Selanjutnya
A.I.D. LOAN NO. 497-T-085
A.I.D. PROJECT NO. 497-0341
0
PROJECT
LOAN AGREEMENT
BETWEEN
THE REPUBLIC OF INDONESIA
AND THE
UNITED STATES OF AMERICA
FOR
FINANCIAL INSTITUTIONS DEVELOPMENT
Dated:
0
May 24, 1984
PRQJEC'r LOAN AGREEMEN'I
Table of Contents
PAGE
Article 1
'1h e Agre em en t
1
Article 2
The Project
1
SECTION 2 .1.
Article 3 :
Financing
SECTION 3.1.
SECTION 3. 2.
SECTION 3.3.
Article 4 :
SECTION
SEC'I'ION
SECTION
SEC'IION
SECTION
SECTION
Article 5 :
4.1.
4. 2.
4.3.
4.4.
4. 5.
4. 6.
Interest
Repayment
Application, Currency and Place of Payment
Prepayment
Renegotiation of Terms
Termination on Full Payment
Conditions Precedent to Disbursement
SECTION 5.3.
SEC'lION 5.4.
SEC'lION 5.5.
SECTION 5.6.
First Disbursement
Conditions Precedent to Di&bursement for
Project Ac ti vi ties Other 'l'han 'I'echnical
Assistance and Pre-Implementation Activities
Conditions Precedent to Disbursement of
Funds for System Capitalization
Conditions Precedent to the Disbursement of
Funds for Computer-Related Equipment
Notification
'lerminal Dates for Conditions Precedent
Special Covenants
SECTION 6.1
SEC '!ION 6. 2.
j
'Jhe Loan
Borrower Resources for the Project
Project Assistance Completion Date
Loan 'l'erms
SECTION 5.1.
SECTION 5.2.
Article 6 :
Definition of Project
Project Evaluation
Additional Special Covenants
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2
2
2
2
3
3
4
4
4
5
5
6
6
6
7
7
7
7
7
8
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PAGE
Article 7:
\
Procurement Source
SECTION 7.1.
SECTION 7.2.
Article 8:
SECTION
SECTION
SECTION
SECTION
SECTION
Article 9:
Foreign Exchange Costs
Local Currency Costs
Disbursements
8.1.
8.2.
8.3.
8.4.
8.5.
Disbursement for Foreign Exchange Costs
Disbursement for Local Currency Costs
Other Forms of Disbursement
Rate of Exchange
Date of Disbursement
Miscellaneous
SECTION 9 .1.
SECTION 9.2.
SECTION 9.3.
9
Communications
Representatives
Standard Provisions Annex
9
9
10
10
10
11
11
11
12
12
12
13
Amplified Description of the Project
ANNEX I
Project Loan Standard Provisions
ANNEX II
A.I.D. LOAN NO. 497-T-085
A.I.D. PROJECT NO. 497-0341
PROJECT LOAN AGREEMENT
Dated: May 24, 1984
Between
The Republic of Indonesia ("Borrower")
and
The United States of America, acting through the Agency for
International Development ("A. I. D.").
Article 1.
The Agreement
The purpose of this Agreement is to set out the understandings
of the parties named above ("Parties") with respect to the
undertaking by the Borrower of the Project described below, and with
respect to the financing of the Project by the Parties.
Article 2.
The Project.
SECTION 2.1.
Definition of Project.
The Project, which is
further described in Annex I, is designed to assist the Borrower to
increase rural, non-farm employment through the development of
village-based credit institutions in selected provinces so that they
are able to extend credit to borrowers, expand loan portfolios to
include small entrepreneurs, and mobilize savings.
Annex I,
attached, amplifies the above definition of the Project.
Within the limits of the above definition of the Project,
elements of the amplified description stated in Annex I may be
- 2 changed by written agreement of the authorized representatives of
the Parties named in Section 9.2, without formal amendment of this
\
Agreement.
Article 3.
Financing.
SECTION 3.1.
The Loan.
To assist the Borrower to meet the
costs of carrying out the Project, A.I.D. pursuant to the Foreign
Assitance Act of 1961, as amended, agrees to lend the Borrower under
the terms of this Agreement not to exceed Fifteen Million and Five
Hundred Thousand United States ("U.S.") Dollars ($15,500,000) to
support the Project.
The aggregate amount of disbursements under
the Loan is referred to as "Principal".
The Loan may be used to finance foreign exchange costs, as
defined in Section 7.1. and local currency costs, as defined in
Section 7.2., of goods and services required for the Project.
SECTION 3.2.
(a)
Borrower Resources for the Project.
The Borrower agrees to provide or cause to be provided for
the Project all funds,
in addition to the Loan, and all other
resources required to carry out the Project effectively and in a
timely manner.
(b)
The resources provided by the Borrower for the Project will
be not less than the equivalent of U.S. $9,250,000, including costs
borne on an "in-kind" basis.
SECTION 3.3.
(a)
Project Assistance Completion Date.
The "Project Assistance Completion Date" (PACD), which is
May 31, 1991, or such other date as the Parties may agree to in
writing, is the date by which the Parties estimate that all services
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3 -
financed under the Loan will have been performed and all goods
financed under the Loan will have been furnished for the Project as
contemplated in this Agreement.
(b)
Except as A.I.D. may otherwise agree in writing, A.I.D.
will not issue or approve documentation which would authorize
disbursement of the Loan for services performed subsequent to the
PACD or for goods furnished for the Project, as contemplated in this
Agreement, subsequent to the PACD.
(c)
Requests for disbursement, accompanied by necessary
supporting documentaion prescribed in Project Implementation
Letters, are to be received by A.I.D. or any bank described in
Section 8.1 no later than nine (9) months following the PACD, or
such other period as A.I.D. agrees to in writing.
After such
period, A.I.D., giving notice in writing to the Borrower, may at any
time or times reduce the amount of the Loan by all or any part
thereof for which requests for disbursement, accompanied by
necessary supporting documentation prescribed in Project
Implementation Letters, were not received before the expiration of
said period.
Article 4.
Loan Terms.
SECTION 4.1.
Interest.
The borrower will pay to A.I.D.
interest which will accrue at the rate of two percent (2%) per annum
for ten (10) years following the date of the first disbursement
hereunder and at the rate of three percent (3%) per annum thereafter
on the outstanding balance of Principal and on any due and unpaid
- 4 interest.
Interest on the outstanding balance will accrue from the
date (as defined in Section 8.5.) of each respective disbursement,
and will be payable semiannually.
The first payment of interest
will be payable no later than six (6) months after the first
disbursement hereunder, on a date to be specified by A.I.D.
SECTION 4.2.
Repayment.
The Borrower will repay to A.I.D. the
Principal within forty (40) years from the date of the first
disbursement of the Loan in sixty-one (61) approximately equal
semiannual installments of Principal and interest.
The first
installment of Principal will be payable nine and one-half (9-1/2)
years after the date on which the first interest payment is due in
accordance with Section 4.1.
A.I.D. will provide the Borrower with
an amortization schedule in accordance with this Section after the
final disbursement under the Loan.
SECTION 4.3.
Application, Currency, and Place of Payment.
All payments of interest and Principal hereunder will be made in
U.S. Dollars and will be applied first to the payment of interest
due and then to the repayment of Principal.
Except as A.I.D. may
otherwise specify in writing, payments will be made to the
Controller, Office of Financial Management, Agency for International
Development, Washington, D.C. 20523, U.S.A., and will be deemed made
when received by the Office of Financial Management.
SECTION 4.4.
Prepayment.
Upon payment of all interest and any
refunds then due, the Borrower may prepay, without penalty, all or
any part of the Principal.
Unless A.I.D. otherwise agrees in
writing, any such prepayment will be applied to the installments of
Principal in the inverse order of their maturity.
- 5 -
SECTION 4.5.
Renegotiation of Terms.
(a)
The Borrower and
A.I.D. agree to negotiate, at such time or times as either may
\
request, an acceleration of the repayment of the Loan in the event
that there is any significant and continuing improvement in the
internal and external economic and financial position and prospects
of the Republic of Indonesia, which enable the Borrower to repay the
Loan on a shorter schedule.
(b)
Any request by either Party to the other to so negotiate
will be made pursuant to Section 9.2, and will give the name and
address of the person or persons who will represent the requesting
Party in such negotiations.
(c)
Within thirty (30) days after delivery of a request to
negotiate, the requested Party will communicate to the other,
pursuant to Section 9.2, the name and address of the person or
persons who will represent the requested Party in such negotiations.
(d)
The representatives of the Parties will meet to carry on
negotiations no later than thirty (30) days after delivery of the
requested Party's communication under subsection (c).
The
negotiations will take place at a location mutually agreed upon by
the representatives of the Parties, provided that, in the absence of
mutual agreement, the negotiations will take place at the office of
borrower's Minister of Finance in the Republic of Indonesia.
SECTION 4.6.
Termination on Full Payment.
Upon payment in full
of the Principal and any accrued interest, this Agreement and all
obligations of the Borrower and A.I.D. under it will cease.
- 6 -
Article 5.
Conditions Precedent to Disbursement.
SECTION 5.1.
First Disbursement.
Prior to the first
disbursement under the Loan, or to the issuance by A.I.D. of
documentation pursuant to which disbursement will be made, the
Borrower will, except as the Parties may otherwise agree in writing,
furnish to A.I.D. in form and substance satisfactory to A.I.D.:
(a)
An opinion of the Minister of Justice of the Borrower that
this Agreement has been duly authorized and/or ratified by, and
executed on behalf of, the Borrower, and that it constitutes a valid
and legally binding obligation of the Borrower in accordance with
all of its terms; and
(b)
A statement of the name of the person holding or acting in
the Office of the Borrower specified in Section 9.2; and of any
additional representatives, together with a specimen signature of
each person specified in such statement.
SECTION 5.2.
Conditions Precedent to Disbursement for Project
Activities Other Than Technical Assistance and Pre-Implementation
Activities.
Prior to disbursement under the Loan, or to issuance by
A.I.D. of documentation pursuant to which disbursement will be made
for project activities other than technical assistance or
pre-implementation activities , the Borrower shall, except as A.I.D.
may otherwise agree in writing, furnish in form and substance
satisfactory to A.I.D.:
(a) evidence that the Borrower has assigned
at least five full-time professionals to the BPD Tingkat I team in
each of the provinces assisted by this Project, and (b) evidence
that the Borrower has established and staffed a team for rural
- 7 credit in Bangda, Ministry of Home Affairs, with at least two
full-time professionals.
SECTION 5.3.
Condition Precedent to Disbursement of Funds for
System Capitalization.
