September 2015.

1.6 Set up a desk within the MED for the CGS operationalization (by month 12) Completed. CGS Cell was established in MMA and scheme was officially launched on 7 August 2016. All banks in Maldives are covered with the scheme.

2. Access to finance improved for private sector MSMEs 2.1 Complete onlending agreement between MOFT and BML and finalization of the subloan eligibility

conditions (by month 3) Completed. The SLA between MOFT and BML was signed on 25 June 2013.

2.2 Process applications to determine eligible applicants under the program and complete internal procedures (by month 6) Completed. LCF was officially launched on 6 January 2014 and received 172 applications. The WEL scheme was officially launched on 13 February 2018.

2.3 Expand the CIB member group by including Maldives Islamic Bank, insurance companies, telecommunications, and utilities companies (by month 24) Partially completed. MMA’s CIB self-inquiry services were launched for public use on 6 February 2019. The CIB system enhancements were released to the member financial institutions (8 banks, including Islamic Bank, Maldives Financial License Company, and Housing Development Finance Corporation) on 6 July 2017. Inclusion of the insurance and telecommunications companies can only be done upon passing of the CIB Bill, which has been drafted and is with the Attorney General’s Office for submission to the Parliament. The passing of the CIB Bill was delayed due to presidential and parliamentary elections. It was decided during the project implementation that utilities will not be included as it is not practical in the Maldivian context.

2.4 Develop new products such as credit scores from the CIB (by month 24) Partially completed. The new system enables self-inquiry of credit report by individuals and corporations and includes new value-added products such as portfolio monitoring, account monitoring, and mobile applications. Credit scoring service will not be introduced under the IMSMEDP as it requires a minimum of 5 years of complete data to enable this service.

2.5 Create public awareness to disseminate information (whole duration) Completed. Various public awareness activities on MSMEs such as trainings, seminars, business fairs, and consultations with entrepreneurs through BDSCs were carried out during the program.

2.6 Carry out a feasibility study for the establishment of an STR (by month 6) Completed. A report on the establishment of STR was submitted to MMA on July 2017.

2.7 Define the functional and technical specifications of the STR and prepare a request for proposal for selecting a vendor for STR (by month 9) Completed. The request for proposal was issued on 8 July 2015.

2.8 Design and implement regulatory review and impact process (by month 18) Completed. Feasibility Report on legal and regulatory changes to support MSMEs was submitted on 30 September 2015.

24 Appendix 1

3. Technologies for MSME development established 3.1 Procure a vendor for the design, bid process management, project management, and quality

assurance of the CSC package (by month 9) Completed. 3.2 Procure a vendor for design, development, and maintenance of the MSME portal (by month 20)

Completed. 3.3 Establish MED portal (by month 30)

Completed. MSME portal was established in 2016. Inputs Amount

($ million) ADB (Special Funds) Loand 2.71 Grant 4.45 IDB Loan 10.30 Government of Maldives 0.07 Total 17.53

Assumptions for Partner Financing Not applicable. ADB = Asian Development Bank; BDS = business development services; BDSC = business development service center; BML = Bank of Maldives; BOLI = means “shell” in Maldivian (also known as Dhivehi), name of the online MSME business portal; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; GOM = Government of Maldives; IDB = Islamic Development Bank; IMSMEDP = Inclusive Micro, Small, and Medium-Sized Enterprise Development Project; IT = information technology; LCF = Line of Credit Facility; LOF = Line of Finance; MED = Ministry of Economic Development; MIRA = Maldives Internal Revenue Administration; MMA = Maldives Monetary Authority; MOFT = Ministry of Finance and Treasury; MOU = memorandum of understanding; MSME = micro, small, and medium-sized enterprises; Rf = rufiyaa; SLA = subsidiary loan agreement; SME = small and medium-sized enterprise; STR = secured transaction registry; WEL = Women Entrepreneurs Loan. Notes: 1. Data for the status of achievement was based on consultant reports and information provided by the implementing

agencies of the Inclusive Micro, Small, and Medium-sized Enterprise Development Project. 2. A revised design and monitoring framework was approved with the memo for minor change in implementation

arrangements dated 2 September 2016, including the following changes in the output targets: (i) “drafted civil procedure code and insolvency laws” was changed to “SME Act Amendment drafted” as

other laws were prioritized by the Ministry of Economic Development after a comprehensive review and gap analysis of small and medium-sized enterprise related laws were undertaken;

(ii) “Credit Information Bureau offers increased range of credit scoring services” was changed to “Credit Information Bureau membership expanded and new reporting and credit scoring services provided” as the Maldives Monetary Authority was not undertaking credit scoring services but will be utilizing the various credit reports produced by the Credit Information Bureau enhancement.

(iii) “Judgement debt database established” was found to be redundant as the Department of Judicial Administration has already developed a judgement database which would, as intended by the Inclusive Micro, Small, and Medium-sized Development Project, enable financial institution and businesses to review judgements passed on to individuals and businesses for improved risk management.

(iv) “Seven solar-powered citizen service centers established with at least two through public‒private partnership (PPP)” was found to be redundant given that solar-powered service centers were more in the ambit of South Asia Energy Department’s Sustainable Energy Development Project, one of which was helping Maldives to tap solar power, reduce reliance on diesel oil, and install solar-diesel hybrid grids on outer islands and the greater Malé region.

(v) Quantities in few indicators were also reduced to a more realistic and achievable target. a Exceeded. Unemployment rate dropped to 6.1% in 2018 (5.7% for women and 6.2% for men) from 11.7% in 2010 (13.8% for women and 10.4% for men), corresponding to 5.6 percentage points reduction.

b Exceeded. Proxy is used to capture the poverty reduction as the indicator above is no longer available. Proportion of employed population below $1.9 PPP (using purchasing power parity) a day dropped to 2.7% in 2018 (3.6% for women and 2.4% for men) from 6.6% in 2012 (7.2% for women and 6.1% for men), indicating 59% reduction in the ratio.

Source: ADB Basic 2017 and 2019 Statistics at https://www.adb.org/publications/series/basic-statistics C The original design and monitoring framework used the term “component” instead of “output.” d The loan amount in dollar ($) reflected the approved cancellations in the original loan amount and was determined based on the value of the special drawing rights at the time of the approval of revised design and monitoring framework.

Appendix 2 25

PROJECT COST AT APPRAISAL AND ACTUAL

A. LOAN COST AT APPRAISAL AND ACTUAL (SDR ‘000)

Appraisal Estimate Revised Allocations Actual

Item Foreign

Exchange Local

Currency Total Cost

a

b

c

d

Foreign Exchange

Local Currency

Total Cost

A. Equipment 98 0 98 316 0 0 0 0 0 0 B. Consulting Services 0

1. System Development Consultancy (CIB and STR)

1,365 0

1,365 448 0 0 0 0 0 0

2. System Development Consultancy (MSME technologies)

813 0

813 0 0 0 0 0 0 0

C. Training, capacity development 0 0 0 33 0 0 0 0 0 0 D. Line of Credit Facility 975 0 975 987 1,857 1,078 1,061 1,061 0 1,061 E. Contingency 332 0 332 73 0 0 0 0 0 0 F. Interest Charge/Financing Charges 39 0 39 21 21 21 21 21 0 21 Total (A+B+C+D+E+F) 3,622 0 3,622 1,878 1,878 1,099 1,082 1,082 0 1,082 CIB = Credit Information Bureau; MSME = micro, small, and medium-sized enterprise; SDR = special drawing rights; STR = secured transaction registry. Source: Asian Development Bank. a Cancellation of SDR1,744,098.35 because of savings from (i) the consultancy and equipment budget of the Ministry of Economic Development, and (ii) Credit

Information Bureau enhancement and central registry for movable property of the Maldives Monetary Authority based on the memo dated 21 August 2013 and amendment to the Financing Agreement on 20 February 2014.

b Increase in the Line of Credit Facility of the Bank of Maldives (BML) by reallocating the amounts from equipment, consulting services, training, and unallocated budget based on the memo dated 2 February 2018 and amendment to the Financing Agreement on 13 April 2018.

c As approved with memo dated 6 December 2018, cancellation of the unutilized BML loan (SDR778,166) on 10 December 2018. d Cancellation of the unutilized loan of SDR18,173.75 on 11 January 2019 in preparation for financial closure.

26 Appendix 2

B. GRANT COST AT APPRAISAL AND ACTUAL ($’000)

Appraisal Estimate

Item Foreign

Exchange Local

Currency Total Cost

A. Equipment 400 0 400 B. Consulting Services

1. Project Management Unit 2,440 0 2,440 2. BDSC Institutional and Legal Framework 0 0 0 3. Access to Finance (CGS, CIB, and STR) 700 0 700 4. MSME portal, judgment debt database, and CSCs 300 0 300

C. Training, Capacity Development 160 0 160 D. Civil Works 0 0 0 E. Miscellaneous Administrative and Support Costs 0 0 0 F. Contingency 450 0 450 Total (A+B+C+D+E+F) 4,450 0 4,450

BDSC = business development service center; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; MSME = micro, small, and medium-sized enterprise; STR = secured transaction registry. Source: Asian Development Bank.

Appendix 2 27

B. GRANT COST AT APPRAISAL AND ACTUAL ($’000)

Table continued Revised Allocations Actual Item

a

b

c

d

e

f

g

Foreign

Exchange Local

Currency Total Cost

A. Equipment 0 530 530 238 345 359 338 338 0 338 B. Consulting Services

1. Project Management Unit 590 450 450 472 474 419 396 396 0 396 2. BDSC Institutional and Legal framework 1,432 1,560 1,560 2,200 2,200 2,193 2,131 2,131 0 2,131 3. Access to Finance (CIB, CGS, and STR) 740 740 740 889 889 843 843 843 0 843 4. MSME portal, judgment debt database, and CSCs 1,375 845 845 262 268 286 279 279 0 279

C. Training, Capacity Development 206 206 206 53 121 53 35 35 0 35 D. Civil Works 0 0 0 0 90 90 81 81 0 81 E. Miscellaneous Administrative and Support Costs 0 0 40 60 60 60 56 56 0 56 F. Contingency 106 119 79 276 3 0 0 0 0 0 Total (A+B+C+D+E+F) 4,450 4,450 4,450 4,450 4,450 4,303 4,159 4,159 0 4,159

BDSC = business development service center; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; MSME = micro, small, and medium-sized enterprise; STR = secured transaction registry. a Reduction in inputs for the project management unit (PMU) of the Ministry of Economic Development (MED) and increase in the budget for consulting services for MSME portal and training based on the memo dated 21 August 2013 and amendment to the Financing Agreement dated 20 February 2014.

b Creation of an equipment budget item representing information technology (IT) equipment for PMU, BOLI (means “shell” in Maldivian [also known as Dhivehi], name of the online MSME business portal) enhancements, new business development service centers (BDSCs), and business incubator program. Reduction in inputs for MED PMU, MSME portal, and CSC. Split of the consultancy packages on CSCs based on memo dated 30 April 2014.

c Creation of a new budget item representing miscellaneous administrative and support costs for PMU based on the memo dated 23 September 2014 and amendment to Financing Agreement dated 16 October 2014.

d Accommodation of project extension for one year including (i) additional inputs of PMU staff during the extension, (ii) development of record-keeping software for MSMEs by Maldives International Revenue Administration (MIRA), and (iii) CIB enhancement based on the memo dated 2 September 2016.

e Procurement of equipment for MED’s CSC and creation of a civil works budget item; increase in training and capacity development budget for MED and Maldives Monetary Authority (MMA); and recruitment of consultants for the enhancement of MED’s BOLI portal based on the memo dated 27 March 2018 and amendment to the Financing Agreement dated 13 April 2018. The revised allocation already incorporated the revised allocation made as per memo dated 15 November 2017, including (i) additional allocation for CSC, (ii) additional allocation for MIRA, and (iii) additional procurement package for MMA’s STR hardware (separate grant allocation table was not documented in project files).

f Partial cancellation of uncommitted funds of $146,794 in preparation of project closure as per memo dated 6 December 2018. g Final cancellation of undisbursed funds of $144,399 effective as of 8 April 2019. Source: Asian Development Bank.

28 Appendix 3

PROJECT COST BY FINANCIER

Table A3.1: Project Cost at Appraisal by Financier ($‘000)

ADB IDB GOM Total Cost

Loan

Grant Total

Amount % of Cost Category



Amount

Taxes and

Duties Item A A/D B B/D C C/D D E A. Investment Costs 1. Equipment 150 400 550 100% 0 0% 0 0% 550 0 2. Consultants

a. Project Management Unit 0 2,440 2,440 100% 0 0% 0 0% 2,440 0 b. System Development Consultancy

(CIB, STR) 2,100 0 2,100 100% 0 0% 0 0% 2,100 0

c. Capacity Development 0 160 160 47% 180 53% 0 0% 340 0 d. Access to Finance

(CGS, CIB, and STR) 0 700 700 100% 0 0% 0 0% 700 0

e. MSME Technologies 1,250 300 1,550 100% 0 0% 0 0% 1,550 0 f. Cost-Sharing Facility 0 0 0 0% 2,000 100% 0 0% 2,000 0 g. Line of Credit Facility 1,500 0 1,500 18% 7,000 82% 0 0% 8,500 0

B. Contingencies 510 450 960 51% 920 49% 0 0% 1,880 0 C. Financial Charges during Implementation 60 0 60 23% 200 77% 0 0% 260 0 D. Taxes and Duties 0 0 0 0.00% 0 0.00% 700 100% 700 0

Total Project Cost (A+B+C+D) 5,570 4,450 10,020

10,300

700

21,020 0 % Total Project Cost 48% (ADB) 49% (IDB) 3% (GOM) 100%

ADB = Asian Development Bank; CGS = credit guarantee scheme; CIB = Credit Information Bureau; GOM = Government of Maldives; IDB = Islamic Development Bank; MSME = micro, small, medium-sized enterprise; STR = secured transaction registry. Notes: Figures for IDB and GOM are from ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to the Government of Maldives for the Inclusive Micro, Small, and Medium-Sized Development Project. Project Administration Manual, page 20. (accessible from the list of linked documents in Appendix 2). Figures for ADB are from the Project Administration Manual, p. 20; Financing Agreement dated 20 September 2012; and details on allocation of loan and grant proceeds provided in the memo dated 21 August 2013. Source: Asian Development Bank.

Appendix 3 29

Table A3.2: Project Cost at Completion by Financier

($‘000) ADB a IDB b GOM c Total Cost

Loan

Grant

Total Amount

% of Cost Category



Amount

Taxes and

Duties Item A A/D B B/D C C/D D E A. Investment Costs 1. Equipment 0 338 338 51% 330 49% 0 0% 668 0 2. BDSC Staff and Operating Costs 0 0 0 0% 2,582 100% 0 0% 2,582 0 3. Consultants

a. Project Management Unit 0 396 396 100% 0 0% 0 0% 396 0 b. BDSC Institutional and Legal Framework 0 2,131 2,131 100% 0 0% 0 0% 2,131 0 c. System Development Consultancy

(CIB and STR) 0 0 0 0% 0 0% 0 0% 0 0

d. Capacity Development 0 35 35 11% 270 89% 0 0% 305 0 e. Access to Finance (CGS, CIB, and STR) 0 843 843 100% 0 0% 0 0% 843 0 f. MSME Technologies 0 279 279 100% 0 0% 0 0% 279 0 g. Cost-Sharing Facility 0 0 0 0% 88 100% 0 0% 88 0 h. Line of Credit Facility 1,572 0 1,572 21% 6,000 79% 0 0% 7,572 0 i. Civil Works (CSC) 0 81 81 100% 0 0% 0 0% 81 0 j. Miscellaneous Administration and Support

Costs 0 56 56 100% 0 0% 0 0% 56 0

B. Contingencies 0 0 0 0% 1,030 100% 0 0% 1,030 0 C. Financial Charges during Implementation 30 0 30 100% 0 0% 0 0% 30 0 D. Taxes and Duties 0 0 0 0% 0 0.00% 700 100% 700 0

Total Project Cost (A+B+C+D) 1,602 4,159 5,761

10,300

700

16,761 0 % Total Project Cost 34% (ADB) 62% (IDB) 4% (GOM) 100%

ADB = Asian Development Bank; BDSC = business development service center; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; GOM = Government of Maldives; IDB = Islamic Development Bank; MSME = micro, small, medium-sized enterprise; STR = secured transaction registry. Notes: a Figures for ADB allocation are from ADB Loan and Grant Financial Information Services dated 3 February 2019. The cost of the audits of project financial statements, including IDB-financed components, during FY2013‒FY2018 was $700,000 and covered under the component 1 of Inclusive Micro, Small, and Medium-Sized Enterprise Development Project as part the ADB grant for the Ministry of Economic Development.

b Figures for the Islamic Development Bank (IDB) reallocation is obtained from the letter sent by the Minister of Finance and Treasury of the Government of Maldives to ADB (Ref: 13-N1/PRIV/2017/339) on 20 June 2017. The IDB components is presented below. The figures are also consistent with Islamic Development Bank. 2012. Microenterprise Development Project MDV 0072. Project Appraisal Document. September. No other information was shared with ADB regarding the final project cost allocation by IDB.

30 Appendix 3

Loan Allocation of Islamic Development Bank Output/Activity

As of 1 May 2016 $ ‘000

As of 20 June 2017 $ ‘000

1. Line of Finance Facility 6,000 6,000 2. Capacity Building and Management Information System for Islamic Microfinance 270 270 3. Marketing and Incubator Program 2,500 2,912

a. BDSC Staff Costs (Field Manager, Training Coordinator, Business Development Officer, Accountant, Finance and Administrative Assistant, Driver)

760 1,006

b. Equipment (Office equipment and furniture, IT equipment, refrigerator storage facility, 4X4 pick up vehicle, vacuum packaging, sealing and labeling equipment)

390 330

c. Operating Costs (Office rent, utilities [electricity, water, phone], cleaning service, training and workshop expenses, miscellaneous, vehicle fuel and maintenance, office supplies, boat rental)

1,350 1,576

4. Cost-Sharing Facility 500 88 5. Contingencies 1,030 1,030 TOTAL 10,300 10,300

BDSC = business development service center; IT = information technology. c No other updates regarding GOM’s contribution to the project was shared and thus it is assumed to be the same as at appraisal. Source: Asian Development Bank.

Appendix 4 31

DISBURSEMENT OF ADB LOAN AND GRANT PROCEEDS

Table A4.1a: Annual and Cumulative Disbursement of ADB Loan Proceeds at Appraisal

($‘000) Annual Disbursement Cumulative Disbursement

Year Amount % of Total Amount % of Total 2013 - 0% - 0% 2014 340 6% 340 6% 2015 1,095 20% 1,435 26% 2016 4,135 74% 5,570 100% 2017 - - - - 2018 - - - - 2019 - - - - Total 5,570 100% 5,570 100%

( - ) = not applicable. Note: Figures are obtained from version 1 of the baseline projections as of project effectiveness on December 2012. Source: Asian Development Bank.

Table A4.1b: Annual and Cumulative Disbursement

of ADB Loan Proceeds at Completion ($‘000)

Annual Disbursement Cumulative Disbursement Year Amount % of Total Amount % of Total 2013 - 0% - 0% 2014 1,178 74% 1,178 74% 2015 227 14% 1,405 88% 2016 13 1% 1,418 89% 2017 1 0% 1,419 89% 2018 183 11% 1,602 100% 2019 - - - - Total 1,602 100.0% 1,602 100%

( - ) = not applicable. Note: Figures are obtained from version 14 of the baseline projections as of March 2019. Source: Asian Development Bank.

Table A4.2a: Annual and Cumulative Disbursement

of ADB Grant Proceeds at Appraisal ($‘000)

Annual Disbursement Cumulative Disbursement Year Amount % of Total Amount % of Total 2013 94 2% 94 2% 2014 662 15% 756 17% 2015 1,050 24% 1,806 41% 2016 2,644 59% 4,450 100% 2017 - - - - 2018 - - - - 2019 - - - - Total 4,450 100% 4,450 100%


32 Appendix 4

Table A4.2b: Annual and Cumulative Disbursement of ADB Grant Proceeds at Completion

($‘000) Annual Disbursement Cumulative Disbursement

Year Amount % of Total Amount % of Total 2013 142 3% 141 3% 2014 86 2% 227 5% 2015 1,191 28% 1,418 33% 2016 1,148 27% 2,566 60% 2017 1,067 25% 3,633 84% 2018 532 12% 4,165 97% 2019 138 3% 4,303 100% Total 4,303 100.0% 4,303 100%

Note: Since the figures were obtained from version 13 of the baseline projections as of December 2018, only partial cancellation of $146,794 under uncommitted grant funds in preparation of project closure is recorded in 2019 figure. Final cancellation of undisbursed funds of $144,399 effective as of 8 April 2019 was not recorded in the disbursement data. Source: Asian Development Bank.

Figure A4: Projected and Actual Cumulative Disbursements

of ADB Loan and Grant Proceeds ($‘000)

Source: Asian Development Bank.

Appendix 4 33

Table A4.3: Summary of Major Changes in Projections for the Loan and Grant Disbursements, Contract Awards, and Procurement Packages

The contract award and disbursement projections have been revised 14 times for the loan and 13 times for the grant starting from the effectiveness of the project (version 1 dated December 2012) until project closure (version 14 dated March 2019). The procurement plan has been revised 12 times throughout the project (version 1 dated March 2012 and version 12 dated December 2018). Summary of major changes are provided below: February 2013. Review of procurement action plan during the review mission on 18‒21 February 2013 with the implementation agencies to reflect the requested changes, including discussions with the National Tender and Evaluation Board. Revision of projections for disbursements and contract awards for the period of 2013‒2016. April 2013. Revision of procurement plan, including breakup and change in selection method of MMA package on CIB into two portions: (i) allocation for single source selection of Dunn and Bradstreet; and (ii) change of recruitment method from a local audit firm to individual national audit specialist (based on memo dated 16 April 2013). July 2013. Identification of savings during the review mission on 1‒4 July 2013, decreasing project size from $10.2 million to $7.4 million. Reduction of project budget allocations by approximately $2.6 million for (i) development of central registry for movable property; (ii) institutional and IT infrastructure for CIB; (iii) capacity building for MSME development including MSME portal and judgement database; and (iv) IT and office infrastructure for CSCs and upgrade of seven BDSCs. Revision of procurement plan, including (i) four individual consultants and project management consultancy for MED; (ii) change from international legal expert into an SME banking specialist; (iii) reduction in amount of CIB system reconfiguration and change in selection method of Dunn and Bradstreet to single source selection; and (iv) budget for audit firm (based on memo dated 22 July 2013). August 2013. Revision of the procurement plan, following cancellation of SDR1,744,098.35 under the loan because of savings from (i) MED’s consultancy and equipment budget, and (ii) MMA’s CIB enhancement and central registry for movable property (based on memo dated 21 August 2013 and amendment to the Financing Agreement on 20 February 2014). Reduction in inputs for MED’s PMU and increase in the budget for consulting services for MSME portal and training under the grant (based on memo dated 21 August 2013 and amendment to the Financing Agreement dated 20 February 2014). November 2013. Revision of projections for disbursements and contract awards in December 2013 in line with the partial loan cancellation and grant reallocation (based on memo dated August 2013). April 2014. Revision of procurement plan, including split of the consultancy packages on CSCs into (i) expansion of MED’s BOLI software and rollout in CSCs and citizen helpdesk and/or call center; (ii) procurement of equipment and/or hardware for PMU, BOLI enhancement, and new BDSCs; and (iii) expansion of business incubator program. Splitting of program management consultants for access to finance into one international CIB specialist and consulting firm for establishment of the central registry for movable assets. Creation of an equipment budget item under the grant representing IT equipment for PMU, BOLI enhancement, new BDSCs, and business incubator program. Reduction in inputs for MED PMU, MSME portal, and CSC (based on memo dated 30 April 2014). Revision of projections for disbursements and contract awards in April 2014. September 2014. Creation of a new budget item representing miscellaneous administrative and support costs for PMU under the grant (based on memo dated 23 September 2014). November 2014. Revision of procurement plan, including change in implementation arrangements for the recruitment of BOLI development package from a firm to three national individual software developers (based on memo dated 4 December 2014). Revision of projections for disbursements and contract awards in December 2014. February 2015. Revision of contract award and disbursement projections for 2015‒2016 discussed during mid-term review mission. Revision of projections for disbursements and contract awards in April 2015.

