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Semi-Annual Safeguards Monitoring Report Project Number: 47046-002 August 2017

PRC: Gansu Featured Agriculture and Financial Services System Development Project

Prepared by the Project Management Office of Gansu Featured Agriculture and Financial Services System Development Project for the Asian Development Bank. This safeguards monitoring report is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. 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.

Gansu Featured Agriculture and Financial Service System Development

Project

Loan No.: 3312-PRC

Safeguard Monitoring Report

Reporting Period

From 1st Jan. to 30

th Jun. 2017

Prepared by the Project Management Office of Gansu Featured Agriculture and Financial

Service System Development Project

Date: August 30, 2017

TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................................................ 3

II. IMPORTANT ACTION AND WORK .................................................................................. 4

A. Environment safeguard ......................................................................................................... 5

i. Progress of the establishment and implementation of ESME by FIs: environment safeguard ... 5

ii. Good practices of environment management ....................................................................... 7

B. Social safeguard .................................................................................................................... 7

C. Information disclosure ........................................................................................................ 10

D. Progress of implementing grievance redressing mechansim .............................................. 10

E. Preparation of the simplified ESMS ................................................................................... 10

F. MIS ...................................................................................................................................... 11

III. ISSUES AND SOLUTIONS .................................................................................................. 11

i. Issues encountered in implementing ESMS .............................................................................. 11

ii. Solutions ................................................................................................................................... 11

IV. LESSONS LEARNT ............................................................................................................. 12

V. NEXT STEPS ............................................................................................................................. 13

Annexes:

1 Social and Gender Action Plan Monitoring ..................................................................................... 16

2 Minority Development Monitoring .................................................................................................. 18

3 Records of Complaints ..................................................................................................................... 19

4 Quarterly Credit Monitoring ............................................................................................................ 20

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I. INTRODUCTION

1. Asian Development Bank (hereafter refers to as ADB) approved the Gansu Featured

Agriculture and Financial Service System Development Project (hereafter refers to as the Project)

on November 12, 2015. ADB and the Chinese Government signed the Loan Agreement on

December 8, 2015 and the project became effective on March 29, 2016. The planned total

investment of the project is USD 200 million, including USD 100 million of ADB loan, USD

68.58 million input from Financial Intermediary (hereafter refers to as FI), USD 24.67 million

contribution of beneficiaries and USD 6.75 million input of Gansu Provincial Government.

Project resources will be used to support the achievement of four outputs as (i) inclusive and

environmentally-friendly featured agricultural production bases developed; (ii) farmer

cooperatives and agricultural enterprises financed and strengthened; (iii) rural financial service

system developed and enhanced; and (iv) capacity for project implementation and management

strengthened. The objective of the project is to enhance the participation of farmers in more

productive and market-oriented agricultural activities to achieve income growth. The

Implementation Kick-off Workshop convened in Lanzhou of Gansu on June 2, 2016 symbolized

the official start of project implementation.

2. As an innovative project of “agriculture+financing”, the most striking difference comparing this project with other projects operated through traditional models is the incorporation of

financial intermediaries (FI). Through screening intermediary banks with the required

qualifications, about 90% of project loan proceeds is on-lent to the FIs. Through close

cooperation between the government and FIs, the FIs via market operation will use project

resources to support local featured agriculture and the development of new rural financial

institutions. In this process, the government fully plays the role of macro regulation and capacity

building at all levels while the banks put their advantages in fund management and operation into

full play to enable recycled use of limited funds serving the development of featured agriculture

maximize its effects. Meanwhile, the project is meant to explore a sustainable model for

financing in support of agriculture. The project also attaches great attention to capacity building

of FIs as well as support to new rural financial service providers including rural banks, micro

credit companies and mutual cooperatives to enhance the capacity of rural financing services and

the development of diversified rural financing system.

3. With FI model, Bank of Gansu (BOG), Bank of Lanzhou (BOL) and Yuzhong SPD Rural

Bank established Environmental and Social Management System (ESMS) to evaluate and

manage the potential environment and social impacts of their lending activities, which is an

important instrument to implement the environment and social safeguard policies of ABD, and

also an important practice of applying ADB’s environment and social safeguard policies in credit activities of banks in China after Industrial Bank adoption of Equator Principles, and this is

highly aligned with the green development principles promoted by GOC. It is expected that the

outcome generated through project implementation will be replicated and scaled-up in broader

areas of China, which would contribute to the integrated, balanced and sustainable development

of rural economy, the environment and the human society.

4. By the end of the reporting period, the 11 project counties had in total issued 8 Subloans

with ADB’s loan resources, totaling CNY 7.59 million (USD 1.17345 million). Five counties

(Yongjing, Hezheng, Lintao, Jishishan and Jingchuan) have completed the release of the first

Subloans, totaling CNY 3.55 million (USD 524,030); in addition, Bank of Lanzhou also issued

the second and third Subloans in Jishishan and released the second Subloan in Yongjing, totaling

CNY 4.4 million (USD 649,500).