Prior to the disbursement of funds under the
Loan, or to issuance by A.I.D. of documentation pursuant to which
disbursement will be made for system capitalization, the Borrower
shall, except as A.I.D. may otherwise agree in writing, furnish in
form and substance satisfactory to A.I.D.:
(a) evidence of the
procedures established for the transfer of funds between the
Ministry of Finance and the respective BPD's and for the transfer of
those funds to participating units, and (b) evidence that the
Borrower has taken the necessary steps to allow village-based credit
systems assisted by this Project to accept voluntary savings from
borrowers and non-borrowers and to safeguard such savings through
procedures reflecting unit performance.
SECTION 5.4.
Condition Precedent to Disbursement of Funds for
Computer-Related Equipment.
Prior to the disbursement of funds
under the Loan, or to issuance by A.I.D. of documentation pursuant
to which disbursement will be made for computer-related equipment,
the Borrower shall, except as A.I.D. may otherwise agree in writing,
furnish in form and substance acceptable to A.I.D., an assessment of
BPD computer needs in West Java, Central Java, and West Sumatra.
SECTION 5.5.
Notification.
When A.I.D. has determined that the
conditions precedent specified in Section 5.1, 5.2, 5.3 and 5.4 have
been met, it will promptly notify the Borrower.
SECTION 5.6.
Terminal Dates for Conditions Precedent.
If all
of the conditions specified in Section 5.1 have not been met within
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8 -
90 days from the date of this Agreement, or such later date as
A.I.D. may agree to in writing, A.I.D., at its option may terminate
\
this Agreement by written notice to Borrower.
Article 6.
Special Covenants.
SECTION 6 . 1.
Project Evaluation.
The Parties agree to
establish an evaluation program as part of the Project.
Except as
the Parties otherwise agree in writing, the program will include,
during the implementation of the Project and at one or more points
thereafter:
(a) evaluation of progress toward attainment of the
objectives of the Project;
(b) identification and evaluation of
problem areas or constraints which may inhibit such attainment;
(c)
assessment of how such information may be used to help overcome such
problems; and (d) evaluation, to the degree feasible, of the overall
development impact of the Project.
SECTION 6.2.
Additional Special Covenants.
Except as A.I.D. may otherwise agree in writing, the Parties
agree to the following additional Special Covenants:
(a)
the
Borrower agrees to use accounting practices and interest rates of
village credit systems under this project which insure their
financial viability, including procedures to reserve funds for loan
losses and to write-off uncollectable loans, and (b) the Borrower
agrees to ensure that the Team Pembina Pembangunan Kredit Perdesaan
will meet at least once a year to review performance of each of the
village credit systems and to consider adjustments based on
performance, with the paramount criterion being financial
- 9 -
viability as defined in the amplified project description of this
Agreement.
Article 7:
Procurement Source.
SECTION 7.1.
Foreign Exchange Costs.
Disbursements pursuant to
Section 8.1 will be used exclusively to finance the costs of goods
and services required for the Project having with respect to goods,
their source and origin and with respect to services, their
nationality in countries included in Code 941 of the A.I.D.
Geographic Code Book as in effect at the time orders are placed or
contracts entered into for such goods and services ("Foreign
Exchange Costs"), except as A.I.D. may otherwise agree in writing,
and except as provided in the Project Loan Standard Provisions
Annex, Section C.l (b) with respect to marine insurance.
Ocean
transportation costs will be financed under the Loan only on vessels
under flag registry of the United States, or Indonesia, or Code 941
countries as long as chartered or operated by Indonesian shipping
companies, except as A.I.D. may otherwise agree in writing.
SECTION 7.2
Local Currency Costs.
Disbursements pursuant to
Section 8.2 will be used exclusively to finance the costs of goods
and services required for the Project having their source and,
except as A.I.D. may otherwise agree in writing, their origin in the
Republic of Indonesia ("Local Currency Costs").
provided for under this Agreement,
To the extent
"Local Currency Costs" may also
include the provision of local currency resources required for the
Project.
- 10 Article 8.
Disbursements.
SECTION 8.1.
(a)
Disbursement for Foreign Exchange Costs.
After satisfaction of Conditions Precedent, the Borrower
may obtain disbursements of funds under the Loan for the Foreign
Exchange Costs of goods or services required for the Project in
accordance with the terms of this Agreement, by such of the
following methods as may be mutually agreed upon:
(1)
by submitting to A.I.D. with necessary supporting
documentation as prescribed in Project Implementation Letters,
(A) requests for reimbursement for such goods or services, or (B)
requests for A.I.D. to procure commodities or services in Borrower's
behalf for the Project; or
(2)
by requesting A.I.D. to issue Letters of Commitment
for specified amounts (A) to one or more U.S. banks, satisfactory to
A.I.D., committing A.I.D. to reimburse such bank or banks for
payments made by them to contractors or suppliers, under Letters of
Credit or otherwise, for such goods or services, or (B) directly to
one or more contractors or suppliers, committing A.I.D. to pay such
contractors or suppliers for such goods and services.
(b)
Banking charges incurred by Borrower in connection with
Letters of Commitment and Letters of Credit will be financed under
the Loan unless the Borrower instructs A.I.D. to the contrary.
Such
other charges as the Parties may agree to may also be financed under
the Loan.
SECTION 8.2.
(a)
Disbursement for Local Currency Costs
After satisfaction of Conditions Precedent, the Borrower
may obtain disbursements of funds under the Loan for Local Currency
- 11 Costs required for the Project in accordance with the terms of this
Agreement, by submitting to A.I.D., with necessary supporting
documentation as prescribed in Project Implementation Letters,
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requests to finance such costs.
(b)
obtained:
The local currency needed for such disbursement may be
(1)
In local currency acquired by A.I.D. by purchase or
from local currency already owned by the U.S. Government or (2) by
A.I.D. requesting the Borrower to make available the local currency
for such costs, and thereafter reimbursing an amount of U.S. dollars
equal to the amount of local currency made available by the
Borrower.
The U.S. dollar equivalent of the local currency made
available hereunder will be the amount of U.S. dollars required by
A.I.D. to obtain the local currency.
SECTION 8.3.
Other Forms of Disbursement.
Disbursements of the
Loan may also be made through such other means as the Parties may
agree to in writing.
SECTION 8.4.
Rate of Exchange.
Except as may more specifically
be provided under Section 8.2, if funds provided under the Loan are
introduced into Indonesia by A.I.D. or any public or private agency
for purposes of carrying out obligations of A.I.D. hereunder, the
Borrower will make such arrangements as may be necessary so that
such funds may be converted into currency of the Republic of
Indonesia at the highest rate of exchange which, at the time the
conversion is made, is not unlawful in Indonesia.
SECTION 8.5.
Date of Disbursement.
Disbursements by A.I.D.
will be deemed to occur (a) on the date on which A.I.D. makes a
disbursement to the Borrower or its designee, or to a bank,
contractor or supplier pursuant to a Letter of Commitment, contract,
- 12 or purchase order;
(b) on the date on which A.I.D. disburses to the
Borrower or its designee local currency acquired in accordance with
Section 8.2.
Article 9.
Miscellaneous
SECTION 9.1.
Communications.
Any notice, request, document,
or other communication submitted by either Party to the other under
this Agreement will be in writing or by telegram or cable, and will
be deemed duly given or sent when delivered to such party at the
following addresses:
To the Borrower:
Mail Address:
Departemen Luar Negeri
Jalan Pejambon No. 6
Jakarta Pusat
Indonesia
Alternate address for telegrams:
DEPLU JAKARTA
To A. I. D.:
Mail Address:
U.S. Agency for International Development
American Embassy
Jl. Medan Merdeka Selatan 5
Jakarta, Indonesia
Alternate address for telegrams:
USAID AMEMB JAKARTA
All such communications will be in English, unless the Parties
otherwise agree in writing.
Other addresses may be substituted for
the above upon the giving of notice.
The Borrower, in addition,
will provide the USAID Mission with a copy of each communication
sent to A. I. D.
SECTION 9.2.
Representatives.
For all purposes relevant to
this Agreement, the Borrower will be represented by the individual
holding or acting in the off ice of the Chairman or Vice Chairman,
- 13 National Development Planning Agency (BAPPENAS) and A.I.D. will be
represented by the individual holding or acting in the office of
Mission Director, USAID Mission to Indonesia, each of whom, by
written notice, may designate additional representatives for all
purposes other than exercising the power under Section 2.1 to revise
elements of the amplified description in Annex I.
The names of the
representatives of the Borrower, with specimen signatures, will be
provided to A.I.D., which may accept as duly authorized any
instrument signed by such representatives in implementation of this
Agreement, until receipt of written notice of revocation of their
authority.
SEC'IION 9. 3.
Standard Provisions Annex.
A "Project Loan
Standard Provisions Annex" (Annex 2) is attached to and forms part
of this Agreement.
IN WI1NESS WHEREOF, the Republic of Indonesia and the United
States of America, each acting through its duly authorized
representative, have caused this Agreement to be signed in their
names and delivered as of the day and year first above written.
REPUBLIC OF INDONESIA
Signed
-'i(ahono Martohadinegoro
Acting Director General
for Foreign Economic Relations
Department of Foreign Affairs
UNITED S 'l 'A'l'.ES 01" AMERICA
Signed
Richard C. Howland
Charge d'Affaires
Embassy of the United States
of America/Indonesia
Annex I
FINANCIAL INSTITUTIONAL DEVELOPMENT
AMPLIFIED PROJECT DESCRIPTION
The Financial Institutions Development Project (FID) is a US$27.8
million project to develop and expand existing village-based credit
institutions in West Java, West Sumatera, and Central Java to extend
credit to borrowers, to expand loan portfolios beyond trader credits to
include small entrepreneurs and to mobilize voluntary savings. The
systems and estimated number of units that will receive assistance are:
Badan Kredit Kecamatan (491 units Central Java); Bank Karya Produksi Desa
(217 units West Java); Lembaga Perkreditan Kecamatan (103 units West
Java); and Lumbung Pitih Negari (561 units West Sumatera).
The project also provides funds to capitalize individual units and
help expand loan portfolios by working through two ministries, the
Ministry of Finance and the Ministry of Home Affairs, and the provincial
development banks (Bank Pembangunan Daerah--BPD). The project provides
training, technical assistance and equipment to develop the staff and
operational procedures and to forge a closer link between the local
credit systems and the provincial banks responsible for supervision,
training and inspection. Provincial development banks will provide
supervisory guidance, technical expertise, training and access to
capital. In doing so, the project will attempt to demonstrate the
elements of a viable, self-financing local credit system applicable
elsewhere throughout Indonesia.