34 Appendix 4

June 2015. Revision of procurement plan, including replacement of STR operational specialist and STR legal specialist with domain expert and system developer since substantial legal work was already conducted under the earlier Private Sector Development Project and change in package name to “Establishment of Secured Transaction Registry” (based on memo dated 30 July 2015). December 2015. Revision of projections for disbursements and contract awards. April 2016. Revision of projections for disbursements and contract awards. August 2016. Revision of procurement plan, including (i) accommodation of project extension for one year until 31 December 2017; (ii) additional inputs of PMU staff during the extension; (iii) development of record-keeping software for MSMEs by MIRA; and (iv) reallocation of funds for CIB enhancement (based on memo dated 2 September 2016). December 2016. Revision of projections for disbursements and contract awards. Revisions of procurement plan was dated October 2016, December 2016, and January 2017. March 2017. Revision of projections for disbursements and contract awards and procurement plan in February 2017 because of the project extension by 12 months (based on memo dated 21 March 2017). November 2017. Revision of procurement plan, including additional allocation for CSC (consulting, goods procurement, and works procurement for construction), MIRA SAP EHP upgrade (single source selection of Invenio Business Solutions Limited), and procurement package for MMA’s STR hardware under the grant (based on memo dated 15 November 2017). Revision of projections for disbursements and contract awards in December 2017. February 2018. Increase in LCF of BML from SDR0.987 million to SDR1.857 million by reallocating the loan amounts from equipment, consulting services, training and unallocated budget and extension of project closing date to 30 June 2018 (based on memo dated 2 February 2018 and amendment to the Financing Agreement on 13 April 2018). Projections for disbursements and contract awards were revised in January 2018. March 2018. Procurement of equipment for MED’s CSC and creation of a civil works budget item; increase in training and capacity development budget for MED and MMA and recruitment of consultants for the enhancement of MED’s BOLI portal under the grant (based on memo dated 27 March 2018). Revision of procurement plan in April 2018. May 2018. Revision of procurement plan in May 2018. December 2018. Cancellation of unutilized BML loan (SDR778,166) on 10 December 2018 (based on memo dated 6 December 2018). Cancellation of uncommitted funds of $146,794 under the grant in preparation of the project closure (based on memo dated 6 December 2018). Revision of projections for disbursements and contract awards in December 2018. January 2019. Cancellation of unutilized loan of SDR18,173.75 on 11 January 2019 in preparation for financial closure. April 2019. Final cancellation of undisbursed funds of $144,399 under the grant, which became effective as of 8 April 2019. Revision of projections for disbursements and contract awards in March 2019 with closure of the project.

BDSC = business development service center; BML = Bank of Maldives; BOLI = means “shell” in Maldivian (also known as Dhivehi), name of the online MSME business portal; CIB = Credit Information Bureau; CSC = citizen service center; IT = information technology, LCF = Line of Credit Facility, MED = Ministry of Economic Development; MIRA = Maldives Inland Revenue Authority; MMA = Maldives Monetary Authority; MSME = micro, small, and medium-sized enterprise; PMU = project management unit; SAP EHP = System Applications and Products Enhancement Package; SDR = special drawing rights; SME = small and medium-sized enterprise; STR = secured transaction registry. Source: Asian Development Bank (compiled from Inclusive Micro, Small, and Medium-Sized Enterprise Development Project records from the updated Project Administration Manual, aide memoires of the ADB missions, and minor change memos for implementation arrangements).

Appendix 5 35

CONTRACT AWARDS OF ADB LOAN AND GRANT PROCEEDS

Table 5A.1a: Annual and Cumulative Contract Awards

of ADB Loan Proceeds at Appraisal

($‘000) Annual Contract Awards Cumulative Contract Awards

Year Amount % of Total Amount % of Total 2013 100 2% 100 2% 2014 450 8% 550 10% 2015 2,575 46% 3,125 56% 2016 2,445 44% 5,570 100% 2017 - - - - 2018 - - - - 2019 - - - - Total 5,570 100% 5,570 100%


Table 5A.1b: Annual and Cumulative Contract Awards

of ADB Loan Proceeds at Completion


Year Amount % of Total Amount % of Total 2013 - - - - 2014 1,572 100% 1,572 100% 2015 - - 1,572 100% 2016 - - 1,572 100% 2017 - - 1,572 100% 2018 - - 1,572 100% 2019 - - 1,572 100% Total 1,572 100% 1,572 100%

( - ) = not applicable. Note: Figures are obtained from version 14 of the baseline projections as of March 2019. Source: Asian Development Bank.

Table 5A.2a: Annual and Cumulative Contract Awards of ADB Grant Proceeds at Appraisal


Year Amount % of Total Amount % of Total 2013 1,063 24% 1,063 24% 2014 1,616 36% 2,679 60% 2015 470 11% 3,149 71% 2016 1,301 29% 4,450 100% 2017 - - - - 2018 - - - - 2019 - - - - Total 4,450 100% 4,450 100%


36 Appendix 5

Table A5.2b: Annual and Cumulative Contract Awards of ADB Grant Proceeds at Completion

($‘000) Annual Contract Award Cumulative Contract Award

Year Amount % of Total Amount % of Total 2013 254 6% 254 6% 2014 258 6% 512 12% 2015 2,365 55% 2,877 67% 2016 771 18% 3,648 85% 2017 266 6% 3,914 91% 2018 387 9% 4,301 99.95% 2019 2 0.05% 4,303 100% Total 4,303 100% 4,303 100%

( - ) = not applicable. Note: Figures are obtained from version 13 of the baseline projections as of December 2018. Source: Asian Development Bank.

Figure A5: Projected and Actual Cumulative Contract Awards

of ADB Loan and Grant Proceeds ($‘000)

Note: The summary of major changes in projections for the loan and grant disbursements and contract awards is in Table A4.3 of Appendix 4. Source: Asian Development Bank.

Appendix 6 37

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Loan 2867-MLD (SF) and Grant 0290-MLD (SF) Covenants of the Financing Agreement

between the Republic of Maldives and ADB

Reference in Financing Agreement

Status of Compliance The Loan and the Grant ADB agrees to provide to the Beneficiary from ADB’s Special Funds resources, on terms and conditions set forth in this Financing Agreement: (a) a loan in various currencies equivalent to three million six hundred

twenty-two thousand SDR (SDR3,622,000) (“Loan”); (b) a grant in the amount of four million four hundred fifty thousand

dollars ($4,450,000) (“Grant”).

Amendment to Article II Section 2.01(a) of the Financing Agreement on 20 February 2014. Section 2.01(a)(i) of the Financing Agreement was amended and restated to read as follows: (a) a loan in various currencies equivalent to one million eight hundred

seventy-seven thousand nine hundred one and sixty-five hundredths SDR (SDR1,877,901.65) (“Loan”)

Article II Section 2.01

Complied with. The loan amount of SDR1,744,098 was cancelled and the overall loan size was reduced from SDR3,622,000 to SDR1,877,901.65 with memo dated 21 August 2013 (approved on 28 August 2013) as a result of identified savings coming from the reduction in consultancy and equipment inputs for MED and more cost-effective solution for Credit Information Bureau and central registry for movable property under MMA. Allocation of loan and grant proceeds to several categories were adjusted accordingly. Article II Section 2.01(a) of the Financing Agreement was amended to give effect to the changes on 20 February 2014 as agreed by the Beneficiary on 4 April 2014. Out of the original approved loan of $5,570,000 (SDR3,622,000), there were a total of three partial cancellations of unutilized project funding under the loan: (i) $2,651,762.01 (SDR1,744,098.35)

approved on 28 August 2013; (ii) $1,077,861.07 (SDR778,166) on 10

December 2018 as approved with memo dated 6 December 2018, mostly for unutilized BML loan; and

(iii) $25,325.30 (SDR18,173.75) on 11 January 2019 as approved with memo 11 December 2018, for BML expenses.

Final net loan amount utilization was $1,601,858 (SDR1,081,561.90).

38 Appendix 6




Status of Compliance With memo dated 6 December 2018, $146,794 under the unutilized grant was cancelled. Effective 8 April 2019, $144,399.35 under the unutilized grant was cancelled. Final net grant amount utilization was $4,158,806.65. These funds were returned to ADB during the winding up period. The loan was financially closed on 11 January 2019 and the grant was financially closed on 8 April 2019.

Use of Proceeds of the Loan and Grant (a) The Beneficiary shall cause the proceeds of the loan and the grant to be applied to the financing of expenditures on the Project in accordance with the provisions of this Financing Agreement.

Article III Section 3.01

Complied with. The loan and grant were approved by ADB on 25 May 2012. The Financing Agreement was signed between the Republic of Maldives and ADB on 20 September 2012. A Project Agreement between ADB and BML was signed on 20 September 2012. A Project Agreement between ADB and MMA was signed on 28 September 2012. The loan and grant were declared effective on 21 December 2012 upon fulfillment of conditions and legal opinion received from MOFT on 10 December 2012.

(b) In respect of the Project: (i) In respect of Component 2, subcomponent (i), the Beneficiary shall

relend BML, under the BML SLA, a portion of the loan proceeds in rufiyaa equivalent to $1,500,000, upon terms and conditions


Complied with. The SLA between MOFT and BML was signed on 25 June 2013.

Appendix 6 39




Status of Compliance satisfactory to ADB. Except as ADB shall otherwise agree, the terms for relending to BML shall include interest at a rate per annum sufficient to reflect costs of raising such funds locally but not less than ADB’s ordinary capital resources lending rates, inclusive of foreign exchange risk and a repayment period of 15 years inclusive of a grace period of 3 years. The foreign exchange risk shall remain with the Beneficiary. The Beneficiary shall cause BML to apply such proceeds to the financing of expenditures on the Project in accordance with the provisions of this Financing Agreement, the BML SLA, and the BML Project Agreement; and

Addendum No. 1 dated 25 August 2013 added a new clause under Article IV titled “miscellaneous provisions.” Article IV: Miscellaneous Provisions Section 6.05 At any time and from time to time during the term of SLA, MOFT, its employees, staff, agents, and consultants shall have the right to audit, review, examine, and make copies from all related records relating to or pertaining to the SGIA at MMA in the name of BML with respect to LCF activities under subcomponent (i) of Component 2 of IMSMEDP. Addendum No. 2 dated 19 January 2015 amended the clause 3.06 under Article III titled “responsibilities of BML.” Article III: Responsibilities of BML Section 3.06 BML shall not charge collateral from Qualified Enterprise for subloans below Rf50,000. For subloan amounts between Rf50,001 to Rf500,000, collateral is to be charged from the Qualified Enterprise 20% less than the prevailing BML collateral requirements; and for subloan amounts between Rf500,001 to Rf1,000,000 collateral is to be charged from the Qualified Enterprise 10% less than the prevailing BML collateral requirements. For subloans exceeding Rf1,000,000, collateral shall be charged from the Qualified Enterprise at the prevailing BML collateral requirements. GOM shall cover any lending risks which may arise to BML PLC due to the reduction of

40 Appendix 6




Status of Compliance collateral security below the norms of BML credit policy. Repayment from the Qualified Enterprise shall be for a period up to 8 years with a grace period based on cash flow projections. Interest rate from the Qualified Enterprise shall be set at 9%. Addendum No. 3 dated 20 February 2018 modified and supplemented the SLA dated 25 June 2013. (i) MOFT agrees to enter this Addendum No.3

with BML, to onlend an additional Maldivian rufiyaa equivalent of $1,200,000 (hereinafter called the “Additional Subsidiary Loan”) through MOFT on terms and conditions set forth herein.

(ii) The total lending amount under the SLA

shall mean the original subsidiary loan combined with the additional subsidiary loan. For avoidance of doubt upon signing of this addendum, the total lending amount under the SLA shall stand at Maldivian rufiyaa equivalent of $2,700,000.

(iii) Section 2.03 shall be amended and a

subclause 2.03.01 shall be added to read as follows:

Section 2.03: Repayment of the principal amount of the subsidiary loan onlent under this SLA shall be paid in 24 equal semi-annual installments on the 15th of May and the 15th of November of each year. The first repayment

Appendix 6 41




Status of Compliance shall commence on the first available payment date falling 3 years after the first withdrawal under the subsidiary loan. Subclause 2.03.01: Repayment of the principal amount of the additional subsidiary loan onlent under this SLA shall be paid in 24 semi-annual installments on the 15th of May and the 15th of November of each year. The first repayment shall commence on the first available payment date falling 3 years after the first withdrawal under the additional subsidiary loan.

(ii) In respect of Component 2, subcomponents (ii)-(iii), the Beneficiary shall relend to MMA under the MMA Subsidiary Financing Agreement a portion of the loan and grant proceeds equal to the rufiyaa equivalent of $3,080,000 upon the same or similar terms and conditions as these contained in the Financing Agreement. The Beneficiary shall cause MMA to apply such proceeds to the financing of expenditures on the Project in accordance with the provisions of this Financing Agreement, the MMA Subsidiary Financing Agreement, and the MMA Project Agreement.


Complied with. A Subsidiary Financing Agreement between MOFT and MMA was signed on 22 September 2013.

Amendment to Article III Section 3.01(b)(ii) of the Financing Agreement on 20 February 2014. Section 3.01(b)(ii) of the Financing Agreement was amended and restated to read as follows: (ii) In respect of Component 2, subcomponents (ii)-(iii), the

Beneficiary shall relend to MMA under the MMA Subsidiary Financing Agreement a portion of the loan and grant proceeds equal to the rufiyaa equivalent of $1,500,000 upon the same or similar terms and conditions as these contained in the Financing Agreement. The Beneficiary shall cause MMA to apply such proceeds to the financing of expenditures on the Project in accordance with the provisions of this Financing Agreement, the


Complied with. Following request from the Beneficiary, the loan amount of SDR1,744,098 was cancelled and the overall loan size was reduced from SDR3,622,000 to SDR1,877,901.65 with memo dated 21 August 2013 (approved on 28 August 2013) as a result of identified savings coming from reduction in consultancy and equipment inputs for MED and more cost-effective solution for credit information enhancement and central registry for movable property for MMA. Allocation of loan and grant proceeds to several categories were adjusted accordingly. Article III Section 3.01(b)(ii) of the Financing Agreement was amended to give effect to the changes on 20

42 Appendix 6




Status of Compliance MMA Subsidiary Financing Agreement, and the MMA Project Agreement.

February 2014 as agreed by the Beneficiary on 4 April 2014.

Amendment to Article III Section 3.01(b)(i) of the Financing Agreement on 13 April 2018 Section 3.01(b)(i) of the Financing Agreement is deleted and replaced by the following: (i) In respect of Component 2, subcomponent (i), the Beneficiary shall

relend BML under the BML SLA a portion of the loan proceeds in rufiyaa equivalent to $2,700,000, with terms and conditions satisfactory to ADB. Except as ADB shall otherwise agree, the terms for relending to BML shall include interest at a rate per annum sufficient to reflect costs of raising such funds locally but not less than ADB’s ordinary capital resources lending rates, inclusive of foreign exchange risk and a repayment period of 15 years inclusive of a grace period of 3 years. The foreign exchange risk shall remain with the Beneficiary. The Beneficiary shall cause BML to apply such proceeds to the financing of expenditures on the Project in accordance with the provisions of this Financing Agreement, the BML SLA, and the BML Project Agreement;


Complied with. Following request from the Beneficiary, ADB approved with memo on 2 February 2018, changes (i) to increase the amount the Beneficiary will relend to BML under Component 2 of IMSMEDP, and (ii) extend the loan closing date and grant closing date to 30 June 2018. (The first extension of the closing date by one year from 31 December 2016 to 31 December 2017 was approved with memo dated 2 September 2016.) The procurement of equipment, systems development, and training that were earlier covered under the loan were completed under the grant and thus the unutilized loan balance was reallocated to the loan focusing on women-led MSMEs. To give effect to these changes, the Financing Agreement was amended on 13 April 2018 and approved by the Beneficiary on 9 May 2018.

The proceeds of the loan and the grant shall be allocated and withdrawn in accordance with the provisions of Schedule 3 to this Financing Agreement, as such Schedule may be amended from time to time by agreement between the Beneficiary and ADB.


Complied with.

Except as ADB may otherwise agree, the Beneficiary shall procure or cause to be procured, the items of expenditure to be financed out of proceeds of the loan and grant in accordance with the provisions of Schedule 4 to this Financing Agreement.


Complied with.

Withdrawals from the loan account and grant account in respect of goods, works, and consulting services shall be made only on account of expenditures relating to (a) Goods which are procured in and supplied from, and works and

Article III Section 3.04 (a) and (b)

Complied with.

Appendix 6 43




Status of Compliance consulting services which are supplied in such member countries of ADB as shall have been specified by ADB from time to time as eligible sources for procurement, and

(b) Goods, works, and consulting services which meet such other eligibility requirements as shall have been specified by ADB from time to time.

The loan closing date for the purposes of Section 8.02 of the loan regulations shall be 31 December 2016, and the grant closing date for purposes of Section 8.02 of the grant regulations shall be 31 December 2016 or in each case, such other date as may from time to time be agreed between the Beneficiary and ADB.


Complied with. The closing dates for the loan and grant were extended twice, first to 31 December 2017 with memo dated 2 September 2016 and second to 30 June 2018 with memo dated 2 February 2018. With memo dated 26 October 2018, the winding up period was extended from 30 October 2018 to 31 January 2019. The loan was financially closed on 11 January 2019 and the grant was financially closed on 16 April 2019.

Amendment to Article III Section 3.05 of the Financing Agreement on 13 April 2018. Section 3.05 of the Financing Agreement is deleted and replaced by the following: The Loan Closing Date for the purposes of Section 8.02 of the loan regulations shall be 30 June 2018, and the grant closing date for purposes of Section 8.02 of the grant regulations shall be 30 June 2018, or in each case, such other date as may from time to time be agreed between the Beneficiary and ADB.

Complied with. Following the request from the Beneficiary, ADB approved the memo dated 2 February 2018 with changes (i) to increase the amount that the Beneficiary will relend to BML under Component 2 of IMSMEDP, and (iii) extend the loan closing date and grant closing date to 30 June 2018. (The first extension of the closing date by one-year, from 31 December 2016 to 31 December 2017, was approved with memo dated 2 September 2016.) To give effect to these changes, the Financing Agreement was amended on 13 April 2018 and approved by the Beneficiary on 9 May 2018.

Particular Covenants In the carrying out of the Project and operation of the Project facilities, Article IV Complied with.

44 Appendix 6




Status of Compliance the Beneficiary shall perform, or cause to be performed, all obligations set forth in Schedule 5 of this Financing Agreement, the Subsidiary Financing Agreements, and the Project Agreements.

Section 4.01

(a) The Beneficiary shall (i) maintain, or cause to be maintained, separate accounts for the Project, including separate accounts for the loan and the grant; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience, and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statement and the report of the auditors relating thereto (including the auditors’ opinion on the use of the loan proceeds and grant proceeds and compliance with the financial covenants of this Financing Agreement as well as on the use of the procedures for the imprest accounts and statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

(b) The Beneficiary shall enable ADB, upon ADB’s request, to discuss

the Beneficiary’s financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by the Beneficiary pursuant to subparagraph (a) hereinabove, and shall authorize and require any representatives of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Beneficiary unless the Beneficiary shall otherwise agree.

Article IV Section 4.02 (a) and (b)

Complied with. International Public Sector Accounting Standard under the cash basis of accounting was followed. Auditing standards used was ISA. The statement of assets and statement of capital and liabilities were prepared in accordance with the Public Finance Act. Financial statements for the loan and grant under MED, MMA, and BML imprest accounts were audited by the FJS Associates LLP (an independent audit and chartered accountants firm recruited by ADB) from FY2013 to FY2018). The list of subborrowers under BML’s LCF were included in FY2018 audited financial statement. The audit period covered 1 January until 31 October.

The Beneficiary shall enable ADB’s representatives to inspect the Project, the goods and works, and any relevant records and documents.

Article IV Section 4.03

Complied with.

The Beneficiary shall take all action which shall be necessary on its part to enable each of the implementing agencies to perform its obligations under the project agreements and shall not take or permit any action which would interfere with the performance of such

Article IV Section 4.04

Complied with.

Appendix 6 45




Status of Compliance obligations. (a) The Beneficiary shall exercise its rights under the Subsidiary

Financing Agreements in such a manner as to protect the interests of the Beneficiary and ADB and to accomplish the purposes of the loan and grant.

(b) No rights or obligations under the Subsidiary Financing Agreements shall be assigned, amended, or waived without the prior concurrence of ADB.

Article IV Section 4.05 (a) and (b)

Complied with.

Allocation of Withdrawal of Loan and Grant Proceeds The tables attached to this Schedule set forth the categories of items of expenditure to be financed out of the proceeds of the loan and grant. Table 1 sets forth the allocation of the loan proceeds to each Category. Table 2 sets out the allocation of the grant proceeds to each Category. (Reference to “Category” in this Schedule is to a Category or Subcategory of Table 1 and Table 2, respectively.)

Schedule 3 General para. 1

Complied with.

Schedule 3, Attachment 1, Table 1:

Allocation and Withdrawal of Loan Proceeds Category ADB Financing

No.

Item

Total Amount Allocated

for ADB Financing (SDR)

% and Basis for Withdrawal from the Loan

Account Category Subcategory 1 Equipment 98,000 100% of total

expenditure claimed

2 Consulting Services

2,178,000

2A System Development Consultancy (CIB, STR)

1,365,000

2B System Development Consultancy (MSME technologies)

813,000

3 Line of Credit Facility

975,000

Schedule 3 Attachment 1 and Attachment 2

Complied with. The following amendments were made.

46 Appendix 6




Status of Compliance 4 Interest Charge/

Financing Charges 39,000 100% of amount

due 5 Unallocated 332,000 Total 3,622,000

Schedule 3 Attachment 2 Table 2:

Allocation and Withdrawal of Grant Proceeds Category ADB Financing

Item

Total Amount Allocated for ADB Financing ($)

% and Basis for Withdrawal from

the Grant Account

Category Subcategory Equipment 400,000 100% of total

expenditure claimed

Consulting Services 3,600,000 Project Management (PMU Consultancy)

2,440,000

Access to Finance (CGS, CIB, STR)

700,000

MSME Technologies 300,000 Capacity Development 160,000 Unallocated 450,000 Total 4,450,000

Amendment on 20 February 2014 Attachments 1 and 2 to Schedule 3 of the Financing Agreement were hereby deleted and replaced with Annexes 1 and 2 as attached hereto.

Schedule 3, Attachment 1, Table 1: Revised Allocation Table of ADB Loan Proceeds in SDR

Category ADB Financing No.

