44318-025: Housing for Integrated Rural Development Improvement Program - Tranche 2

Project Data Sheet (PDS): Details

Description

The Housing for Integrated Rural Development (HIRD) Program is a high priority component of Uzbekistan s Welfare Improvement Strategy (WIS) 2012 2015 for achieving inclusive growth and greater diversification of the economy. HIRD focuses on rural housing as an engine for economic transformation and accelerating rural development. Planned communities, modern house designs, new construction technology and materials, and more environmentally sustainable construction solutions are advancing the construction sector and providing opportunities for Uzbek entrepreneurs and industries. As part of HIRD up to 10,000 homes are being built per year, creating opportunities for up to 1,000 small rural contractors and 100,000 rural construction jobs annually. Improved access to nearby schools and clinics is a key part of this program. More reliable electricity, gas, and water supply, combined with community designs that include space for retail shops and commercial services, are opening up opportunities for home-based businesses. HIRD is an important driver for the 500,000 rural micro and small enterprises and home-based jobs targeted each year. On 31 August 2011, the Asian Development Bank (ADB) approved a $500 million multitranche financing facility (MFF) for the Housing for Integrated Rural Development (HIRD) Investment Program principally to provide financing to participating commercial banks (PCBs) for onlending to more than 40,000 targeted rural homebuyers. Under HIRD, subloans financed by the MFF help support construction of new modern houses built in planned rural community sites, with serviced land plots with electricity, gas, water supply and sanitation, and roads provided by local governments. Local governments also provide access to and improvements in nearby schools and medical clinics, and are making space available for new retail shops and commercial services.

Project Rationale and Linkage to Country/Regional Strategy

Uzbekistan s strong macroeconomic fundamentals have helped maintain high rates of economic growth over the last decade and resiliency during the global financial crisis. Gross domestic product growth has averaged 8% since 2004, per capita income has doubled in real terms, and absolute poverty has almost been cut in half, from 27% of households in 2000 to about 15% in 2012. While declining, rural poverty in Uzbekistan remains higher (20.1%) than urban poverty (13.4%). Higher rural population growth and increases in the working age population (from 54% in 2001 to 61% in 2010), along with shifts in the economy from agriculture to industry, means that rural jobs are harder to find. Urban migration and informal and seasonal employment are all rising. Key inputs needed to attract rural investment for job creation, and to retain entrepreneurs and skilled professionals in rural areas, include improvements in: (i) education and health services; (ii) telecommunications and reliable infrastructure; (iii) promotion of regional investment; (iv) access to finance; and (v) housing and living conditions. As part of HIRD, the MFF roadmap and policy framework links ADB investment support to the government's reform program. The overall program will improve the quality of life for rural households by: (i) increasing access to modern rural housing with related infrastructure, (ii) strengthening local government capacity for integrated rural planning and results-based delivery of rural services, and (iii) accelerating rural MSME development to diversify and increase rural jobs and attract regional investment in industry. The MFF supports the program implementation unit (PIU) and capacity development, as well as rural housing finance under the first component. Housing plots, related infrastructure arrangements, and associated commercial and social services are provided by the government. The second and third components, with accompanying reforms, are financed by the government with support from the PIU for monitoring and evaluation.

Impact

Improved rural housing for targeted beneficiaries.

Project Outcome

Description of Outcome

Downstreaming of the rural housing scheme for moderate and lower income beneficiaries, with a focus on women.

Progress Towards Outcome

Of the $200 million Tranche 2 loan approved on 1 October 2013 (which became effective on 24 October 2013), $198.56 million has been disbursed for rural housing mortgages (subloans). Under Tranche 2, ADB financing helped finance subloans for the construction of 9,348 new houses for eligible rural families, and provided capacity development and PIU support for Component 1 of HIRD.

