Government of Romania

DECISION

For approval of micro-credit scheme for licensing of Credit Agencies

in order to administer the US$ 3.6 million stipulated in the Loan Agreement 4509-RO

between Romania and IBRD

Based on the provisions of art. 107 from the Romanian Constitution and of the article 5

from the Government Ordinance no. 40/2000 on Licensing Credit Agencies to Manage Funding

for Micro-credit

Based on the provisions of Annex A of annex no. 1 and of pct. 3, part B of annex no. 2

from the Loan Agreement between Romania and the International Bank for Reconstruction and

Development – I.B.R.D., regarding the financing of Mine Closure and Social Mitigation Project,

amounting to 44.5 million USD, signed in Bucharest on October 13,1999, ratified by the

Government Ordinance no.11 / 2000, and modified by Law no. 168/2000.

G o v e r n m e n t o f R o m a n i a a p p r o v e t h e p r e s e n t D e c i s i o n :

Single article. It is approved the micro-credit scheme presented in the Annex, which is

integral part of the present decision, regarding licensing of the credit agencies in order to

administer the fund amounted to US$ 3.6 million stipulated in the Loan Agreement between

Romania and IBRD no. 4509-RO ratified by the Government Ordinance no.11 / 2000 for the

ratification of the Loan Agreement between Romania and IBRD regarding the financing of Mine

Closure and Social Mitigation Project, amounting to 44.5 million USD, signed in Bucharest on

October 13,1999, ratified by the Government Ordinance no.11 / 2000, and modified by Law no.

168/2000, published in the Official Gazette of Romania, Part I, no. 497 on October 10, 2000.

PRIME MINISTER

Mugur Constantin Isarescu

ANNEX

MICROCREDIT SCHEME On licensing of the Credit Agencies in order to administer the USD 3,60 million fund provided

through 4509-RO Loan granted to Romania by International Bank for Reconstruction and

Development concerning financing of the mine closure and social mitigation Project, amounting

to USD 44,5 million, signed in Bucharest on October 13,1999 and ratified by the Government

Ordinance 11/2000, approved with modifications by the Law 168/2000

CHAPTER I

General Provisions

Art.1.- The micro-credit scheme prepared on the basis of GO 40/2000 regarding the licensing of the credit agencies in order to administer the funds for granting micro-credits, has the objective to define the procedures which allow MOIC that through NAD to give in administration public funds constituted on the basis of the state budget starting with 2000, from resources ensured from the 4509 - RO Loan granted to Romania by International Bank for Reconstruction and Development concerning financing of the mine closure and social mitigation Project, amounting to USD 44,5 million, signed in Bucharest on October 13,1999 and ratified by the Government Ordinance 11/2000, approved with modifications by the Law 168/2000, to the credit agencies by public tendering organized under the law provisions. Art.2.- The operating area of the micro-credit scheme is represented by the mining regions grouped in 5 operational areas, as presented in annex no. 1. Art.3.- The credit agencies, selected on the basis of the procedures and criteria approved by this scheme, that receive in administration micro-credit funds, are qualified to grant micro-credits only to the applicants carrying on their activity in the operating area of the scheme, defined in annex no. 1, and belonging to the respective agency.

CHAPTER II Definitions

Art.4.- To the meaning of the present scheme for granting micro-credit, the following terms shall be defined as follows: a) public funds - public financial resources to be used for micro-credit lending, in compliance

with the law, and managed by governmental agencies; b) governmental agencies - public central and local institutions the heads of which have the

authority of main credit coordinators in compliance with the law, institutions that manage public funds for micro-credit lending;

c) credit agencies (CA) - legal entities, non-profit organizations, established or recognized in compliance with the law, licensed according to GO 40/2000, to manage the public funds for micro-credit awarded by government agencies from public funding, by competitive bidding so as the law requires;

d) funds for micro-credits - public funds granted by governmental agencies to credit agencies through competitive bidding so as the law requires, in order to be transform in micro-credit through revolving financing mechanism;

e) micro-credit - repayable loan with or without interest, made to applicants, of up to 10,000 Euro-s nominal value, granted in Romanian Lei at the NBR exchange rate on the day prior the release of the loan, with a payback period of up to 36 months, with or without a grace period, to be used for the purchase of fixed assets, raw materials, materials, energy, fuel, as well as other services required in the implementation of the project with a view to undertake a commercial activity for which it was authorized;

f) applicants - legal entities, incorporated businesses with less than fifty employees under a collective employment contract, licensed self-employed and family associations established under Decree-Law No. 54/1990 or under other normative documents, as well as any natural person who submits a well-founded business plan for starting or developing business;

g) micro-credit recipients – legal entities, incorporated businesses with less than fifty employees under individual employment contract, licensed self-employed and family associations established under Decree-Law No. 54/1990 or under other normative documents, as well as any natural person who submits a well-founded business plan, under the terms it is authorized in compliance with the law;

h) micro-credit scheme - the whole set of rules and procedures to be followed by government agencies, through the approval of which, according to the GO 40/2000 the following are regulated: objectives of the micro-credit scheme; type of micro-credit recipients; biding documents for selecting credit agencies; contents and terms of the contract between the governmental agency and the credit agency; accepted risk level in the recovery of the public funds granted by government agencies to credit agencies for micro-credit lending; proposed duration and financial circuit of the fund; collateral and interest level, as applicable; management of public funds granted to credit agencies as funds for micro-credit lending, mechanism for reporting, evaluation, supervision and control of Cas activities;

i) credit agencies licensing – designation, under the terms of GO 40/2000, and in compliance with the criteria set out in the micro-credit scheme, of the non-profit legal entities established or recognized in compliance with the law, that may be granted funds from public finance by governmental agencies to manage for micro-credit lending, subject to annual auditing in view of renewal of their authorization;

j) MOF – Ministry of Finance; k) MOIC – Ministry of Industry and Commerce; l) MOIC PMU - Project Management Unit subordinated to MOIC, established through GD