Item

Total Amount Allocated for

ADB Financing


the Loan Account 1501 Equipment

(net of tax) 315,914.18 100% of total

expenditure claimed 2101 Consulting

Services–CIB STR Vendor

447,545.08


Complied with. Following the request from the Beneficiary, the loan amount of SDR1,744,098 was cancelled and the overall loan size was reduced from SDR3,622,000 to SDR1,877,901.65 with memo dated 21 August 2013 (approved on 28 August 2013) as a result of identified savings coming from the reduction in consultancy and equipment inputs for MED and more cost-effective solution for Credit Information Bureau enhancement and central registry for movable property under MMA. Allocation of loan and grant proceeds to several categories were adjusted accordingly with amendment to Financing Agreement on 20

Appendix 6 47




Status of Compliance (net of tax)

2401 Training, Capacity Development (net of tax)

32,907.73

7901 Line of Credit Facility

987,231.80

6901 Interest Charge/ Financing Charges

21,060.95 100% of total amount due

9301 Contingency/ Unallocated

73,241.92 100% of total expenditure claimed

Total 1,877,901.65

Schedule 3, Attachment 2, Table 2: Revised Allocation Table of ADB Grant Proceeds US Dollar

Category ADB Financing No.

Item

Total Amount Allocated for ADB Financing

% and Basis for Withdrawal from the Grant

Account

Category Subcategory Consulting

Services 4,137,677 100% of total

expenditure claimed 3101 Project

Management Unit (net of tax)

590,400

3102 BDSC Institutional and Legal Infrastructure (net of tax)

1,432,277

3103 Strengthening CIB and STR (net of tax)

740,000

3104 MSME Portal, Judgement Debt Database, and CSCs (net of tax)

1,375,000

3501 Training, 206,000

February 2014 and agreed by the Beneficiary on 4 April 2014.

48 Appendix 6




Status of Compliance Capacity Development (net of tax)

4901 Contingency/ Unallocated

106,323

Total 4,450,000

Amendment on 16 October 2014 The table attached as Attachment 1 to Schedule 3 to the Financing Agreement was deleted and replaced by the table below.

Schedule 3, Attachment 1, Table 1: Revised Allocation of Loan Proceeds

No.

Item

Total Amount Allocated for ADB Financing (SDR)

Category


the Loan Account 1 Equipment 315,914.18 100% of total

expenditure claimed 2 Consulting Services—CIB STR Vendor

447,545.08

3 Training, Capacity Development

32,907.73

4 Line of Credit Facility 987,231.80 5 Interest Charge/

Financing Charges 21,060.95

6 Unallocated 73,241.92 Total 1,877,901.65

The table attached as Attachment 2 to Schedule 3 to the Financing Agreement was deleted and replaced by the table below.

Schedule 3, Attachment 2, Table 2: Revised Allocation of Grant Proceeds

No.

Item

Total Amount Allocated

for ADB Financing ($)


Account Category Subcategory 100% of total

expenditure 1 Equipment 530,000


Complied with. Following the request from the Beneficiary, ADB approved a memo on 30 April 2014 on the revised allocation of grant proceeds with reallocation of $530,000 from consultancy budget to equipment budget to fund the computers, tablets, office equipment and hardware requirements for PMU, BOLI enhancements, BDSCs and business incubator program. As approved with memo on 23 September 2014, one new category of expenditures for miscellaneous administration and support cost was created with reallocation of $40,000 from contingencies. Tables in Attachment 1 and 2 to Schedule 3 of the Financing Agreement, as amended by the Amendment Letter dated 4 April 2014 were revised and replaced by the new tables on 16 October 2014 and approved by the Beneficiary on 16 October 2014.

Appendix 6 49




Status of Compliance 2 Consulting

Services 3,595,000 claimed

2A Project Management (PMU Consultancy)

450,000

2B BDSC Institutional and Legal Infrastructure

1,560,000

2C Strengthening CIB and STR

740,000

2D MSME Portal, Judgement Debt Database, and CSCs

845,000


206,000

4 Miscellaneous Administration and Support Costs

40,000

5 Unallocated 79,000 Total 4,450,000

Amendment on 13 April 2018 The table included as Attachment 2 to Schedule 3 to the Financing Agreement was deleted and replaced by the table attached hereto as Attachment (Allocation and Withdrawal of Grant Proceeds).

Schedule 3, Attachment 2, Table 2: Revised Allocation of Grant Proceeds

No.

Item

Total Amount Allocated for ADB Financing ($)


Account Category Subcategory 100% of total

expenditure claimed

1 Equipment 344,900 2 Consulting

Services 3,831,300

2A Project Management (PMU

474,300

Schedule 3 Attachment 2

Complied with. Following the request from the Beneficiary, ADB approved a memo on 2 February 2018 with changes in the Project (i) to increase the amount the Beneficiary will relend to BML under Component 2 of the Project, and (iii) extend the loan closing date and grant closing date to 30 June 2018. (The first extension of the closing date by one-year, from 31 December 2016 to 31 December 2017, was approved with memo dated 2 September 2016.) The procurement of equipment, systems development and training, that was earlier covered under the loan, was completed under the grant and thus the unutilized loan balance

50 Appendix 6




Status of Compliance Consultancy)

2B BDSC Institutional and Legal Infrastructure

2,200,000

2C Strengthening CIB and STR

889,000

2D MSME Portal, Judgement Debt Database, and CSCs

268,000


121,000

4 Civil Works 90,000 5 Miscellaneous

Administration and Support Costs

60,000

6 Unallocated 2,800 Total 4,450,000

was reallocated to the loan focusing on women-led MSMEs. With a memo on 27 March 2018, ADB approved changes to create new category of expenditures to be financed out of the proceeds of the grant. The total revised allocation was $273,300 covering consultancy services for BOLI and company registration services, development of promotional materials for enterprise development, creation of civil works category for CSC, and hardware for business center connectivity, training, and capacity development. To give effect to these changes, the Financing Agreement was amended on 13 April 2018 and approved by the Beneficiary on 9 May 2018.

Except as ADB may otherwise agree, the items of expenditure shall be financed out of the proceeds of the loan and the grant on the bases of the percentages set forth in Tables 1 and 2, respectively.

Schedule 3 Percentages of ADB Financing, para. 2

Complied with.

The amount allocated to Category 4 of Table 1 is for financing the interest charge of the Loan during the implementation period of the Project.

Schedule 3 Interest Charge para. 3

Complied with.

Notwithstanding the allocation of the loan proceeds and the grant proceeds and the withdrawal percentages set forth in Table 1 and Table 2, respectively, (a) if the amount of the loan or the grant allocated to any Category

appears to be insufficient to finance all agreed expenditures in that Category, ADB may, by notice to the Beneficiary, (i) reallocate to such Category, to the extent required to meet the estimated shortfall, amounts of the Loan or the Grant which have been allocated to another Category but, in the opinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal

Schedule 3 Reallocation para. 4 (a) and (b)

Complied with.

Appendix 6 51




Status of Compliance percentage applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made; and

(b) if the amount of the loan or the grant then allocated to any Category

appears to exceed all agreed expenditures in that Category, ADB may, by notice to the Beneficiary, reallocate such excess amount to any other Category.

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

Schedule 3 Disbursement Procedures, para. 5

Complied with.

(a) Except as ADB may otherwise agree, the Beneficiary shall establish immediately after the Effective Date, two first-generation imprest accounts at MMA in the name of MED. The MED imprest accounts shall be used for financing of all activities under Components 1 and 3. The initial amount to be deposited into the MED imprest accounts shall not exceed the lower of (i) the estimated expenditure for the first 6 months of project implementation, or (ii) 10% of the respective loan and grant amount.

(b) Except as ADB may otherwise agree, the Beneficiary shall establish immediately after the Effective Date, a further two first-generation imprest accounts at MMA in the name of MMA. The MMA imprest accounts shall be used for financing activities under subcomponents (ii) and (iii) of Component 2. The initial amount to be deposited into the MMA imprest accounts shall not exceed the lower of (i) the estimated expenditure for the first 6 months of project implementation, or (ii) 10% of the respective loan and grant amount.

(c) Except as ADB may otherwise agree, the Beneficiary shall establish immediately after the effective date, a further first-generation imprest accounts at MMA in the name of MOFT. The MOFT imprest accounts shall be used for financing LCF activities under subcomponent (i) of Component 2. The initial amount to be deposited into the MOFT imprest accounts shall not exceed the lower of (i) the estimated expenditure for the first 6 months of project implementation, or (ii) 10% of the respective loan and grant

Schedule 3 Imprest Account; Statement of Expenditures para. 6 (a) to (f)

Complied with. The following changes to the imprest account arrangements were approved with memos dated: 4 February 2014 Increase in ceiling of advances to imprest account assigned to BML from $150,000 to $750,000 was approved to meet the immediate funding commitments of the LCF component. 11 November 2014 (Post-facto approval) (a) Change in location of the SGIA established

by BML from the MMA to BML (b) The financing of the said SGIA was through

the FGIA at MMA in the name of MOFT, which was established for financing the said LCF activities.

The change was made as per advice of MOFT in March 2014 that MMA disallowed BML from accessing funds from its SGIA (despite being in BML’s name) as BML was not considered as an entity of GOM, rendering the SGIA obsolete. For BML to access funds and disburse these to subborrowers under LCF, MOFT had transferred funds to an account located in BML.

52 Appendix 6




Status of Compliance amount.

(d) The currency of the MED imprest accounts, the MMA imprest accounts, and the MOFT imprest account shall be the dollar.

(e) Except as ADB may otherwise agree, the Beneficiary shall cause BML to establish a second-generation imprest account at MMA in the name of BML with respect to LCF activities under subcomponent (i) of Component 2. The BML SLA shall provide for the right of MOFT to review and audit the operations of such account. The currency of the BML imprest account shall be in rufiyaa. The BML imprest account shall be funded by the MOFT imprest account indicated in subparagraph (c) above and shall be further subject to the BML SLA. The initial amount to be deposited into the BML imprest account shall not exceed the lower of (i) the estimated expenditure for the first 6 months of project implementation, or (ii) the rufiyaa equivalent of $150,000.

(f) The SOE procedure may be used for reimbursement of eligible expenditures and to liquidate advances provided into the imprest accounts described in clauses (a)-(e) above, in accordance with the Loan Disbursement Handbook and detailed arrangements agreed upon the between the Beneficiary and ADB. In respect of the MED imprest accounts, MMA imprest accounts, and MOFT imprest accounts, any individual payment to the reimbursed or liquidated under the SOE procedure shall not exceed the equivalent of $150,000. In respect of the BML imprest account, any individual payment to the reimbursed or liquidated under the SOE procedure shall not exceed the rufiyaa equivalent of $150,000.

24 March 2015 (i) Change in source of financing for the LCF

SGIA, which is in the name of and located in BML, from the FGIA in MMA in the name of MOFT to the existing FGIA in the name of MED; and

(ii) The closing of two accounts both located in MMA: the FGIA in the name of MOFT and the SGIA in the name of BML.

The change simplified project implementation with only four FGIAs at MED and MMA, managing their respective loan and grant accounts. BML continued to manage its SGIA under LCF. The two imprest accounts located in MMA, i.e. MOFT FGIA and BML SGIA, became redundant. 30 July 2015 The ceiling of advance for imprest account for Grant 0290 was increased to the lower of (i) the estimated expenditure for the first 6 months of the project implementation, or (ii) from 10% of the grant amount to $700,000 in order to meet the funding commitments of MED, especially to accommodate the monthly expenses of E.Gen consultants. MED requested to fund payment of E.Gen’s monthly invoices through their imprest account instead of using direct payment, which required at least $100,000 for each application. The increase in ceiling was applicable to the MED-managed, grant-funded imprest account only and the ceiling for other imprest accounts remained unchanged.

Appendix 6 53




Status of Compliance 16 September 2016 In reference to Schedule 3, para. 6 (b) of the Financing Agreement, the ceiling of the MMA imprest accounts shall not exceed the lower of (i) the estimated expenditure for the first 6 months of project implementation, or (ii) 10% of the respective loan and grant amount. In August 2016, MMA awarded two consultancy contracts for establishment of STR for $303,503 and enhancement of CIB for $425,000. Expected milestone payments due within 6 months was $431,396. To meet these funding commitments for procurement and consultancy services, the ceiling of the advance for imprest account was increased to the estimated expenditure for the first 6 months of project implementation.

The imprest accounts described in clauses (a)-(e) above shall be established, managed, replenished, and liquidated in accordance with the Loan and Disbursement Handbook, and detailed arrangements agreed upon between the Beneficiary and ADB. The imprest accounts shall only be used for the purposes of the Project. Unless otherwise agreed by ADB, the aggregate ceiling for the imprest accounts shall not exceed the lower of (i) the estimated expenditure to be financed from the imprest accounts for the first 6 months of project implementation, or (ii) the equivalent of 10% of the aggregate amount of the loan and the grant.

Schedule 3 Imprest Account; Statement of Expenditures, para. 7

Complied with. See changes listed above regarding the ceiling of the imprest account.

For the consulting services, a direct payment procedure shall be established in accordance with the Loan Disbursement Handbook and detailed arrangements agreed upon between the Beneficiary and ADB.

Schedule 3 Direct Payment para. 8

Complied with. Following the memo dated 30 July 2015, the ceiling of advance for imprest account for Grant0290 was increased to the lower of (i) the estimated expenditure for the first 6 month of the project implementation, or (ii) from 10% of the grant amount to $700,000 in order to meet the funding commitments of MED, especially to accommodate the monthly expenses of E.Gen consultants. MED requested to fund payment of

54 Appendix 6




Status of Compliance E.Gen’s monthly invoices through their imprest account instead of using direct payment, which required at least $100,000 for each application. The increase in ceiling was applicable to the MED-managed, grant-funded imprest account only and the ceiling for other imprest accounts remained unchanged. For other consulting services, direct payment procedure was followed.

Withdrawals from the grant account may be made for reimbursement of eligible expenditures incurred under the Project before the Effective Date, but not earlier than 180 days before the date of this Financing Agreement, in connection with Consulting Services in relation to project management consultants and BDSC consultants, subject to maximum amount equivalent to 20% of the aggregate amount of the grant.

Schedule 3 Retroactive Financing, para.9

Complied with.

Notwithstanding any other provision of this Loan Agreement, no withdrawals shall be made from the Loan Account (i) for LCF activities under Component 2, subcomponent (i) until BML SLA shall have been executed by the Beneficiary and BML; (ii) for LCF activities under Component 2, subcomponent (i), until at least 2 of the onlending agreements, in form and substance satisfactory to ADB, shall have been executed by BML and a Qualified Enterprise and (iii) for Component 2, subcomponents (ii)-(iii), until the MMA Subsidiary Financing Agreement shall have been executed by the Beneficiary and MMA.

Schedule 3 Condition of Withdrawals from Loan Account para 10

Complied with. (i) The SLA between MOFT and BML was

signed on 25 June 2013. (ii) Two onlending agreements from BML to

qualified beneficiaries referenced BML/LSU/FUDB/MSME-0001/2014/0746 (Rf50,000 for copying/printing business) and BML/LSU/FUDB/MSME-0002/2014/0747 (Rf250,000 for fish processing) were received.

(iii) SLA between the GOM acting through

MOFT and MMA was signed on 22 September 2013.

Execution of Project (Financial Matters) The Beneficiary and the Project Executing Agency shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the PAM. Any subsequent change to the PAM shall become effective only after approval of such change by the

Schedule 5 Implementation Arrangements, para. 1

Complied with.

Appendix 6 55




Status of Compliance Beneficiary and ADB. In the event of any discrepancy between the PAM and this Financing Agreement, the provisions of this Financing Agreement shall prevail.

Within 3 months of the Effectivity Date, the Beneficiary shall set up the project steering committee chaired by the Deputy Minister of MED in accordance with the detailed arrangements set out in the PAM.

Schedule 5 Implementation Arrangements, para. 2

Complied with. The structure of the PSC was shared with ADB on 6 December 2012. The permanent secretary of MED was appointed as the project director.

The Beneficiary shall ensure that, throughout the implementation period of the Project, adequate budgetary allocations of the required counterpart funds are made available, approved, and released in a timely manner.

Schedule 5 Sustainability and Financial Support, para.3

Complied with.

The Beneficiary Shall ensure that adequate office and other facilities for the Project are made available and ensure that all such facilities are properly maintained during the project implementation period.


Complied with.

The Beneficiary shall ensure that each of the implementing agencies is adequately staffed and provided, in a timely manner, with the necessary financial, technical and other resources, including but not limited to the required equipment, to effectively perform their functions under the Project.


Complied with.

The Beneficiary shall ensure that within 3 months of the Effectivity Date, the existing BDSCs shall institute and have in operation the Market Development Approach, a new operational approach, as defined and further detailed in the PAM.

Schedule 5 BDSC and BDSC Operation Desks, para. 6

Complied with.

Each BDSC Operation Desk shall submit an annual progress report on the supported enterprises to the BDSC project coordinator. The cost of monitoring and evaluation by CSF (as defined in the PAM) upon prior approval of the CSF management unit.


Complied with. They submitted weekly reports, which were included project quarterly reports submitted to ADB.

The Beneficiary shall ensure that the Project Director, assisted by the PMU in MED and in cooperation with MNCCI and WEC, conducts information dissemination on BDSC and LCF on a regular basis to the public and potential subborrowers under the LCF.


Complied with.

Proposals meeting the oriority Criteria, set out in Appendix 1 of the PAM (Section II, Output 2B), shall be given priority in selection for the Business Incubator Program.

Schedule 5 Business Incubator Program—Priority Criteria, para. 9

Complied with.

56 Appendix 6




Status of Compliance The Beneficiary shall ensure that (i) BML has in operation an LCF desk within 2 months of the Effective Date in line with the PAM, and (ii) LCF is made operational within 6 months of the Effective Date in accordance with PAM.

Schedule 5 LCF, para. 10

Complied with.

The Beneficiary shall ensure that within 3 months of the Effective Date, BML revises the detailed operational mechanism for LCF, satisfactory to ADB, in accordance with the PAM.

Schedule 5 LCF, para. 11

Complied with. It was carried out in accordance with the criteria outlined by MED and terms of the SLA between BML and MOFT dated 25 June 2013. In addition, the bank’s internal loan due diligence procedures were followed.

In order to participate in the LCF, BML shall, upon commencement of LCF activities and throughout implementation thereof, comply with the eligibility criteria set out in the PAM, which shall include, at a minimum, demonstration at BML of: (i) financial soundness as evidenced by adequate capital asset

quality, liquidity, and profitability; (ii) adequate credit and risk management policies, operating systems,

and procedures; (iii) compliance with prudential regulations, including exposure limits; (iv) acceptable corporate and financial governance and management

practices including transparent financial disclosure policies and practices;

(v) sound business objectives and strategy and/or plan; (vi) autonomy in lending and pricing decisions; and (vii) adequate policies, systems, and procedures to assess and monitor

the economic, social, and environmental impact of Qualified Projects in accordance with parameters established by ADB for this purpose.

Schedule 5 LCF-Eligibility Criteria for BML, para. 12

Complied with. BML has maintained credit risk management, liquidity management, and risk management policies in compliance with the prudential regulations of GOM. BML is a listed company in the Maldives Stock Exchange and complies with listing rules which includes disclosure of annual reports and quarterly reports. Lending decisions were made according to BML’s internal and MMA’s regulatory policies.

ADB reserves the right to disallow disbursements from the LCF in the event of non-compliance by BML with any of the above criteria applicable to it until such time as BML is able to satisfy the criteria. BML shall be required to remedy any non-compliance with the eligibility criteria within 6 months of the event of non-compliance and in any event, within the disbursement period of the LCF to be financed by proceeds of the loan.


Complied with.

The Beneficiary shall cause BML to, and BML shall, (a) submit to ADB for review and approval the form of Onlending Agreement to be utilized in subloans to Qualified Enterprises, and (b) provide to ADB at least

Schedule 5 LCF-Eligibility Criteria for BML,

Complied with. Two sanction agreements (BML/LSU/FUDB/MSME-0001/2014/0746 [Rf50,000 for copying/printing business] and

Appendix 6 57




Status of Compliance the first two executed Onlending Agreements with Qualified Enterprises, prior to requesting disbursement of any loan proceeds for LCF activities under subcomponent (i) of Component 2.

para. 14 BML/LSU/FUDB/MSME-0002/2014/0747 [Rf250,000 for fish processing]) were provided.

The Beneficiary shall cause BML to, and BML shall, refrain from requesting, and shall ensure that BML, does not request or make, any disbursement of funds from IDB in relation to IDB’s financing of an analogous LCF, until such time as BML shall have provided written notification to MOFT and ADB, appending the list of relevant subloans, that the entirety of ADB funds allocated to LCF activities under subcomponent (i) of Component 2 shall have been allocated to approved subloans to Qualified Enterprises.


Complied with.

The Beneficiary shall ensure that all subloan proposals are selected in accordance with the following Selection Criteria and that BML shall ensure all Onlending Agreements include among other things provisions pursuant to which:

(i) no subloan is extended with Project funding other than to a Qualified Enterprise for a Qualified Project;

(ii) the Qualified Enterprise shall fall within the definition of a micro (at present, less than five employees), small (at present, less than 30 employees), or medium (at present, less than 100 employees) enterprise adopted by MSME council of MED from time to time;

(iii) the Qualified Enterprise shall have been registered at the MED MSME database;

(iv) a Qualified Enterprise with less than 30 employees shall have an enterprise budget and those with 30 or more employees shall have adequate cash flow and collateral based on an independent default risk assessment criterion agreed between the Beneficiary, BML, and ADB;

(v) the Qualified Project shall be carried out in compliance with the Beneficiary’s applicable environmental laws and regulations;

(vi) the Qualified Project shall have minimal or no adverse environmental impacts in accordance with the SPS;

(vii) the Qualified Project shall not involve any activities included on the Prohibited Activities List, and the Qualified Enterprise applying to borrow the subloan shall not engage in any activities included on the Prohibited Activities List; and

(viii) each Qualified Project is implemented in accordance with sound

Schedule 5 LCF Subloan Selection Criteria and Provisions, para. 16

Complied with. (i)-(ii) Criteria outlined by ADB and MED were complied with. (iii) All qualitied enterprises were registered MSMEs. (iv) Applicants were required to provide forecasted cash flow. (v)-(vi) No projects were funded that would potentially harm the environment. (vii)-(viii) No projects were funded that involves any activities included on the Prohibited Activities List.

58 Appendix 6




Status of Compliance administrative, social, environmental, and governance principles.

The Beneficiary shall ensure that all subloan proposals and subloans are demonimated in rufiyaa in an amount not exceeding the equivailent of $80,000.

Schedule 5 LCF Subloan Selection Criteria and Provisions, para. 17

Complied with.

The Beneficiary shall ensure that MED will designate a staff member as focal point for CGS matters within 2 months after the Effective Date and that the CGS is operational by the end of the Project implementation period. In designing and operationalizing the CGS, the Beneficiary shall take into consideration the recommendations of the consultants under the Project for defining the parameters of loans to be deemed eligible for participation in CGS.

Schedule 5 CGS, para. 18

Complied with. The CGS was launched on 7 August 2016 and has been operational. The feasibility report on CGS by the consultants was shared on 30 September 2015.

On or before the end of the project implementation period, the Beneficiary shall ensure that MMA shall have (i) expanded the membership base to include utility and telecommunications companies, and (ii) fully operationalized the launch of new credit scoring products, in accordance with the PAM.

Schedule 5 CIB, para. 19

(i) Not complied with. Amendment to the CIB regulation was issued on 13 July 2018 to enable issuance of self-inquiry credit reports to the public. Inclusion of the insurance and telecommunications companies can only be done upon passing of the CIB Bill, which has been drafted and is with the Attorney General’s Office for submission to the Parliament. Passing of the Bill was delayed due to the presidential and parliamentary elections. It was decided during project implementation that utilities will not be included as it is not practical in Maldives.

(ii) Partially complied with. MMA’s CIB self-

inquiry services were launched for public use on 6 February 2019. The IT enhancements of the system was released to the member financial institutions (8 banks, Maldives Financial License Company and Housing Development Finance Corporation) on 6 July 2017. The new system enables self-inquiry of credit report by individuals and corporations and

Appendix 6 59




Status of Compliance includes new value-added products such as portfolio monitoring, account monitoring, and mobile applications. Credit scoring service will not be introduced under the IMSMEDP as it requires a minimum of 5 years of complete data to enable this service.