5. During the reporting period, BOG and BOL released three Subloans in three project counties,

with total loan amount of CNY 7.2 million (USD 1.06282 million), of which, two loans were

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provided to enterprises and one to a farmer household. One January 22, 2017 Jingcheng Rural

Bank in Lintao issued the first Subloan of CNY 200,000 (USD 29,520) in Lintao, which was

prior reviewed by ADB. The loan in Lintao will be used to develop mutton sheep production

park. On April 21, 2017, Jingchuan Branch of BOG released the first Subloan of CNY 3 million

(USD 442,840) to Jingchuan Shengteng Livestock Company Ltd. for the procurement of beef

cattle and cows. BOL Linxia Branch on June 8, 2017 released Subloan of CNY 4 million (USD

590,460) to Yongjing Yidianyuan Eco-Livestock Production Company Ltd. for beef cattle

production.

6. In line with the categorization of environment impact of ESMS, the sub-projects supported

by the three Subloans during the reporting period had very limited or no negative impact on the

environment, therefore, they are Category C for environment.

7. During the reporting period, all sub-project activities supported by Subloans did not involve

any issues of land acquisition and involuntary settlement as defined in ABD’s Safeguard Policy Statement and the ESMS of this project, all of them are Category C of involuntary settlement.

Only one sub-project supported by one Subloan involves minority, i.e. Yongjing Yidianyuan

Eco-Livestock Production Company Ltd rented 34.1 mu of land from villagers’ committee, which involved 27 Hui households and 135 persons. Before land circulation took place, the said

piece of land was barren and farmer households did not benefit anything from it. Land

circulation can increase the income of minority households and improve their livelihood. The

activities of sub-projects did and produce any negative impact on minorities, they are Category C

(no need to be monitored). All three Subloans involve land circulation, with due diligence study,

the procedures and formalities of land circulation of the sub-projects were complete and

complied with Land Circulation Framework.

8. Focusing on the Social and Gender Action Plan, the 11 project counties during the reporting

period have been actively implementing the monitoring indicators, with great efforts to ensure

women and the poor would benefit from the project. During the reporting period, funds of all

Subloans including any working capital and counterpart funding were not used for any

prohibited activities listed in Annex 5 of ADB’s Safeguard Policy Statement. FIs in the project implementation areas disclosed basic information of each sub-product supported by each

Subloan.

II. IMPORTANT ACTION AND WORK

9. With the joint efforts of PPMO, national consultant team, FIs and the 11 CPMOs, the

following activities related ESMS have been carried out, including completion of the

environment and social assessment of the Subloans to be released (three Subloans have been

released), on-spot check and supervision of the operation of ESMS in project counties, provision

of related capacity building, promoting orderly implementation of Social and Gender Action

Plan, preparation of simplified ESMS for ADB’s approval, and the establishment of ESMS and

grievance redressing mechanisms in Project Management Information System.

10. Progress of the first Subloans: By the end of the reporting period, five (Yongjing, Hezheng,

Lintao, Jishishan and Jingchuan) among the 11 counties have completed the issuance of the first

Subloans, totaling CNY 3,55 million (USD 524,030), which were issued to 4 farmer households

and one enterprise, including the first Subloans of BOL in Lintao and BOG in Jingchuan for

sheep and cattle production respectively. Details are given in table 1 as below.

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Table 1：First Subloans (by June 30, 2017)

Exchange rate: USD 1 = CNY 6.7744 (June 30, 2017)

No. County FI Applicant Amount (m) Amount

(USD 000) Source Date Activity

1 Hezheng BOL Sanhe Pite Fruit

Production Base 0.05 7.38 ADB 2016.12.9 Pite fruit base

2 Jishishan BOL

Wansheng Sichuan

Pepper

procurement Coop

0.2 29.52 ADB 2016.12.9

Purchase of

Sichuan

pepper

3 Yongjing BOL Fujing Crop

Farming Coop 0.1 14.76 ADB 2016.12.9 Greenhouse

4 Lintao BOL Fujing Crop

Farming Coop 0.2 29.52 ADB 2017.1.22

Sheep

production

5 Jingchuan BOG Shengteng

Livestock Ltd 3 442.84 ADB 2017.4.21

Cattle

production

Total 3.55 524.03 — —

11. Progress of further sub-loans: By the end of the reporting period, in addition to the first

Subloans, BOL in Jishishan issued the second and the third Subloans and released the second

Subloan in Yongjing, totaling CNY 4.4 million (USD 649,500). During the reporting period, the

first Subloan issued in Yongjing is used to support mutton sheep production. Details are given

table 2 as follows.

Table 2: Further Subloans (by June 30, 2017)

Exchange rate: USD 1 = CNY 6.7744 (June 30, 2017)

No. County FI Applicant Amount

(m)

Amount

(USD 000) Source Date Activity

1 Jishishan BOL Wansheng Sichuan

Pepper procurement Coop 0.2 29.52 ADB 2016.12.9

Purchase of

Sichuan pepper

2 Jishishan BOL Wansheng Sichuan

Pepper procurement Coop 0.2 29.52 ADB 2016.12.9

Purchase of

Sichuan pepper

3 Yongjing BOL Yidianyuan Livestock 4 590.46 ADB 2017.6.8 Sheep production

Total 4.4 649.50 — —

A. Environment safeguard

i. Progress of the establishment and implementation of ESMS by FIs - environment

safeguard

12. During the reporting period, BOG and BOL released three Subloans in total in Jingchuan,

Lintao and Yongjing, of which, two Subloans are targeted at enterprise and one at a farmer

household in the production base, and all three Subloans are used for livestock production that

are located away from residential areas (at least 1,000 m) with very limited impact on residents.