418/1999 regarding the implementation of the pilot project on mining sector restructuring; m) CCPI – Committee for Coordinating Project Implementation, established 418/1999; n) IBRD - International Bank for Reconstruction and Development; o) NAD - The National Agency for the Development and the Implementation of the

Reconstruction Programs in the Mining Regions;

p) NAD PIU – NAD Project Implementation Unit, established through GD 418/1999 regarding the implementation of the pilot project on mining sector restructuring;

q) regional office - the subsidiary without legal status subordinated to NAD, that carries on its activity in a locality situated in the operating area of the micro-credit scheme;

r) project - The project "Mine Closure and Social Mitigation" financed through 4509-RO Loan granted to Romania by International Bank for Reconstruction and Development concerning financing of the mine closure and social mitigation Project, amounting to USD 44,5 million, signed in Bucharest on October 13,1999 and ratified by the Government Ordinance 11/2000, approved with modifications by the Law 168/2000;

s) PAD – Project Appraisal Document, edited by IBRD and integrating part of the project; t) Program - a part of the Project component "Social Mitigation", whose objective is to grant in

administration a portion of the micro-credit fund to a Credit Agency selected for one or more of the 5 mining regions and licensed for granting micro-credits as well as provision of the service charges for the micro-credit funds in order to grant micro-credits by CA from public funds according to the provisions of the micro-credit scheme;

u) Advertisement - the text containing the minimum requirements for the Credit Agency presentation, published in "Development Business" and/or in a national newspaper with a wide circulation, referring to NAD requesting the Credit Agencies to send expressions of interest for "Micro-finance Management", in order to prepare the long list;

v) expression of interest - represents the document sent by the Credit Agency until the deadline specified in the advertisement, expressing their interest to participate in the selection organized by NAD for "Micro-finance Management ";

w) long list – the registration of the Credit Agencies having submitted the expressions of interest until the deadline mentioned in the advertisement;

x) short list – the Credit Agencies selected based on the expressions of interest, submitted until the date mentioned in the advertisement;

y) request for proposals – documentation for drawing up and presenting the proposals, comprising: letter of invitation; information for Credit Agency; technical proposal – standard form, financial proposal – standard form, the terms of reference; the standard form of contract; as well as other information that may facilitate for all bidders the preparation of documents in compliance with the IBRD provisions.

z) operating costs – for the services for administrating of the micro-credit fund stipulated in the contract, for the inception period that may not exceed 6 months, represent the costs calculated by each Credit Agency and presented in the financial proposal, made up of: a) costs financed from IBRD funds, as mentioned in the request for proposals, section IV “Financial Proposal IV G – Specimen Budget Format”; b) costs financed from Romanian contribution to the project, in accordance with GO 11/2000, approved with modifications by Law 168/2000. The costs for operating period of the micro-credit scheme are structured in the same manner as for the inception period and will be financed from the interest charged on micro-credits;

aa) Administration services – services performed by the Credit Agency as mentioned in chapter D point 36 Section V from request for proposals;

bb) Risk level - the percentage of micro-credits that was declared lost and was written off.

CHAPTER III The fund and the implementation period of micro-credit scheme

Art.5.- The fund is constituted annually on the basis of the state budget, starting with 2001, from the source amounting to USD 3.6 million provided through 4509-RO Loan granted to Romania by International Bank for Reconstruction and Development concerning financing of the mine closure and social mitigation Project, amounting to USD 44,5 million, signed in Bucharest on October 13,1999 and ratified by the Government Ordinance 11/2000, approved with modifications by the Law 168/2000 and stipulated in the MOIC budget for NAD in order to be given in administration to the credit agencies for micro-credits granting. World Bank financing for micro-credit will be stipulated in the MOIC budget for NAD in accordance with the functional classification of the expenditures on chapter “Loan Granted”, code 86.01, sub-chapter “Loan Granted by Governmental Agencies managed by Credit Agencies”, code 860113, and in accordance with the economical classification, on title “Loan Granted”, article “Loans”, paragraph 80.12 “Loan Granted by Governmental Agencies managed by Credit Agencies”, as stipulated in “Classification of incomes and expenditures of the state budget”. Art.6.- The total fund of USD 3.6 million is divided following the 5 mining areas, as defined in Annex no. 1, as follows:

Area NAD Regional Offices Micro-credit Fund related to the each area

1 Targu Jiu, Gorj County 850,000 US Dollars 2 Petrosani, Hunedoara County 850,000 US Dollars

3

Anina, Caras Severin County Moldova Noua, Caras Severin County Deva - Brad, Hunedoara County Alba Iulia-Abrud-Baia de Aries, Alba County

675,000 US Dollars

4

Voivozi, Bihor County Baia Borsa, MaramuresCounty Baia Mare, Maramures County Rodna, Bistrita Nasaud County Gura Humorului, Suceava County

675,000 US Dollars

5 Balan, Harghita County Comanesti, Bacau County Ploiesti, Prahova County

550,000 US Dollars

Art.7.- The Micro-credit Fund given in administration to a Credit Agency, on one contract for each mining area, may not be greater than the equivalent in ROL of EURO 1 million, calculated at the exchange rate communicated by NBR in the day prior to the signing of the contract with NAD. Art.8.- The period for micro-credit scheme implementation is of 56 months, starting from the date of the Government Decision application for approval of the present micro-credit scheme, unless otherwise specified by another regulation.