Aggregate usage of credit information reports has increased from 523 in 2012 to 10,055 in 2017. Data for 76,223 individuals and 1,629 corporations (a total of 77,852) are available at credit information system as of June 2018.

Prior to the end of the project implementation period, the Beneficiary shall (i) conclude a financial analysis concerning the viability of spinning off CIB as an independent entity from MMA, and (ii) ensure the presentation of the proposal for such spinoff to the board of directors on MMA and to MOFT.

Schedule 5 CIB, para. 20

Complied with. Analyses on improvements to CIB operations were made by the consultants. Given the size of the country, it was assessed that credit information services are best provided under MMA once the adequate legal framework is in place and IT enhancements are made. The CIB has started charging fees for its services, which is an important step for sustainability.

The Beneficiary shall prepare and submit for adoption the package of proposed laws and regulations required for establishment of the STR. Within the 36 months of the Effective Date, the Beneficiary shall ensure that the STR has become operational and shall have concluded the first round of internal training at MMA as further set out in the PAM.

Schedule 5 STR, para. 21

Not complied with. The STR system has been completed and was ready to go live as of June 2018 following user acceptance testing. However, its implementation can only commence upon passing of STR Bill. MMA has been coordinating with the Attorney General’s Office in finalizing the drafting of the Bill and its translation and it is currently waiting to be submitted to the Parliament.

The Beneficiary shall ensure and shall cause the Project executing agency, and implementing agencies to ensure, that the Project activities shall not entail any adverse environmental impacts. The Beneficiary and the Project executing agency shall ensure that the

Schedule 5 Environment, para. 22

Complied with. IMSMEDP was under financial intermediation category treated as C for the environment, indigenous peoples, and involuntary resettlement and remained the same

60 Appendix 6




Status of Compliance proceeds of the loan and the grant shall be utilized in accordance with (i) all applicable laws and regulations of the Beneficiary relating to environment, health, and safety; and (ii) the environmental safeguards. If any impact is anticipated, the Beneficiary and the Project executing agency shall ensure that an EMP is prepared in accordance with the SPS.

until completion.

In case of any discrepancies between the Beneficiary’s environmental laws, regulations, and procedures and ADB’s requirements, the SPS shall prevail.

Schedule 5 Environment, para. 23

Complied with.

The Beneficiary shall ensure and shall cause the Project executing agency and implementing agencies to ensure that no Project activity will entail land acquisition or any involuntary resettlement, including relocation. If any resettlement is anticipated, the Beneficiary and the Project executing agency shall ensure that the RP is prepared in accordance with the SPS.

Schedule 5 Land Acquisition; Resettlement, para. 24

Complied with. IMSMEDP was under financial intermediation category treated as C for the environment, indigenous peoples, and involuntary resettlement and remained the same until completion.

The Beneficiary shall ensure and shall cause the Project executing agency and implementing agencies to ensure that the Project and all subprojects shall not have adverse impacts on indigenous peoples and that all components shall be implemented in culturally appropriate and participatory manner to meet the needs of various peoples of the country. If any impact is anticipated, the Beneficiary and the Project executing agency shall ensure that an IPP is prepared in accordance with the SPS.

Schedule 5 Indigenous Peoples, para. 25


The Beneficiary shall make available and cause the Project executing agency to make available necessary budgetary and human resources to fully implement EMP(s), the RP(s), and the IPP(s) (if any), as applicable.

Schedule 5 Human and Financial Resources to Implement Safeguards Requirements, para. 26


The Beneficiary shall ensure that no proceeds of the loan or grant are used to finance any activity included in the Prohibited Activities List.

Schedule 5 Human and Financial Resources to Implement Safeguards Requirements, para. 27

Complied with.

Appendix 6 61




Status of Compliance The Beneficiary, Project executing agency, and implementing agencies shall ensure that the works contracts and bidding documents under the Project include specific provisions requiring contractors to comply with all (a) applicable labor laws and core labor standards on (i) prohibition of child labor as defined in the national legislation for construction and maintenance services, on (ii) equal pay for equal work of equal value regardless of gender, ethnicity, or caste, and on (iii) elimination of forced labor; and (b) the requirement to disseminate information on sexually-transmitted diseases including HIV/AIDS to employees and local communities surrounding any work sites. Such contracts shall also include clauses for termination by the Project executing agency in case of any breach of the stated provisions by the contractors.

Schedule 5 Labor Law, Health, Social Protection, para. 28

Complied with. There were no works contract during the project where this clause would be applicable.

The Beneficiary shall ensure that the Project executing agency and implementing agencies implement the GAP as described in the PAM in a timely manner over the entire project implementation period, and that adequate resources are allocated for this purpose. In particular, the Beneficiary, Project executing agency and implementing agencies shall ensure that the targets stated in the GAP are achieved, including that at least 15% of the beneficiaries of the Project activities for BDS and LCF, respectively, shall be women entrepreneurs. The Project executing agency and implementing agencies shall conduct training on GAP implementation for all staff involved in the Project. The Beneficiary, Project executing agency, and implementing agencies shall ensure that implementation of the GAP is closely monitored, and progress is reported to ADB.

Schedule 5 Gender and Development, para. 29

Complied with. Final status of GAP achievements is provided in Appendix 7. Quarterly reports were submitted by E.Gen consultants monitoring the progress with GAP implementation and achievements.

In carrying out the legal reforms under Component 1, the Beneficiary shall engage in consultations with women’s groups to solicit their views on the conduct of such reforms and shall ensure that full consideration is given to inclusion of TSM (in the preparation of any proposed enactments and amendments forming such legal reforms).

Schedule 5 Gender and Development, para. 30

Complied with. The SME Public Consultation Forum was held on 26 March 2016 with 127 participants, of which 69 were women. The amendments to the SME Act (2013) were submitted to the Attorney General’s Office following consultations with relevant stakeholders in April 2016 and they are expected to be submitted to the Parliament by September 2019 following incorporation of new revisions. The National Gender Policy of Maldives have been drafted. The Women

62 Appendix 6




Status of Compliance Entrepreneurship Support Program was introduced during early 2017.

The Beneficiary, Project executing agency, implementing agencies and the PMU shall (i) comply with the Anticorruption Policy and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practice relating to the Project; and (ii) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.

Schedule 5 Governance and Anticorruption, para. 31

Complied with.

The Beneficiary, Project executing agency, implementing agencies, and PMUs shall ensure that anticorruption provisions acceptable to ADB are included in all bidding documents and contracts, including provisions specifying the right of ADB to audit and examine the records and accounts of the executing and implementing agencies and all contractors, suppliers, consultants, and other service providers as they relate to the Project.

Schedule 5 Governance and Anticorruption, para. 32

Complied with.

The Beneficiary, the Project executing agency, and the implementing agencies shall keep ADB informed of discussion with other multilateral and bilateral aid agencies that may have implications for the implementation of the Project. The Beneficiary, Project executing agency, and implementing agencies shall provide ADB with an opportunity to comment on any resulting policy reforms which could affect the Project and shall take into account ADB’s views before finalizing and implementing any such proposals.

Schedule 5 Development Coordination, para. 33

Complied with. Regular consultations with IDB were maintained during IMSMEDP.

No later than 6 months after the Effective Date, the Beneficiary, through MED, shall ensure that the PMU at MED has expanded and accommodated with its existing website capacity created for the ADB Private Sector Development Project (ADB Loan No. 2427), dedicated website space for Project information (“Project website”). MED shall announce the Project and business opportunities associated with the Project on the Project website. In addition, the Beneficiary shall ensure that the Project website shall disclose at a minimum, the following information in relation to goods and services procured for the Project: (i) the list of participating bidders, (ii) the name of the winning bidder, (iii) the amount of the contracts awarded, and (iv) the goods and services procured.

Schedule 5 Project Website, para. 34

Not complied with. Although MED’s website refers to the collaboration with ADB and IDB in promoting MSMEs, and there is a dedicated website for news and general announcements including business and job opportunities, as of drafting of PCR, no dedicated website for the Project, containing the indicated information, was found on MED website.

Appendix 6 63

ADB = Asian Development Bank; BDSC = business development service centers; BML = Bank of Maldives; BOLI = means “shell” in Maldivian (also known as Dhivehi), name of the online MSME business portal; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; CSF = cost-sharing facility; EMP = environmental management plan; FGIA = first-generation imprest account; GAP = gender action plan; IDB = Islamic Development Bank; IMSMEDP = Inclusive Micro, Small, and Medium-Sized Enterprise Development Project; IPP = indigenous peoples plan; ISA = International Standards of Accounting; IT = information technology; LCF = Line of Credit Facility; MED = Ministry of Economic Development; MMA = Maldives Monetary Authority; MNCCI = Maldives National Chamber of Commerce and Industry; MOFT = Ministry of Finance and Treasury; MSME = micro, small, and medium-sized enterprise; PAM = project administration manual; PLC = public limited company, PMU = project management unit; Rf = rufiyaa; RP = resettlement plan; SDR = special drawing rights; SGIA = second-generation imprest account; SLA = subsidiary loan agreement; SME = small and medium-sized enterprise; SOE = statement of expenditures; SPS = ADB’s Safeguard Policy Statement; STR = secured transactions registry; TSM = temporary special measures; WEC = Women’s Entrepreneurs Council. Source: Asian Development Bank.

Loan 2867-MLD Covenants of the Project Agreement between ADB and BML

Reference in Project Agreement

Status of Compliance

Particular Covenants (a) BML shall carry out the Project with due diligence and efficiency,

and inconformity with sound banking administrative, financial, engineering, environmental, and business practices.

(b) In carrying out the Project and in conduct of its business, BML shall perform all the obligations set forth in the Financing Agreement to the extent that they are applicable to BML.

(c) BML shall notify ADB of any proposal to substantially amend, suspend, or repeal any provision of its Memorandum and Articles, and shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon.

(d) Without limiting the generality of the foregoing, BML undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of the loan and the grant against hazards incident to the acquisition, transportation, and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.


Complied with. The Project Agreement between ADB and BML was signed on 20 September 2012. The SLA between MOFT and BML was signed on 25 June 2013. See details on Addendum No.1, No.2, and No.3.

BML shall not make a subloan to any Qualified Enterprise unless such Qualified Enterprise has at its disposal, or has made appropriate arrangements to obtain, as and when required, all funds including adequate working capital, and other resources which are required by such Qualified Enterprise for the carrying of its Qualified Project in respect of which the subloan is to be made.


Complied with. Careful due diligence with required documentation on cash flow of the business plan was conducted by BML for screening qualified loan applicants.

BML shall maintain records and accounts adequate to record the progress of the Project and of each Qualified Project (including the cost thereof) and to reflect, in accordance with consistently maintained


Complied with. The list of LCF disbursements to qualified borrowers and payment status of loans were shared with PMU and ADB.

64 Appendix 6




sound accounting principles, the operations and financial condition of BML. (a) ADB and BML shall cooperate fully to ensure that purposes of the

loan will be accomplished. (b) BML shall promptly inform ADB of any condition which interferes

with or threatens to interfere with the progress of the Project, the performance of its obligations under this Project Agreement, or the BML SLA of the accomplishment of the purposes of the loan.

(c) ADB and BML shall, from time to time, at the request of either party,

exchange views through their representatives with regard to any matters relating to the Project, BML, and the loan and grant.


Complied with.

(a) BML shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the loan and the grant and the expenditure of the proceeds thereof; (ii) the Project; (iii) the Qualified Enterprises, the Qualified Projects and the subloans; (iv) the administration, operations, and financial condition of BML; and (v) any other matters relating to the purposes of the loan.

(b) Without limiting the generality of the foregoing, BML shall furnish to

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

(c) Promptly after the closing date for withdrawals from the loan

account but in any event not later than 3 months after the said closing date or such later date as ADB may agree for this purpose, BML shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the utilization of the loan, the execution of the Qualified Projects, their costs, the performance by BML of its obligations under this Project Agreement and the accomplishments of the purposes of the loan.


Complied with. The reports on LCF disbursements to qualified borrowers and payment status of the loans were shared with PMU and ADB. BML is a publicly listed company under the Maldives Stock Exchange and financial statements and annual reports of BML, reporting its operations and financial condition are available on BML website. Following the closing of withdrawals from the loan account on June 2018, the latest BML report was submitted to PMU and ADB on 5 February 2019 and 24 March 2019.

Appendix 6 65




(a) BML shall have its accounts and financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience, and terms of reference are acceptable to ADB, shall promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, furnish to ADB (i) certified copies of such audited accounts and financial statements, and (ii) the report of the auditors relating thereto (including the auditors’ opinion on the use of loan proceeds and compliance with the financial covenants of the Financing Agreement and the Project Agreement, as well as on the use of procedures for the imprest accounts and statement of expenditures), all in the English language. BML shall furnish to ADB such further information concerning such accounts and financial statement and the audit thereof as ADB shall from time to time reasonably request.

(b) BML shall enable ADB, upon ADB’s request, to discuss BML’s

financial statements and its financial affairs from time to time with the auditors appointed by BML pursuant to Section 3.06 (a) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of BML unless BML shall otherwise agree.


Complied with. Financial statements of the Project for the loan and grant under MED, MMA, and BML imprest accounts were audited by the FJS Associates LLP (an independent audit and chartered accountants firm recruited by ADB) from FY2013 to FY2018. The list of subborrowers under BML’s LCF were added to the audited financial statement in FY2018. The audit period covered 1 January until 31 October. BML’s annual report also includes independent audit.

BML shall enable ADB’s representatives to inspect any Qualified Enterprise, any Qualified Project, the goods and works financed out of the proceeds of the loan or the grant, and any relevant records and documents.


Complied with. ADB conducted (i) a review mission on 13-16 October 2014 with a site visit to Kulhuduffushi and Hoarafushi atolls, (ii) a review mission on 11‒13 July 2016 with a site visit to Fonadhoo and Laamu atolls and (iii) a project completion report mission on 24‒28 March 2019 with site visits to Hulhumale, Malé, Naifaru, and Thinadhoo. During these visits, ADB reviewed the progress by interacting with the BDSCs and beneficiary MSMEs receiving the LCF.

(a) BML shall, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations, and to


Complied with.

66 Appendix 6




acquire, maintain, and renew all rights, properties, powers, privileges, and franchises, which are necessary in carrying out the Project or in the conduct of its business.

(b) BML shall at times conduct its business in accordance with sound

banking, administrative, financial, environmental, and business practices and under supervision of competent and experienced management and personnel.

(c) Except as ADB may otherwise agree (such agreement not to be

unreasonably withheld), BML shall not (i) sell, lease, transfer, or otherwise dispose of any of its assets, except (x) in the ordinary course of its business or (y) if such assets do not exceed 10% individually or in the aggregate of BML’s total assets; or (ii) establish or acquire any subsidiary.

Except as ADB may otherwise agree, BML shall maintain a ratio of the consolidated debt of BML and all its subsidiaries to the consolidated equity of BML and all its subsidiary not higher than 7:1. For purposes of the foregoing provision: (a) “Debt” refers to any debt incurred, assumed, or guaranteed by BML

or a subsidiary which matures more than one year after the date on which it is originally incurred (including that portion of any such debt payable within one year from the date of any debt-equity ratio calculation), provided that debt shall be counted only to the extent it is drawn down and outstanding; the incurring debt includes any modification of the terms of payments of such debt;

(b) “Consolidated debt of BML and all its subsidiaries” means the total

amount of debt of BML and of all its subsidiaries, excluding (i) any debt owed by BML to any subsidiary or by any subsidiary to BML or to any other subsidiary, and (ii) the amount referred to in paragraph (c)(ii) of this Section; and

(c) “Consolidated equity of BML and all its subsidies” means the

aggregate of (i) the total unimpaired paid-in capital, surplus, and free reserves of BML and all its subsidiaries after excluding such items of capital, surplus, and reserves as shall represent equity


Complied with. As per BML Annual Report 2018, page 18, available at www.bankofmaldives.com.mv, the ratio of total liabilities (Rf17.1 billion) to shareholders’ funds (Rf5.8 billion) was at 2.9 in 2018. The same ratio was 3.1 in 2017, which was also confirmed by FJS Associates LLP in the audited project financial statements. The ratio was 5.9 in 2013.

Appendix 6 67




interests of BML in any such subsidiary or of any such subsidiary in BML or any other such subsidiary; and (ii) the amount of the government loans at the time outstanding and repayment after the date of the last outstanding maturity of the principal amount of the loan.

Except as ADB may otherwise agree, BML shall not take or cause to be taken, any action, which would have the effect of amending, abrogating, assigning, or waiving any provision of, or any right or obligation of BML under the government loan agreements, or repay any portion of the government loans in advance of maturity.


Complied with.

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


Complied with.

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


Complied with.

ADB = Asian Development Bank; BDSC = business development service centers; BML = Bank of Maldives; GOM = Government of Maldives; LCF = Line of Credit Facility; MED = Ministry of Economic Development; MMA = Maldives Monetary Authority; MOFT = Ministry of Finance and Treasury; MSME = micro, small, and medium-sized enterprise; PMU = project management unit; Rf = rufiyaa; SLA = subsidiary loan agreement. Source: Asian Development Bank

Loan 2867-MLD and Grant 0290-MLD Covenants of the Project Agreement between ADB and MMA



Particular Covenants (a) MMA shall carry out the Project with due diligence and efficiency, and

inconformity with sound banking administrative, financial, engineering, environmental, and business practices.

(b) In carrying out the Project and operation of the Project facilities, MMA

shall perform all the obligations set forth in the Financing Agreement to the extent that they are applicable to MMA, and all obligations set forth in the Schedule to this Project Agreement.


Complied with. The Project Agreement between ADB and MMA was signed on 28 September 2012. The SLA between MOFT and MMA was signed on 22 September 2013.

68 Appendix 6




MMA shall make available, promptly as needed, the funds, facilities, services, and other resources as required, in addition to the proceeds of the loan and grant, for the carrying out of the Project.


Complied with.

(a) In the carrying out of the Project, MMA shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.

(b) Except as ADB may otherwise agree, MMA shall procure all items of

expenditures to be financed out of the proceeds of the loan and the grant in accordance with the provisions of Schedule 4 to the Financing Agreement. ADB may refuse to finance a contract where any such item has not been procured under procedures substantially in accordance with those agreed between the Beneficiary and ADB or where the terms and conditions of the contract are not satisfactory to ADB.


Complied with. ADB procurement guidelines were followed.

MMA shall carry out the Project in accordance with plans, specifications, work schedules, and construction methods acceptable to ADB. MMA shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and works schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.


Complied with.

(a) MMA shall take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of equipment and facilities out of the proceeds of the loan and the grant to such extent and against such risks and in such amounts as shall be consistent with sound practice.

(b) Without limiting the generality of the foregoing, MMA undertakes to

insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of the loan and the grant against hazards incident to the acquisition, transportation, and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.


Complied with.

MMA shall maintain, or cause to be maintained, records and accounts adequate to identify the goods, works, and consulting services financed out of the proceeds of the loan and the grant, to disclose the use thereof in the Project, to record the progress of the Project (including the cost


Complied with.

Appendix 6 69




thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition. (a) ADB and MMA shall cooperate fully to ensure that the purposes of the

loan and the grant will be accomplished. (b) MMA shall promptly inform ADB of any condition which interferes with,

or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the MMA Subsidiary Financing Agreement, or the accomplishment of the purposes of the loan and the grant.

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


Complied with.

(a) MMA shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the loan and the grant and the expenditure of the proceeds thereof; (ii) the goods, works and consulting services financed out of such proceeds; (iii) the Project; (iv) the administration, operations, and financial condition of MMA; and (v) any other matters relating to the purposes of the loan and the grant.

(b) Without limiting the generality of the foregoing, MMA shall furnish to

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

(c) Promptly after physical completion of the Project, but in any event not

later than 3 months thereafter or such later date as ADB may agree for this purpose, MMA shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request on the execution and initial operation of the Project, including its costs, the performance by MMA of its obligations under this Project Agreement and the accomplishment of the purposes of the loan and the grant.


Complied with. Regular progress reports were shared with PMU and ADB. MMA’s annual reports about its operations and financial conditions are available on MMA’s website.

70 Appendix 6




(a) MMA shall (i) maintain separate accounts for the Project; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience, and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the loan and grant proceeds and compliance with the financial covenants of the Financing Agreement and the Project Agreement, as well as compliance with statement of expenditure procedures for the MMA imprest accounts), all in the English language. MMA shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

(b) MMA shall enable ADB, upon ADB’s request, to discuss MMA’s

financial statements and its financial affairs from time to time with the auditors appointed by MMA pursuant to Section 2.09 (a) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of MMA unless MMA shall otherwise agree.


Complied with. Financial statements for the loan and grant under MED, MMA, and BML imprest accounts were audited by the FJS Associates LLP (an independent audit and chartered accountants firm recruited by ADB) from FY2013 to FY2018. The audit period covered 1 January until 31 October. MMA’s annual report also includes independent audit.

MMA shall enable ADB’s representatives to inspect the Project, the goods and works financed out of the proceeds of the loan and the grant, and any relevant records and documents.


Complied with.

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

(b) MMA shall at times conduct its business in accordance with the sound

administrative financial environmental and banking practices, and under the supervision of competent and experienced management personnel.


Complied with.

Appendix 6 71




(c) MMA shall at all times operate and maintain its equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals, thereof, all in accordance with sound administrative, financial, engineering, environmental, banking, and maintenance, and operational practices.

Except as ADB may otherwise agree, MMA shall not sell, lease, or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.


Complied with.

Except as ADB may otherwise agree, MMA shall apply the proceeds of the loan and the grant to the financing of the expenditures on the Project in accordance with the provisions of the Financing Agreement and this Project Agreement, and shall ensure that all goods, works and consulting services financed out of such proceeds are used exclusively in the carrying out of the Project.


Complied with.

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


Complied with.

MMA shall promptly notify ADB any proposal to amend, suspend, or repeal any provision of its MMA Act (1981) and shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon.


Complied with.

ADB = Asian Development Bank; MMA = Maldives Monetary Authority; MED = Ministry of Economic Development; MOFT = Ministry of Finance and Treasury; PMU = project management unit; SLA = subsidiary loan agreement. Source: Asian Development Bank.

72 Appendix 7

IMPLEMENTATION OF GENDER ACTION PLAN AND ACHIEVEMENTS A. Introduction 1. The Inclusive Micro, Small, Medium-Sized Enterprise Development Project (IMSMEDP) was conceived to support the goals of the Government of Maldives (GOM) for the micro, small, and medium-sized enterprise (MSME) sector. These are to (i) promote the development of MSMEs for reducing poverty and related vulnerabilities; (ii) create an enabling environment for MSMEs to generate jobs and develop a broad-based livelihood platform, particularly in the provinces and especially for women; and (iii) strengthen the MSME sector as a means towards economic diversification.1 Other key social objectives of IMSMEDP were to provide employment opportunities for women and youth in the MSME sector and to strengthen gender equality and women’s empowerment. 2. Overall, IMSMEDP had four key features:

(i) strengthening the legal and institutional framework for MSME development to remove systemic constraints on MSME growth;

(ii) strengthening business support infrastructure capacity to minimize regional disparities in MSME development;

(iii) widening access to finance for MSMEs, especially women- and youth-led MSMEs, through increasing the Line of Credit Facility (LCF), expanding the eligibility criteria, and setting up a credit guarantee scheme that could reduce collateral-based lending and loan processing time; and

(iv) updating technologies for knowledge sharing for MSMEs (including women and youth) in the atolls and in Malé.