Recognizing the variations in organizational development in the
provinces selected, the project will build on their coilllilon strengths and
respond to the common needs of each. The project will be phased by
province to allow each system to consolidate organizational and
procedural changes with BPD and unit management development before
expanding to undertake new services. The end of the project will attempt
to have the units from all four systems to reach a performance level that
insures self-sustainability. To do this the BPDs will establish
performance criteria and allow units above a set level of performance to
conduct: a) further expansion to cover more villages by setting up more
village posts, b) a savings mobilization program and c) a small
industries loan program administered on criteria of loan performance.
Project outputs will reflect the end of project status of four village
c redit systems operating in three provinces each with more standard loan,
administrative and accounting procedures; a simplified and usable
management information system; formal administrative and financial
linkages between the provincial development banks and the local credit
units; and trained banking personnel both in the units and in
supervisory and inspection positions within three BPDs.
2
Project Inputs:
A) Training Support: At least 5,300 direct employees will have to be
trained or retrained during the life of the project to create and
maintain a system of efficient but widely dispersed financial units.
Each BPD will develop its in-house training capability to provide a
continuing training program that provides all operating personnel with
periodic training up-dated regularly. Specific training programs for unit
and BPD officials will be developed. The GOI will fund the development of
training facilities at the BPDs and personnel training costs. AID will
fund local training costs and if required, a trip by selected GOI project
officials to the other Asian countries to observe comparable rural credit
programs applicable to the Indonesian program.
B) Technical Assistance: Technical assistance will work closely with
respective provincial development banks to help develop their management,
supervisory and inspection capability. Technical assistance will provide
resident and short-term specialists to work with the provincial banks to
create and improve management information systems, savings programs,
accounting systems, and curriculum design to support a large training
effort. The initial tasks will be to assist in the review of accounting
procedures in use, consolidate the financial position of each of the
sub-systems assisted, re-classify participating units and conduct an
initial assessment of computer requirements to support management
information system development. Later, the capacity of individual units
and the BPD to monitor larger types of loans will be stressed. The bulk
of technical assistance will be provided through an institutional
contract. The contract will finance resident technical advisors at each
province and have forty-person months of special short-term assistance
with an option to extend.
Resident advisors will reside in West Sumatera, Central Java and West
Java for four years with knowledge of the Indonesian language and the
Indonesian financial system an important criteria in contract selection.
As the senior team member in country, one advisor will spend
approximately a third to a half of his time in Jakarta and other
provinces.
Short-term specialized assistance will be used for curriculum
development and training program design. Specialized assistance likely
will also be required to assist the BPDs in:
i)
ii)
iii)
iv)
management information system development.
designing savings mobilization programs.
accounting system redesign and modification where warranted.
designing financial instruments to strengthening BPD
linkages to Jakarta-based financial institutions.
v) a computer needs assessment of the BPDs and the BPD offices.
vi) working on short-term specialized financial issues requested by
the GOI •
3
An Indonesian firm will conduct the borrower viability portion of the
evaluation. Design assistance for the methodology and questionaires used
will be provided by the institutional firm and the USAID Mission's
evaluation officer. Approximately two-person years will also be set
aside for specialized technical assistance needed by the GO! and not
available from either the institutional or the local evaluation
subcontractor. This assistance will be given in a number of areas as the
BPDs and Jakarta-based counterparts identify their needs during project
implementation. Some areas where assistance may be required are:
a) the examination of policy, legal and regulatory questions related
to the implementation of this project.
b) pre-feasibility and feasibility studies for project expansion
into other provinces.
c) managerial questions related to overall BPD operations.
C. Commodities: Approximately $3.5 million worth of project commodities
($0.75 million AID and $2.75 million GOI) are estimated for the project.
Subject to AID approval and waiver requirements, USAID's contribution
will include approximately 50 vehicles plus limited office equipment, and
computer equipment. The GOI's contribution will consist of office
equipment required to reestablish units and conduct larger training
programs. Vehicles will support supervisors/auditors and thus allow a
greater number of supervisory visits. The BPD's will fund motorcycles for
unit loan officers to establish village posts based on BPD procurement or
employee hire/purchase programs. Limited equipment for local units will
be provided by the GO! and phased per expansion plans of each individual
province. Computer equipment for the management information and
accounting system will consider overall BPD needs and to that used in
other provinces. An assessment of information needs and computer
capabilities will be done at the beginning of the project. AID financed
miscellaneous equipment including training equipment will be determined
by each BPD as they begin a training program and identify equipment needs.
D. Funds for System Capitalization: System expansion will relate to
financial performance and developing management capacity at the BPD and
unit level. Capitalization flows will be based on current Ministry of
Finance procedures and will base expansion on units meeting performance
criteria established by Rural Village Credit Committee. Additional loan
expansion is expected to come from savings, the individual unit's equity
accounts less a reserve for potential losses and normal interbank
facilities at competitive rates. Unit capitalization requests will be
funded from Ministry of Finance's established lines to the provinces
which, as of 1984, are as follows:
A) Central Java: Rp. 3,000,000,000 line established; 1,500,000 used.
B) West Sumatera: Rp. 1,500,000,000 line established; Rp.500,000,000
used.
C) West Java: Rp.1,000,000,000 (credit line to be establishedby
Ministry of Finance).
4
Drawdown of funds will be matched by AID from the capital line item
of the project budget. AID will make capital available to each province
after a preliminary accounting and unit review is completed and unit
classification systems are established in West Java and West Sumatera.
Procedures will be described in project implementation letters.
International loan funded procurement of goods and services under the
project will be solicited from firms or individuals in Code 941,
Indonesia and the United States. International grant funded procurement
of goods and services will be solicited from firms or individuals in
Indonesia and the United States. Goods and services funded by the
project budget will be procured on a competitive basis, advertised in
Indonesia as well as abroad for international procurement. Indonesian
firms will be eligible to bid for all local and international procurement.
Project outputs:
The following project outputs will receive attention, primarily
through technical assistance and training, to achieve the end of project
status:
A) Self-sustaining BPD Training Capability: A self-sustaining training
capability in the three BPDs of West Java, West Sumatera and Central Java
will institutionalize procedures and policies. Specific minimum levels of
job performance will be required from the approximately 5,300 rural
credit employees either retrained or recruited for the project to expand
lending and improve loan quality. Unit personnel will require further
skills development in loan appraisal, loan processing and bookkeeping,
especially as more developed units begin developing small industry loans
and dealing with larger borrowers. FID will help the BPDs develop a
training capacity in West Java, Central Java, and West Sumatera to:
1.
2.
3.
4.
5.
6.
7.
Write annual rural credit training plans including training
objectives, budgeting and manpower scheduling;
Develop job descriptions and performance requirements for loan
officers, unit supervisors, bookkeepers, and cashiers;
Design and implement standard courses for the above positions using
training methods that rely on simulations, exercises , and case
studies;
Develop an apprentice program for operational personnel;
Conduct periodic training needs analysis;
Evaluate the impact of courses on job performance;
Develop specialized courses to support a small industry lending
program.
The above objectives will be approached in a structured training
program based on methodology found effective and refined for variations
of each province. Both the content of training curriculum and scheduling
of unit and BPD personnel will be developed by the BPD and technical
advisors early in the project.
5
B) Improved Auditing, Inspection and Supervision: The project will
strengthen supervision and auditing by assisting the BPDs to address the
personnel and reorganization requirements related to major expansion of
lending and savings. Assistance will be through increased training for
area supervisors and auditors, increased mobility with additional
vehicles, and improved access to relevant financial information. The
supervisor working out of the BPD offices will develop monitoring and
inspection skill so timely management decisions may be taken. The area
auditor, at a BPD office covering several districts, will audit and
analyze the financial condition of individual units. The province will
designate a group of supervisors and auditors as full-time BPD
employees. Each of the BPDs will undergo expansion of inspection staff
so inspectors may visit each unit of the participating systems at least
monthly and be knowledgable in new project initiatives such as small
industry lending and savings promotion. Inspection reporting formats
will be revised where necessary to capture essential data on performance
and profitability. A first task in project implementation will be to
assess current inspection procedures, formats and staffing levels.
C) Formal Efficient System of Savings: Each of the village credit
systems plans to expand savings mobilization significantly by working
with the BPD and village post system and through:
1. A Stronger Emphasis On Voluntary Savin.gs: Within funding and
loan security constraints, mandatory savings should play less of a role
as voluntary savings increase. During the life of project mandatory
savings requirements may be phased out as systems become capable of
mobilizing voluntary savings. Savings should be returned on request to
any saver who does not have an outstanding overdue loan. Implementation
of the savings program will be phased based on the performance of a
particular unit or system.
2. Interest Rates Sufficient to Attract Savin.gs: As part of the
financial review, the savings rate will be reviewed annually for its
impact on financial viability, its effect in attracting voluntary
savings, and the ability of savings to finance planned village-post
expansion. The evaluation will also review the effectiveness of savings
programs initiated to date.
3. Allow Posts to Accept Savings from Both Borrowers and
Non-Borrowers: In the four systems to receive assistance under this
project both borrowers and non borrowers will be allowed to save.
A
request similar to the one from the Ministry of Home Affairs via the
Ministry of Finance to the Bank Indonesia that would allow the Central
Java system (BKK) to accept savings would also be sent for West Java and
West Sumatera. The pace of implementing a voluntary savings program
would depend on the development of each system in terms of individual
unit performance and overall system monitoring and supervision.
6
4. Mechanisms to Safeguard Savings Deposits: During the life of
project each province plans to institute mechanisms to safeguard savings
deposits. Such procedures will be established early in the project and
be closely linked with the financial performance of the system as a
whole.
5. Specialized Programs and Campaigns to Promote Savings
Generation: Subsequent to the above steps, the BPDs plan to initiate a
series of programs and savings instruments to promote savings in stronger
performing units. The programs will likely include a series of savings
promotion efforts and new saving instruments and be done in conjunction
with the training program described earlier.
D) A Self-Sustaining Costing Structure: The interest rate structure
will consider contrary factors: encouraging savings mobilization,
offering the borrower a profit from his investment and returning enough
interest to cover institutional costs, loan losses, inflation, and
expansion. This project will support and help develop the existing
pricing structure which, at the time of the signing of the Project
Agreement, is as follows:
Type of Funds
Interest Paid by Units
for Initial BPD Funds
Interest Charged by Units
for Loans to Borrowers
BKK
LPK
BKPD
12%
12%
12%
45%
36-48%
36-48%
LPN
7%
20%
Revisions and further development of the pricing structure may be
warranted during the life of the project. The project will include a
yearly financial evaluation beginning in the project's second year to
assess the performance of each province incorporating the real expenses,
i.e. administration, loan losses, etc. and present its findings to the
Ministry of Finance and other members of the Badan Pembinaan Pembangunan
Kredit Perdesaan with specific recommendations for adjustment of project
elements. Each of the provinces will also consider establishing
procedures and rates for borrowings from regular BPD facilities when
their financial performance so warrants. As individual units reach a set
performance level, they should have sufficient equity, less reserve for
potential losses, should be available for lending expansion.