The possible environment impact during the development and operation of the sub-projects

includes dust, noise and vibration, solid waste or hazardous waste, manure of cattle and sheep,

waste water, odor and the use of chemicals, but with mitigation measures including the use of

noise insolation materials to reduce noise, timely removal of wastes, maintaining hygienic

environment of the livestock farm, proper treatment of manure to reduce odor, such impacts are

being minimized. Therefore, the environment impact categorization of three Subloans is

Category C in line with relevant stipulations of ADB and China. During reporting period, no

support is granted to environment category A and B sub-projects.

13. Water use: the sub-project activities supported by the three Subloans depend on groundwater

and the major water-saving measures adopted is recycled use of production waste water and the

waste water from flushing livestock sheds is used to irrigate farmland. On-site measurement

indicated that the maximum water consumption of the sub-projects is 1,200 m3

annually, which

is in conformity with the stipulations of the “Water Use Permit and Water Charge Management

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Method of Gansu1”, there is no need to obtain water use permit.

14. In consideration of the possible environment impact during the development and operation

of the sub-projects, with the guidance of the consultants and environment officials of the project

counties, FIs proposed corresponding mitigation measures that are documented in the ESMS

assessment as well as the annexed commitment letters. Borrowers of Subloans must adopt these

mitigation measures during the implementation of the sub-projects to avoid, reduce, mitigate or

remedy negative impact on the environment.

15. Such measures include:

(1) Notice

Locate project site away from residential area.

Use low noise equipment and process (such as foam material, steel panel for sound

absorption and insolation and reduction of vibration), use mufflers on blowers and

ventilation machine.

Use buffer zone around livestock farm and its function areas.

Strictly follow procedures to reduce artificial noise. Time of construction must be

strictly controlled and it is prohibited to use high noise equipment during night time.

(2) Solid wastes or hazardous waste

Timely remove garbage.

Construction wastes should be used to fill in the low lying areas of the farm.

Recycled use of construction wastes and hazardous wastes must be handled according

relevant regulations.

(3) Waste water during project operation

Waste water during the operation of the projects is mainly urine of sheep and cattle and

flush water of sheds, which will be transported by pipeline to sedimentation tank. Most

of solid wastes will be removed through grills. Fluids are transported to the tank for

treatment, afterwards, fluids will then be used as organic fluid fertilizer for farmland.

(4) Dust and odor during construction

During construction, the builders should follow the stipulation of on-site management of

construction works and set up site plan and sign boards of principal information of the

project, safety warning, fire control and code of conduct of personnel.

Machines should be operated in line with their operation manual, collision of metals

should be reduced to lower noise. Equipment and material sites should be covered to

reduce dust.

Constructors should erect simple panels on the side of residential areas to reduce dust

when the wind is strong.

Maintaining hygiene of animal farms. Animal manure should be composted and

fermented to reduce hazardous materials. Treatment facilities should be located at

downward of wind or lateral side of wind to reduce odor and related pollution.

(5) Use of chemicals

1 Article 4 of Gansu Water Withdrawal Permit and Water Charge Management Method (2014) stipulates that water use of

less than 2,000 m3 annually for daily life of households, scattered livestock farming and drinking water does

not need permit.

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Use of low residual and low toxic chemicals in shed disinfection.

Supervision of the use of chemicals should be strengthened.

ii. Good practices of environment management

16. In the process of implementing the above sub-projects, consultants and the county

agricultural and livestock bureaus provided corresponding technical support and good practices

and methods in environment management, including standardized construction and disinfection

of sheep and cattle sheds, the establishment of disinfection and testing system, the construction

and operation of waste water and manure treatment facilities, sound practices of animal feeding

and disease control. In line with the national disease control schemes, animal disease control is

carried out.

17. Monitoring and evaluation of sustainable agricultural practices and mitigation measures of

environment impacts are jointly carried out by related CPMOs, FIs, agriculture and livestock

bureaus and environment protection agencies. (1) Sustainable agricultural practices: CPMO, FIs

and the livestock disease surveillance unit affiliated to the county agriculture and livestock

bureaus supervise measures adopted by enterprises for the treatment of animal wastes. The

frequency of monitoring is twice a year as regular or surprise supervision. Regular supervision is

normally carried out in spring or fall, while surprise supervision can take place at any time.

Technical and skill guidance and training are provided on site to deal with those irregular

measures of enterprises. (2) Water and water pollution: CPMO, FIs and county environment

protection bureaus supervise water use and discharge and water pollution of enterprises,

supervision is carried out twice annually normally by surprises. For irregularities identified,

guidance and correctional measures are provided. After monitoring, reports are prepared for

submission to the PPMO and leaders of related counties for further action when needed. (3)

mitigation measures for possible environment impact: CPMO, FIs and the inspection station of

county agriculture and livestock bureau jointly carry out supervision at least twice annually,

regularly and by surprise. Regular supervision is done in spring and fall, surprise supervision can

take place at any time. Corresponding technical and skill recommendations are provided to the

enterprises to address irregularities identified.

B. Social safeguard

18. In line with the requirements of ESMS, the social impact of the project on the adjacent

communities and the public should be assessed, including land acquisition, involuntary

settlement, ethnic minorities and land circulation.

Land acquisition and involuntary settlement

19. During the reporting period, all sub-project activities supported by Subloans did not involve

issues of land acquisition and involuntary settlement as defined in ADB’s Safeguard Policy Statement and the ESMS system of the project, it is therefore Category C for involuntary

settlement.