Implementation Progress

Description of Project Outputs

Housing loans provided by PCBs to targeted credit worthy subborrowers in rural areas Improved capacity of local governments to prepare and implement integrated rural development plans and investment promotion strategies Improved enabling environment for entrepreneurs and MSEs to establish or expand new businesses in rural areas

Status of Operation/Construction or Implementation Progress

Under Output 1, site due diligence conducted in accordance with the ADB Safeguard Policy Statement (SPS) 2009 ensured that HIRD sites complied with the ADB SPS and related Uzbek laws and regulations. Use of extensive public advertising, social scoring, and information technology solutions to assess mortgage applications has improved targeting. Qishloq Qurilish Bank (QQB) delivered training on HIRD and credit appraisal and portfolio risk management processes to its branch managers, loan officers, and other staff. Efforts to improve creditworthiness for women applicants included promoting the use of guarantors and help to mobilize down payments. Under Output 2 local governments developed and delivered community plans and land use arrangements, installed infrastructure and social services, and tendered housing contracts. Budget allocations are now made annually to relevant state entities and local governments to ensure site and services development for HIRD, and to fulfill Component 2 and Component 3 work plans. Hokimiyat capacity building and rural skills development are being delivered nationwide under specialized professional education programs. During Tranches 1 and 2, almost 25,000 local government officials were trained in HIRD processes and integrated rural development planning and investment promotion strategies. Training curricula was developed for results-based regional investment planning, with additional TA support. The Program also developed two intern programs. Under Output 3 the government is implementing targeted measures to improve access to a broad range of financial services and to reduce bureaucratic bottlenecks for MSEs. In 2012, the government reduced license and permit requirements, simplified and reduced tax payments, and reduced inspections to lower MSE transaction costs. Programs to increase access to finance for rural MSEs, including an existing ADB financial inclusion project with an emphasis on rural and women-owned businesses is underway. To reduce small business barriers, a pilot program for online business registration has been launched.

Safeguard Categories

Environment: FI
Involuntary Resettlement: FI-C
Indigenous Peoples: FI

Summary of Environmental and Social Aspects

Environmental Aspect

Environmental impacts are anticipated to be insignificant. Each PCB will adopt an environmental and social management system (ESMS) with screening criteria and monitoring procedures to ensure that the subprojects have minimal or no adverse environmental or social risks.

Involuntary Resettlement

Only land sites with no involuntary resettlement impacts will be considered. The ESMS will also monitor this.

Indigenous Peoples

Only land sites with no indigenous peoples' impacts will be selected. The ESMS will also monitor this.

Stakeholder Communication, Participation and Consultation

During Project Design

The Housing for Integrated Rural Development Investment Program cuts across a number of development themes. Donor coordination focuses on three key themes: rural development, financial sector development, and local government capacity building. Close ADB donor coordination is maintained in these three themes and in cross-cutting areas, specifically governance, environment, and gender. With the World Bank, collaboration is supported in the financial sector, micro and small enterprises, local government, and cross-cutting governance issues including public procurement. Cooperation with the UNDP is achieving synergy on local government capacity building efforts and environmentally sustainable approaches for rural housing and community development. The Islamic Development Bank is evaluating cofinancing as part of its country programming process. Possibilities linked to plans to diversify small to medium enterprise programs have also been explored with Kreditanstalt fur Wiederaufbau (KfW).

During Project Implementation

The Housing for Integrated Rural Development Investment Program continues to work with a number of stakeholders to help achieve the objectives of the program. This includes working with district hokimiyats, mahallas, branch offices of the women's committee, and local youth groups around beneficiary selection, site selection and other local issues. To ensure efficient implementation of HIRD, a total of 8 review missions were undertaken between December 2013 and March 2015. A combined mid-term review mission for Tranche 2 and inception mission for Tranche 3 is planned for September 2015. Extensive discussions are held with the government agencies and stakeholders and missions teams undertake field visits to meet beneficiaries, contractors, mohalla representatives, and regional government officers to assess first hand some of the positive impacts of the program. All of the FFA undertakings have currently been complied with to date. A local audit firm Grant Thornton has been engaged on 9 January 2015 (contract cost is $314,560) to conduct Technical and Financial Performance Audit for houses constructed in 2012 and 2013. The firm has submitted its inception report and the survey design and questionnaires have been finalized. Surveys are underway and the expected closing date for the assignment is June 2015.

Status of Covenants

Category Rating
Loan 3039
Sector
Social
Financial Satisfactory
Economic
Others Satisfactory
Safeguards Satisfactory
Project Financial Statements

 

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