CHAPTER IV Objectives of micro-credit scheme

Art.9.- The support of the enterprises having less than 50 employees, employed on the basis of

individual labor contract, persons licensed to carry on independent activities and family

associations established on the basis of the Decree-Law 54/1990 or of any other legal acts, as

well as any natural person who presents a well grounded proposal for the purpose of initiation

and development of a business on the operating area of the micro-credit scheme.

Art.10.- Stimulation of employment of the unemployed persons located in the operating area of

the micro-credit scheme.

Art.11.- Stimulation of diversification of the economic environment by developing the private

sector and the profit generating activities in the operating area of the micro-credit scheme.

Art.12.- The support of the employment of the redundant people in order to become

entrepreneurs, beneficiary of micro-credits that may establish small enterprises and support

them in the development of the business for which the loan was requested.

Art.13.- The support of entrepreneurs who develop their business in the workspace centers that

are to be established in 14 regions in the operating area of the micro-credit scheme, as part of

the program "Workspace Centers", included in the "Social Mitigation" component of the project.

Art.14.- Establishment the criteria for selecting credit agencies and authorization of the selected

credit agencies for granting micro-credits to the recipients from the mining areas through a

revolving financing mechanism and according to the provisions of the present micro-credit

scheme.

Art.15.- Stimulation of attracting of independent businesses so that they may become legal.

CHAPTER V Type of micro-credits beneficiaries

Art.16.- Private own capital enterprises, having their registered head-office in one of the localities placed in the operating area of the micro-credit scheme and less than 50 employees with individual labor contract. Art.17.- Regional branches of the private own capital enterprises which develop their activity in the operating area of the scheme and less than 50 employees with individual labor contract.

Art.18.- Family associations and persons authorized to carry on independent activities and established on the basis of the Decree-Law 54/1990 or of any other statutory acts, located in the operating area of the micro-credit scheme. Art.19.- Any natural person who submits a viable proposal for setting up and development of a business in the operating area of the micro-credit scheme, following the authorization in accordance with law.

CHAPTER VI

Selection of Credit Agencies Art.20.- Within 7 working days, starting from the date the Government Decision approving the present scheme is published in the Official Gazette Part I, NAD will proceed with the organization of a public information campaign consisting of: a) publication in a national newspaper of wide circulation, in regional newspapers from the

counties belonging to the operating area of the micro-credit scheme as well as in an specialized newspaper, of the specific advertisement prepared in compliance with the IBRD procedures, containing the invitation to the interested Credit Agencies to submit to NAD expressions of interest for "Micro-finance Management", position 12 of the Annex 6 of PAD, as per annex no. 2;

b) communication of the advertisement mentioned at a) to the Embassies of the countries known as being experienced in development of micro-credit programs;

c) direct information, according to the IBRD procedures, using fax transmission, mail, e-mail and any other communication form that can confirm the reception of the message in writing, of the Credit Agencies (NGO) from inland and from abroad, known as entities offering such services.

Art.21.- Until the date specified in the advertisement from Art. 20, the interested Credit Agencies shall transmit to NAD PIU the expressions of interest, at the address and person mentioned in the advertisement. Art.22.- NAD PIU shall proceed, in accordance with IBRD procedures:

a) drawing up the long lists for each of the 5 regions; b) evaluation by the evaluation committee, on the basis of the criteria published in the advertisement, of the expressions of interest submitted by the Credit Agencies; c) preparing the 5 short lists, according to the 5 areas; d) forwarding to the IBRD the short lists drawn up for comments; e) notifying the Credit Agencies that have not been selected; f) transmitting the Request for Proposals (RFP) to the short listed credit agencies.

Art.23.- Minister of Industry and Commerce, coordinator of the “Mine Closure and Social Mitigation Project” according to GD 418/2000, shall establish through order the score level for evaluation criteria applied to technical proposals from Section II – “Data Sheet” 9.5.3., based on NAD PIU proposal, with the support of MOIC PMU and endorsed by NAD’ s General Director, complying with the World Bank procedures. This information shall be included in the RFP to be transmitted to the short listed credit agencies.

Art.24.- The RFP will be transmitted to the short listed Credit Agencies by express courier; costs related to the transmittal will be paid in accordance with GO 11/2000 for ratify of Loan Agreement between Romania and IBRD concerning the financing of the Mine Closure and Social Mitigation Project, amounted of US$ 44.5 million, signed at Bucharest on October 13, 1999 and approved with modifications by Law 168/2000. Art.25.- The RFP, as presented in annex no. 3, prepared following the standard form of selection of consultants based on cost and quality, edited by the World Bank in January, 1997 and revised in September, 1997 and January, 1999, shall contain the following: a) Letter of invitation (section I); b) Information to credit agencies (section II); c) Technical proposal – standard form (section III); d) Financial proposal – standard form (section IV); e) Terms of reference (section V). Art.26.- The procedures related to the submission of proposals, correspondence with and notification of Credit Agencies, as well as to the public opening, evaluation and negotiation of the contracts will be performed in accordance with the IBRD procedures included in the “World Bank Guidelines for selection of consultants based on cost and quality”, edited by the World Bank in January 1997, revised in September, 1997 and January 1999. Art.27.- Within 14 calendar days from receiving of “No Objection” from the World Bank, NAD PIU will invite the winners for negotiation of the contract, for the micro-credit fund management in mining areas, for which standard form of contract is presented in annex no. 4. Art.28.- The committee for negotiating the contract, established according to the provisions of GD 418/1999 and according to the provisions of IBRD, is empowered with the negotiation of the contracts with the wining CA in the period of its proposal validity. Art.29.- Should the negotiations failed to lead to the conclusion of a acceptable contract in the period of validity of offer specified in the RFP, NAD reserves itself the right that, after informing IBRD, to stop the negotiations with the selected CA, informing it in writing about the reasons for which the negotiations have been stopped. Art.30.- Within a term of two weeks from the date of the notification under art. 29 of the rejected CA, NAD PIU shall invite for negotiation the next CA qualified in the final evaluation report if its proposal is still valid. Art.31.- NAD PIU, upon receiving the agreement form the next CA to maintain its proposal, shall request the approval of IBRD for extension of period of validity of proposal. Art.32.- Should the proposal of the next qualified CA is no more within the period of validity of the proposal for the contract negotiations and signing, NAD PIU shall request the said CA to extend the validity period. Art.33.- Should within a term of 5 working days from the date of notification of the CA qualified next place in the final evaluation report the said CA does not send an answer from which it to result its agreement to took part in negotiation, NAD PIU shall ask the next CA qualified in the final evaluation report.