Minority

20. During the reporting period, one sub-project supported by one Subloan involved minority. In

line with the requirement of minority development framework, the assessment of project impact

on minorities needs to consider the impact the project brings about to the minorities and the

vulnerability of the minority communities. Yongjing Yidianyuan Eco-Livestock Company Ltd.

rented 34.1 mu of land from Villagers’ Committee, involving 27 households of Hui and 135 people. This piece of land was barren before land circulation took place and farmer households

did not benefit anything from such land. Land circulation with the project can help minority

farmer households increase income and improve livelihood. Activities of the sub-project did not

generate any type of negative impact on minorities, therefore, it is Category C for minority (no

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need for monitoring).

Land circulation

21. During the reporting period, the three Subloans all involved the issue of land circulation,

totaling 139.29 mu (22.95 acres), which triggered the requirement of land circulation framework

agreed upon by ADB and the government. With the assistance of social officials of the PMOs

and consultants during loan implementation period, BOL Lintao Rural Bank, BOL Linxia

Branch, BOG Jingchuan Branch carried out due diligence studies, including the process of land

circulation, contents and implementation of land circulation contracts, the scope of impact of

land circulation and the number of people affected, verification of price and payment and the

way of payment effected for land circulation, as well as measures for protecting the rights of the

affected, with three due diligence reports furnished. The studies revealed that the three land

circulation contracts were qualified and all of them were signed by women, conforming with the

requirements of ADB that at least 70% of land circulation agreements should be signed by

women.

22. Through on-site studies and desk review of relevant materials, it was found that: (i) land

circulation procedures were standardized and legal with complete formalities, complying with

Land Circulation Framework as well as relevant laws, regulations and stipulations of the state,

province, municipality and counties. In the process of land circulation, the rights of both sides

were fully considered and policies for protecting rights and appeal mechanisms were all given;

(ii) the circulated land has signed Land Circulation Contract and the contents of the contracts

complied with Land Circulation Framework as well as relevant laws, regulations and stipulations

of the state, province, municipality and counties. There are also provisions to address possible

disputes; (iii) land circulation has positive impacts on both side. On the basis of protecting the

interests of the affected, win-win results have been achieved; and (iv) the circulated land does

not have any pending and remaining issues to be addressed.

23. The due diligence report of land circulation protected the interests of the affected farmer

households in the process of land circulation, hence it minimized the negative impact on the

public of the project area, and provided good momentum for smooth project implementation.

Social and gender

24. In accordance with the indicators set in the Social and Gender Action Plan, the PPMO

developed the monitoring indicators for social and gender action plan for distribution among

project counties. During the reporting period, the 11 counties followed the action plan and

implemented the monitoring indicators to maximize the benefits of women and the poor from

project interventions.

25. Located in the northwest of China, geographically, Gansu is far from the political and

economic centers with fragile ecological environment and stubborn poverty. There are in total 86

counties in the province, of which, 52 are designated as national poverty counties accounting for

60.5%, therefore, Gansu is one of the poorest provinces of the country. Hence, the PPMO in the

process of project management and implementation attaches more attention to the development

of poverty population and it has made it clear that the poverty population is the priority target of

project support. During the reporting period, in line with the objectives of “establishing inclusive and environment friendly featured agricultural production bases” and “supporting the

development of farmer cooperatives and agricultural enterprises”, CPMOs have provided training to 10,018 farmers, of which, poverty population made up 443 accounting for 4.4%. At

the beginning stage of project implementation, focus is being placed on trials and demonstration,

the involvement of the poor was a bit low, but along with the progress of project implementation,

more and more poverty population will be taken onboard of the project, which will speed up the

process of poverty reduction of the project counties and increase income of the poor.

9

26. ADB project attaches great importance to gender, therefore, the PPMO since the start-up of

the project has been promoting gender rationale in project implementation. It requires that

women should be no less than 30% among the beneficiaries of the project. During the reporting

period of project implementation, based on the objective of establishing inclusive and

environment friendly featured agricultural production base, the PPMO and CPMOs have

provided training to 6,862 farmers, of which, women were 2,008 or 29.3%; trained 126

technicians with 68 women or 54%. Based on the objective of “supporting the development of agricultural cooperatives and enterprises”, the PPMO and CPMOs trained 3,156 farmers including 923 women or 29.2%.

27. The above training includes livestock technical skills, ADB project, operation and

management, financing knowledge and products, financial management, how to protect your

money and how to better use the loan. Such training enabled more and more poor and women to

access training and education, hence helped poor women build up their own capacity for

development and for resisting risks, and mobilize their enthusiasm and initiative to participate in

project and poverty reduction activities. In the end, it will promote their participation in social

and economic activities.

28. During the reporting period, three farmer households were issued with Subloans, of which,

two were signed by women, accounting for 66.7%. Participation in loan activities enabled rural

women to receive due respect and equality. They also realize their rights and value through

credit activities and project implementation. There were three land circulation contracts all

signed by women, indicating more and more women have the rights to dispose production

materials of the household including land. The gap between men and women in production, daily

life and resource allocation in the project area is gradually closing.

29. While offering training related to the project, the FIs also specifically required the

proportion of women participation to be reached. During the reporting period, branches of FIs

organized 10 training sessions and 83 staffers of FIs participated in one training session offered

by the PPMO, of which, women staffers accounted for 29 or 35%; and 3 staffers of RFSPs

participated in the training including one woman or 33%. Contents of training included prior

review, reimbursement and loan withdrawal, financial statement, voucher management, MIS

application and social and environment safeguard.