E) Strengthened Operational and Accounting Procedures for Each System:
Each system faces unique problems in the accounting procedures and in
applying them to a greater number of village posts. Over the life of the
project the BPD and consultant will build on existing procedures to
design, implement and refine a more uniform accounting system in each
province. Established effective practices such as maintaining loan
authority in the unit in the kecamatan and quick loan approval times
which have helped the systems to grow will be encouraged.
7
During the project each province will review and revise accounting
procedures to allow for a significant expansion in lending and savings.
Early in the project, systems in West Java and West Sumatera will require
an initial review of their accounting procedures and an analysis of the
consequences of applying their procedures to a significantly greater
volume of lending. In addition, the systems will need to establish
defined sub-capital accounts, specifically reserve accounts and write off
procedures for loan losses, to better measure profitability and the
degree of system expansion.
As BPDs make procedural and documentation revisions they will also
address the issue of managing surplus funds. BPD and technical
assistance will design procedures that allow surplus units to place money
with the provincial BPD office for set periods and at competitive rates.
The project may also establish special secondary lines to tide over units
during periods of heavy withdrawal when savers will want access to
voluntary savings. Additionally, the BPDs will address operational
questions such as setting limits for cash on hand.
During the course of project implementation the BPDs will also design
and phase in procedures for:
1) establishing reserve accounts in the capital account of
individual units.
2) establishing reserve and write-off policies based on actual
performance.
3) considering methods to track overdue loans such as special
overdue subsidiary loan ledgers at each unit outlet.
4) setting up audit and inspections triggered by the overdue
position of an outlet.
5) helping set up credit policies based on the unit classification
system to prevent lending expansion when outstanding overdue are above
acceptable norms.
F) Management Information System (MIS):
Under this project the
existing management information systems will be refined and upgraded as
managment capacity develops and specific information needs are
identified. The BPDs will work to further develop a simple management
information system that will:
1.
2.
3.
4.
5.
Track operational performance of each unit in terms of loan
performance, loan delinquencies and how much they are overdue, equity
growth, loans outstanding, number of borrowers, number of village
posts, monthly loan circulation, total savings, expenses and income;
Consolidate the above to help the BPD set realistic credit and growth
ceilings for each unit;
Identify and prevent malfeasance;
Produce reports on a monthly, quarterly, and semi-annual basis;
Maintain centralized consolidated financial statements regarding
overall sources and applications of project funds;
8
Development in each province will be the responsibility of the BPDs
supervision units with the assistance of the consultant team. The first
task will be to review frequency of reports, their organizational
distribution and management actions taken as a result. Each province
will be approached based on its development and the need to continue
integrating report findings with management decision making, refine cash
management reporting, consider coding loans by type, and monitoring the
current unit classification system. Thus technical assistance for MIS
and accounting to the BPD will go beyond strictly village credit system
needs and consider overall BPD requirements as well. Introduction of the
MIS will first require a review of the accounting procedures in place and
a confirmation of the accuracy of consolidated financial data of all
units. Implementation will be phased with training and BPD staffing.
Implementation Plan:
A. Project Participants:
Ministry of Home Affairs: Home Affairs will assign a Project Manager and
one assistant to a full time section in BANGDA covering only rural
credit. BANGDA will be the main project signer, help coordinate the
contributions of the various project participants BANGDA will :
1)
2)
3)
4)
5)
provide GO! contributions to the training and equipment budgets;
monitor overall project implementation and system expansion;
review requests forwarded to the Ministry of Finance;
coordinate the host country contribution from other GO!
participants; and
relate FID experience to other provinces for possible replication.
Ministry of Finance: The Directorate of State Wealth Management,
Ministry of Finance, will finance unit recapitalization and expansion per
procedures already established. The Directorate's Rupiah line of credit
equivalent to US$3 million to Central Java and $1.5 million to West
Sumatera for rural credit expansion will be augmented by a similar line
of credit to West Java equivalent to US$ 1 million. The Ministry will
chair the review committee on rural credit that will meet yearly. With
the Ministry of Home Affairs, the Ministry will continue its present role
of coordinating mid-project adjustments that require assistance from
agencies such as the Bank Indonesia not directly participating in the
project.
Team Pembina Pembangunan Kredit Pedesaan (Village Credit Development
Team) is a working group already formed under the leadership of the
Ministry of Finance to monitor overall rural credit policy in Indonesia.
It will monitor the overall policy content of this project and consist of
senior officals of the Ministry of Home Affairs, the Central Bank,
Ministry of Finance, and BAPPENAS. The Board will meet at least yearly
immediately after the regular evaluation to review yearly
9
financial results and concur and facilitate project changes identified.
The Bank Indonesia will participate in the project by participation on
the Badan Pembinaan Pembangunan Kredit Pedesaan and also via their Bank
Inspection Division which has oversight responsibility for overall BPD
operations.
Bank Pembangunan Daerah(Provinical Development Bank): The three BPDs of
West Java, Central Java, and West Sumatera will be the daily operational
counterparts for this project. The specific management office in each
respective BPDs is anticipated as follows:
West Java: Bureau for Research and Planning
Central Java: Bureau for Supervision
West Sumatera: Bureau for Supervision
Each BPD will strengthen its staff to inspect and develop the local
credit systems under its authority. Additional staff for implementation,
monitoring and supervision will be provided. The BPD will be the prime
counterpart for formulating unit expansion requests, procedural changes,
and the size, content and phasing of the training program. The BPDs in
turn will be monitored by the provincial Badan Pembinaan consisting of
various TK I administrative bodies such as BAPPEDA, governor's office,
Kooperasi, and the BPD itself. Exact Badan membership varies in each
province.
B.
Initial Steps for Project Implementation:
Coordination will take place via the Ministry Dalam Negeri plus
through the coordinating committee meeting of the Badan Pembinaan
Pembangunan Kredit Pedesaan (Village Credit Development Board) to prepare
overall yearly budgetary levels, apportion contributions from the
respective agencies, review system expansion to date and assist in any
required policy changes. Two immediate tasks are:
1) Core Staffing Assignments: The appointment of a two member full
time rural credit team in BANGDA should be made while the BPD offices
will be staffed up to at least five people to provide the credit, unit
accounting and MIS and supervision critical for an expanded lending and
savings program.
2) Initial Operational Assessment: After meeting initial conditions
precedent, AID and the GOI will contract for technical assistance. The
first task of the BPD will be to work with the technical advisors to:
a) review accounting and operational procedures and determine any
adjustments needed;
b) formulate a workplan for identified accounting and procedural
changes;
c) recompile and reconfirm the aggregate financial position of
participating systems with appropriate adjustments to consolidated
records;
10
d) establish unit performance criteria for West Java and West
Sumatera;
e) conduct a computer needs analysis of the participating BPDs to
determine system requirements for MIS and accounting formats and for
compatibility with overall BPD computer procurement; and
f) help design a comprehensive training curicullum and a schedule for
the first year of implementation.
C.
System Capitalization and Unit Classification:
USAID capital flows will follow fulfillment of conditions precedent,
redesign of a unit classification system for West Java and West Sumatera
and the review of current accounting procedures and financial position of
each system. The project will base performance standards for each
participating unit on a classification system as adjusted to the
characteristics of the West Java, West Sumatera and Central Java. That
criteria initially consists of new loans booked, the ratio of village
"posts" to banking units, the quality of the portfolio based on the
percentage of overdue, loans, savings generated, and loan circulation. To
the extent possible those performance norms will be uniform in each
province. Transfer of capital will be based on established procedures.
D.
Financial Plan:
The financial plan is illustrative only. Adjustments between line
items may be made by representatives of the parties named in the text of
the Agreement without formal amendment of the Agreement so long as (1)
AID's total contribution as provided in the text of the Agreement is not
exceeded and (2) the Government's contribution as provided in the text of
the Agreement is not decreased. Adjustments between line items greater
than 15% must be agreed to by the parties in writing.
11
PROJECT BUDGET (OOO's; 1US$= lOOORp)
A I D
Grant*
Technical Assistance
Training
3,500
500
6,950
3,000
10,450
750
2,750
3,500
3,000
3,500
6,500
Capital
Total
Total
2,000
Commodities and
Equipment
Contingency
GOI**
I Loan
I
500
1,300
3,000*
15,500
5,500
1,800
9,250
27,750
*/
The amount of grant funds obligated is $1,000,000. Future
increments are subject to the availability of funds and mutual
agreement of the parties to proceed. Of grant funded obligated
in FY 1984 approximately $900,000 is estimated for technical
assistance and $100,000 for training and preimplementation
activities.
**/
It is anticipated that the contribution by the GOI for each
line item will come from the Ministry of Finance, Ministry of
Home Affairs and the provincial government. The exact
contribution of each agency will be determined in the yearly
review of the project.
Table of Content
Project Loan Standard Provisions
Annex 2
Page
Article A:
Project Implementation
Article B:
General Covenanr.s
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
Article C:
B. 1.
B.2.
B. 3.
B. 4.
B. 5.
B.6.
B.7.
B.8.
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
\
Consultation
Execution of Project
Utilization of Goods and Services
Taxation
Reports, ｒ･｣ｾｲ､ｳＬ＠
Inspections, Audit
Completeness of Information
Other Payments
Information and Marking
Procurement Provisions
SECTION C.l.
SECTION C.2.
SECTION C. 3.
SECTION C. 4.
SECTION C.5.
SECTION C.6.
SECTION C. 7.
SECTION · C.8.
Article D:
ｌ･ｴ｣ｾｳ＠
Special Rules
Eligibility Date
Plans, Specifications, ｾｮ､＠
Contracts
Reasonable Price
Notification to Potential Suppliers
Shipping
Insurance
U.S. Government-Owned Excess Property
1
l
1
1
2
2
2. 3
3
3
3
3
3, 4
4
4
5
5
5' 6
6, 7
7
Termination; Remedies
7
D. 1.
D. 2.
D. 3.
D.4.
D.S.
D.6.