CHAPTER VII

Accepted risk level in the recovery of the public funds granted by NAD to credit agencies for micro-credit lending

Art.34.- Accepted risk level in the recovery of the public fund to state budget, managed by NAD in order to be granted to credit agencies for micro-credit lending, is maximum 15% from the total loan portfolio. Art.35.- Accepted risk level by present micro-credit scheme, in the recovery of the public fund granted by NAD to credit agencies for micro-credit lending, will be negotiate with NAD but will not exceed 15% from the each CA total loan portfolio. Art.36.- Each CA, which manages a part from micro-credit fund, will create a loan loss provision in amount from a minimum 50% from the accepted risk level in the recovery of the public fund granted by NAD to credit agencies for micro-credit lending. Art.37.- The write off micro-credits will not exceed 15% from total credit portfolio of each CA. Art.38.- The level of the provisions made by CAs will be certified by an independent auditor, which will be contracted and remunerated by NAD, in accordance with article 3 (2) from GO 11/2000.

CHAPTER VIII

Financial Flow Chart Art.39.- The selected CA will open and maintain a foreign currency account at a commercial bank agreed with the NAD, dedicated for trances from micro-credit fund.

Art.40.- PMU-MOIC, at NAD-PIU request, will transfer into CA account, as indicated at art. 39, the respective trances, with a limit of amounts negotiated.

Art.41.- PMU-MOIC, at NAD-PIU request, will transfer into NAD PIU account opened at the State Treasury, amounts representing the CA service charges.

Art.42.- NAD will disburse to CA amounts for service charges for the inception period, in accordance with the negotiated contract.

Art.43.- The selected CA will open and maintain a local currency account designated for micro-credits, at the commercial bank agreed with NAD, for the transfer of amounts in local currency in the state treasury in one of localities, which is near of its regional office within the operating area. This account is also used for reimbursing of micro-credits from beneficiaries.

Art.44.- The selected CA will open and maintain a local currency account at the commercial bank agreed with NAD, designated for reimbursement of the interest from the beneficiaries.

Art.45.- The selected CA will open and maintain a local currency account at the State Treasury within the operating area, and will reimburse amounts from the account opened in conformity with art. 43 and amounts for service charges.

Art.46.- The selected CA will exchange the hard currency amounts form its account opened at the commercial bank into local currency and transfer the resulted amounts in its account opened in conformity with art. 43. These amounts will be transferred at the State Treasury and will be transferred into Beneficiaries State Treasury accounts or will pay the beneficiary’s suppliers.

Art.47.- The Beneficiary will receive the micro-credit amounts in its account opened at the state treasury (for working capital, suppliers’ payments) or will receive the contracted goods and/or services paid directly by the CA, according with the provisions of the contract concluded with the CA.

Art.48.- The first portion of the fund contracted with NAD will be subject of negotiations between the CA and NAD, based on CA experience, total volume of micro-credit granted, and actual rate of reimbursements, and will be indicated in the contract, not exceeding in any case 200,000 US$.

Art.49.- The value of the following portions of the fund, to the extent of the fund contracted with NAD, will be requested by the CA upon the presentation of a financing need estimated according with the selected micro-credit applications.

Art.50.- The minimum value of any fund portion is 50,000 US$.

Art.51.- The beneficiaries will repay the micro-credit, according to the provisions from the contract, in the account opened according to art. 43.

Art.52.- The beneficiaries will repay the interest in the account opened according to art.44.

Art.53.- The amounts collected from the repayment of micro-credits in the account opened according to art. 43 will be transferred in the account opened according to art. 45 for the payment of the amounts to beneficiaries or their suppliers, from the newly lent micro-credits.

Art.54.- The amounts collected from the payment of interests for the micro-credits according to art. 44 will be used for the payment of the CA charge (commission), as agreed within the contract, and the exceeded amounts will be transferred in the account opened according art. 43, for a new financing cycle.

Art.55.- The amounts collected by CA in the account opened according to art. 43 from the repaying the micro-credits beginning with the 57th month from the date the present government decision is issued in the Official Monitor, will be transferred in a bank account in ROL-s opened by NAD at the state treasury, dedicated to micro-credits reimbursement.

Art.56.- NAD, in accordance with art. 22 from the Government Ordinance no. 40/2000, will repay monthly the gathered amounts to MOF, if the GOR will not decide otherwise.

Art.57.- All CA reimbursements and disbursements will be presented monthly to NAD.

Art.58.- Using of funds from interest and for operational costs, and if the case may be, transforming of the exceed into micro-credits, will be made upon the prior written approval from NAD.

CHAPTER IX Collateral and Interests Level

Art.59.- The CA will negotiate with each beneficiary the value and the nature of the collateral considered acceptable for each micro-credit, based on risk evaluation.