30. The PPMO and CPMOs in staffing structure also attach attention to gender and increasing

the number of women staff. For instance, the PPMO has 11 staffers, women accounted for 6 or

54.4%; the total number of staffers of CPMOs are 65 including 28 women or 43.1%; both of

which are higher than ADB’s requirement that “women staffers should be no less than 35%.”

31. Meanwhile, the PPMO and CPMOs in training related to project management and

implementation and ESMS also aim at meeting the requirements of increasing women’s participation. During the reporting period, the PPMO trained 10 staffers including 6 women

staffers or 60%; among the 52 CPMO staffers received training, women were 23 or 44%, which

are higher than ADB’s benchmark that “the participation of women PMO staffers in training in

project management, financial management and the implementation of ESMS/EMDP/

SGAP/M&E should be no less than 35%.”

32. Looking from the provincial level, the 11 project counties are keen on protecting the interest

of women even in the first years of project implementation and have attached great attention to

women’s participation. We firmly believe that along with the implementation of the project, the proportion of women beneficiaries will continue to increase. At present, rural population in

China is characterized by more women are left on the land than men, therefore, the PPMO

during the following years of project implementation will design some featured activities for

women such as vegetable production and animal production that require less labor input, women

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will be given the priority in accessing loan. Enterprises with women as the legal person

representative should be supported in loan release as a priority. In all capacity building activities,

the proportion of women should be no less than 30%. Through these measures, it is safe to say

that women’s participation in training and direct benefiting from the project will be no less than 30%.

Prohibited investment activities

33. During the reporting period, all funds of all Subloans including working capital and

counterpart funding were not used to any prohibited activities listed in annex 5 of ADB’s Safeguard Policy Statement.

C. Information disclosure

34. FIs disclosed the basic information at the implementation site for each sub-project supported

by each Subloan, including the location, activity, potential impact, end borrower and FI as well

as the contact details of the environment and social officials of the CPMOs, and grievance

redressing mechanism. Such disclosure is for 10 days to ensure that the public has adequate time

to provide writing or oral feedback to the CPMOs.

D. Progress of implementing grievance redressing mechanism

35. In line with the circular “On Establishing Grievance Redressing Mechanism of Gansu Featured Agriculture and Financial Service System Development Project Co-Financed by ADB” issued by the PPMO as well as the stipulations of ADB on grievance redressing, all 11 project

counties have set up their own grievance redressing mechanisms, FIs in support of the counties

also established grievance redressing channels to ensure that the population that might be

affected by the project can at any time file complaints on issues related to the environment and

social aspects during project implementation. This also enabled timely handling of grievances

and appeals of the affected groups to effectively protect the rights and interests of the residents

of the project area. The mechanism has been disclosed at prominent locations in project counties,

townships and villages in a way that the affected groups and other stakeholders particularly

minorities, women, the poor and those who cannot read can understand. Such efforts are meant

to make sure that the affected and stakeholders know and are familiar with the contents of

grievance redressing mechanism and file their grievances through the ways prescribed in the

mechanism.

36. The PPMO has never ignored the use of new technologies to uplift project management and

service. In order to ensure the timeliness and effectiveness of receiving complaints, discovering

issues and handling grievances, the PPMO in its MIS established grievance redressing

mechanism, the CPMOs and the branches of the FIs would record writing and oral complaints to

the project as well as the results of handling, while the PPMO would track and monitor the

process and visit the complaint filers. From manual recording to on-line sharing platform

recording, it not only realized data sharing through the net, but also improved the timeliness of

grievance redressing, which resulted higher efficiency, standardization, transparency and

smoother management of the process.

37. By the end of the reporting period, the 11 project counties and the HQs and branches of FIs

had not received any forms of appeals or complaints.

E. Preparation of the simplified ESMS

38. In line with the FI ESMS approved by ADB and the objectives and requirements of the

project, national consultants in consideration of organizational features and business process of

rural financial service providers developed simplified ESMS template, which is the foundation

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for adoption by all RFSPs. The PPMO submitted the template to ADB on July 26, 2017. Once

approval is received from ADB, the PPMO will issue it to FIs that will be requested to

incorporate the template in loan conditions with RFSPs. The PPMO in connection with the FIs

will provide guidance and supervision to RFSPs on work related to ESMS.

F. MIS

39. MIS is an integrated system with built-in modules of project management, FM, planning and

monitoring, reimbursement and withdrawal and reporting. Through the interactive and sharing

network platform, it realized sharing and management of comprehensive information of the

project. The PPMO in the MIS established ESMS record function, grievance redressing

mechanism and automated generation and output of reports and tables. All social and

environment indicators of each Subloan are included in the corresponding credit contract

information, including the results of assessment of the environment category, land acquisition,

involuntary settlement, land circulation and the impact on minorities. MIS in line with the keyed

in data of credit contract automatically calculate related monitoring indicators, which greatly

facilitated tracking, managing, monitoring and reporting of sub-projects. It not only standardizes

the process of project management and promotes paperless office, but also substantively

improves work efficiency and ensures the timeliness, consistency and accuracy of project

monitoring data, a corner stone for accurate internal control and accurate management of the

project.