D. 7.
7
Cancellation by Borrower
Events of Default; Acceleration
Suspension
Canc
A.I.D. PROJECT NO. 497-0341
0
PROJECT
LOAN AGREEMENT
BETWEEN
THE REPUBLIC OF INDONESIA
AND THE
UNITED STATES OF AMERICA
FOR
FINANCIAL INSTITUTIONS DEVELOPMENT
Dated:
0
May 24, 1984
PRQJEC'r LOAN AGREEMEN'I
Table of Contents
PAGE
Article 1
'1h e Agre em en t
1
Article 2
The Project
1
SECTION 2 .1.
Article 3 :
Financing
SECTION 3.1.
SECTION 3. 2.
SECTION 3.3.
Article 4 :
SECTION
SEC'I'ION
SECTION
SEC'IION
SECTION
SECTION
Article 5 :
4.1.
4. 2.
4.3.
4.4.
4. 5.
4. 6.
Interest
Repayment
Application, Currency and Place of Payment
Prepayment
Renegotiation of Terms
Termination on Full Payment
Conditions Precedent to Disbursement
SECTION 5.3.
SEC'lION 5.4.
SEC'lION 5.5.
SECTION 5.6.
First Disbursement
Conditions Precedent to Di&bursement for
Project Ac ti vi ties Other 'l'han 'I'echnical
Assistance and Pre-Implementation Activities
Conditions Precedent to Disbursement of
Funds for System Capitalization
Conditions Precedent to the Disbursement of
Funds for Computer-Related Equipment
Notification
'lerminal Dates for Conditions Precedent
Special Covenants
SECTION 6.1
SEC '!ION 6. 2.
j
'Jhe Loan
Borrower Resources for the Project
Project Assistance Completion Date
Loan 'l'erms
SECTION 5.1.
SECTION 5.2.
Article 6 :
Definition of Project
Project Evaluation
Additional Special Covenants
l
2
2
2
2
3
3
4
4
4
5
5
6
6
6
7
7
7
7
7
8
8
8
PAGE
Article 7:
\
Procurement Source
SECTION 7.1.
SECTION 7.2.
Article 8:
SECTION
SECTION
SECTION
SECTION
SECTION
Article 9:
Foreign Exchange Costs
Local Currency Costs
Disbursements
8.1.
8.2.
8.3.
8.4.
8.5.
Disbursement for Foreign Exchange Costs
Disbursement for Local Currency Costs
Other Forms of Disbursement
Rate of Exchange
Date of Disbursement
Miscellaneous
SECTION 9 .1.
SECTION 9.2.
SECTION 9.3.
9
Communications
Representatives
Standard Provisions Annex
9
9
10
10
10
11
11
11
12
12
12
13
Amplified Description of the Project
ANNEX I
Project Loan Standard Provisions
ANNEX II
A.I.D. LOAN NO. 497-T-085
A.I.D. PROJECT NO. 497-0341
PROJECT LOAN AGREEMENT
Dated: May 24, 1984
Between
The Republic of Indonesia ("Borrower")
and
The United States of America, acting through the Agency for
International Development ("A. I. D.").
Article 1.
The Agreement
The purpose of this Agreement is to set out the understandings
of the parties named above ("Parties") with respect to the
undertaking by the Borrower of the Project described below, and with
respect to the financing of the Project by the Parties.
Article 2.
The Project.
SECTION 2.1.
Definition of Project.
The Project, which is
further described in Annex I, is designed to assist the Borrower to
increase rural, non-farm employment through the development of
village-based credit institutions in selected provinces so that they
are able to extend credit to borrowers, expand loan portfolios to
include small entrepreneurs, and mobilize savings.
Annex I,
attached, amplifies the above definition of the Project.
Within the limits of the above definition of the Project,
elements of the amplified description stated in Annex I may be
- 2 changed by written agreement of the authorized representatives of
the Parties named in Section 9.2, without formal amendment of this
\
Agreement.
Article 3.
Financing.
SECTION 3.1.
The Loan.
To assist the Borrower to meet the
costs of carrying out the Project, A.I.D. pursuant to the Foreign
Assitance Act of 1961, as amended, agrees to lend the Borrower under
the terms of this Agreement not to exceed Fifteen Million and Five
Hundred Thousand United States ("U.S.") Dollars ($15,500,000) to
support the Project.
The aggregate amount of disbursements under
the Loan is referred to as "Principal".
The Loan may be used to finance foreign exchange costs, as
defined in Section 7.1. and local currency costs, as defined in
Section 7.2., of goods and services required for the Project.
SECTION 3.2.
(a)
Borrower Resources for the Project.
The Borrower agrees to provide or cause to be provided for
the Project all funds,
in addition to the Loan, and all other
resources required to carry out the Project effectively and in a
timely manner.
(b)
The resources provided by the Borrower for the Project will
be not less than the equivalent of U.S. $9,250,000, including costs
borne on an "in-kind" basis.
SECTION 3.3.
(a)
Project Assistance Completion Date.
The "Project Assistance Completion Date" (PACD), which is
May 31, 1991, or such other date as the Parties may agree to in
writing, is the date by which the Parties estimate that all services
-
3 -
financed under the Loan will have been performed and all goods
financed under the Loan will have been furnished for the Project as
contemplated in this Agreement.
(b)
Except as A.I.D. may otherwise agree in writing, A.I.D.
will not issue or approve documentation which would authorize
disbursement of the Loan for services performed subsequent to the
PACD or for goods furnished for the Project, as contemplated in this
Agreement, subsequent to the PACD.
(c)
Requests for disbursement, accompanied by necessary
supporting documentaion prescribed in Project Implementation
Letters, are to be received by A.I.D. or any bank described in
Section 8.1 no later than nine (9) months following the PACD, or
such other period as A.I.D. agrees to in writing.
After such
period, A.I.D., giving notice in writing to the Borrower, may at any
time or times reduce the amount of the Loan by all or any part
thereof for which requests for disbursement, accompanied by
necessary supporting documentation prescribed in Project
Implementation Letters, were not received before the expiration of
said period.
Article 4.
Loan Terms.
SECTION 4.1.
Interest.
The borrower will pay to A.I.D.
interest which will accrue at the rate of two percent (2%) per annum
for ten (10) years following the date of the first disbursement
hereunder and at the rate of three percent (3%) per annum thereafter
on the outstanding balance of Principal and on any due and unpaid
- 4 interest.
Interest on the outstanding balance will accrue from the
date (as defined in Section 8.5.) of each respective disbursement,
and will be payable semiannually.
The first payment of interest
will be payable no later than six (6) months after the first
disbursement hereunder, on a date to be specified by A.I.D.
SECTION 4.2.
Repayment.
The Borrower will repay to A.I.D. the
Principal within forty (40) years from the date of the first
disbursement of the Loan in sixty-one (61) approximately equal
semiannual installments of Principal and interest.
The first
installment of Principal will be payable nine and one-half (9-1/2)
years after the date on which the first interest payment is due in
accordance with Section 4.1.
A.I.D. will provide the Borrower with
an amortization schedule in accordance with this Section after the
final disbursement under the Loan.
SECTION 4.3.
Application, Currency, and Place of Payment.
All payments of interest and Principal hereunder will be made in
U.S. Dollars and will be applied first to the payment of interest
due and then to the repayment of Principal.
Except as A.I.D. may
otherwise specify in writing, payments will be made to the
Controller, Office of Financial Management, Agency for International
Development, Washington, D.C. 20523, U.S.A., and will be deemed made
when received by the Office of Financial Management.
SECTION 4.4.
Prepayment.
Upon payment of all interest and any
refunds then due, the Borrower may prepay, without penalty, all or
any part of the Principal.
Unless A.I.D. otherwise agrees in
writing, any such prepayment will be applied to the installments of
Principal in the inverse order of their maturity.
- 5 -
SECTION 4.5.
Renegotiation of Terms.
(a)
The Borrower and
A.I.D. agree to negotiate, at such time or times as either may
\
request, an acceleration of the repayment of the Loan in the event
that there is any significant and continuing improvement in the
internal and external economic and financial position and prospects
of the Republic of Indonesia, which enable the Borrower to repay the
Loan on a shorter schedule.
(b)
Any request by either Party to the other to so negotiate
will be made pursuant to Section 9.2, and will give the name and
address of the person or persons who will represent the requesting
Party in such negotiations.
(c)
Within thirty (30) days after delivery of a request to
negotiate, the requested Party will communicate to the other,
pursuant to Section 9.2, the name and address of the person or
persons who will represent the requested Party in such negotiations.
(d)
The representatives of the Parties will meet to carry on
negotiations no later than thirty (30) days after delivery of the
requested Party's communication under subsection (c).
The
negotiations will take place at a location mutually agreed upon by
the representatives of the Parties, provided that, in the absence of
mutual agreement, the negotiations will take place at the office of
borrower's Minister of Finance in the Republic of Indonesia.
SECTION 4.6.
Termination on Full Payment.
Upon payment in full
of the Principal and any accrued interest, this Agreement and all
obligations of the Borrower and A.I.D. under it will cease.
- 6 -
Article 5.
Conditions Precedent to Disbursement.
SECTION 5.1.
First Disbursement.
Prior to the first
disbursement under the Loan, or to the issuance by A.I.D. of
documentation pursuant to which disbursement will be made, the
Borrower will, except as the Parties may otherwise agree in writing,
furnish to A.I.D. in form and substance satisfactory to A.I.D.:
(a)
An opinion of the Minister of Justice of the Borrower that
this Agreement has been duly authorized and/or ratified by, and
executed on behalf of, the Borrower, and that it constitutes a valid
and legally binding obligation of the Borrower in accordance with
all of its terms; and
(b)
A statement of the name of the person holding or acting in
the Office of the Borrower specified in Section 9.2; and of any
additional representatives, together with a specimen signature of
each person specified in such statement.
SECTION 5.2.
Conditions Precedent to Disbursement for Project
Activities Other Than Technical Assistance and Pre-Implementation
Activities.
Prior to disbursement under the Loan, or to issuance by
A.I.D. of documentation pursuant to which disbursement will be made
for project activities other than technical assistance or
pre-implementation activities , the Borrower shall, except as A.I.D.
may otherwise agree in writing, furnish in form and substance
satisfactory to A.I.D.:
(a) evidence that the Borrower has assigned
at least five full-time professionals to the BPD Tingkat I team in
each of the provinces assisted by this Project, and (b) evidence
that the Borrower has established and staffed a team for rural
- 7 credit in Bangda, Ministry of Home Affairs, with at least two
full-time professionals.
SECTION 5.3.
Condition Precedent to Disbursement of Funds for
System Capitalization.