B. Gender Issues 3. Categorized effective gender mainstreaming (EGM) in accordance with the ADB’s Gender and Development Policy,2 during its design phase, IMSMEDP identified the following underlying reasons for the low participation of women (assessed at 37%)3 in the MSME sector:

(i) Traditional gender roles in Maldivian society where women are primarily expected to perform reproductive roles;

(ii) Women’s lack of business knowledge and skills; (iii) Lack of access to credit due to restrictive lending policies and customary practices

hampering business start-ups and expansion even when women have acquired business knowledge and skills through training;

(iv) Lack of support services such as affordable transport and childcare; (v) Limited mobility, time, and self-confidence to access business development

services; (vi) Weak women’s associations and cooperatives; and (vii) Limited information-sharing and coordination between service providers.

1 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to

the Republic of the Maldives for the Inclusive Micro, Small, and Medium-Sized Enterprises Development Project. Summary Poverty Reduction and Social Strategy (accessible from the list of linked documents of Appendix 2). Manila.

2 ADB. 2010. Gender and Development in ADB Operations. Operations Manual. OM Section C2/BP. Manila. 3 Ministry of Economic Development and Trade and United Nations Development Programme. 2010. SME Mapping

Survey. Malé.

Appendix 7 73

4. Engaging in microenterprise is the primary source of income for many divorced women in Maldives, who bear the sole responsibility of raising their children (footnote 1). This issue is significant because of high divorce rate in Maldives and its resulting high percentage of women-headed households. Also, this type of employment suits women, who are traditionally tasked to take care of their families and manage their households. In 2014 (the beginning phase of the project), female labor force participation rate was at 47.6%, which was very low compared to 79.7% male labor force participation rate.4 Of those outside the labor force, 71.7% were women, most of whom were in the age group of 20‒34. A large majority (77%) of unemployed females was at ages 15‒34, many of whom were 20‒24 years of age (39%). This was considered to be ideal age when women could start to have their own family and children. Related to this, the proportion of Maldivian women, who work for less than 6‒7 hours, was more than that of Maldivian men. The top reasons for women’s unemployment were lack of job opportunities in the island of residence, and household chores or caring for the children (footnote 4). 5. Similar findings on women’s labor force participation patterns in outer atolls were also provided by the Ministry of Economic Development (MED)’s 2016 resource mapping and secondary data survey in atolls.5 Majority of women micro-entrepreneurs in Maldives have been characterized as home-based, small-scale production with low commercial returns, especially in the agriculture and fisheries sectors. Maldivian cultural stereotypes have been deterring women from entering and fully participating in the sector, and thus causing them to miss out on the opportunities to develop and improve their own enterprises. In addition, women have limited access to the resources required to start and run their own enterprises. The access to finance for business start-ups has been found to be a major stumbling block along with lack of vocational and business start-up skills and information about markets. C. Project Gender Features 6. To provide opportunities for greater involvement of the Maldivian women in the MSME sector, in compliance with ADB’s EGM categorization requirements, the IMSMEDP included a gender action plan (GAP) with the following key features:

(i) Integration of gender- and youth-related concerns in draft legislations, especially

the draft amendments of the Small and Medium Enterprise (SME) Act (2013), based on the results of a 2015 study on the barriers to and opportunities for women’s engagement in MSMEs;6

(ii) Establishment and operationalization of BDSCs to provide business development services to women- and youth-led MSMEs;

(iii) Training of women and youth entrepreneurs; (iv) Provision of LCF for business start-up loans and business services to women and

youth entrepreneurs; and (v) Building and supporting associations, partnerships, and networks to promote

women and youth entrepreneurship.

4 National Bureau of Statistics. Ministry of Finance and Treasury. 2014. Maldives Population & Housing Census 2014.

Statistical Release: IV Employment. Malé. 5 Ministry of Economic Development.2016. Atoll socio-economic and demographic profiles. Malé. 6 Ministry of Economic Development. 2015. Identification of challenges faced by women who runs SMEs and the

opportunities available in Maldives. November. Malé.

74 Appendix 7

7. MED had the overall responsibility for the implementation of the GAP. The project management unit (PMU) provided technical and monitoring support through gender and MSME experts under a consultancy firm. 8. During the project implementation, the GAP went through a series of modifications. The final GAP (presented in table below) is different from the original GAP, which (i) did not use the template of ADB, (ii) had unclear list of activities and performance indicators, and (iii) was not aligned with the target outputs of the project’s design and monitoring framework (DMF). This problem was raised during a review mission in September 2015, where MED agreed to submit a revised GAP. Given that the original GAP submitted to ADB was beyond the scope of IMSMEDP, in another review mission held in January 2016, MED agreed to limit the contents to the scope of IMSMEDP. In March 2016, MED submitted another GAP that was aligned with IMSMEDP’s DMF and in accordance with ADB’s GAP format.

9. In the succeeding GAP implementation reports, recurring problem—unclear activities and performance indicators—was observed. Thus, in December 2017, while MED was awaiting ADB’s approval of the extension of IMSMEDP to 31 June 2018, a consultation mission was held to discuss the problem. In this consultation mission, it was agreed to change the phrasing of five activities and two performance targets to make them specific, measurable, attainable, realistic, and time-bound (SMART); and better aligned with the performance indicators in the DMF. This change is incorporated in the Aide Memoire dated 13 April 2018. The GAP used in this report is the version submitted by MED in March 2016 with changes done in December 2017 incorporated. D. Gender Action Plan Achievements 10. As shown in the GAP Achievements Matrix below, 21 out of 22 activities (95%) were fully completed and 100% of ten quantitative targets were fully achieved.

Gender Action Plan Achievements Matrix

GAP Activities and Targets

Achievements

(as of June 2018)

Status at Project

Completion Output 1: Business Support Infrastructure Built

Ensure responsiveness of MSME laws, policies, and regulations to youth development and gender equality thrusts Activity 1. Review draft bill proposed by the Legal Team to ensure integration of youth development and gender equality thrusts therein. Target: MSME Act and other related policies and regulations aligned with youth development and gender equality thrusts of the national government and with Government Manifesto GAP Activity 1 aligned with DMF Output 1c. Proposed amendments include measures to promote

The SME Act (2013) had several women-specific elements such as (i) reviewing and amending of legislation and policies, inhibiting participation by women and other disadvantaged groups in the MSME sector; (ii) providing support to MSMEs owned and operated by women and youth; (iii) representation of women entrepreneurs as one of the seven permanent members of the MSME Council; and (iv) increasing women’s voices and views among the MSME council’s four invited members. The IMSMEDP consultants provided gender- and youth-related inputs for the amendment of the SME Act (2013) based on the results of the 2015 study (footnote 6), stakeholder

Completed

Appendix 7 75


Achievements

(as of June 2018)

Status at Project

Completion women in MSMEs (2011 baseline: none)

consultations and gaps identified in the existing legal framework for MSME promotion. Key proposed amendments included integration of gender-specific and women’s empowerment measures in the implementation rules and regulations of the amended SME Act (2013) and improved ability to use the SME fund for training programs, grants and projects that encourage and support the participation of women and youth in the MSME sector. The amendments were submitted to the Attorney General’s Office in April 2016 and are expected to be submitted to the Parliament by September 2019 following incorporation of new revisions. In line with the SME Act (2013) and proposed amendments, cooperatives society governance code requires 20% women’s participation, which helps women in the outer islands to pool resources for business start-ups. Furthermore, Women’s Chamber of Commerce was announced to be established in February 2019 to promote women’s entrepreneurship. The IMSMEDP consultants also provided gender-related inputs for the drafting of the National Gender Policy of Maldives. Furthermore, the Gender Equality Act (2016) was supported technically and financially by the ADB and its Article 17(e) encourages women to work or generate income through private or personal enterprise, particularly through self-help groups and cooperative societies.

Activity 2. Conduct a study on the impact of the MSME Act on women and youth participation in MSMEs Target: Opportunities and barriers to youth’s and women’s participation in MSMEs identified, and recommendations to tap opportunities and remove and/or overcome barriers provided

A study was conducted by MED in 2015 to identify the challenges and opportunities faced by MSMEs and to develop recommendations for women and youth’s enhanced participation in the MSME sector (see footnote 6). The study covered 24 case studies (14 women and 10 men microentrepreneurs) collected from Fonandhoo, Hithadhoo, Kudahuvadhoo, Kulhudhuffushi and Thinadhoo BDSCs. Identified challenges or barriers were (i) lack of access to sufficient capital; (ii) transportation and marketing; (iii) maintaining an acceptable work-life balance in society with rigid gender roles; (iv) licensing

Completed

76 Appendix 7


Achievements

(as of June 2018)

Status at Project

Completion procedures; and (v) sourcing skilled labor on a limited budget. Identified opportunities were (i) large number of young unemployed females; (ii) women have more free time when their children have grown up; and (iii) government and funding agencies focus on women and young entrepreneurs.

Activity 3. Consult relevant stakeholders (Ministry of Youth, Ministry of Family, Gender and Law, gender focal points) on the draft bill and impact study

The following consultations on the SME Act (2013) and impact study were held with: (i) MED’s legal team, relevant ministries,

and Attorney General’s Office (ii) MSMEs/business community (total of 79

participants—45 men and 34 women) (iii) Law firms (total of 32 participants—18

men and 14 women) (iv) SME Public Consultation Forum was

held at Public Service Media on 26 March 2016 where SMEs, general public, and higher education students participated (total of 127 participants—58 men and 69 women)

The MED legal team also participated in live television shows (PSM, SUN TV, and VTV) and disseminated information on the proposed changes for the draft bills and shared the concept and importance of introducing other new bills for the benefit of MSMEs in Maldives; and posted the draft bills in the MED’s official website for public information and to elicit public comments.

Completed

Establish BDSC operations in seven regions Activity 4. Assign youth and gender desk officers at BDSCs

BDOs have been designated as youth and gender desk officers at BDSCs in their respective regions, supported by other officials of the BDSCs.

Completed

QT1: BDSC operations providing services to women and youth-owned and/or managed MSMEs established in seven regions QT1 aligned with DMF Output 1d. Two additional BC established to cover all seven provinces (2011 baseline: 5)

BDSCs providing services to women- and youth-owned or managed MSMEs in seven regions (Fonadhoo, Hanimadhoo, Kudahuvadhoo, Kulhudhuffushi, Malé, Naifaru and Thinadhoo) have been established and their operations are ongoing.

Achieved

Activity 5. Establish coordination mechanism and/or partnership agreements with relevant stakeholder groups (e.g., youth and women networks, WDCs and MFGL, Youth Ministry, NGOs, etc.)

Regional BDSCs were designated as focal points for coordination with WEA, Youth Ministry, and Gender Ministry, Enterprise Development Division of MED. MED and BDSCs collaborated with SABAH Maldives, a specialized agency associated with youth and

Completed

Appendix 7 77


Achievements

(as of June 2018)

Status at Project

Completion women to explore and establish market

linkages for the products developed by SABAH members.

Partnership was established with WEA for

training module on home-based business skills development for women. JCI Malé, a local chapter under JCI Maldives, has developed customized training under YES initiative.

QT2: At least 300 women- and youth-managed MSMEs availed of BDS of BDSCs7

3,525 business consultations and technical business visits were held with a total number of 17,465 participants (50% women [8,729] and 60% youth [10,440]).

Achieved

Activity 6. Develop 30 new BDS products and services in BSDCs

32 BDS products were developed. (See Output 1e under DMF in Appendix 1 for the complete list of BDS)

Completed

QT3. 30 newly developed BDS products and services offered to women- and youth-managed MSMEs QT3 aligned with DMF Output 1e. 30 developed BDS products and services offered by BDSCs (2011 baseline: 10)

Out of 32 BDS, Youth Entrepreneurship Support (YES) Scheme, Women Entrepreneurship Support (WES) Scheme, Women Entrepreneurship – Home-based Workers training, youth entrepreneurship training for schools, GetSet Scheme for youth entrepreneurship development loans specifically targeted women- and youth-managed MSMEs. Other BDS were accessible to both genders and age groups. For all BDS provided, a total of 532 training and technical programs, mostly on business start-up and business planning, and 3,525 business consultations and technical business visits were held with a total number of 17,465 participants (50% women [8,729] and 60% youth [10,440]).

Achieved

Activity 7. Develop two training modules and programs—targeting women and youth entrepreneurs—in collaboration with one selected educational institution8

Two training programs were developed with TVET Authority of Maldives: (i) Photographers Training Program for

Youth (550 youth and/or women completed photographers training course, under the “1000 Photographers Scheme”)

(ii) Cashiers Training Program for Youth

Completed

7 The original target was number of women- and youth-led MSMEs availing BDS increased to 500. This was changed

to align with the DMF output 1a: 20%—of 1500 baseline—increase in women- and youth-managed MSMEs (see Aide Memoire dated 13 April 2018).

8 The original activity was “to partner with educational institutions in developing training modules and programs for women and youth entrepreneurs.” This was changed to make the activity and its target specific, measurable, attainable, realistic, and time-bound (SMART) (see Aide Memoire dated 13 April 2018).

78 Appendix 7


Achievements

(as of June 2018)

Status at Project

Completion Partnership was established with WEA for

new training module on home-based business skills development for women.

QT 4: At least two training modules and programs developed (for women and youth entrepreneurs) in collaboration with selected educational institutions

4 training programs were developed. Two training modules were developed with TVET Authority: (i) Photographers Training Program for Youth under the “1000 Photographers Scheme” and (ii) Cashiers Training Program for Youth. Home-based business skills training module was developed with WEA in May 2016. A training program was conducted at MMA Training Institute in October 2017 by Enterprise Development Division of MED to create awareness among women entrepreneurs about financial products. Attention was given to Islamic Financing Scheme, GetSet Scheme, National SME Fund and MED’s financial products. 80 WEA members attended the awareness event.

Achieved

Activity 8. Conduct 125 training events for 3,000 beneficiaries (including women and youth entrepreneurs) on business, entrepreneurship, and vocational skills

From April 2015 to June 2018, a total of 532 training events, technical programs, and 3,525 business consultations and technical business visits were held with a total number of 17,465 participants (50% women [8,729] and 60% youth [10,440]).

Completed

Target: Training modules for women and youth entrepreneurs developed

Two training-of-trainers modules on gender sensitivity and gender awareness were developed in August 2015—presentations in local language Dhivehi and training guide were prepared for BDSC managers. Two training modules with TVET Authority were developed: (i) Photographers Training Program for Youth under the “1000 Photographers Scheme” and (ii) Cashiers Training Program for Youth. Home-based business skills training module was developed with WEA.

A training program was conducted at MMA Training Institute in 2017 to create awareness among women entrepreneurs about financial products. 80 members of WEA attended the awareness event.

QT5: 3,000 entrepreneurs (including women and youth) trained on business,

A total of 532 training and technical programs—mostly on business start-up, business planning and related business areas, and 3,525 business consultations and

Achieved

Appendix 7 79


Achievements

(as of June 2018)

Status at Project

Completion entrepreneurship, and vocational skills QT5 aligned with DMF Output 1f. 4,000 beneficiaries trained under 300 training programs (2011 baseline: 3,500 beneficiaries under 150 trainings)

technical business visits were held with a total number of 17,465 participants (50% women [8,729] and 60% youth [10,440]).

Facilitate the start-up of 30 new MSME partnership businesses under the business incubator program Activity 9. Create one business (professional) association in one key industry, associating women and/or youth entrepreneurs9

During the Techstars Start-up Weekend in 2017, launched by the Enterprise Development Division of MED with support from UNDP, a group of women formed the Women-In-Tech and worked towards its registration as an NGO; and four community leaders formed a partnership called “Spark Hub” for creating a start-up ecosystem.

Completed

Activity 10. Develop one model of government institution’s subcontracting work arrangement to women’s society and/or youth club10

CSF operations manual was prepared to support subcontracting opportunities for women and youth. Business development arrangement (subcontracting work) with women society and/or youth clubs. MMI supported the development of a creative media production.

Completed

Activity 11. Organize entrepreneurial visits of women and youth to other areas within the islands and other adjacent countries to learn on successful MSMEs

Inter-island orientation programs on women and youth enterprises on business start-up consultations and training were conducted in BDSCs. WEA members participated in Women Fair in 2017. MED conducted meetings with WEA members in several BDSCs. Women- and youth-owned MSMEs participated in Maldives trade fairs held in Kunming, People’s Republic of China in June 2016.

Completed

QT 6: At least 15% or five new MSME partnership businesses assisted are owned and/or managed by women and youth

96 women-owned and 37 youth-owned MSMEs benefited from ADB’s LCF. 5 women-owned and 23 youth-owned MSMEs benefited from IDB’s LOF.

Achieved

10 women-owned and 38 youth-owned MSMEs benefited from SME Loan Scheme in

9 The original activity was “to create business (professional) associations in selected industries and encourage women

and youth entrepreneurs to join the association.” This was changed to make the formulation SMART (see Aide Memoire dated 13 April 2018).

10 Former Activity 3.2 and 3.3 were merged into Activity 10 because of overlap: (i) Activity 3.2: Create subcontracting opportunities to women and youth; (ii) Activity 3.3: Encourage government institutions to subcontract their work to women societies and youth clubs.

80 Appendix 7


Achievements

(as of June 2018)

Status at Project

Completion 2016. 23 women-owned and 27 youth-owned

MSMEs benefited from SME Loan Scheme in 2017. 70 MSMEs benefited from GetSet Scheme for the young entrepreneurs. Through the Enterprise Development Finance Scheme of MED, loans were provided to 349 women and/or youth entrepreneurs.

Output 2: Access to finance improved for private sector MSMEs Activity 12. Assist women and youth entrepreneurs in availing loans from BML Islamic SME finance scheme

Faseyha Madhahu was the first shariah compliant Islamic finance scheme in Maldives offered through IDB’s financial support administered by BML, which was part of the cofinancing of the IMSMEDP. The scheme had mandatory 15% allocation target for women entrepreneurs. Of 37 approved loans, 5 were provided for women-owned and 23 for youth-owned MSMEs.

Completed

QT 7: At least 30% of the targeted 200 new loans are granted to women and youth-owned and/or managed MSMEs (30% = 60 new loans). QT7 aligned with DMF Output 2a. 40 new loans through ADB’s LCF and 160 new loans from IDB with mandatory 15% for women MSMEs (2011 baseline for MSMEs: 100, no mandatory allocation) (40+160) x 15% = 30 loans

96 women-owned and 37 youth-owned MSMEs benefited from ADB’s LCF. 5 women-owned and 23 youth-owned MSMEs benefited from IDB LOF.

Achieved

Activity 13. Evaluate loan scheme processes to identify and minimize barriers to women and youth loan application

Loan schemes were internally evaluated by BML and MED to minimize barriers to loan applications by women and youth under the Islamic Finance Scheme, GetSet Scheme, and SME Loan Scheme (Source: Loan scheme qualification guidelines and loan evaluation procedures as posted on BML and MED websites). No barrier for women and youth participation was found. 2019 World Bank Ease of Doing Business Score reported that in 2019, there are no differences between men and women in terms of number of procedures (6), time (12 days) and cost (4% of per capita income) for starting a business. World Bank. Doing Business 2019. Economy Profile of Maldives (accessible at http://www.doingbusiness.org/)

Completed

Appendix 7 81


Achievements

(as of June 2018)

Status at Project

Completion Activity 14. Educate bank loan officers on the difference of MSME loans from formal bank loans to facilitate loan applications of aspiring women and youth entrepreneurs.

Training was completed for BML loan officers and BDSC staff mentoring MSME loan applicants. (Gender disaggregated data on trainees is not available) Seminar was conducted on principles of women’s financial inclusion. IDB consultants assisted BML with this training.

Completed

Activity 15. Simplify bank procedures and delivery system for obtaining seed capital

2019 World Bank Ease of Doing Business Score reported that cost for starting a business have declined from 8.9% of per capita income in 2012 to 4% in 2019 with the simplification of bank procedures and delivery system for obtaining seed capital for both men and women. World Bank. Doing Business 2019. Economy Profile of Maldives (accessible at http://www.doingbusiness.org/) Launching of the Credit Guarantee Scheme on 7 August 2016 will contribute to reducing collateral requirements for loan processing. Faster turnaround time for loan processing and increased options for access to finance, particularly with schemes dedicated to women and youth facilitate start-ups for MSMEs.

Completed.

QT8: Turnaround time for processing MSME loan applications reduced by 30% QT8 corresponds with DMF Output 2b. Turnaround time for processing MSME loan applications reduced by 30% (2011 baseline: 6 months for 100 loans)

The average loan processing time for MSME lending was reduced to about 3‒4 months from a baseline of 6 months as stated in DMF in Appendix 1. The target reduction by 30% was achieved.

Achieved

Output 3: Technologies for MSME development established Activity 16. Establish mechanism for enhancing linkages between youth and women-owned and/or managed MSMEs and technology providers

Regional BDSCs established partnerships with local public and private technology service providers. Two partnership collaboration workshops were held.

Completed

Target: Linkages of women and youth entrepreneurs with public and private technology providers established

BDSCs in Hithadhoo and Thinadhoo are working closely with SABAH on enhancing skills of women and youth entrepreneurs. BDSCs conducted food hygiene classes for women beneficiaries of SABAH.

82 Appendix 7


Achievements

(as of June 2018)

Status at Project

Completion Activity 17. Facilitate joint ventures for technology upgrading and productivity enhancement (to attract aspiring women and youth entrepreneurs) Target: Joint ventures for enhancing technology upgrading and transfer established by women and youth entrepreneurs

The Business Center Corporation has initiated plans to develop joint ventures for technology transfer. Key constraint is limited range of technology service providers in Maldives.

Not completed

Activity 18. Conduct capability development workshops for ISOs and other service providers of women and youth-owned and/or managed MSMEs Target: Training workshops for ISOs and service providers of women and youth-owned and/or managed MSMEs conducted

Enterprise Development Division of MED organized the “Go Youth National Skills Forum” with TVET Authority, in collaboration with QUT of Australia, held on 1 February 2017. The national forum strengthened the links between various stakeholders involved in TVET trainings in the Maldives, which included industry bodies, employers, government agencies, schools, civil societies as well as youth. JCI Malé, a local chapter under JCI Maldives, has developed customized training under YES initiative. Enterprise Development Division of MED and BDSCs collaborated with SABAH Maldives, a specialized agency associated with youth and women, to explore and establish market linkages for the products developed by SABAH members. An exhibition was organized in June 2018 in Thinadhoo Business Center in collaboration with Women Entrepreneurship Painting Program (20 participants) and special customized training was held for home-based producers by BML and Maldives Islamic Bank.

Completed

Activity 19. Provide incubator services to women and youth entrepreneurs

Business incubation mentoring services were provided by BDSCs on routine basis to SME loan recipients, BDSC MSME clients, BML’s Islamic Finance scheme, and GetSet Scheme loan applicants.

Completed

Target: Incubator services for women and youth provided

Incubator mentoring services were provided by Enterprise Development Division of MED and major BDSCs for 41 Islamic Finance and 71 GetSet Scheme loan recipients.