III. ISSUES AND SOLUTIONS

i. Issues encountered in implementing ESMS

40. During the reporting period, FIs only released 3 Subloans in the 11 project counties, very

slow progress in Subloan approval and release. The major reason is that the applicants of

Subloans had weak or no guarantee measures, CPMOs and the FI branches did not effectively

implement the long list mechanism.

41. While implementing ESMS, FIs encountered the following major issues: (i) most Subloan

applicants had distorted understanding about the ADB project, the loan was perceived as

government loan; (ii) the project requires the end borrowers to provide large amount of

information, and the end borrowers could not accurately understand and elaborate on issues

related to ESMS assessment of the sub-project, it needs multiple and repeated confirmation of

the environment manager and social manager, with high costs of communication; (iii) when

carrying out environment categorization and assessment, some end borrowers had incomplete

arrangements for environment impact mitigation measures, as a result, further improvement is

required; (iv) Subloan borrowers are not used to the ESMS disclosure and grievance redressing

mechanisms; (v) the understanding of CPMO and FI staffers on the actual management and

operational procedures of ESMS needs to be further improved, which has certain impact on the

assessment and management of the project; and (vi) monitoring and reporting mechanism needs

fine tuning.

42. During the process of project implementation, FIs still need some time to get used to ADB’s management procedures, approaches and requirements, leading to lower efficiency at the

beginning of project implementation. Even though CPMOs and FI branches have established

project posts and manned such positions, but the stability of staffers is an issue, which has some

negative impact on the smooth implementation and high efficiency operation of the project.

ii. Solutions

43. Speeding up Subloan approval and establishing broader long list for Subloan candidates are

one of the remedies considered, including (i) communication and coordination between FI HQs

12

and their branches, PPMO and CPMOs and CPMOs and FI branches should be further

strengthened to avoid increased communication costs and low work efficiency caused by

asymmetry of information; (ii) FI branches and CPMOs should effectively implement long list

screening system, FIs should feedback on the long list within the prescribed timeframe, FIs

should propose sub-projects that meet the screening criteria to the CPMOs and the CPMOs

should timely feedback to the FIs about the results of screening. The PPMO should ask the two

sides to convene regular meetings to see through the screening and approval of Subloans, to

update the long list, increase the number of Subloan applicants and improve the quality; and (iii)

FIs need to, through PPMO, report to DOF quarterly the progress of Subloan approval so as to

strengthen supervision at provincial level.

44. FIs on one hand will use the long list as foundation to carry out screening of the Subloan

applicants. At the same time of screening new applicants, FIs can also screen their existing

clients that meet the conditions of the ADB project for loan, which is an important way of

ensuring adequate target clients. On the other hand, the difficulties of guarantee of loan clients

need to be addressed through multiple channels. Efforts will be made to explore other guarantee

alternatives in addition to the regular collateral and guarantee measures, such as collateral by

using agricultural production facilities, forest land rights, land circulation and land use rights,

joint guarantee and mutual guarantee. With meeting the loan conditions of banks as the threshold,

guarantee conditions of clients should be lowered as much as possible so as to speed up the

release of ADB loan.

45. Project information release should be enhanced to enable more potential clients to get to

know and understand ADB project and its requirement, particularly its environment and social

safeguard requirement. When implementing grievance redressing mechanisms, explanation

should be offered in a way that the end borrower can understand so as to mitigate or wipe out

their resistance. Training should be strengthened to enhance project management staffers and FI

staffers understanding of the overall project, ESMS, ADB’s management requirement and project annual planning.

46. While implementing ESMS, credit officials of FIs should strengthen communication with

end borrowers in order to repeatedly verify related issues and make sure that there are accurate

answers to related questions of the project. In the process of implementing sub-projects,

supervision and evaluation should be enhanced. The end borrowers shall be required to fully

implement mitigation measures of environment impact.

47. On the issue of reshuffle of staffers of the CPMOs and the FIs, it is required to maintain the

stability of staffers as much as possible; when reshuffle happens, hand-over should be well

attended before the departure of the involved employees. Training should be provided to the new

employee to ensure that new staffer acquires certain knowledge and execution capacity for

ESMS before getting on the job.

48. The PPMO will increase its strength and frequency of in-process and post factum

supervision through regular reporting procedure, regular supervision and monitoring, including

effectively monitoring the operation of long list and enhancing information release and capacity

building to ensure that the project will achieve its objectives.

IV. LESSONS LEARNT

49. On-site ESMS supervision: during the reporting period, PPMO and the national consultant

team carried out on-site supervision, tracking and monitoring of ESMS implementation, which in

a short period of time effectively enhanced FIs understanding about the environment and social

impact, the capacity of hands-on assessment and the level of tracking and monitoring. It helped

ensure that FIs can independently implement ESMS and effectively carry out M&E, recording

13

and reporting.

50. Capacity building: the PPMO, FIs and the 11 CPMOs have delivered multiple capacity

building sessions, which effectively complemented the knowledge of project staffers about the

environment and social issues, uplifted their understanding about safeguard policies of ADB,

improved their comprehension about the environment protection and inclusive development

rationales. These efforts added another layer of assurance that project implementation will fully

comply with laws, policies, regulations and stipulation of the country and ADB, and the interest

of the vulnerable groups are well protected.

51. Communication and coordination: timely communication and coordination among the

PPMO and ADB, environment and social management experts and FIs and the 11 project

counties are the key to the smooth operation of the project, particularly regular communication

of the implementing agency and the FIs, as well as between the implementing agency and FIs at

provincial level and county level, which is critical to the success of project implementation.