Prior to the disbursement of funds under the
Loan, or to issuance by A.I.D. of documentation pursuant to which
disbursement will be made for system capitalization, the Borrower
shall, except as A.I.D. may otherwise agree in writing, furnish in
form and substance satisfactory to A.I.D.:
(a) evidence of the
procedures established for the transfer of funds between the
Ministry of Finance and the respective BPD's and for the transfer of
those funds to participating units, and (b) evidence that the
Borrower has taken the necessary steps to allow village-based credit
systems assisted by this Project to accept voluntary savings from
borrowers and non-borrowers and to safeguard such savings through
procedures reflecting unit performance.
SECTION 5.4.
Condition Precedent to Disbursement of Funds for
Computer-Related Equipment.
Prior to the disbursement of funds
under the Loan, or to issuance by A.I.D. of documentation pursuant
to which disbursement will be made for computer-related equipment,
the Borrower shall, except as A.I.D. may otherwise agree in writing,
furnish in form and substance acceptable to A.I.D., an assessment of
BPD computer needs in West Java, Central Java, and West Sumatra.
SECTION 5.5.
Notification.
When A.I.D. has determined that the
conditions precedent specified in Section 5.1, 5.2, 5.3 and 5.4 have
been met, it will promptly notify the Borrower.
SECTION 5.6.
Terminal Dates for Conditions Precedent.
If all
of the conditions specified in Section 5.1 have not been met within
-
8 -
90 days from the date of this Agreement, or such later date as
A.I.D. may agree to in writing, A.I.D., at its option may terminate
\
this Agreement by written notice to Borrower.
Article 6.
Special Covenants.
SECTION 6 . 1.
Project Evaluation.
The Parties agree to
establish an evaluation program as part of the Project.
Except as
the Parties otherwise agree in writing, the program will include,
during the implementation of the Project and at one or more points
thereafter:
(a) evaluation of progress toward attainment of the
objectives of the Project;
(b) identification and evaluation of
problem areas or constraints which may inhibit such attainment;
(c)
assessment of how such information may be used to help overcome such
problems; and (d) evaluation, to the degree feasible, of the overall
development impact of the Project.
SECTION 6.2.
Additional Special Covenants.
Except as A.I.D. may otherwise agree in writing, the Parties
agree to the following additional Special Covenants:
(a)
the
Borrower agrees to use accounting practices and interest rates of
village credit systems under this project which insure their
financial viability, including procedures to reserve funds for loan
losses and to write-off uncollectable loans, and (b) the Borrower
agrees to ensure that the Team Pembina Pembangunan Kredit Perdesaan
will meet at least once a year to review performance of each of the
village credit systems and to consider adjustments based on
performance, with the paramount criterion being financial
- 9 -
viability as defined in the amplified project description of this
Agreement.
Article 7:
Procurement Source.
SECTION 7.1.
Foreign Exchange Costs.
Disbursements pursuant to
Section 8.1 will be used exclusively to finance the costs of goods
and services required for the Project having with respect to goods,
their source and origin and with respect to services, their
nationality in countries included in Code 941 of the A.I.D.
Geographic Code Book as in effect at the time orders are placed or
contracts entered into for such goods and services ("Foreign
Exchange Costs"), except as A.I.D. may otherwise agree in writing,
and except as provided in the Project Loan Standard Provisions
Annex, Section C.l (b) with respect to marine insurance.
Ocean
transportation costs will be financed under the Loan only on vessels
under flag registry of the United States, or Indonesia, or Code 941
countries as long as chartered or operated by Indonesian shipping
companies, except as A.I.D. may otherwise agree in writing.
SECTION 7.2
Local Currency Costs.
Disbursements pursuant to
Section 8.2 will be used exclusively to finance the costs of goods
and services required for the Project having their source and,
except as A.I.D. may otherwise agree in writing, their origin in the
Republic of Indonesia ("Local Currency Costs").
provided for under this Agreement,
To the extent
"Local Currency Costs" may also
include the provision of local currency resources required for the
Project.
- 10 Article 8.
Disbursements.
SECTION 8.1.
(a)
Disbursement for Foreign Exchange Costs.
After satisfaction of Conditions Precedent, the Borrower
may obtain disbursements of funds under the Loan for the Foreign
Exchange Costs of goods or services required for the Project in
accordance with the terms of this Agreement, by such of the
following methods as may be mutually agreed upon:
(1)
by submitting to A.I.D. with necessary supporting
documentation as prescribed in Project Implementation Letters,
(A) requests for reimbursement for such goods or services, or (B)
requests for A.I.D. to procure commodities or services in Borrower's
behalf for the Project; or
(2)
by requesting A.I.D. to issue Letters of Commitment
for specified amounts (A) to one or more U.S. banks, satisfactory to
A.I.D., committing A.I.D. to reimburse such bank or banks for
payments made by them to contractors or suppliers, under Letters of
Credit or otherwise, for such goods or services, or (B) directly to
one or more contractors or suppliers, committing A.I.D. to pay such
contractors or suppliers for such goods and services.
(b)
Banking charges incurred by Borrower in connection with
Letters of Commitment and Letters of Credit will be financed under
the Loan unless the Borrower instructs A.I.D. to the contrary.
Such
other charges as the Parties may agree to may also be financed under
the Loan.
SECTION 8.2.
(a)
Disbursement for Local Currency Costs
After satisfaction of Conditions Precedent, the Borrower
may obtain disbursements of funds under the Loan for Local Currency
- 11 Costs required for the Project in accordance with the terms of this
Agreement, by submitting to A.I.D., with necessary supporting
documentation as prescribed in Project Implementation Letters,
\
requests to finance such costs.
(b)
obtained:
The local currency needed for such disbursement may be
(1)
In local currency acquired by A.I.D. by purchase or
from local currency already owned by the U.S. Government or (2) by
A.I.D. requesting the Borrower to make available the local currency
for such costs, and thereafter reimbursing an amount of U.S. dollars
equal to the amount of local currency made available by the
Borrower.
The U.S. dollar equivalent of the local currency made
available hereunder will be the amount of U.S. dollars required by
A.I.D. to obtain the local currency.
SECTION 8.3.
Other Forms of Disbursement.
Disbursements of the
Loan may also be made through such other means as the Parties may
agree to in writing.
SECTION 8.4.
Rate of Exchange.
Except as may more specifically
be provided under Section 8.2, if funds provided under the Loan are
introduced into Indonesia by A.I.D. or any public or private agency
for purposes of carrying out obligations of A.I.D. hereunder, the
Borrower will make such arrangements as may be necessary so that
such funds may be converted into currency of the Republic of
Indonesia at the highest rate of exchange which, at the time the
conversion is made, is not unlawful in Indonesia.
SECTION 8.5.
Date of Disbursement.
Disbursements by A.I.D.
will be deemed to occur (a) on the date on which A.I.D. makes a
disbursement to the Borrower or its designee, or to a bank,
contractor or supplier pursuant to a Letter of Commitment, contract,
- 12 or purchase order;
(b) on the date on which A.I.D. disburses to the
Borrower or its designee local currency acquired in accordance with
Section 8.2.
Article 9.
Miscellaneous
SECTION 9.1.
Communications.
Any notice, request, document,
or other communication submitted by either Party to the other under
this Agreement will be in writing or by telegram or cable, and will
be deemed duly given or sent when delivered to such party at the
following addresses:
To the Borrower:
Mail Address:
Departemen Luar Negeri
Jalan Pejambon No. 6
Jakarta Pusat
Indonesia
Alternate address for telegrams:
DEPLU JAKARTA
To A. I. D.:
Mail Address:
U.S. Agency for International Development
American Embassy
Jl. Medan Merdeka Selatan 5
Jakarta, Indonesia
Alternate address for telegrams:
USAID AMEMB JAKARTA
All such communications will be in English, unless the Parties
otherwise agree in writing.
Other addresses may be substituted for
the above upon the giving of notice.
The Borrower, in addition,
will provide the USAID Mission with a copy of each communication
sent to A. I. D.
SECTION 9.2.
Representatives.
For all purposes relevant to
this Agreement, the Borrower will be represented by the individual
holding or acting in the off ice of the Chairman or Vice Chairman,
- 13 National Development Planning Agency (BAPPENAS) and A.I.D. will be
represented by the individual holding or acting in the office of
Mission Director, USAID Mission to Indonesia, each of whom, by
written notice, may designate additional representatives for all
purposes other than exercising the power under Section 2.1 to revise
elements of the amplified description in Annex I.
The names of the
representatives of the Borrower, with specimen signatures, will be
provided to A.I.D., which may accept as duly authorized any
instrument signed by such representatives in implementation of this
Agreement, until receipt of written notice of revocation of their
authority.
SEC'IION 9. 3.
Standard Provisions Annex.
A "Project Loan
Standard Provisions Annex" (Annex 2) is attached to and forms part
of this Agreement.
IN WI1NESS WHEREOF, the Republic of Indonesia and the United
States of America, each acting through its duly authorized
representative, have caused this Agreement to be signed in their
names and delivered as of the day and year first above written.
REPUBLIC OF INDONESIA
Signed
-'i(ahono Martohadinegoro
Acting Director General
for Foreign Economic Relations
Department of Foreign Affairs
UNITED S 'l 'A'l'.ES 01" AMERICA
Signed
Richard C. Howland
Charge d'Affaires
Embassy of the United States
of America/Indonesia
Annex I
FINANCIAL INSTITUTIONAL DEVELOPMENT
AMPLIFIED PROJECT DESCRIPTION
The Financial Institutions Development Project (FID) is a US$27.8
million project to develop and expand existing village-based credit
institutions in West Java, West Sumatera, and Central Java to extend
credit to borrowers, to expand loan portfolios beyond trader credits to
include small entrepreneurs and to mobilize voluntary savings. The
systems and estimated number of units that will receive assistance are:
Badan Kredit Kecamatan (491 units Central Java); Bank Karya Produksi Desa
(217 units West Java); Lembaga Perkreditan Kecamatan (103 units West
Java); and Lumbung Pitih Negari (561 units West Sumatera).
The project also provides funds to capitalize individual units and
help expand loan portfolios by working through two ministries, the
Ministry of Finance and the Ministry of Home Affairs, and the provincial
development banks (Bank Pembangunan Daerah--BPD). The project provides
training, technical assistance and equipment to develop the staff and
operational procedures and to forge a closer link between the local
credit systems and the provincial banks responsible for supervision,
training and inspection. Provincial development banks will provide
supervisory guidance, technical expertise, training and access to
capital. In doing so, the project will attempt to demonstrate the
elements of a viable, self-financing local credit system applicable
elsewhere throughout Indonesia.