Output 4: Communication and Advocacy Materials Targeting Women and Youth Entrepreneurs Developed Activity 20. Incorporate youth development and gender equality themes in communication and advocacy strategy to promote

Youth and gender have been integrated as cross-cutting themes into all activities, plans and programs of MED, BDSCs and MSME promotion in general. MED and BDSC

Completed

Appendix 7 83


Achievements

(as of June 2018)

Status at Project

Completion positive images of women and youth entrepreneurs Target: Youth and gender themes integrated in the communication and advocacy strategy Target: Communication materials to promote positive images of women and youth entrepreneurs developed

communication materials included youth and women related programs to improve outreach. Communication materials that promote positive images of youth and women entrepreneurs have been in use. Women's Chamber of Commerce and Women on Boards were formed to actively promote women entrepreneurship and recognize their achievements through annual awards (Source: “Unleashing the power of women: Women on Boards recognizes exceptional women, expands mandate” Maldives Business Review. 8 May 2018. https://mbr.mv/1287/)

Activity 21. Ensure that all forms and applications (e.g., business registrations) have fields on age and sex of respondents and/or applicants

The following forms include information on the age and gender of all respondents or applicants: (i) BDSC client registration form (ii) BDSC training registration form (iii) Application for business incubation (iv) Business profile form (v) Client interaction form (vi) Business performance review

Completed

Activity 22. Collate and analyze data on youth and gender, and incorporate results in reports for planning QT9: All forms and applications are capable of providing information on age and sex of all respondents and/or applicants Target: Data on youth and gender concerns collated, analyzed, incorporated in reports, and considered during planning

Monthly and quarterly progress reports highlighted the project implementation activities and achievements involving men, women, and youth. All MED and BDSC forms and applications provided information on the age and gender of all respondents or applicants. Data on women and youth were collected and analyzed and incorporated in all reports and considered during planning.

Completed Achieved

ADB = Asian Development Bank; BDO = business development officer; BDSC = business development service center; BML= Bank of Maldives; CSF = cost-sharing facility; DMF = design and monitoring framework; GAP = gender action plan; GOM = Government of Maldives; IDB = Islamic Development Bank; IMSEMDP = Inclusive Micro, Small, and Medium-Sized Enterprise Development Project; ISO = industrial support organization; JCI = Junior Chamber International; LCF = Line of Credit Facility; LOF = Line of Finance; MED= Ministry of Economic and Development; MFGL= Ministry of Family, Gender, and Law; MMI = Maldives Media Institute; MSME= micro, small, and medium-sized enterprise; NGO = nongovernmental organization; PMU = project management unit; QT = quantitative target; QUT = Queensland University of Technology; SME = small and medium-sized enterprise; Rf = rufiyaa; TVET = Technical and Vocational Education Training; UNDP = United Nations Development Programme; WDC = women development council; WEA = Women Entrepreneurship Association; WEL = Women Entrepreneurs Loan; YES = youth entrepreneurship support. Sources: ADB and data provided by the MED and IMSMEDP consultant reports.

84 Appendix 7

E. Evidence on Gender-Related Benefits from IMSMEDP 11. As detailed under the GAP achievement matrix, the activities carried out through GAP strengthened the implementation of SME Act (2013) by improving the enabling institutional environment for women’s participation in the MSME sector and bringing more visibility and focus to gender- and youth- related interventions carried out by GOM. In line with the SME Act (2013) and proposed amendments, GOM has become more active in targeting women and youth by offering BDS and specific lending schemes such as Youth Entrepreneurship Support (YES) Scheme, Women Entrepreneurship Support (WES) Scheme, and GetSet Scheme for youth entrepreneurship development loans through the network of BDSCs that were expanded to all seven regions under IMSMEDP. Furthermore, partnerships with the Women Entrepreneurship Association, SABAH Maldives, Ministry of Education, Technical and Vocational Education Training Authority, Public Service Media, Junior Chamber International Malé, and island women development councils have been formed to provide business start-up and marketing services to women and youth entrepreneurs. These partnerships facilitated women’s access to markets through trade fairs and building linkages with potential buyers inside and outside of Maldives. Cooperatives societies have been required to ensure 20% women’s participation, which helps women in the outer islands to pool resources for business start-ups. A recent announcement to establish the Women’s Chamber of Commerce in Maldives in February 2019 has been another important step to promote and organize women entrepreneurs in Maldives. 12. The GAP activities contributed to improvement of the vocational and entrepreneurial skills of women and youth. Business management and start-up trainings were offered through BDSCs along with specialized programs by educational institutions, government and private agencies.

13. Finally, 678 women and youth-led MSMEs gained access to lending schemes offered by ADB, IDB, BML and GOM. The availability of these schemes along with reduction in turnaround time for loan processing, less procedures and lower cost of starting a business and wider coverage of Credit Information Bureau services have contributed to financial inclusion in the MSME sector. In particular, a survey conducted by MED and BML in March 2016 on 63 MSMEs financed under ADB’s LCF Phase I11 has shown that these loans have been performing well, indicating financial sustainability and made positive development impact in terms of asset creation, business continuity, volume of sales, job creation and geographical distribution of economic activity across Maldives (Appendix 9).

14. In addition to this survey, beneficiaries of IMSMEDP’s LCF and staff of BDSCs in Hulhumale, Malé, Naifaru, and Thinadhoo were interviewed in March 201912 to gather first-hand evidence on the project’s overall achievements, and gender equality and women empowerment results. A total of 14 LCF clients were interviewed individually and during focus group discussions to obtain information about their demographic and socio-economic profiles, experiences during business development, and any challenges encountered while obtaining LCF.

15. The interviews and focus group discussions showed that LCF recipients were mainly engaged in family-owned, home-based businesses and used the small LCF loans (Rf50,000) primarily to expand existing businesses and supplement other income sources. The small-scale and geographically segregated local markets, relatively unsophisticated needs of local communities compared to urban centers, and inability to create sales volume due to limited

11 Ministry of Economic Development and Bank of Maldives report (March 2016). 12 A video on achievements of IMSMEDP was developed during March 2019 mission, available at

https://www.adb.org/news/videos/empowering-small-businesses-maldives

Appendix 7 85

number of inhabitants in small villages and towns in remote atolls continue to be the major structural constraints for full-fledged and diversified MSME development. On the other hand, continuing improvements in maritime and airport connectivity, and better linkages between tourist resorts and local communities present a potential for expanding and diversifying MSME activities.

16. The testimonials of six women entrepreneurs who benefited from the implementation of the GAP are presented as further evidence of the successful implementation of the GAP (Boxes 1-3). These testimonials were collected from the site visits. These women, assessed during IMSMEDP’s preparatory phase as having greater constraints than men in venturing into MSMEs, benefited in terms of economic empowerment, human development, decision making and leadership. The testimonials also show that BDSCs have played a critical role to improve entrepreneurial potential by (i) providing information about available credit facilities, (ii) helping develop business plans and (iii) providing business training. With support from BDSCs, MSMEs have improved the self-reliance of small communities.

Box 1. Women’s Economic Empowerment Increased income after business loan acquired through IMSMEDP

Beneficiary No.1 Aishath Shara, home-based baker in Naifaru, 32 years old, married

I have been baking and decorating cakes and pastries for parties and weddings since 2014. I learned to bake through websites and attending a one-week basic baking training in Malé. In 2018, I sought the assistance of the BDSC in Thinadhoo to apply for a business loan. To help me become eligible for the loan, the BDSC taught me how to develop a business plan and register my business. I got a loan of Rf50,000 with which I bought more baking equipment and tools, as well as ingredients. That has expanded my business because I can now accept more orders. I also have created an account (titled “I Sing Cakes”) on Facebook which I use to display the designs of my cakes and reach some clients. My income has increased since I got the loan. From a net income of Rf4,000 a month before the loan, my net income has increased to Rf8,000 a month. However, the loan is not enough to put up my own store or rent a place where I can display my cakes and pastries and entertain clients. I also hope the BDSC will give me more training and help me with marketing.”

Beneficiary No.2 Zulfa Abdulla, owner of Fresh Mini Mart in Hulhumale, 48 years old, married I first borrowed a small place of my younger brother and promised him that I would pay him once my retail shop (of a variety of local products, including fish snacks and local delicacies) starts earning. Our retail shop started very small. Then we experienced shortage of stocks and did not have enough funds. When we heard about the Line of Credit Facility of the IMSMEDP in 2014, we took the chance and applied for a business loan. We used the approved loan of Rf50,000 as well as the sale of our taxi—my husband was a driver—and financial assistance of our daughter to buy additional stocks. The earning was good that we were able to expand the size of our shop. Now, the net worth of our shop, including our stocks, has increased to more than Rf1 million. Before we got the loan in 2014, our net income was Rf1,050 a day or Rf31,500 a month, and we did everything on our own. After the loan, with our bigger stocks and larger shop, our net income has increased to Rf3,750 a day or Rf112,500 a month, and we are now employing four workers—two Maldivians and two foreigners. Two of our children are doctors, one is a chemical engineer, another is a lawyer, and the youngest is in grade 7. Two of them got a presidential scholarship, and we are now financing only the education of our youngest. That also has helped ease our family expenses and improved the capital of our business.

BDSC = business development service center; IMSMEDP = Inclusive Micro, Small, and Medium-Sized Development Project; Rf = rufiyaa. Source: Asian Development Bank.

86 Appendix 7

Box 2. Gender Equality in Human Development Better marketing skills and strategy after attending a training of the BDSC

Beneficiary No.3 Zumarath Rasheed, owner of “Scoops and Smiles” store in Thinadhoo, 36 years old, married My ambition has always been to run my own business. So, when I lost my job in 2013, I decided to take my first step. With my own money, I put up a small popcorn store in front of our family’s house. In 2017, my sister lent me Rf20,000, which I used to buy a refrigerator, a mixer, and ingredients. That started my selling of smoothies and ice cream. But the business was very small and could not cope with the increasing demand after the construction of a park and playground across my house. My business really started to gain steam and has become what it is now when the BDSC in Thinadhoo trained me in business development, including packaging and labeling, and helped me get a business loan of Rf50,000 in September 2018. The loan enabled me to buy more refrigerators and ingredients, as well as order more supplies from Malé. I used to earn a net income of Rf2,000‒3,000 a month. Now, my earning has increased ten times, a net income of Rf20,000 from a gross income of Rf70,000 a month. With that income, I can now support my family’s needs. I am the main breadwinner and my husband, who helps me take care of our three children, is very supportive. The BDSC has been my business partner because they come here once a week to monitor the progress of my operations and for consultations.

Beneficiary No. 4 Ramzana Dam, owner of home-based “Yummy Point” local delicacy producer in Thinadhoo, 37 years old, married I have been into the business of making different types of pastries and food delicacies for 6 years. Income was not good, so I sought the help of the business centre in Thinadhoo. Two years ago, I attended their training on business start-up. This is a 7-day (2 hours per day) training. They also helped me register my business. Since the training, I have introduced some improvements and I market my food products. I work 4 days a week. Each day, I produce 400 small packs of food delicacy (similar to tortillas chips with local spices) and distribute them to different stores. The stores sell each pack for Rf10. On a consignment basis where the storeowner pays me after selling all packs, I earn Rf9.00 per pack and the storeowner earns Rf1.00. I have introduced another option to the storeowners, that is their share will increase to Rf2.00 per pack if they pay me upon delivery. With a consignment arrangement, I earn Rf3,600 a day. I expect this sale to significantly increase when my business loan of Rf50,000 is released. The BDSC helped me apply for this loan. I will use the money to buy tables and machines for packing and labelling.”

BDSC = business development service center; Rf = rufiyaa. Source: Asian Development Bank.

Box 3. Gender Equality in Decision-Making and Leadership

Women’s greater involvement in business and contributions to the family and society Beneficiary No. 5 Azma Ilyas, owner of “Moment” photography studio in Naifaru, 37 years old, married My husband started a photography business in 2009. That business grew in 2012 when he got a contract with a resort that lasted until 2016 with a monthly income of Rf60,000. Unfortunately, the resort put up its own photography unit and terminated the photography service contract of my husband. That pushed him to run a photography shop with different small clients. In early 2018, our camera broke down and so the business stopped. That was the time when we learned about WEL, which we could access through the BDSC in Naifaru. As only women were qualified to apply for this loan, my husband and I decided to transfer the business to my name and for me to become the manager of the business, while he remains as the photographer. The BDSC helped us register the business in my name and get a WEL of Rf50,000, which we used to buy new camera, lights, light stand, and other materials. Now, with the help of the BDSC, our photography business is up and running again. The assistance has also facilitated my greater involvement in the business. It is no longer just my husband’s business but our family’s business—I am working together with my husband, as the owner, and more involved in decision making. We earn a monthly gross income of Rf20,000 and an average net income

Appendix 7 87

of Rf15,000, which is more than my income as a nurse in a hospital. Our earning has helped us meet our needs, including those of our 9-year old daughter. Beneficiary No.6 Fathimath Shirmeela, owner of “Cuddle Care” child daycare in Malé, 53 years old, married In 2010, I started Cuddle Care, which was the only child daycare center in Malé, with a loan of Rf180,000. There came a time when I had to expand and this bigger space (current location) was available. I could not apply for another loan so I used whatever funds I had, which was the money for the studies of my children. In end of 2013, I learned about the SME project. I applied for a loan of Rf300,000 using my property which is worth Rf315 million as a collateral. The loan payment is for 8 years, starting in 2014. I used the money to renovate this place. That included constructing the toilet, glass door, and others. I also purchased the air conditioner. I did not get any other assistance from the SME project and from the government aside from this loan. That was disappointing because this business was pioneering and very important. Many children are neglected when their parents go to work. Here, these 60 children are assured of a good environment while their parents are at work because somebody is looking after them. Still, I am very thankful for the loan because it would have been difficult for me to continue. My daughter needed her educational funds. Also, before the loan, I had no income, no profit. Now, I have some profit because apart from taking care of the children, I also cook the food of the children, do the accounting, supervision, and all other administrative work. My 13 staff work for 6.5 hours, while I work for 12 to 14 hours. If I hire a supervisor, cook, and accountant, then there will be no profit. The families of Malé have also begun to see the benefit of a daycare center for children. Unlike when I started the business, now more families are bringing their children here. The capacity of the center is only 60 children maximum. Apart from the income, I also feel that I am contributing something important to the families and to the Maldivian society. I do this more as a social service. I am happy with what I am doing. For the last 10 years, I made sure that the parents have no complaints. In Malé, many of the women are educated and working, but once they get married, they stop working to take care of their children. With this child daycare center, these women are now able to work and are stress free because I assure them that their children are well-taken care of. They trust me so much that I cannot just leave or stop this business even if it is not profitable.

BDSC = business development service center; Rf = rufiyaa; SME = small and medium-sized enterprise; WEL = Women Entrepreneurs Loan. Source: Asian Development Bank.

F. Conclusions and Recommendations 17. Designed to address the issues or factors constraining women’s involvement in the MSME sector and aligned with GOM’s goals, GAP strengthened the relevance of IMSMEDP. The results of the GAP implementation point to significant contributions of IMSMEDP to the strengthening of women’s visibility in the MSME sector and to women’s economic empowerment. Moreover, with 95% of the GAP’s activities completed and 100% GAP’s quantitative targets fully achieved, supported by testimonials of beneficiary women entrepreneurs, GAP contributed significantly to the effectiveness of the project. Thus, GAP implementation is rated successful. 18. While great strides have been made to facilitate women and youth’s involvement in the MSME sector, following areas need further action and improvement:

(i) The SME Act (2013) and proposed amendments need to be passed by the

Parliament to strengthen the legal framework for promotion of MSMEs, including women and youth-related interventions by GOM;

(ii) The Women Entrepreneurs Loan scheme, which eased up the collateral requirement of loan application for women entrepreneurs, was opened only in 2018 and would need to be continued and expanded for improving women’s involvement in the MSME sector. Minimum loanable amount of Rf50,000 as business loan was

88 Appendix 7

not enough and could be raised to help new entrepreneurs fully set up their businesses;

(iii) Business support services as well as promotion of cooperatives and industry associations are needed to improve the quality of products produced by women entrepreneurs as well as their marketing;

(iv) Effective linkages with tourism-related activities and improving the interaction of local communities with incoming foreign tourists and resorts could offer an immediate and relatively underexploited opportunity to expand the job opportunities and markets for domestically produced goods;13

(v) Since majority of first-time entrepreneurs, including women and youth, have limited technical and vocational skills, provision of market-oriented human resource development alongside business and financial support is critical. Skill development programs should be sensitive to traditional roles of women in the Maldivian society and the preference for home-based businesses; and

(vi) Joint ventures for technology upgrading and productivity enhancement are needed to improve the productivity of MSMEs and overcome geographical barriers in access to markets.

13 Although tourism is a growing sector, only 40% of tourism-generated jobs were filled by Maldivians in 2014 and a

high share of the goods supplied for the tourist resorts are imported (World Bank. 2015. Maldives: Systematic Country Diagnostic, published by World Bank Sri Lanka office).

Appendix 8 89

SUMMARY OF KEY CHANGES IN PROJECT IMPLEMENTATION ARRANGEMENTS A. PROJECT ORGANIZATION STRUCTURE 1. At appraisal. The Ministry of Finance and Treasury (MOFT) was the executing agency of the Inclusive Micro, Small, and Medium-Sized Enterprise Development Project (IMSMEDP) responsible for carrying out and coordinating the activities of the implementing agencies and liaising with the Asian Development Bank (ADB) and the Islamic Development Bank (IDB) on all project administration matters in general (Table A8.1). The project management units (PMUs) were established at the implementing agencies, namely Ministry of Economic Development (MED), Maldives Monetary Authority (MMA), and the Bank of Maldives (BML) that were headed by project directors. The project organizational structure at appraisal is presented in Figure A8.1.

Table A8.1: Implementation Arrangements 1. Oversight body PSC with MED deputy minister (chair), executive directors from MOFT and MHE,

a senior executive director of MMA, a general manager of BML, and PMU project director (members). One representative each from MNCCI and WEA as observers.

2. Executing agency

MOFT

3. Implementing agencies

MED: Responsible for components 1 and 3. The component 1 was supported by central BDSC and provincial BDSCs located in all seven provinces. MMA: Responsible for component 2 except the implementation of LCF. BML: Responsible for LCF under component 2.

4. Implementation unit

PMU in MED (for general project administration) including four core consultants (international BDSC coordinator, international M&E expert, and two national MSME specialists), international and national gender specialists, legal specialists, three government staff and audit firm; PMU in MMA (for CGS, CIB, and STR), and PMU in BML (for LCF)

BDSC = business development service center; BML = Bank of Maldives; CGS = credit guarantee scheme; CIB = Credit Information Bureau; IMSMEDP = Inclusive Micro, Small, and Medium-Sized Enterprise Development Project; LCF = Line of Credit Facility; M&E = monitoring and evaluation; MED = Ministry of Economic Development; MHE = Ministry of Housing and Environment; MMA = Maldives Monetary Authority; MNCCI = Maldives National Chamber of Commerce and Industry; MOFT = Ministry of Finance and Treasury; MSME = micro, small, and medium-sized enterprise; PMU = project management unit; PSC = project steering committee; STR = secured transactions registry; WEA = Women Entrepreneurs Association. Source: ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to the Government of Maldives for the Inclusive Micro, Small, and Medium-Sized Development Project. Project Administration Manual (accessible from the list of linked documents in Appendix 2). Manila. 2. Changes made during the project. The summary of key changes are as follows:

3. Additional implementing agency. The Maldives Inland Revenue Authority (MIRA) was assigned as an additional implementing agency with a memo dated 2 September 2016 for the simplification of the management of the information technology (IT) consultancy for the micro, small, and medium-sized enterprise (MSME) financial record-keeping software instead of going through MED. However, disbursements under this package continued to be handled by PMU in MED for a centralized project financial management. With memo dated 2 September 2016, the allocation for the judgement debt database was removed and equipment costs were reduced with savings generated from IDB-sponsored business development service center (BDSC) IT equipment. The grant amount of $150,000 was reallocated for this component under MIRA.

4. With memo dated 15 November 2017, an additional $50,000 from the uncommitted grant balance was allocated for MIRA’s procurement of System Applications and Products (SAP)

90 Appendix 8

Component 3:

Technologies for MSME

development established

Finance Consultants

EA: MOFT

Project Steering Committee

ADB (IDB)

Provincial BDSCs

CSCs at each BDSCs

Component 1: Business support infrastructure built

PMU Consultants

Central BDSC

CSF Sub-

Committee

LCF desk at BML

PPP and Solar

Energy Consultant

s

Capacity Building

Consultants

Component 2: Access to

finance improved for private sector

MSMEs (CIB, STR, and CGS)

Component 2: Access to

finance improved for private sector

MSMEs (LCF)

IA: MED

PMU

IA: MMA

PMU

IA: BML

PMU

software upgrade. The total funding for MIRA was increased to $200,000. The disbursements of MIRA’s funds were handled by MED for a centralized project financial management. 5. Revised design and monitoring framework (DMF). Approved with the aide memoire dated 12 February 2016, a revised DMF dropped the output targets on seven solar-powered citizen service centers established with at least two through public‒private partnership (PPP). This was found to be redundant given that solar-powered service centers were more in the ambit of ADB’s Sustainable Energy Development Project. Thus, PPP and solar energy-related consultancy was dropped.

Figure A8.1: Project Organization Structure at Appraisal

ADB = Asian Development Bank; BML = Bank of Maldives; BDSC = business development service centers; CIB = Credit Information Bureau; CSC = citizen service centre; CSF = cost-sharing facility; EA = executing agency; IA = implementing agency; IDB = Islamic Development Bank; LCF = Line of Credit Facility; MMA = Maldives Monetary Authority; MED = Ministry of Economic Development; MSME = micro, small, and medium-sized enterprise; PMU= project monitoring unit; STR = secured transaction registry. Source: ADB Project Administration Manual

Appendix 8 91

B. FUND FLOW ARRANGEMENTS 6. At appraisal. Five first-generation imprest accounts (FGIAs) were established for the IMSMEDP at MMA. The first two FGIAs of MED for the loan and grant financed all activities under component 1 and component 3. The second two FGIAs of MMA for the loan and grant financed all activities under component 2 related to Credit Information Bureau (CIB), secured transactions registry (STR), and credit guarantee scheme (CGS). The third FGIA of MOFT for the loan financed all activities under component 3 for the Line of Credit Facility (LCF). MOFT, MED, and MMA were responsible for managing and administering the FGIAs. The aggregated maximum ceiling of the imprest accounts would not at any time exceed the estimated ADB-financed expenditures to be paid from the imprest accounts for the next 6 months or 10% of the respective loan and grant amount, whichever would be lower. The currency of these FGIAs were dollar. 7. BML established a second-generation imprest account (SGIA) at MMA, subject to the subsidiary loan agreement (SLA) in place between BML and MOFT. The currency of the SGIA was rufiyaa. The maximum ceiling of SGIA was the lower of the estimated ADB-financed expenditures for the next 6 months or $150,000 of the respective loan. Around $1.5 million of LCF was provided by ADB under component 2 while $7 million was provided by the IDB’s loan. 8. Under the SLA with BML, the Government of Maldives (GOM) would relend $1.5 million equivalent from ADB fund (and $7 million equivalent from IDB fund) in local currency to BML to develop an LCF. Under a subsidiary loan and grant agreement with MMA, GOM would relend the fund to MMA for the setting up of the extended CIB, establishment of STR, and a feasibility study and preparation of CGS. GOM has indicated that the terms of the loans to BML and MMA would not exceed 15 years, including a 3-year grace period. These loans and grant will be disbursed over 3 years, subject to a midterm review after 18 months on disbursement progress and refinement of the arrangements as needed. 9. The structure of fund flows under FGIAs and SGIAs for ADB and IDB funds at appraisal are presented in Figures A8.2–A8.6. 10. Changes made during the project. The summary of key changes are as follows: 11. Cancellation of the loan to MMA. With memo dated 21 August 2013, the loan amount of SDR1,744,098 was cancelled and the overall loan size was reduced from SDR3,622,000 to SDR1,877,901.65 as a result of identified savings coming from the reduction in consultancy and equipment inputs for MED and more cost-effective solution for CIB enhancement and central registry for movable property for MMA. The allocation of loan and grant proceeds to several categories were adjusted accordingly and the Financing Agreement was amended to reflect these changes on 20 February 2014 as agreed by the Beneficiary on 4 April 2014. 12. Increase in ceiling of BML imprest account. With memo dated 4 February 2014, the ceiling of advances to SGIA assigned to BML was increased from $150,000 to $750,000 to meet the immediate funding commitments of the LCF component of the project. 13. Change in location of SGIA. With memo dated 11 November 2014, the location of SGIA established by BML was changed from MMA to BML and the financing of the said SGIA was made through the FGIA at MMA in the name of MOFT for financing LCF activities. The change was made as per advice of MOFT as MMA disallowed BML from accessing funds in its SGIA as BML was not considered as an entity to GOM. With this change, MOFT transferred funds to an account located in BML.