52. The development of green financing: through establishing and implementing ESMS, the

project has been actively promoted green financing business of the FIs and helped the FIs

establish sustainable credit management system, which is well aligned with the requirements of

developing green financing policies in the banking sector promoted in China. The HQs of BOG

is preparing for the establishment of Green Financing Department with the aim of giving due

considerations to potential environment impact in investment decision making. It will

incorporate the potential return, risk and cost related to environment into the routine business

process of the bank. The ESMS framework, organization arrangement, indicator system, work

flow, assessment methodology and practical operation provided advanced rationales and

valuable experiences to the BOG.

53. Agricultural technicians and national consultants assisted farmers and carried out series of

climate smart agricultural practices, including water resource use efficiency, recovery of plastic

film, treatment of animal waste, soil protection, IPM and animal disease control, which helped

credit officials of FIs understand agricultural production and ecosystems and uplift FIs’ capacity of engaging in green agricultural business.

54. The project pushes the FIs to fulfill their social responsibilities. The establishment and

implementation of SGAP, LCF and MDP have effectively promoted social and gender

development of the project area. At practical level, it balances the relationship of obtaining

economic return and fulfilling the social responsibilities, setting up an example for the FIs to

fulfill social responsibilities of enterprises.

55. Further efforts are needed in intelligent, convenient and accessible management and services.

Using computerized management system to track, manage, monitor and report social and

environment impact of the Subloans, it will not only standardize project management process

and improve the efficiency of work, but also ensure the timeliness, consistency and accuracy of

project monitoring data, enhancing project management and service provision.

V. NEXT STEPS

56. Speeding up Subloan approval and release is the primary task for the coming months. All

efforts will be made to achieve the USD 10 million target of ADB loan disbursement and

contract award in 2017, meanwhile ESMS assessment, tracking and monitoring and reporting for

each Subloan need to be well undertaken.

57. Capacity building will be continued. In the process of project implementation in the second

half of 2017, capacity building for project staffers particularly those in CPMOs and FIs should

be enhanced to improve their execution ability as well as their capacity of understanding ESMS

14

and project management.

58. With the support of national consultants, PPMO and CPMOs will continue to urge and guide

FIs to carry out related environment and impact assessment of the proposed Subloans in the long

list before releasing loans, in line with the presidents’ directory of FI HQs and the ESMS

requirements. For sub-project activities of environment category B or minority category B, the

Initial Environment Screening Report, Minority Development Plan and Social and Gender

Action Plan should be disclosed.

59. PPMO in connection with CPMOs will urge and supervise FIs to disclose at project site

related project activities (location, activity, potential impact, end borrower, FI and the contact

details of the environment and social officials of CPMOs) of sub-projects approved by the banks

and confirmed category C for environment, involuntary settlement and indigenous people.

60. The PMO will urge the FIs to identify as soon as possible the targets of RFSPs for loan

release, and following the requirement of the MOU of ADB’s supervision in July, provide to

ADB the Subloans to be released to RFSPs before September 30, 2017 for approval.

61. Cooperation will rendered to the safeguard supervision mission in the second half of 2017. It

is hoped that ADB will provide related training to enable project stakeholders to continuously

localize ESMS and the grievance redressing mechanism and to ensure the full understanding of

the essence of ESMS and its sound use.

62. Data monitoring will be enhanced. Communication and coordination among agencies should

be strengthened. ESMS monitoring and evaluation will be carried out with standardized

procedures, monitoring approaches and methods. At the same time of minimizing the negative

impact of the project, it is to supervise the project to achieve all targets and objectives as set in

the project documents.

15

Annexes

1. Social and gender action plan monitoring

2. Minority monitoring framework

3. Grievance redressing record

4. Quarter credit monitoring

16

Annex 1:

Gansu Featured Agriculture and Financial Service System Development Project

Social and Gender Action Plan Monitoring

(Reporting period: Jan 1 – June 30, 2017)

Output Social and gender output activities Accumulative Jan 1 – June 30, 2017

Output 1:

Inclusive and

environmentall

y-friendly

featured

agricultural

production

bases

developed

1a. Training of 14,130 farmers, 50% of participants are women and 30% of participants are poor

total number of farmers trained 14571 6862

women farmers trained 5102 2008

poor farmers trained 1689 303

proportion of women 35.0 29.3

proportion of poor 11.6 4.4

1b. Training of 473 technicians, 30% are female

Technicians trained 509 126

women technicians trained 263 68

Proportion (%) 51.7 54.0

1c. Inclusive beneficiaries of the production base development, 30% are poor

Total beneficiaries 5648 1062

Poor beneficiaries 524 130


1d. Women’s equal access to project sub-loans 50% of loans from the FIs to individual farmer household with women’s signature

HH got Subloans 8 3

HH Subloans signed by women 6 2


1e. Women’s signature on land use rights transfer agreement 70% land use rights transfer agreement signed during the project

implementation period with women’s signatures

Total number of land circulation contracts 392 3

Contracts signed by women 289 3

Proportion (%) 73.7 100

1g. At least 50 staffers participate in soil and water conservation monitoring, of which, women should be no less than 30%

Total participants 0

Women participants 0

Proportion (%)

Output 2:

Farmer

cooperatives

and

agricultural

enterprises

financed and

strengthened

2a. Training of 6,510 members, 50% of participants are women and 30% for the poor