Art.60.- The level of collateral requested by CA will be establish in each case and should be made to obtain a security cover of realizable assets as close as is feasible to the nominal value of the credit in each case.

Art.61.- The whole responsibility for the appreciation of the value of collateral for each micro-credit will rest exclusively by CA.

Art.62.- (1) The interests charged to micro-credit recipients may not exceed the amount of the commission due to the credit agency for the operating of micro-credit fund granted by NAD, as specify in the contract.

(2) CAs are allow to grant credit with preferential interests on each recipients, but this interest may not exceed the interests charged by the commercial banks.

(3) The CAs may not make profit from the administration of the scheme.

CHAPTER X

Management of public funds awarded to credit agencies as funds for micro-credit lending

Art.63.- During 30 days from the contract signing with each CA, the said CA will promote a initial public information campaign consist in:

a) Publish in a wide national newspaper of the methodology for micro-credit granting;

b) Publish in a local newspaper from each county from operating area of the micro-credit of the methodology for micro-credit granting;

c) Display at the NAD regional offices of the methodology for micro-credit granting;

d) Organization, with NAD regional offices support, of a public information conference with local authorities, decentralized state institutions, local consortia, private enterprises and trade unions, chamber of commerce and industry from all counties that micro-credit scheme operating area refers to, business unions, promotional conference that will be held in one of the mining regions related to the contract.

Art.64.- The CA will organize public information campaigns during the implementation period, as many times as necessary, through the Public Information and Social Dialogue within the Social Mitigation component of the project.

Art.65.- In maximum 60 normal days from contract signing, the CA will submit to NAD the first report regarding organizing and functioning condition completion, as so is specified in the contract.

Art.66.- Starting with the date specify by publicity campaign, the applicants will submit application to CA for micro-credits.

Art.67.- The CA, on the basis of GO 40/2000 art. 11 alin. 3 will proceed with analysis and evaluations of applications, based on the methodology specify in their proposals, methodology annexed to the contract with NAD.

Art.68.- The methodology presented in proposal will be based on procedures from annex 6 and will take part from contract agreed with NAD.

Art.69.- In 30 calendar days from the registration of the application, the CA are obliged to notify the applicants on the decision.

Art.70.- During the decision taking period, the CA may request supplementary information to the applicants.

Art.71.- CA has the obligation to support the applicants in drawing up the documentation stipulated in the methodology for obtaining micro-credits.

Art.72.- The applicants whose applications received favorable decisions will go to the CA for negotiating and signing the contract, with the standard format shown in annex no. 7.

Art.73.- The CA will sign contracts and lend micro-credits, within the amount limits available in the account opened according to art. 39, the amounts in the ROL-s account, opened according to art. 42 and depending on the repayments schedule.

Art.74.- The CA will monitor each micro-crediting contract by:

a) Supervising the use of funds on each destination, according to the contracts concluded with the beneficiaries;

b) Supervising the compliance with the contracts referring to clauses, micro-credit repayment and its interest, payment deadline;

c) Organizing meetings to check the beneficiaries` activity at the end of each quarter;

d) Checking the activity of beneficiaries who have been late in paying the rates and/or the interest and their notification starting with the fifth working day from their due date;

e) Checking if the guarantee for the micro-credit are in place;

f) Taking all necessarily measures to comply with the contract conditions on the funds use, repayment in time of the credits and interest.

Art.75.- The maximum interest charged by the CA will be negotiated and indicated in the contract concluded with NAD; any modification thereon will not modify the micro-credit contracts signed prior to modification date.

Art.76.- Following the evaluation report, NAD is reserving, under the provisions of the article 9. (2) from Governmental decision no 40/2000, the right to notify within 5 working days form the its approval by the CCPI, the findings regarding the break of the micro-credit scheme provisions, the terms of the contract between NAD and the CA or the contracts concluded between the CA and micro-credit beneficiaries.

Art.77.- If within 45 calendar days from notification, the CA will not respect the provisions of the contact, NAD will unilateral terminate the Contract.

Art.78.- If the evaluation report indicates penal or breaching, within 5 working days from the CCPI report approving, NAD will take all necessarily measures indicated in art. 10 from GO 40/2000.

Art.79.- If the contract is terminated under the provisions of article 4, (4) from the Governmental decision no 40/2000, NAD will take all the liabilities regarding the micro-credit fund management and (1) will transfer, based on the proved performance criteria, to another prior selected CA, based on the World Bank procedures, specified in the guidelines for selection of consultants based on and cost quality, edited by the World Bank in January 1997 and revised in September 1997 and January 1999; (2) will select and sign a new contract through public bidding with another CA.

Art.80.- The CA will remain responsible after the micro-credit scheme implementation for the reimbursement of the on-going micro-credit and for the reimbursement of those amounts to NAD, in order to return the fund to the state budget, under the provisions of the Governmental decision no 40/2000, article 22.

Art.81.- Within 30 calendar days from the termination of the contract, the CA will transfer to NAD the amounts representing the credit loss provisions accumulated on the scheme functioning duration.

Art.82.- The possible plus between the evaluated operating costs and the effective operating costs indicated in the annual balance sheet or in the audit report, recorded by the CA, will be added to the micro-credit fund.

CHAPTER XI The mechanism for reporting, evaluation,

Supervision and control of CA’s activities Art.83.- CAs shall provide NAD with the following reports:

a) By the tenth working day of each month, the report on operating costs (annex no. 8.1);

b) By the tenth working day of each month, the report on the loans portfolio (annex no. 8.2);

c) By the tenth working day of each month, the report on micro-credit lent broken down by categories of beneficiaries (annex no. 8.3);

d) Annual report on the project progress, to be submitted to NAD within 30 days from the end of each fiscal year (point 40, section V, annex no. 3);

e) Final report at the contract completion (point 40, section V, annex no. 3);

f) Any other report that NAD might reasonably request.