Recognizing the variations in organizational development in the
provinces selected, the project will build on their coilllilon strengths and
respond to the common needs of each. The project will be phased by
province to allow each system to consolidate organizational and
procedural changes with BPD and unit management development before
expanding to undertake new services. The end of the project will attempt
to have the units from all four systems to reach a performance level that
insures self-sustainability. To do this the BPDs will establish
performance criteria and allow units above a set level of performance to
conduct: a) further expansion to cover more villages by setting up more
village posts, b) a savings mobilization program and c) a small
industries loan program administered on criteria of loan performance.
Project outputs will reflect the end of project status of four village
c redit systems operating in three provinces each with more standard loan,
administrative and accounting procedures; a simplified and usable
management information system; formal administrative and financial
linkages between the provincial development banks and the local credit
units; and trained banking personnel both in the units and in
supervisory and inspection positions within three BPDs.
2
Project Inputs:
A) Training Support: At least 5,300 direct employees will have to be
trained or retrained during the life of the project to create and
maintain a system of efficient but widely dispersed financial units.
Each BPD will develop its in-house training capability to provide a
continuing training program that provides all operating personnel with
periodic training up-dated regularly. Specific training programs for unit
and BPD officials will be developed. The GOI will fund the development of
training facilities at the BPDs and personnel training costs. AID will
fund local training costs and if required, a trip by selected GOI project
officials to the other Asian countries to observe comparable rural credit
programs applicable to the Indonesian program.
B) Technical Assistance: Technical assistance will work closely with
respective provincial development banks to help develop their management,
supervisory and inspection capability. Technical assistance will provide
resident and short-term specialists to work with the provincial banks to
create and improve management information systems, savings programs,
accounting systems, and curriculum design to support a large training
effort. The initial tasks will be to assist in the review of accounting
procedures in use, consolidate the financial position of each of the
sub-systems assisted, re-classify participating units and conduct an
initial assessment of computer requirements to support management
information system development. Later, the capacity of individual units
and the BPD to monitor larger types of loans will be stressed. The bulk
of technical assistance will be provided through an institutional
contract. The contract will finance resident technical advisors at each
province and have forty-person months of special short-term assistance
with an option to extend.
Resident advisors will reside in West Sumatera, Central Java and West
Java for four years with knowledge of the Indonesian language and the
Indonesian financial system an important criteria in contract selection.
As the senior team member in country, one advisor will spend
approximately a third to a half of his time in Jakarta and other
provinces.
Short-term specialized assistance will be used for curriculum
development and training program design. Specialized assistance likely
will also be required to assist the BPDs in:
i)
ii)
iii)
iv)
management information system development.
designing savings mobilization programs.
accounting system redesign and modification where warranted.
designing financial instruments to strengthening BPD
linkages to Jakarta-based financial institutions.
v) a computer needs assessment of the BPDs and the BPD offices.
vi) working on short-term specialized financial issues requested by
the GOI •
3
An Indonesian firm will conduct the borrower viability portion of the
evaluation. Design assistance for the methodology and questionaires used
will be provided by the institutional firm and the USAID Mission's
evaluation officer. Approximately two-person years will also be set
aside for specialized technical assistance needed by the GO! and not
available from either the institutional or the local evaluation
subcontractor. This assistance will be given in a number of areas as the
BPDs and Jakarta-based counterparts identify their needs during project
implementation. Some areas where assistance may be required are:
a) the examination of policy, legal and regulatory questions related
to the implementation of this project.
b) pre-feasibility and feasibility studies for project expansion
into other provinces.
c) managerial questions related to overall BPD operations.
C. Commodities: Approximately $3.5 million worth of project commodities
($0.75 million AID and $2.75 million GOI) are estimated for the project.
Subject to AID approval and waiver requirements, USAID's contribution
will include approximately 50 vehicles plus limited office equipment, and
computer equipment. The GOI's contribution will consist of office
equipment required to reestablish units and conduct larger training
programs. Vehicles will support supervisors/auditors and thus allow a
greater number of supervisory visits. The BPD's will fund motorcycles for
unit loan officers to establish village posts based on BPD procurement or
employee hire/purchase programs. Limited equipment for local units will
be provided by the GO! and phased per expansion plans of each individual
province. Computer equipment for the management information and
accounting system will consider overall BPD needs and to that used in
other provinces. An assessment of information needs and computer
capabilities will be done at the beginning of the project. AID financed
miscellaneous equipment including training equipment will be determined
by each BPD as they begin a training program and identify equipment needs.
D. Funds for System Capitalization: System expansion will relate to
financial performance and developing management capacity at the BPD and
unit level. Capitalization flows will be based on current Ministry of
Finance procedures and will base expansion on units meeting performance
criteria established by Rural Village Credit Committee. Additional loan
expansion is expected to come from savings, the individual unit's equity
accounts less a reserve for potential losses and normal interbank
facilities at competitive rates. Unit capitalization requests will be
funded from Ministry of Finance's established lines to the provinces
which, as of 1984, are as follows:
A) Central Java: Rp. 3,000,000,000 line established; 1,500,000 used.
B) West Sumatera: Rp. 1,500,000,000 line established; Rp.500,000,000
used.
C) West Java: Rp.1,000,000,000 (credit line to be establishedby
Ministry of Finance).
4
Drawdown of funds will be matched by AID from the capital line item
of the project budget. AID will make capital available to each province
after a preliminary accounting and unit review is completed and unit
classification systems are established in West Java and West Sumatera.
Procedures will be described in project implementation letters.
International loan funded procurement of goods and services under the
project will be solicited from firms or individuals in Code 941,
Indonesia and the United States. International grant funded procurement
of goods and services will be solicited from firms or individuals in
Indonesia and the United States. Goods and services funded by the
project budget will be procured on a competitive basis, advertised in
Indonesia as well as abroad for international procurement. Indonesian
firms will be eligible to bid for all local and international procurement.
Project outputs:
The following project outputs will receive attention, primarily
through technical assistance and training, to achieve the end of project
status:
A) Self-sustaining BPD Training Capability: A self-sustaining training
capability in the three BPDs of West Java, West Sumatera and Central Java
will institutionalize procedures and policies. Specific minimum levels of
job performance will be required from the approximately 5,300 rural
credit employees either retrained or recruited for the project to expand
lending and improve loan quality. Unit personnel will require further
skills development in loan appraisal, loan processing and bookkeeping,
especially as more developed units begin developing small industry loans
and dealing with larger borrowers. FID will help the BPDs develop a
training capacity in West Java, Central Java, and West Sumatera to:
1.
2.
3.
4.
5.
6.
7.
Write annual rural credit training plans including training
objectives, budgeting and manpower scheduling;
Develop job descriptions and performance requirements for loan
officers, unit supervisors, bookkeepers, and cashiers;
Design and implement standard courses for the above positions using
training methods that rely on simulations, exercises , and case
studies;
Develop an apprentice program for operational personnel;
Conduct periodic training needs analysis;
Evaluate the impact of courses on job performance;
Develop specialized courses to support a small industry lending
program.
The above objectives will be approached in a structured training
program based on methodology found effective and refined for variations
of each province. Both the content of training curriculum and scheduling
of unit and BPD personnel will be developed by the BPD and technical
advisors early in the project.
5
B) Improved Auditing, Inspection and Supervision: The project will
strengthen supervision and auditing by assisting the BPDs to address the
personnel and reorganization requirements related to major expansion of
lending and savings. Assistance will be through increased training for
area supervisors and auditors, increased mobility with additional
vehicles, and improved access to relevant financial information. The
supervisor working out of the BPD offices will develop monitoring and
inspection skill so timely management decisions may be taken. The area
auditor, at a BPD office covering several districts, will audit and
analyze the financial condition of individual units. The province will
designate a group of supervisors and auditors as full-time BPD
employees. Each of the BPDs will undergo expansion of inspection staff
so inspectors may visit each unit of the participating systems at least
monthly and be knowledgable in new project initiatives such as small
industry lending and savings promotion. Inspection reporting formats
will be revised where necessary to capture essential data on performance
and profitability. A first task in project implementation will be to
assess current inspection procedures, formats and staffing levels.
C) Formal Efficient System of Savings: Each of the village credit
systems plans to expand savings mobilization significantly by working
with the BPD and village post system and through:
1. A Stronger Emphasis On Voluntary Savin.gs: Within funding and
loan security constraints, mandatory savings should play less of a role
as voluntary savings increase. During the life of project mandatory
savings requirements may be phased out as systems become capable of
mobilizing voluntary savings. Savings should be returned on request to
any saver who does not have an outstanding overdue loan. Implementation
of the savings program will be phased based on the performance of a
particular unit or system.
2. Interest Rates Sufficient to Attract Savin.gs: As part of the
financial review, the savings rate will be reviewed annually for its
impact on financial viability, its effect in attracting voluntary
savings, and the ability of savings to finance planned village-post
expansion. The evaluation will also review the effectiveness of savings
programs initiated to date.
3. Allow Posts to Accept Savings from Both Borrowers and
Non-Borrowers: In the four systems to receive assistance under this
project both borrowers and non borrowers will be allowed to save.
A
request similar to the one from the Ministry of Home Affairs via the
Ministry of Finance to the Bank Indonesia that would allow the Central
Java system (BKK) to accept savings would also be sent for West Java and
West Sumatera. The pace of implementing a voluntary savings program
would depend on the development of each system in terms of individual
unit performance and overall system monitoring and supervision.
6
4. Mechanisms to Safeguard Savings Deposits: During the life of
project each province plans to institute mechanisms to safeguard savings
deposits. Such procedures will be established early in the project and
be closely linked with the financial performance of the system as a
whole.
5. Specialized Programs and Campaigns to Promote Savings
Generation: Subsequent to the above steps, the BPDs plan to initiate a
series of programs and savings instruments to promote savings in stronger
performing units. The programs will likely include a series of savings
promotion efforts and new saving instruments and be done in conjunction
with the training program described earlier.
D) A Self-Sustaining Costing Structure: The interest rate structure
will consider contrary factors: encouraging savings mobilization,
offering the borrower a profit from his investment and returning enough
interest to cover institutional costs, loan losses, inflation, and
expansion. This project will support and help develop the existing
pricing structure which, at the time of the signing of the Project
Agreement, is as follows:
Type of Funds
Interest Paid by Units
for Initial BPD Funds
Interest Charged by Units
for Loans to Borrowers
BKK
LPK
BKPD
12%
12%
12%
45%
36-48%
36-48%
LPN
7%
20%
Revisions and further development of the pricing structure may be
warranted during the life of the project. The project will include a
yearly financial evaluation beginning in the project's second year to
assess the performance of each province incorporating the real expenses,
i.e. administration, loan losses, etc. and present its findings to the
Ministry of Finance and other members of the Badan Pembinaan Pembangunan
Kredit Perdesaan with specific recommendations for adjustment of project
elements. Each of the provinces will also consider establishing
procedures and rates for borrowings from regular BPD facilities when
their financial performance so warrants. As individual units reach a set
performance level, they should have sufficient equity, less reserve for
potential losses, should be available for lending expansion.