Farmers trained 6700 3156

Women farmers trained 2345 923

Poor farmers trained 776 140

Women proportion (%) 35 29.2

Poor proportion (%) 11.6 4.4

2b. Training of 868 technicians and managers, 30% are technicians are females

Total number of technicians trained 399 100

Women technicians trained 127 30

Proportion of women 31.8 30

2c. Priority to women and the poor for new job opportunities in enterprises and farmer cooperatives, 40% for women, 30% for the poor

Total new employees 210 50

17

Output Social and gender output activities Accumulative Jan 1 – June 30, 2017

Women new employees 116 29

Poor new employees 63 10

Proportion of women 55.2 58

— Proportion of poor 30.0 20

Output 3:

Rural financial

service system

developed and

enhanced

3a. Training of 270 staff of FIs and 35 staff of RFSPs, 30% of females

FI staffer trained 178 83

Women staffer trained 71 29

Proportion of women 39.9 34.9

RFSP staffer trained 8 3

Women RFSP staffers trained 4 1

Proportion of women staffers (%) 50 33.3

3b. Establishment of 29 grassroots financial service units, 30% of female staff, all female staff trained

Service units built 5 2

Total employees 120 20

Women employees 54 6

Female employees trained 17 2

Proportion of female employees (%) 45 30

Output 4:

Capacity for

project

implementatio

n and

management

strengthened

4a. Training on gender and development: (i) concepts and practices of gender and development, (ii) ADB’s gender policies; (iii) ESMS

for FIs; and (iv) SGAP, All staff of PPMO and CPMOs, Staff of FIs operating the Project

4b. Gender disaggregated data collection for project documentation, M&E, Assigning responsible persons for documentation and M&E

in PPMO, CPMOS and FIs, Establishment of gender disaggregated database

4c. With adequate budget, establish PPMO and 11 CPMOs with women staffers no less than 35%

Total number of staff at PPMO 11 11

PPMO women staffers 6 6

Proportion of women staffers at PPMO 54.5 54.5

Number staffers of CPMOs 82 65

Women staffers of CPMOs 35 28

Proportion of women staffers at CPMOs 42.7 43.1

4d. Training provided to 76 PMO staffers in project management, FM and implementation of ESMS/EMDP/SGAP/M&E, women

staffer should be no less than 35%

PPMO staffers trained 10 10

Women staffers trained at PPMO 6 6

Proportion of women trained at PPMO 60 60

CPMO staffers trained 75 52

Women staffers trained at CPMOs 33 23

Proportion of women staffers trained at CPMOs 44 44.2

18

Annex 2:


Minority Development Monitoring

Bank of Gansu, Bank of Lanzhou and Yuzhong SPD Rural Bank

Consolidated by the PPMO

Reporting period: Jan 1 – June 30, 2017

Activity* Project village Involved minority** Number of minority HHs Minority

population Positive/negative impact

Yongjing Yidianyuan

Eco-Livestock Company

Ltd.

Houping Village,

Xinsi TWSP of

Yongjing

Hui 27 135 Land circulation brings

about economic benefits

*Title of each loan contract

**Ethnic minorities: Dongxiang, Sala, Baoan and Hui

19

Annex 3:


Records of Complaints

Consolidated by: PPMO

Reporting period: Jan 1 – July 30, 2017

No.

Typ

e of

com

pla

ints

*

Sco

pe*

*

Bri

ef d

escr

ipti

on

Nam

e

Aff

ecte

d p

op

ula

tion

Date received Handling unit and results

RFSP FI

Vill

ager

s’

Com

mit

tee

TWNS CPMO

Oth

ers*

**

RFSP FI

Vill

ager

s’

Com

mit

tee

TWNS CPMO

Oth

ers*

**

1 None

RFSP= rural financial service provider

*1 writing, 2 oral

** 1 environment, 2 social

*** if yes, please indicate the name of the agency

20

Annex 4:


Quarterly Credit Monitoring

Filed by: BOG, BOL and Yuzhong SPD

Consolidated by: PPMO

Reporting period: Jan 1 – June 30, 2017

Cli

ent

Na

ture

*

Pu

rpo

se

Am

ou

nt

(CN

Y 1

0,0

00

)

Ma

turi

ty

Da

te o

f is

sua

nce

Bala

nce

(C

NY

10,0

00

)

Un

pa

id b

ala

nce

No

. o

f v

illa

ges

HH

**

Po

pu

lati

on

**

Po

pu

lati

on

**

Poo

r**

Wo

men

**

Min

ori

ty H

H*

*

Min

ori

ty p

op

ula

tio

n**

Land

circulation

(mu)

Fund source (CNY

10,000) Remark

ADB Equity

Jingchuan

Shengteng

Livestock Company

Ltd

Retail Procurement

of cattle 300 12m 2017.04.21 300 0 1 50 180 4 12 88 0 0 90.192 300 0 Jingchuan

Yongjing

Yidianyuan

Eco-Livestock

Company Ltd.

Retail Sheep 400 12m 2017.06.08 400 0 1 27 135 25 125 54 27 135 34.1 400 133 Yongjing

Du Yingdong Retail Sheep 20 12m 2017.01.22 30 0 1 19 78 1 5 39 0 0 15 20 6 Lintao

Subtotal 720 1y 730 0 3 96 393 30 142 181 27 135 139.292 720 139.33

* wholesale or retail

** It refers to project loan involved farmer households, registered poor households, total poverty population, total number of women and minority.

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