Art.84.- CAs will co-operate with NAD Regional Offices in what concerns the reporting and monitoring requirements stipulated in the negotiated contract between CA and NAD.

Art.85.- CA is bound to notify NAD whenever it occur any deviation that could jeopardize the good progress of the contract between CA and NAD.

Art.86.- Following receipt of notification from the CA, the General Director of NAD shall appoint through a decision a committee responsible for investigation and proposal of solving solutions.

Art.87.- CA has the duty of and is responsible for the accounting records related to the micro-credit fund and to the operating cost service as well, in accordance with the national and international standards and is fully responsible for those records.

Art.88.- CA shall allow the access of NAD to the records kept according to art. 87, within the activity program of the working days, following a two days advance notice by NAD.

Art.89. – (1) CA shall contract yearly and no later than six months from the end of the fiscal year, in accordance with the legislation on public procurement and after having received comments from the IBRD, an independent auditor to review its activity, according to the national and international standards.

(2) CA auditing, regarding micro-credit lending, by its own audit department of the public institution to whom NAD is subordinating and by the institution granting micro-credit.

(3) CA is bound to make available to the General Department for internal audit within the Ministry of Finance, all data and information requested in order to control the operations or the essential activities (established on the reprezentativity and evaluation principles) following the entire logical and chronological chain, in order to ensure the closure of the operational circuit under formal and practical aspects regarding the objective or the object of audit, according to the trasability principle stipulated in the minister of finance order no. 1.070/2000, every time that the audit will be done by the audit inspections and / or as the case may be.

Art.90 - CA is bound to make available to NAD the audit report and all necessary documents for the annual appraisal by NAD of CA’s performances, together with the annual report.

CHAPTER XII

Final and transitory provisions Art.91.- The annexes 1 to 8 shall be deemed to form an integral part of this micro-credit

scheme.

Art.92.- This micro-credit scheme has been prepared by NAD and MOIC and refers

exclusively to the management of the micro-credit fund financed by 4509-RO Loan granted to

Romania by International Bank for Reconstruction and Development concerning financing of the

mine closure and social mitigation Project, amounting to USD 44,5 million, signed in Bucharest

on October 13,1999 and ratified by the Government Ordinance 11/2000, approved with

modifications by the Law 168/2000.

Art.93.- While putting into the practice the micro-credit scheme, this methodology can be

amended, upon General Director of NAD request and approved by IBRD, by Ministry of Industry

and Commerce.

ANNEX 1

to micro-credit scheme

ANNEX No. 2

to micro-credit scheme

ROMANIA

Mine Closure and Social Mitigation Project

Loan No 4509 – RO Micro-Finance Management

Expressions of Interest

This request for expressions of interest follows the General Procurement Notice for this project that appeared in Development Business No. 538 of 16th July 2000. The Government of Romania has received a loan from the International Bank for Reconstruction and Development (IBRD) in the amount of 44.5 million US Dollars equivalent toward the cost of the Mines Closure and Social Mitigation Project. It intends to apply part of the proceeds of this loan to payments under this project for the procurement of Micro-Finance Management consultancy services for the component. The Social Mitigation component under the Mine Closure and Social Mitigation Project includes a sub-component establishing a Micro-Credit Fund to support micro-finance services in the 14 mining regions. The programme will be implemented by Micro-Finance Institution(s) (MFI) that will manage the credit line in accordance with the project requirements and guidelines and specified in an operating manual (to be provided by the NAD). The project aims to facilitate new job creation and encourage entrepreneurs to develop their businesses for hiring unemployed people. Loans will also be provided to set up new micro-enterprises, which will be assisted for development, and for maintaining the created jobs. For the purpose of stimulating micro and small enterprise development in the affected mining areas, funding will be provided from the IBRD loan for the establishment and operation of a Micro Credit Fund [MCF].

For project management purposes, the affected mining regions have been grouped into five

areas designated by the location of NAD’s local offices as follows:

Area NAD Office locations 1 Targu Jiu, Gorj County 2 Petrosani, Hunedoara County

3

Anina, Caras Severin County Moldova Noua, Caras Severin County Deva – Brad, Hunedoara County Alba Iulia – Abrud – Baia de Aries, Alba County

4 Voivozi, Bihor County

Baia Borsa, Maramures County

Baia Mare, Maramures County

Rodna, Bistrita Nasaud County

Gura Humorului, Suceava County

5 Balan, Harghita County Comanesti, Bacau County Ploiesti, Prahova County

The numbering assigned to the Areas is solely for administrative reference - each area

can be taken as having the same high development priority.

This project is now seeking to appoint micro funds institutions [MFIs] as the micro credit fund

manager(s) for one or more of the grouped mining areas following a competitive tendering

process. Prospective contractors are invited to tender for the management of the MCF in

one, all or a combination of these areas and should clearly state their choice on their

submissions. Each area should be the subject of a separate tender.

The main objectives of the sub-component are development of entrepreneurial capacity of

people from mining regions, creation of a favourable business environment, hiring of a

measurable portion of unemployed people, creation of regional development strategies. It is

expected to create over 2,000 jobs, during the life of the project.

Prospective contractor(s) must:

• Qualify as legally competent credit agencies in compliance with Government Ordinance No.40 of 31.01.2000 “On Licensing Credit Agencies to Manage Funding for Micro-Credit”.

• Furnish details of past accomplishment in MCFs implementation and portfolio management with particular reference to loan delinquency rates, repayment rates, loan loss rates and profitability.