E) Strengthened Operational and Accounting Procedures for Each System:
Each system faces unique problems in the accounting procedures and in
applying them to a greater number of village posts. Over the life of the
project the BPD and consultant will build on existing procedures to
design, implement and refine a more uniform accounting system in each
province. Established effective practices such as maintaining loan
authority in the unit in the kecamatan and quick loan approval times
which have helped the systems to grow will be encouraged.
7
During the project each province will review and revise accounting
procedures to allow for a significant expansion in lending and savings.
Early in the project, systems in West Java and West Sumatera will require
an initial review of their accounting procedures and an analysis of the
consequences of applying their procedures to a significantly greater
volume of lending. In addition, the systems will need to establish
defined sub-capital accounts, specifically reserve accounts and write off
procedures for loan losses, to better measure profitability and the
degree of system expansion.
As BPDs make procedural and documentation revisions they will also
address the issue of managing surplus funds. BPD and technical
assistance will design procedures that allow surplus units to place money
with the provincial BPD office for set periods and at competitive rates.
The project may also establish special secondary lines to tide over units
during periods of heavy withdrawal when savers will want access to
voluntary savings. Additionally, the BPDs will address operational
questions such as setting limits for cash on hand.
During the course of project implementation the BPDs will also design
and phase in procedures for:
1) establishing reserve accounts in the capital account of
individual units.
2) establishing reserve and write-off policies based on actual
performance.
3) considering methods to track overdue loans such as special
overdue subsidiary loan ledgers at each unit outlet.
4) setting up audit and inspections triggered by the overdue
position of an outlet.
5) helping set up credit policies based on the unit classification
system to prevent lending expansion when outstanding overdue are above
acceptable norms.
F) Management Information System (MIS):
Under this project the
existing management information systems will be refined and upgraded as
managment capacity develops and specific information needs are
identified. The BPDs will work to further develop a simple management
information system that will:
1.
2.
3.
4.
5.
Track operational performance of each unit in terms of loan
performance, loan delinquencies and how much they are overdue, equity
growth, loans outstanding, number of borrowers, number of village
posts, monthly loan circulation, total savings, expenses and income;
Consolidate the above to help the BPD set realistic credit and growth
ceilings for each unit;
Identify and prevent malfeasance;
Produce reports on a monthly, quarterly, and semi-annual basis;
Maintain centralized consolidated financial statements regarding
overall sources and applications of project funds;
8
Development in each province will be the responsibility of the BPDs
supervision units with the assistance of the consultant team. The first
task will be to review frequency of reports, their organizational
distribution and management actions taken as a result. Each province
will be approached based on its development and the need to continue
integrating report findings with management decision making, refine cash
management reporting, consider coding loans by type, and monitoring the
current unit classification system. Thus technical assistance for MIS
and accounting to the BPD will go beyond strictly village credit system
needs and consider overall BPD requirements as well. Introduction of the
MIS will first require a review of the accounting procedures in place and
a confirmation of the accuracy of consolidated financial data of all
units. Implementation will be phased with training and BPD staffing.
Implementation Plan:
A. Project Participants:
Ministry of Home Affairs: Home Affairs will assign a Project Manager and
one assistant to a full time section in BANGDA covering only rural
credit. BANGDA will be the main project signer, help coordinate the
contributions of the various project participants BANGDA will :
1)
2)
3)
4)
5)
provide GO! contributions to the training and equipment budgets;
monitor overall project implementation and system expansion;
review requests forwarded to the Ministry of Finance;
coordinate the host country contribution from other GO!
participants; and
relate FID experience to other provinces for possible replication.
Ministry of Finance: The Directorate of State Wealth Management,
Ministry of Finance, will finance unit recapitalization and expansion per
procedures already established. The Directorate's Rupiah line of credit
equivalent to US$3 million to Central Java and $1.5 million to West
Sumatera for rural credit expansion will be augmented by a similar line
of credit to West Java equivalent to US$ 1 million. The Ministry will
chair the review committee on rural credit that will meet yearly. With
the Ministry of Home Affairs, the Ministry will continue its present role
of coordinating mid-project adjustments that require assistance from
agencies such as the Bank Indonesia not directly participating in the
project.
Team Pembina Pembangunan Kredit Pedesaan (Village Credit Development
Team) is a working group already formed under the leadership of the
Ministry of Finance to monitor overall rural credit policy in Indonesia.
It will monitor the overall policy content of this project and consist of
senior officals of the Ministry of Home Affairs, the Central Bank,
Ministry of Finance, and BAPPENAS. The Board will meet at least yearly
immediately after the regular evaluation to review yearly
9
financial results and concur and facilitate project changes identified.
The Bank Indonesia will participate in the project by participation on
the Badan Pembinaan Pembangunan Kredit Pedesaan and also via their Bank
Inspection Division which has oversight responsibility for overall BPD
operations.
Bank Pembangunan Daerah(Provinical Development Bank): The three BPDs of
West Java, Central Java, and West Sumatera will be the daily operational
counterparts for this project. The specific management office in each
respective BPDs is anticipated as follows:
West Java: Bureau for Research and Planning
Central Java: Bureau for Supervision
West Sumatera: Bureau for Supervision
Each BPD will strengthen its staff to inspect and develop the local
credit systems under its authority. Additional staff for implementation,
monitoring and supervision will be provided. The BPD will be the prime
counterpart for formulating unit expansion requests, procedural changes,
and the size, content and phasing of the training program. The BPDs in
turn will be monitored by the provincial Badan Pembinaan consisting of
various TK I administrative bodies such as BAPPEDA, governor's office,
Kooperasi, and the BPD itself. Exact Badan membership varies in each
province.
B.
Initial Steps for Project Implementation:
Coordination will take place via the Ministry Dalam Negeri plus
through the coordinating committee meeting of the Badan Pembinaan
Pembangunan Kredit Pedesaan (Village Credit Development Board) to prepare
overall yearly budgetary levels, apportion contributions from the
respective agencies, review system expansion to date and assist in any
required policy changes. Two immediate tasks are:
1) Core Staffing Assignments: The appointment of a two member full
time rural credit team in BANGDA should be made while the BPD offices
will be staffed up to at least five people to provide the credit, unit
accounting and MIS and supervision critical for an expanded lending and
savings program.
2) Initial Operational Assessment: After meeting initial conditions
precedent, AID and the GOI will contract for technical assistance. The
first task of the BPD will be to work with the technical advisors to:
a) review accounting and operational procedures and determine any
adjustments needed;
b) formulate a workplan for identified accounting and procedural
changes;
c) recompile and reconfirm the aggregate financial position of
participating systems with appropriate adjustments to consolidated
records;
10
d) establish unit performance criteria for West Java and West
Sumatera;
e) conduct a computer needs analysis of the participating BPDs to
determine system requirements for MIS and accounting formats and for
compatibility with overall BPD computer procurement; and
f) help design a comprehensive training curicullum and a schedule for
the first year of implementation.
C.
System Capitalization and Unit Classification:
USAID capital flows will follow fulfillment of conditions precedent,
redesign of a unit classification system for West Java and West Sumatera
and the review of current accounting procedures and financial position of
each system. The project will base performance standards for each
participating unit on a classification system as adjusted to the
characteristics of the West Java, West Sumatera and Central Java. That
criteria initially consists of new loans booked, the ratio of village
"posts" to banking units, the quality of the portfolio based on the
percentage of overdue, loans, savings generated, and loan circulation. To
the extent possible those performance norms will be uniform in each
province. Transfer of capital will be based on established procedures.
D.
Financial Plan:
The financial plan is illustrative only. Adjustments between line
items may be made by representatives of the parties named in the text of
the Agreement without formal amendment of the Agreement so long as (1)
AID's total contribution as provided in the text of the Agreement is not
exceeded and (2) the Government's contribution as provided in the text of
the Agreement is not decreased. Adjustments between line items greater
than 15% must be agreed to by the parties in writing.
11
PROJECT BUDGET (OOO's; 1US$= lOOORp)
A I D
Grant*
Technical Assistance
Training
3,500
500
6,950
3,000
10,450
750
2,750
3,500
3,000
3,500
6,500
Capital
Total
Total
2,000
Commodities and
Equipment
Contingency
GOI**
I Loan
I
500
1,300
3,000*
15,500
5,500
1,800
9,250
27,750
*/
The amount of grant funds obligated is $1,000,000. Future
increments are subject to the availability of funds and mutual
agreement of the parties to proceed. Of grant funded obligated
in FY 1984 approximately $900,000 is estimated for technical
assistance and $100,000 for training and preimplementation
activities.
**/
It is anticipated that the contribution by the GOI for each
line item will come from the Ministry of Finance, Ministry of
Home Affairs and the provincial government. The exact
contribution of each agency will be determined in the yearly
review of the project.
Table of Content
Project Loan Standard Provisions
Annex 2
Page
Article A:
Project Implementation
Article B:
General Covenanr.s
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
Article C:
B. 1.
B.2.
B. 3.
B. 4.
B. 5.
B.6.
B.7.
B.8.
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
\
Consultation
Execution of Project
Utilization of Goods and Services
Taxation
Reports, ｒ･｣ｾｲ､ｳＬ＠
Inspections, Audit
Completeness of Information
Other Payments
Information and Marking
Procurement Provisions
SECTION C.l.
SECTION C.2.
SECTION C. 3.
SECTION C. 4.
SECTION C.5.
SECTION C.6.
SECTION C. 7.
SECTION · C.8.
Article D:
ｌ･ｴ｣ｾｳ＠
Special Rules
Eligibility Date
Plans, Specifications, ｾｮ､＠
Contracts
Reasonable Price
Notification to Potential Suppliers
Shipping
Insurance
U.S. Government-Owned Excess Property
1
l
1
1
2
2
2. 3
3
3
3
3
3, 4
4
4
5
5
5' 6
6, 7
7
Termination; Remedies
7
D. 1.
D. 2.
D. 3.
D.4.
D.S.
D.6.
D. 7.
7
Cancellation by Borrower
Events of Default; Acceleration
Suspension
Canc