92 Appendix 8

14. Change in source of funding for SGIA and closing of two accounts in MMA. With memo dated 25 March 2015, the financing of SGIA of BML was changed from FGIA in MMA in the name of MOFT to FGIA in the name of MED and the two accounts in MMA (FGIA in the name of MOFT and the SGIA in the name of BML) were closed. The change simplified the project implementation with only four FGIAs by MED and MMA, managing their respective loan and grant accounts and BML continued to manage its SGIA under LCF. 15. Increase in ceiling of MED imprest account. With memo dated 30 July 2015, the ceiling of advance for FGIA for grant was increased to the lower of (i) the estimated expenditure for the first 6 months of the project implementation or (ii) from 10% of the grant amount to $700,000 to meet the funding commitments of MED, especially to accommodate the monthly expenses of consultants. MED requested to fund payment of consultant firm’s monthly invoices through the imprest account instead of using direct payment, which required at least $100,000 for each application. The increase in ceiling was applicable to the MED-managed, grant-funded FGIA only and the ceiling for other imprest accounts remained unchanged. 16. Increase in ceiling of MMA imprest account. In August 2016, MMA awarded two consultancy contracts for the establishment of STR for $303,503 and enhancement of CIB for $425,000. Expected milestone payments due within 6 months was $431,396. With memo dated 16 September 2016, to meet these funding commitments for procurement and consultancy services, the ceiling of the advance for FGIA was increased to the estimated expenditure for the first 6 months of project implementation. 17. Increase of BML’s LCF. With memo dated 2 February 2018, the BML’s LCF under component 2 was increased by $1,200,000 to a total of $2,700,000. The increased LCF was intended to maximize the loan utilization and to promote gender equality further by focusing on MSMEs led by women. The SLA between MOFT and BML dated 25 June 2013 was amended on 20 February 2018 to reflect these changes.

Appendix 8 93

Figure A8.2. Ministry of Economic Development Imprest Accounts Fund Flow Diagram at Appraisal

Provision of

services

Payment

Contracts, documents submission

ADB

MOFT Loan

Agreement

MED (PMU)

FGIA – ADF Grant

FGIA – ADF Loan

Consultants including PMC

Equipment Suppliers

fund flow

Information (documents)

ADB = Asian Development Bank; ADF = Asian Development Fund; CSF = cost sharing facility; FGIA = first-generation imprest account; MED = Ministry of Economic Development; MOFT = Ministry of Finance and Treasury; PMC = project management consultants; PMU = project management unit. Source: ADB Project Administration Manual

Submission of documents Payment

Transfer of Funds

Guide and support Submission of documents and reporting

System Development Consultants

Submission of documents

94 Appendix 8

Figure A8.3. Maldives Monetary Authority Imprest Accounts Fund Flow Diagram at Appraisal

Provision of services

Payment

Consultant’s contracts

ADB

MOFT

Loan agreement

MMA (PMU)

FGIA – ADF Grant

FGIA– ADF Loan

(MMA)

Consultants including PMC

System Development Consultants

fund flow

Information (documents) flow

ADB = Asian Development Bank; ADF = Asian Development Fund; FGIA = first-generation imprest account; MMA = Maldives Monetary Authority; MOFT = Ministry of Finance and Treasury; PMC = project management consultants. Source: ADB Project Administration Manual


Submission of Documents and reporting

Transfer of funds

Appendix 8 95

Figure A8.4. Bank of Maldives Imprest Account Fund Flow Diagram at Appraisal

Submission of

documents

Supervisio

Subloans (transfer of funds)

ADB

MOFT: FGIA Loan

Agreement

PMU at BML: SGIA

LCF Desk at BML

Sub-borrowers

BML Local Branches – LCF Desk

fund flow


ADB = Asian Development Bank; BML = Bank of Maldives; FGIA = first-generation imprest account; LCF = Line of Credit Facility; MMA = Maldives Monetary Authority; PMU = project management unit; SGIA = second-generation imprest account. Note: FGIA was a dollar account while SGIA was a rufiyaa account (MOFT was responsible for foreign exchange risk) Source: ADB Project Administration Manual

Submission of documents

Instruction

Instruction Reporting

Submission of documents and reporting

Transfer of funds

Transfer of funds Reporting

96 Appendix 8

Figure A8.5. Ministry of Economic Development Imprest Account Fund Flow Diagram (from Islamic Development Bank Fund) at Appraisal

IDB

MOFT Loan

Agreement

MED (PMU)

Imprest Account – Loan

CSF operation

fund flow


IDB = Islamic Development Bank; CSF = cost sharing facility; MED = Ministry of Economic Development; MOFT = Ministry of Finance and Treasury; PMU = project management unit. Note: The fund would be implemented separately and not be mixed with ADB’s imprest accounts. More detailed operation mechanism was further elaborated by IDB before ADB’s loan negotiations with the Government of Maldives. Source: ADB Project Administration Manual


Transfer of Funds

Guide and support Submission of documents and reporting

Appendix 8 97

Figure A8.6. Bank of Maldives Imprest Account Fund Flow Diagram (from Islamic Development Bank Fund) at Appraisal

Submission of

documents

Supervision

Subloans (transfer of funds)

IDB

MOFT: FGIA Loan

Agreement

PMU at BML: SGIA

LCF Desk at BML

Sub-

borrowers

BML Local Branches –

LCF Desk

fund flow


IDB = Islamic Development Bank; BML = Bank of Maldives; FGIA = first-generation imprest account; LCF = Line of Credit Facility; MMA = Maldives Monetary Authority; PMU = project management unit; SGIA = second-generation imprest account. Note: FGIA was a dollar account while SGIA was a rufiyaa account (MOFT was responsible for foreign exchange risk. The fund would not be mixed with ADB’s imprest accounts. More detailed operation mechanism was further elaborated by IDB before ADB’s loan negotiations. Source: ADB Project Administration Manual

Submission of documents Instruction

Instruction Reporting

Submission of documents and reporting

Transfer of funds Transfer of funds

Reporting

Consultants

Consultant’s contracts

Payment

98 Appendix 8

C. PROCUREMENT PLAN 18. The following table lists the procurement activity, which was envisaged at appraisal based on the information in IMSMEDP Project Administration Manual as of March 2012.

Table A8.2: Estimated Consulting Services, Goods, and Works Contracts at Appraisal General Description

Contract Value ($)

Number of Contracts

Recruitment/ Procurement

Advertisement Date

Assignment

Component 1: Business support infrastructure built Project management consultancy package for national project manager; national BDSC coordinator; two economic associates; local audit firm; international gender expert; national gender expert; international M&E expert; national M&E expert; two international legal experts; local legal firm; and CGS expert

1,611,960 (1,569,000 +

contingency 42,960)

13 Individual Q2 / 2012

international and national

BDSC consultancy package for program management consultants (team includes national SME development specialist; international SME capacity building; international SME value chain specialist; international SME renewable energy specialist; international SME energy efficiency specialist; and national capacity building specialist)

928,400 (844,000 + contingency 84.400)

1 QCBS

80:20 Q2 / 2012


Capacity building and trainings for BDSCs, MED, and related stakeholders

176,000 (160,000 + contingency 16,000)

Multiple Multiple (QCBS 80:20 or Direct)

Q2 / 2012 -

Procurement packages for existing five BDSCs 430,000 - NCB Q1 / 2012 -

Procurement packages for two new BDSCs 175,000 - NCB Q1 / 2012 -

Component 2: Access to finance improved for private sector MSMEs Consultancy package of program management consultants for access to finance (including CIB specialist, STR specialist, and MIS specialist/team leader)

770,000 (700,000 + contingency 70,000)

1

QCBS 80:20

Q2 / 2012 international

Procurement of vendor for CIB system reconfiguration 1,100,000 (1,000,000 +

contingency 100,000) -

QCBS 80:20

Q4 / 2012 international and national

Procurement of vendor for development of software and procurement of hardware for STR system development

1,210,000 (1,100,000 + contingency 110,000)

- QCBS 80:20


Component 3: Technologies for MSME development established Consultancy package for program management consultants for enabling technology component (PPP specialist; e-governance specialist; solar technology specialist; and MIS specialist)

330,000 (300,000 + contingency 30,000)

1 QCBS

80:20 Q3 / 2012


Procurement of vendor for establishing MSME portal; judgment debt database; seven CSCs related equipment

1,375,000 (1,250,000 + contingency 12,500)

- QCBS 80:20


Appendix 8 99

General Description

Contract Value ($)

Number of Contracts

Recruitment/ Procurement

Advertisement Date

Assignment

and facilities and internet connectivity for each of the seven BDSCs; computer equipment for running the database system; and human resources support for all these BDSCs and CSCs. ( - ) = not available; BDSC = business development service center; CGS = credit guarantee scheme; CIB = Credit Information Bureau; CSC = citizen service center; M&E = monitoring and evaluation; MED = Ministry of Economic Development; MIS = management information system; MSME = micro, small, and medium-sized enterprise; NCB = national competitive bidding; PPP = public‒private partnership; Q = quarter; QCBS = quality-cost-based selection; SME = small and medium-sized enterprise; STR = secured transactions registry. Source: ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to the Government of Maldives for the Inclusive Micro, Small, and Medium-Sized Development Project. Project Administration Manual, Appendix 4 (accessible from the list of linked documents in Appendix 2). Manila. 19. The following table lists the completed procurement activities under IMSMEDP based on the revised procurement plan (version 12) dated December 2018 and other related project records. 20. Under component 1, 13 individual consultants were recruited for project management unit (PMU) using international competitive selection and their services began at the end of 2013. The renewable energy specialists were dropped with revision of the design and monitoring framework in September 2016. The consultancy firm for institutional and legal infrastructure of MSMEs started with 2 years delay. Three IT-related procurement for MED’s PMU and BDSCs using shopping method were delayed by more than 2 years.

21. There were four consultancy packages for CIB and secured transactions registry (STR) under component 2. The consultancy firm for CIB software, Dunn and Bradstreet, was recruited using single source selection. The STR operational and legal specialists were replaced in 2015 with domain expert and system developer since legal work was already completed under the earlier Private Sector Development Project. Four packages for hardware infrastructure of CIB and STR, procured using shopping method was delayed by 4 years.

22. There were two consultancy packages, a civil works contract and two procurement packages under component 3. Three individual consultants were recruited for BOLI (means “shell” in Maldivian [also known as Dhivehi], name of the online MSME business portal) software, changed from a firm selection in 2014, using international competitive selection. The financial record-keeping software for MSMEs under MIRA was added as a new package using single source selection. The civil works contract for citizen service center was included as a new item. The judgement database was dropped. Consulting services started earliest in 2015.

100 Appendix 8

Table A8.3: Consulting Services, Goods, and Works Contracts at Completion Package No.

General Description

Implementing

Agency

Estimated

Value

Awarded Contract

Value

Recruitment/Procurement

Contract Award Date

Completion

Date

Comments CONSULTING SERVICES Component 1: Business support infrastructure built Project Management Unit

G01 Project Manager/PMU Head MED 147,000 31,892.34 ICS 03/02/2015 24/04/2017 Ibrahim Firushan, G12816 G01 Project Manager/PMU Head MED 147,000 31,756.41 ICS 04/08/2016 30/06/2018 Uzma Abdul Latheef,

G16238 (replacing Ibrahim Firushan)

G01 National Project Manager MED - 2,811.46 - 08/12/2013 07/12/2016 Ahmed Munawar, G10834 G01 National Project Manager MED - 6,807.03 - 26/08/2014 30/12/2016 Haifa Naeem, G12074 G02 BDSC Coordinator MED 147,000 113,176.57 ICS 13/12/2013 30/06/2018 Lamya Ibrahim, G10833 G03 Economic Associate –

Procurement MED 147,000 89,436.50 ICS 13/12/2013 30/06/2018 Aminath Maleela Solih,

G10786 G04 Economic Associate –

Disbursement MED 147,000 37,133.68 ICS 13/12/2013 19/10/2016 Fathimath Thasneem,

G10785 G04 Economic Associate –

Disbursement MED 147,000 57,748.48 ICS 05/11/2015 30/06/2018 Mariyam Nasha, G14135

G04 Economic Associate – Disbursement

MED - 2,010.40 - 12/08/2015 14/08/2015 Aishath Sobaha, G13749

G05 Graphic and Information Designer

MED 8,000 7,175.59 ICS 26/08/2016 09/07/2016 Faruhad Mohamed, G16114

G05 Graphic Consultant MED 3,000 2,488.24 ICS 28/04/2018 30/06/2018 Ahmed Shafy, G19579 G05i Public Relations Officer MED 15,000 8,656.35 ICS 31/05/2017 21/12/2017 Ali Zayan Fayaz, G17527 G14 Consulting services for CSC

(design and creation of BOQ) MED 4,600 4,558.78 ICS 15/11/2017 06/04/2018 Mohamed Yoosuf, G18710

BDSC Institutional and Legal Infrastructure G06A Consultancy package for

MSME institutional and legal enhancement

MED 1,310,000 1,817,611.65

QCBS 15/01/2015 30/06/2018 E.Gen Consultants Ltd, G12875

G06B Microfinance Specialist MED 99,000 72,378.60 ICS 08/07/2014 30/12/2016 A2f Consulting (Modibo Camara), G11907

G07 Audit Firm MED 70,000 41,151.67 LCS 16/02/2015 30/06/2018 FJS Associates LLP, G13071

Component 2: Access to finance improved for private sector MSMEs Strengthening CIB and STR G08A Establishment of STR MMA 300,000 303,503.00 QCBS 08/08/2016 30/06/2018 Vinstar Consulting

International, New Zealand, G16023

G08B CIB Legal Specialist MMA 70,000 71,485.00 ICS 01/06/2014 30/06/2016 Michelle Parnell, G11718 G08C CIB Operational Specialist MMA 70,000 42,891.00 ICS 03/07/2014 22/08/2016 Jeffrey Major, G11849

Appendix 8 101

Package No.

General Description

Implementing

Agency

Estimated

Value

Awarded Contract

Value


Contract Award Date

Completion

Date

Comments G10 CIB Enhancement MMA 425,000 425,000.00 QCBS 11/08/2016 30/04/2017 Dunn and Bradstreet

Technologies and Data Services Pvt. Ltd., India, G15976

Component 3: Technologies for MSME development established MSME Portal, CSCs G09A Enhancement of BOLI

software and rollout in CSCs MED 100,000 278,651.74 ICS 04/05/2015 30/06/2018 Programmers:

Hamdhulla Umar G13179; Imthihan Farooq G13198; and Ibrahim Nashwan M. Shahid G13205

G09C SAP EHP MIRA 200,000 200,000.00 SSS 24/04/2018 30/06/2018 Invenio Business Solutions, G18956

GOODS AND WORKS CONTRACTS Component 1: Business support infrastructure built Project Management Unit

G12A Hardware requirements for PMU

MED 99,000 4,027.08 Shopping 29/12/2014 30/06/2018 View Net Computers, laptops/mouse, SSD card, G11680

G12B Hardware requirements for PMU printer

MED 99,000 4,957.70 Shopping 06/01/2015 30/06/2018 Simdi office automation, G11681 and various, G13781

BDSC Institutional and Legal Infrastructure G13 Hardware requirements for

MED enhancement and business center connectivity

MED 78,720 83,471.08 Shopping 13/06/2017 04/08/2017 Pestex (copier); Personal Computers (2 laptops); Simdi (scanner, printer); Megachip (33 desktops); Roseware (Bladeserver); Click Computers (6 desktops); Personal Computers (RAM, scanner, monitor); Viewnet (projectors and laptops); G17679

Component 2: Access to finance improved for private sector MSMEs Strengthening CIB and STR G12Di CIB system reconfiguration -

server, windows, Vmware, and backup software

MMA 33,003 32,684.72 Shopping 23/10/2016 25/05/2017 Maxcom, Megachip and Focus Computers, G17232

G12Dii CIB system reconfiguration - Linux, firewall,

MMA 49,755 37,550.90 Shopping 26/10/2016 25/05/2017 Focus Computers, G17233, Redhat,

102 Appendix 8

Package No.

General Description

Implementing

Agency

Estimated

Value

Awarded Contract

Value


Contract Award Date

Completion

Date

Comments antivirus,network monitoring

software, and Tableau G17236, Zoho Corp,

G17237, and Tableau, G17238

G12Diii CIB system reconfiguration - load balancer

MMA 6,000 14,133.88 Shopping 05/04/2017 30/06/2018 Focus Computers Pvt Ltd MMA - Load Balancer included in the Bill of Materials provided by Dunn and Bradstreet, G17021

G12Div Development of software and procurement of hardware for STR system development

MMA 65,000 45,443.41 Shopping 08/11/2017 23/11/2017 Roseware (server); Megachip (windows license); Maxcom (SQL server); Megachip (Vmware); Various: G18301

Component 3: Technologies for MSME development established MSME Portal, CSCs

G11 Hardware requirements for BOLI enhancement

MED 5,000 31,643.15 Shopping 13/11/2017 30/06/2018 Megachip, G18238 - 3 desktops for BOLI use

G14i Development of CSC procurement of goods

MED 95,000 86,509.55 Shopping 22/05/2018 30/06/2018 Mirza Maldives, G19193

G14ii Development of CSC procurement of works (civil works)

MED 90,000 80,915.91 Shopping 22/05/2018 30/06/2018 Mirza Maldives, G19006

BDSC = business development service center; BOLI = means “shell” in Maldivian (also known as Dhivehi), name of the online MSME business portal; BOQ = bill of quantities; CIB = Credit Information Bureau; CSC = citizen service center; ICS = international competitive selection; LCS = least-cost selection; MED = Ministry of Economic Development; MIRA = Maldives Inland Revenue Authority; MMA = Maldives Monetary Authority; MSME = micro, small, and medium-sized enterprise; PMU = project management unit; QCBS = quality-cost-based selection; SAP EHP = System Applications and Products Enhancement Package; SME = small and medium-sized enterprise; SSD = solid state drive; SSS = single source selection; STR = secured transactions registry. Source: Asian Development Bank IMSMEDP Revised Procurement Plan version 12 dated December 2018 and related project records.

Appendix 9 103

SUSTAINABILITY ASSESSMENT OF PROJECT’S KEY ACHIEVEMENTS

A. Business Support Infrastructure Built 1. Asian Development Bank (ADB)’s Inclusive Micro, Small, and Medium-sized Enterprise Development Project (IMSMEDP), in partnership with the Islamic Development Bank (IDB), aimed at strengthening access of the micro, small, and medium-sized enterprises (MSMEs) to business development services (BDS) by supporting institutional, operational, infrastructural, and human resource capacity development of business development service centers (BDSCs) in line with the Small and Medium Enterprise (SME) Act (2013). 2. For that purpose, starting 2014, the geographical coverage of BDSCs were expanded to all seven provinces in Fonadhoo, Hanimadhoo, Kudahuvadhoo, Kulhudhuffushi, Malé, Naifaru, and Thinadhoo. Both ADB and IDB provided resources to cover the capacity building, procurement of necessary physical and information technology (IT)-related infrastructure and operational and staffing costs. 3. Furthermore, 32 different BDS were offered by BDSCs (list provided in Appendix 1). A business incubator program and cost-sharing facility were also introduced (i) to support product development in identified priority sectors; (ii) to improve product quality standards; (iii) to develop business management skills through customized training; and (iv) to support market research for identified value chain business opportunities.

4. Towards strengthening the long-term sustainability of BDSCs, one of the objectives of IMSMEDP was to turn the seven BDSCs into a viable, sustainable, and privately-managed national BDS delivery network. The experience under ADB’s Private Sector Development Project, which helped set up five BDSCs earlier, was that their operations discontinued in 2012 following the closure of ADB funding support. Thus, the original operational plan at appraisal of IMSMEDP was to increase revenue stream via fee-based services to MSMEs and develop linkages with other public and private BDS providers. However, the policy decision of the Ministry of Economic Development (MED) has been to offer BDS free of charge to MSMEs at the nascent stages of the sector’s development. 5. In addition, instead of privately-managed BDSC network, the Government of Maldives (GOM) on 19 March 2017, through a special presidential decree, established the Business Center Corporation Limited (BCC) as a state-owned enterprise to be the legal vehicle for overseeing the management of seven BDSCs and providing support to the overall development of the MSME sector under MED’s direction with advisory support from the SME Council, which was established in 2014 as advisory body to MED to develop a national integrated strategy for the promotion of MSME sector and monitor and coordinate programs. 6. Following the study tour undertaken by MED to Malaysia (SME Corporation) and Singapore (SPRING) during 15‒22 April 2017 and having considered similar SME support systems in these countries,1 GOM opted to create a state-owned corporation to lead the implementation of GOM’s SME support programs and pool resources for a unified MSME development agenda. The proposed BCC structure is presented in Figure A9. The BCC

1 SME Corporation Malaysia is a central coordinating agency under Ministry of International Trade and Industry,

formulating overall policies and strategies for small and medium-sized enterprises (SMEs) and acts as a secretariat to the national SME Development Council chaired by Prime Minister. Spring Singapore is an agency under Ministry of Trade and Industry helping enterprises in (i) financing, (ii) capability and management development, (iii) technology and innovation and (iv) access to markets.

104 Appendix 9

operations started in 14 July 2017 under the Malé business center and its board, including managing director were set up. A memorandum of understanding was signed with the Maldives National University for training programs and SME-focused certificates to assist BCC.

Figure A9. Proposed Corporate Model for Business Center Corporation

Source: Government of Maldives. Ministry of Economic Development. Report dated July 2017.

7. In the long run, the operations of the BDSCs are expected to be financed through revenues generated by the assets and/or resources transferred to BCC. For that purpose, MED acquired a 25-year lease on 5,000 square feet land in Hulhumale Industrial zone, which will be developed as SME Industrial Park and act as the main hub of BCC and regional BDSCs. The SME Industrial Park is expected to generate rental income. The construction of the SME Industrial Park started in 12 October 2017 and has not been finalized yet. The SME Industrial Park will host (i) manufacturing factories; (ii) BDSC for the greater Malé region; (iii) warehousing for SMEs, competing for import and export markets; (iv) rental office space and conference facilities; (v) space for research and development, and business incubation services; (vi) packaging center; (vii) Youth City; and (viii) retail outlets for local products. Furthermore, all assets and inventory of the six regional BDSCs, all assets and inventory of two packaging centers in Hithadhoo and Kulhudhuffushi, and staff currently employed in seven BDSCs will be transferred to BCC. The projected income sources and expenditures of BCC is presented in Table A9.1.