• Supply the names of all organisations from which they have received micro credit fund management contracts with reference information (current addresses, telephone numbers and contact personnel) as well as a brief report on the work performed and the outcomes.

• Nominate an operational partner which is registered in Romania including the court decision allowing the organisation to operate in Romania, a copy of the Official Monitor declaration authorising the organisation to operate and the official fiscal code of the organisation.

• Furnish details of their existing micro loan portfolios as well as copies of independently audited statements of account for the past three years, or for the most recent years for which accounts are available.

• Local experience could be an advantage • Furnish a copy of the organisation's accounting manual and any other relevant and

accounting procedures. • Furnish evidence of success in originating enterprise projects, project evaluation

methodology and credit monitoring procedures. • Furnish a copy of its corporate organisation chart. • Furnish a statement of its personnel training and development programs. • Furnish a program plan, which clearly defines project implementation methodology and

the target results with a corresponding plan timeframe. • Furnish a detailed forward project budget; • Furnish a description (with examples) of credit evaluation and monitoring systems. • Furnish CVs of key personnel who will be involved in the implementation of the project. It

is expected that the personnel will demonstrate practical experience in setting up and managing successful micro fund programs and the ability to develop collaborative relationships with counterparts, partners and allied organizations;

• Provide documents that shall demonstrate that on the date of their participation in the biding they do not have any overdue tax obligations.

NAD now invites eligible consultants to indicate their interest in providing the services. Interested consultants must provide information indicating that they are qualified to perform the services (brochures, description of similar assignments, experience in similar conditions, availability of appropriate skills among staff, etc.). Consultants may associate to enhance their qualifications. Consultants will be chosen in accordance with Quality and Cost-based Selection procedures set out in the World Bank’s Guidelines – Selection and Employment of Consultants by World Bank Borrowers January 1997(revised September 1997). Interested consultants may obtain further information at the address below. Expressions of interest must be delivered to the address below by close of business on 19.02.2001.

National Agency of Development and Implementation Of the Reconstruction Programs in Mining Regions

Project Implementation Unit Mrs. Elena Gheorghe; Director PIU

152 - 154 Calea Victoriei, lobby floor, room 18-19, Bucharest, Romania Phone: 401 231 66 33

Email: egheorghe@alfa.imi.ro

ANNEX No. 3

to micro-credit scheme

REQUEST FOR PROPOSALS For selecting and licensing credit agencies for the administration of public fund

amounted to US$ 3.6 million in order to grant micro-credits

Section 1. Letter of Invitation National Agency for Development and Implementation of the Reconstruction

Programs in Mining Regions 152-154 Calea Victoriei Room 18-19, Lobby Floor

Bucharest Romania

Dear [insert: Name of Consultant]: 1. The Government of Romania has received a loan (hereinafter called “loan”)

from the International Bank for Reconstruction and Development (IBRD)

toward the cost of the Mine Closure and Social Mitigation Project and intends

to apply a portion of this loan to eligible payments under this Contract.

2. The National Agency for Development and Implementation of the

Reconstruction Programs in the Mining Regions (NAD hereinafter called

“Client”) now invites proposals to provide the following consulting services:

“To administer micro credit finance scheme in one or more of the designated

regions in order to develop small businesses in the mining regions”

More details on the services required are provided in the attached Terms of

Reference (Section V)

3. The Request for Proposal (RFP) has been addressed to the following

shortlisted consultants:

[insert: List of Shortlisted Consultants and their origin country]

4. Credit Agency will be selected based on World Bank procedures under Quality

and Cost Based Selection (QCBS) and procedures described in this RFP.

5. The RFP includes the following documents:

Section 1 - Letter of Invitation

Section 2 - Information to Credit Agencies

Section 3 - Technical Proposal - Standard Forms

Section 4 - Financial Proposal - Standard Forms

Section 5 - Terms of Reference

6. Please inform us, upon receipt that you received the letter of invitation.

Yours sincerely, ……………………. NAD PIU Director

Section 2. Information to Credit Agencies 1. Introduction 1.1 NAD will select a credit agency among those listed in the

Letter of Invitation (hereinafter called credit agencies), in accordance with the method of selection specified in the RFP and detailed in the edition of the Guidelines for Selection and Employment of Consultants by World Bank Borrowers, edited by World Bank in January 1997 and revised in September 1997 and January 1999 (The Guidelines for Consultants).

1.2 The Credit Agencies are invited to submit a technical

proposal and a financial proposal, as specified in the Section II point 3 (preparation of proposals). The wining proposal after the evaluation process will be the basis for contract negotiations and ultimately for a signed contract between NAD and selected credit agency.

1.3 The contract shall be implemented in accordance with

the phasing indicated in Section II point 9.1.3 (Data Sheet).

1.4 The credit agencies must familiarise themselves with

local conditions and take them into account in preparing

their proposals. To obtain firsthand information on the assignment and on the local conditions, credit agencies are encouraged to visit the NAD before submitting a proposal and to attend a pre-proposal conference organised at date and place specified in Section II point 9.1.4. Attending the pre-proposal conference and visiting NAD are optional. The credit agencies’ representative should contact the officials named in Section II point 9.1.4 and 9.2.1 (Data Sheet), to arrange for their visit or to obtain additional information on the pre-proposal conference. Credit agency should ensure that these officials are advised of the visit in adequate time to allow them to make appropriate arrangements.

1.5 NAD will provide the inputs specified in the Section II

point 9.1.5 (Data Sheet), needed to carry out the services, and make available relevant project data and reports.