Table A9.1: Projected Income and Expenditures for Business Center Corporation (Rf’000) Item 2017 2018 2019 2020 2021 2022

Projected Income Industrial park rent - 912 1,824 2,256 2,335 2,422 Industrial park product sales - - 2,520 6,972 9,027 13,632 Total Income - 912 4,344 9,228 11,362 16,054 Projected Operation Expense 6 BDSC staff cost 4,380 4,380 4,380 4,380 4,380 4,380 6 BDSC operational cost 4,503 4,503 4,503 4,503 4,503 4,503

Appendix 9 105

Item 2017 2018 2019 2020 2021 2022 Enterprise development staff cost 8,178 8,178 - - - - BCC staff cost - - 1,188 1,188 1,188 1,188 BCC program and operation cost 3,660 4,122 5,243 6,063 8,023 HDC land lease 312 312 312 312 312 64. 312 Loan interest payment 1,877 4,170 3,753 3,336 2,919 2,502 Loan principle payment - - 3,000 3,000 3,000 3,000 Total Operational Expenses 19,250 25,203 21,259 21,963 22,366 23,908 Projected Capital Expenditure Building cost 15,000 15,000 - - - - BCC equipment 14,564 - - - - - Total capital expenditure 29,564 15,000 - - - - Total Funding Required 48,814 40,203 21,259 21,963 22,366 23,908

(-) = not available, BDSC = business development service center, BCC = Business Center Corporation Limited, HDC = Housing Development Corporation, Rf = rufiyaa. Notes: Assumption is that BCC will be fully operational in 2019. BCC is supported by Enterprise Development staff of Ministry of Economic Development for the initial 2 years. Source: Ministry of Economic Development report “Sustaining Business Development Services and Business Centers in Maldives” dated 18 June 2017, submitted to ADB on 20 June 2017 via Ministry of Finance Treasury Letter Ref: 13-N1/PRIV/2017/339.

8. The development of the proposed SME Industrial Park is expected to cost Rf30 million and the equipment cost is estimated at Rf14.6 million. Acknowledging the need for financial injections to the BCC in its initial years to cover the operating losses, SME Council decided on 20 March 2017 to set aside Rf10 million for 2017, of which Rf5 million will be utilized as 20% equity for sanctioning the bank loan and Rf5 million for operational cost of BCC and Rf5 million each year during 2018‒2021 from the annual SME Fund allocation of Rf50 million. These cash injections by GOM are meant to support the development of BCC land assets and the operations of BCC and BDSC network in its initial years. Table A9.2 presents the proposed funding for operational and capital expenses of BCC. 9. GOM also requested the extension of IMSMEDP until 31 December 2018 to allocate balance of the project funds to cover the funding gap for the operating costs and expected investments of the BCC towards developing of its land assets. ADB rejected GOM’s request for an additional one year extension because (i) the recurrent operational costs such as staff salaries for the BCC, which is a government-owned enterprise could not be funded by ADB; (ii) the support for BCC and SME Industrial Park was outside the scope of the project; (iii) there was no guarantee that the construction and operationalization of the SME Industrial Park could be completed in time to start generating the proposed revenues; and (iv) majority of original project targets were already met and the project was due for completion following the earlier one year extension.

Table A9.2: Proposed Funding Sources for Operational and Capital Expenses (Rf’000)

Item 2017 2018 2019 2020 2021 2022 SME fund approved allocation 2,189 5,000 5,000 111. 5,000 112. 5,000 5,000 SME fund to be approved - 2,230 11,915 117. 7,735 118. 6,004 7,854 SME industrial park income - 121. 912 4,344 123. 9,228 11,362 16,054 Bank loan for building 15,000 15,000 - - - - ADB project funds approved 8,178 - - - - - ADB project funds to be approved - 8,178 - - - - IDB project funds approved 8,884 - - - - - IDB project funds to be approved 14,564 8,884 - - - - Total Proposed Financing 48,814 40,203 21,259 21,963 22,366 23,908 BCC reserve 7,812 - - - - -

106 Appendix 9

(-) = not available, ADB = Asian Development Bank, BCC = Business Center Corporation Limited, HDC = Housing Development Corporation, IDB = Islamic Development Bank, Rf = rufiyaa, SME = small and medium-sized enterprise.

Source: Ministry of Economic Development report “Sustaining Business Development Services and Business Centers in Maldives” dated 18 June 2017, submitted to ADB on 20 June 2017 via Ministry of Finance Treasury Letter Ref: 13-N1/PRIV/2017/339.

10. In summary, given the funding shortage for the proposed BCC in the medium term and that the existing BDS do not generate a revenue stream, the financial sustainability of the BDSC network would require budget support from GOM. While there are international examples for strong role of government in providing MSME-based services such as the models in Malaysia and Singapore, it is recommended that the BCC develops greater commercial orientation over time by offering fee-based services to MSMEs such as training, loan monitoring, mentoring for beneficiaries of incubator programs, and joint ventures with industry until projected revenue sources from the SME Industrial Park become a reality. As the experience with BDSCs has made positive contributions to enhancement of MSME sector’s capacity, sustainability of their operations is critical in the long run. The GOM is committed to providing the necessary support in the interim.

B. Access to Finance Improved 11. Line of Credit Facility (LCF) of Bank of Maldives (BML). The Phase I of the LCF under IMSMEDP was launched on 6 January 2014. 172 applications were received by BML, of which 100 were approved (Rf21,843,500) and 98 loans were disbursed (Rf 21,743,500) (Table A9.3). 12. Terms of lending. Under the subsidiary loan agreement (SLA) between the Ministry of Finance and Treasury and BML, signed on 25 June 2013, GOM relent the $1.5 million equivalent from ADB funds (in local currency) to BML to develop the LCF. The terms for relending to BML included interest (semiannually at the rate of 3% per annum) sufficient to reflect costs of raising such funds locally but not less than ADB’s ordinary capital resources lending rates, inclusive of foreign exchange risk and a repayment period of 15 years inclusive of a grace period of 3 years.

Table A9.3: Applications Received for Line of Credit Facility Phase I Category No. of Applications Amount (Rf) %

Tourism 16 6,196,999 27 Fisheries 13 2,945,978 13 Agriculture 27 4,120,000 18 ICT 5 1,200,000 5 Taxi renewal 2 463,250 2 Open category 109 23,944,750 36 Total 172 38,870,977 100

ICT = information and communication technology, Rf = rufiyaa. Notes: Open category includes start-up and expansion of businesses (trade, tailoring, resort supply, printing, construction, photography, carpentry, e-commerce, fuel supply, pest control, pharmaceuticals, day care), purchase of vehicle and repair vehicles. Source: Bank of Maldives Limited.

13. The maximum subloan size for qualified enterprises was the rufiyaa equivalent to $80,000, based upon the Maldives Monetary Authority’s reference exchange rate. The terms and conditions of onlending was on a commercial basis at the prevailing market rates of interest and tenor, reflecting costs of raising such funds locally and guaranteeing adequate spread of interest rates for BML to cover transaction costs and risks. The borrowers were required to pay an upfront processing fee of 1% to BML and any assets acquired with the credit line were provided as collateral. The qualified enterprises were defined as micro (less than 5 employees), small (less

Appendix 9 107

than 30 employees), or medium-sized (less than 100 employees) as defined by MED and SME Council and were required to be registered at the MED MSME database to be selected for the subloan. The LCF targeted at least 15% of the loan reaching to women and youth. 14. The repayment from the qualified enterprise was for a period up to 8 years with a grace period of one year, based on cash flow projections. The interest rate for qualified enterprises was set at 9%. BML did not charge a collateral for subloans below Rf50,000. For subloan amounts between Rf50,001 to Rf500,000, the collateral was 20% less than the prevailing BML collateral requirements; and for subloan amounts between Rf500,001 to Rf1,000,000, the collateral was 10% less than the prevailing BML collateral requirements. For subloans exceeding Rf1,000,000, the collateral charged was at the prevailing BML collateral requirements. GOM covered the lending risks due to reduced collateral and the default coverage by GOM was set at 80%. 15. Selection of qualified borrowers under LCF. BML, with a dedicated development banking unit, played a critical role under IMSMEDP for channeling ADB’s LCF to MSMEs given its extensive branch network in almost all islands, existing customer relationships, and trained loan officers, capable of screening and inspecting loan applications and monitoring loan performance.2 BML also effectively collaborated with MED and major BDSCs during loan due diligence. BDSCs assisted the borrowers in preparing loan applications with business plans. The beneficiaries were selected based on credit assessment for the past 12 months, financial actuals and projections of the business feasibility and sustainability, repayment capacity of the applicant, and whether the collateral met the requirement. The supporting documents such as business registration, tax clearance from Maldives Inland Revenue Authority for existing businesses and financial statements for the past 12 months were required. Mobile IT-based banking applications were used to reach out clients. These factors contributed to the good performance of subloans. 16. BML remained in compliance with the eligibility criteria set out by IMSMEDP, including among others, (i) financial soundness, adequate credit and risk management policies, compliance with prudential regulations, acceptable corporate and financial governance and management practices, autonomy in lending and pricing decisions, and monitoring of qualified projects. The performance of LCF as presented below point to financial sustainability of the scheme.

17. Furthermore, due to awareness building of BML early in the project, BML ensured that subloans were selected based on the criteria that recipients did not engage in any restricted business activities stated by ADB and activities or practices that would harm or adversely affect the environment. BML’s management confirmed that the internal loan due diligence process complied with the relevant Maldivian laws and regulations such as the Environment Protection and Preservation Act of Maldives (Law 4/93) – 19 April 1993.

18. Disbursement of LCF. Under Phase I of the LCF implemented during 2014‒2017, out of 172 applications received, 100 subloans were approved, of which 98 subloans (Rf21.7 million or around $1.4 million) were disbursed (Table A9.4). 37 youth and 30 women benefited under Phase I. 80% of LCF loans were given to businesses in sectors other than fisheries and tourism, which contributed to the diversification of the economy.3

2 In 2018, BML had a total of 265,000 customers; 37 branches and 102 automated teller machines in 20 atolls, 277

cash agents in 165 islands and 42 self-service banking centers. The size of BML’s loans to business and individuals reached Rf12 billion and customer deposits reached Rf15 billion in 2018. BML also administered Rf1 billion of government loan schemes. (Bank of Maldives. Annual Report 2018. Malé.)

3 Loans to private sector by commercial banks in Maldives stood at Rf18.5 billion at the end of 2016, of which 39% was allocated to tourism, 3% to fishing, 6% to transport and communication, 21% to construction and real estate,

108 Appendix 9

Table A9.4: Disbursement of Line of Credit Facility Phase I As of March 2019

No. of Loans

Disbursement

(Rf)

Disbursement

($)

% of Approved

Loans

% of Funds

Allocated Funds allocated from ADB - 23,130,000 1,500,000 - - Funds claimed from ADB - 21,307,684 1,381,821 - - Disbursement to Beneficiaries Fully disbursed 82 19,657,400 1,274,799 90.0 85.0 Partially disbursed 16 1,180,950 76,586 5.4 5.1 Total disbursed 98 20,838,350 1,351,385 95.4 90.1 Outstanding funds with BML - 469,334 30,437 - - Disbursement to Beneficiaries by Sector Tourism 9 2,950,000 191,310 13.5 12.7 Fisheries 7 1,631,000 105,772 7.5 7.1 ICT 3 650,000 42,153 3.0 2.8 Open category 75 15,362,500 996,271 70.3 66.4 Agriculture 4 1,150,000 74,578 5.3 5.0 Total Projects Financed 98 21,743,500 1,410,084 99.6 94.0

- = not applicable; ADB = Asian Development Bank, BML = Bank of Maldives, ICT = information and communication technology, Rf = rufiyaa, $ = US dollar. Notes: 1. Applicants requesting for crop-planting loans were allocated to the open category in February 2016 to ensure full

disbursement of the credit line. 2. Out of 16 partially disbursed customers, 10 customers informed that they did not want the balance payment and

5 customers wanted the payment amounting to Rf453,050 ($29,381). For partially disbursed customers, the amount stated refers to actual disbursement. The full loan value amounted to Rf2,086,100.

Source: Bank of Maldives Limited.

19. Recovery performance of LCF Phase I. Out of the 98 subloans as of March 2019, 29 (30%) were paid off, 57 (58%) had regular payment without overdue, 5 (5%) had repayment overdue but more than a month and only 7 (7%) had payment overdue and not performing (Table A9.5). The nonperforming loan (NPL) ratio of LCF was 7%, lower than BML’s 12.2% average NPL ratio during 2014‒2016. BML annual reports of 2015 and 2016 reported NPLs of 20.3% and 9.3%, and 7% in 2014, 2015, and 2016, respectively. No default case was documented as project targeted 2-3% with maximum acceptable default rate at 6% for determining scheme’s viability.

Table A9.5: Recovery of Line of Credit Facility Phase I Repayment

(as of March 2019)

Description No. of Loans

Outstanding (Rf)

Loans paid off Loans paid off 29 0 Repaid without any overdue

The customer regularly pays the repayment amount according to the repayment schedule as agreed in the sanction

57 8,238,485

Repayment overdue but performing

Repayment is overdue but less than a month 0 0 Repayment is overdue but more than a month 5 771,328

Repayment overdue but not performing

The repayment amount is overdue and it has exceeded 90 days

7 979,485

Total Repayment of all the disbursed projects 98 9,989,298 Rf = rufiyaa. Source: Bank of Maldives Limited.

20. Evaluation of MSMEs financed under LCF Phase I. A survey was conducted by MED

17% to commerce and 14% to other sectors. (Government of Maldives. Maldives Monetary Authority. Monthly Statistics. March 2017. Volume 18. Malé.)

Appendix 9 109

and BML in March 2016 to collect primary data about 63 MSMEs financed under LCF Phase I, including project site inspections and personal interviews with the beneficiaries. The key areas covered by the survey included fund utilization, business continuity, sales, job creation and geographical distribution of LCF. The summary of the results are as follows, indicating positive contribution of the LCF to the MSME sector and the economy.

(i) Fund utilization. During the inspections, the initial fund utilization plans were compared with the actual fund utilization. It was observed that 62 out of 63 beneficiaries had utilized funds in activities or acquiring assets and services that were directly related to the main business and only one beneficiary utilized the funds in an activity other than directly related to the project.

(ii) Business continuity. Business continuity was assessed as it has direct relation to the repayment capacity of the beneficiaries. It was found out that 54 out of 63 businesses (86%) were operating the same business as proposed at the time of approval whereas, 3 businesses (5%) switched to a different business other than proposed at the time of approval. Only 6 businesses (10%) completely stopped operating due to reasons such as, partner being terminally ill, insufficient funds to continue the business, and low profitability.

(iii) Sales. The impact on sales volume of the businesses were evaluated to determine the performance and growth potential of the business. It was observed that sales of most of the businesses (38 out of 63 or 60%) increased as a result of the financing received from this loan scheme. However, 15 projects (24%) showed no increase or decrease in average sales and only 2 projects (3%) experienced a decline in average sales. 8 projects (13%) indicated no sales had been made since the disbursement of the loan. Those businesses that experienced a decline in sales indicated that their sales declined due to low demand.

(iv) Job creation. Analysis of the change in number of staff employed by the businesses in comparison to the time of loan approval showed that 24 out of 63 (38%) businesses created new job opportunities by increasing their total staff, and 34 out 63 (54%) businesses neither decreased nor increased the total staff. Only, 5 out of 63 businesses (8%) decreased their total staff. The main reason for dismissal of employees was decrease in sales. The staff turnover was not considered during the review.

(v) Geographical distribution of LCF. The Table A9.6 shows the geographical distribution of 94 loans based on beneficiary location (excluding agriculture category). 39 (41%) projects financed by LCF were in Kaafu (Malé atoll) and the remaining were dispersed across Maldives.

Table A9.6: Geographical Distribution of LCF Phase I Funds

Region Category No. of Loans Amount (Rf‘000) Haa Alif Fisheries 1 232.0 Haa Dhaalu Open 6 520.0 Baa

Open 1 700.0 Tourism 1 500.0

Alif Dhaalu

Open 2 1,000 Tourism 1 1,000.0

Faafu Open 1 48.6 Thaa Fisheries 1 50.0 Gaaf Alif Open 1 700.0 Gaaf Dhaalu

Open 11 2,665.0 ICT 1 50.0

Fisheries 1 50.0

110 Appendix 9

Region Category No. of Loans Amount (Rf‘000) Shaviyani

Open 1 50.0 Fisheries 1 250.0

Noonu Open 1 290.0 Lhaviyani

Open 3 150.0 Tourism 1 200.0

Kaafu

Open 30 5,669.0 ICT 1 300.0

Tourism 6 1,250.0 Fisheries 2 949.0

Laamu

Open 5 1,050.0 ICT 1 300.0

Fisheries 1 100.0 Gnaviyani Open 3 1,450.0 Seenu Open 10 1,070.0

ICT = information and communication technology, LCF = Line of Credit Facility. Source: Ministry of Economic Development and Bank of Maldives report (March 2016).

21. Women Entrepreneurs Loan (WEL). Under the LCF Phase II, WEL, targeting women entrepreneurs, was launched on 13 February 2018. The total relending under BML’s SLA was increased to $2.7 million following the addendum on 20 February 2018. 22. Terms of lending. The existing businesses and women interested in starting up a business in all sectors were eligible to apply. The minimum loan amount under WEL was Rf50,000 and maximum amount was Rf100,000. No collateral was required for loans of Rf50,000; if the loan amount was between Rf50,001 and Rf100,000, the collateral equivalent to 130% of the loan amount was required, acceptable to BML standards. The equity of 15% was required, and if the applicant had already invested for the businesses, invoices and receipts of the capital purchase were needed. The interest rate was 9% and repayment period was a maximum of 8 years including the one-year grace period. The beneficiaries were selected based on credit assessment, business feasibility and sustainability, repayment capacity, collateral, and supporting documents.

23. Disbursement of LCF. During 25 February–1 March 2018, 364 applications were received by BML, of which 74 were approved (Rf3,680,000) and 66 loans were disbursed (Rf3,280,000) (Table A9.7). Only 18% of the allocated funds were disbursed as the WEL scheme was announced late in the project to utilize the undisbursed loan and several applicants were rejected due to lack of and/or late provision of supporting documents, verifying repayment capacity such as business accounts, payment and NPL history and income statements.

Table A9.7: Disbursement of Line of Credit Facility Phase II As of March 2019

No. of Loans

Disbursement

(Rf)

Disbursement

($)

As % of Approved

Loans

As % of Funds

Allocated Funds allocated from ADB - 18,432,000 1,200,000 - - Funds claimed from ADB - 3,196,242 208,089 - - Balance from Phase I - 469,334 30,635 - - Disbursement to Beneficiaries Total approved 74 3,680,000 239,583 - 20.0 Total disbursed 66 3,280,000 213,544 89.1 17.8 Outstanding funds with BML - 385,576 25,103 - - Disbursement to Beneficiaries by Sector Local delicacies 10 498,875 32,479 13.6 2.7 Fisheries 3 150,000 9,766 4.1 0.8 Others 11 542,000 35,286 14.7 2.9

Appendix 9 111

As of March 2019

No. of Loans

Disbursement

(Rf)

Disbursement

($)

As % of Approved

Loans

As % of Funds

Allocated Tailoring 17 839,125 54,631 22.8 4.6 Cake bakery 19 950,000 61,852 25.8 5.2 Agriculture 6 300,000 19,531 8.1 1.6 Total Projects Financed 66 3,280,000 213,545 89.1 17.8

- = not applicable; ADB = Asian Development Bank, Rf = rufiyaa. Notes: Outstanding funds with BML were paid back. Source: Bank of Maldives Limited.

24. Recovery performance. Of the 66 disbursed loans, the performance so far has been satisfactory with 55 (83%) having regular payment without any overdue, 9 (14%) having repayment overdue but performing and 2 (3%) having repayment overdue but more than a month (Table A9.8). The site visits and interviews with women entrepreneurs were conducted in Hulhumale, Malé, Naifaru, and Thinadhoo. They were mainly engaged in family-owned, home-based businesses, and used small loans (Rf50,000) with no collateral requirement, primarily to expand businesses and supplement other income sources. Findings are in Appendix 7.

Table A9.8 Recovery of Line of Credit Facility Phase II

Repayment (as of March 2019)

Description

No. of Projects

Outstanding (Rf)

Loans paid off Loans paid off 0 0.00 Repaid without any overdue

The customer regularly pays the repayment amount according to the repayment schedule as agreed in the sanction

55 2,692,163.43

Repayment overdue but performing

Repayment is overdue but less than a month 9 446,818.01 Repayment is overdue but more than a month 2 99,450.26

Repayment overdue but not performing

The repayment amount is overdue and it has exceeded 90 days

0 0.00

Total Repayment of all the disbursed projects 66 3,238,431.70 Rf = rufiyaa. Source: Bank of Maldives. Source: Bank of Maldives Limited.

25. Other MSME lending products by BML. Besides ADB’s LCF and IDB’s Line of Finance introduced under IMSMEDP, BML made strong efforts to launch its own products targeting MSMEs, based on consulting inputs provided under the project and financed from their own balance sheets. This contributed to the sustainability of improving access to finance for MSMEs. The BML staff received training under ADB’s Regional Workshop on Risk Management in SME Lending in Sri Lanka in March 2018 to improve their capacity in risk assessment. Furthermore, the BDSCs supported credit applications for first-time borrowers. BML’s new MSME loan products included (i) retailers loan (up to 5 times of sales with 10 days processing, no security up to Rf500,000 and at interest rate of 12%), and (ii) business development loan (30% equity, flexible repayment/collateral requirement, interest rate at 11.75%; if credit guarantee scheme is used, 20% equity, 5 years repayment, 6 years grace period, interest rate at 9%, premium 1% yearly)

26. MSME lending products by MED. From 2014 onwards, GOM has introduced the SME Loan Scheme (Rf50 million) and GetSet Scheme for youth entrepreneurs (Rf 25 million) in collaboration with BML to assist MSMEs. A total of 147 MSMEs benefited from SME Loan Schemes in 2016, 2017 and 2018. 70 MSMEs benefited from GetSet Scheme. Through the Enterprise Development Finance Scheme of MED, loans were provided to 628 entrepreneurs (306 were women and 322 were men), of which 349 were women and/or youth.

112 Appendix 9

27. Credit Guarantee Scheme (CGS). To share the credit risk of the financial institutions and reduce collateral requirements, the Credit Guarantee Unit under the Maldives Monetary Authority (MMA) was established and CGS was launched on 7 August 2016. The Ministry of Finance and Treasury (MOFT) provided a capital of Rf15 million and the Maldives Monetary Authority (MMA) Rf10 million to CGS in 2017. Seven participating banks are Bank of Maldives, Bank of Ceylon, Commercial Bank of Maldives, Habib Bank Limited, Maldives Islamic Bank, Mauritius Commercial Bank, and State Bank of India. The scheme supports MSMEs to apply for commercially-viable loans between Rf100,000 to Rf1,000,000 without collateral. The loans will be at favorable interest rates, with a maximum tenure of 5 years. Credit guarantee is issued for an annual premium of 1% of the outstanding loan. As a policy, five times the leverage provision amount for default was set as the limit of CGS loans (Rf125 million). The CGS is expected to contribute to higher volume of lending to MSMEs over time. As of 31 March 2018, 65 loan applications (Rf41 million) were approved. 90% of the loan value (Rf37 million) was guaranteed by MMA and 26 applications were processed at the banks. The commerce sector had the largest share of CGS-approved loans. 72% of these loans were in microenterprise category, followed by small enterprises (26%) and medium-sized enterprises (2%). They were geographically dispersed with only 32% from Malé. As of 30 June 2018, out of 92 loan applications processed, 68 CGS applications were approved. 28. SME Development and Finance Corporation (SDFC). To strengthen access to finance further, SDFC, a state-owned entity, has been recently incorporated in 2018 to manage GOM’s loan schemes with an initial capital of Rf150 million. SDFC comprised 85% government shares and 15% SME council’s shares. The lending of SDFC started on 30 March 2019, offering variety of loan products. The equity requirement for loans is currently between 15%‒20% and the interest rate is currently between 6%‒9.5%. The loan amount is between Rf75,000 and Rf5 million. A new product has also been introduced, providing Rf3,084,000 for development purposes. SDFC and BCC will likely combine their MSME expertise to create synergies in the sector. Furthermore, it is critical that SDFC complements the role of BML and other financial institutions offering MSME products so that scarce capital is efficiently allocated for the MSMEs.