1.6 The credit agencies are informed that (i) the costs of

preparing the proposal and of negotiating the contract, including a visit to the NAD, are not reimbursable as a direct cost of the assignment; and (ii) the NAD is not bound to accept any of the proposals submitted.

1.7 Bank policy requires that credit agencies provide

professional, objective, and impartial advice and at all times hold the NAD’s interests paramount, without any consideration for future work, and strictly avoid conflicts with other assignments or their own corporate interests. Credit agencies shall not be hired for any assignment that would be in conflict with their prior or current obligations to other clients, or that may place them in a position of not being able to carry out the assignment in the best interest of the NAD.

1.7.1 Without limitation on the generality of this rule,

credit agencies shall not be hired under the circumstances set forth below:

(a) A firm which has been engaged by the

NAD to provide goods or works for a project, and any of their affiliates, shall be disqualified from providing consulting services as specified in TORs (Section V)

for the same project. Conversely, firms hired to provide consulting services for the preparation or implementation of a project, and any of their affiliates, shall be disqualified from subsequently providing goods or works or services related to the TORs (Section V) within this project (other than a continuation of the firm’s earlier consulting services) for the same project.

(b) The credit agencies or any of their affiliates

shall not be hired for any assignment which, by its nature, may be in conflict with another assignment implemented by them.

1.7.2 The credit agencies may be hired for downstream

work, when continuity is essential, in which case this possibility shall be indicated in Section II point 9.1.7.2 also mentioned in para. 1.7.1 a), based on credit agencies performance of carried out the assignment. It will be the exclusive decision of the NAD whether or not to have the downstream assignment carried out, and if it is carried out, which credit agencies will be hired for the purpose.

1.7.3 Any previous or ongoing participation in relation to

the assignment by the firm, its professional staff, or its affiliates or associates under a contract with the World Bank may result in rejection of the proposal. The credit agencies should clarify their situation in that respect with the NAD before preparing the proposal.

1.8 It is the Bank’s policy to require that borrowers (including

beneficiaries of Bank loans), as well as credit agencies under Bank-financed contracts, observe the highest standard of ethics during the selection and execution of such contracts. In pursuance of this policy, the Bank:

(a) defines, for the purposes of this provision, the

terms set forth below as follows:

(i) “corrupt practice” means the offering, giving, receiving, or soliciting of anything of

value to influence the action of a public official in the selection process or in contract execution; and

(ii) “Fraudulent practice” means a misrepresentation of facts in order to influence a selection process or the execution of a contract to the detriment of the borrower, and includes collusive practices among credit agencies (prior to or after submission of proposals) designed to establish prices at artificial, non-competitive levels and to deprive the borrower of the benefits of free and open competition.

(b) will reject a proposal for award if it determines that

the firm recommended for award has engaged in corrupt or fraudulent activities in competing for the contract in question;

(c) will cancel the portion of the loan allocated to the

firm’s contract if it at any time determines that corrupt or fraudulent practices were engaged in by representatives of the borrower or of a beneficiary of the loan during the selection process or the execution of that contract, without the borrower having taken timely and appropriate action satisfactory to the Bank to remedy the situation;

(d) will declare a firm ineligible, either indefinitely or

for a stated period of time, to be awarded a Bank-financed contract if it at any time determines that the firm has engaged in corrupt or fraudulent practices in competing for, or in executing, a Bank-financed contract; and

(e) will have the right to require that, in contracts

financed by a Bank loan, a provision be included requiring consultants to permit the Bank to inspect their accounts and records relating to the performance of the contract and to have them audited by auditors appointed by the Bank.

1.9 The credit agencies shall not be under a declaration of

ineligibility for corrupt and fraudulent practices issued by the Bank in accordance with the above sub para. 1.8.

1.10 The credit agencies shall furnish information as

described in the Financial Proposal submission form (Section IV) on commissions and gratuities, if any, paid or to be paid to agents relating to this proposal, and to execute the work if the firm is awarded the contract.

1.11 The credit agencies shall be aware of the provisions on

fraud and corruption stated in Annex 4 to Micro-credit scheme (Contract between NAD and credit agency) under the clauses indicated in Section II point 9 (Data Sheet).

2. Clarification

and Amendment of RFP Documents

2.1 The credit agency may request a clarification of any of the RFP documents up to the number of days indicated in Section II point 9.2.1 (Data Sheet). Any request for clarification must be sent in writing by paper mail, cable, telex, facsimile, or electronic mail to the NAD’s address indicated in Section II point 9 (Data Sheet). NAD will respond by cable, telex, facsimile, or electronic mail to such requests and will send written copies of the response (including an explanation of the query but without identifying the source of inquiry) to all invited credit agencies that intend to submit proposals.

2.2 At any time before the submission of proposals, the NAD

may, for any reason, whether at its own initiative or in response to a clarification requested by an invited firm, amend the RFP. Any amendment shall be issued in writing through addenda. Addenda shall be sent by mail, cable, telex, facsimile, or electronic mail to all invited credit agencies and will be binding on them. NAD may at its discretion extend the deadline for the submission of proposals.

3. Preparation of

Proposal 3.1 The credit agencies are requested to submit a proposal

(para. 1.2) written in the language(s) specified in Section II point 9 (Data Sheet).

Technical Proposal

3.2 In preparing the Technical Proposal, the credit agency is expected to examine the documents constituting this RFP in detail. Material deficiencies (omission in completing of one forms) in providing the information

requested may result in rejection of a proposal. 3.3 While preparing the Technical Proposal, credit agency

must give particular attention to the following:

(i) If a credit agency considers that it does not have all the expertise for the assignment, it may obtain a full range of expertise by associating with individual consultant(s) and/or other credit agency or entities in a joint venture or sub-consultancy, as appropriate. The credit agencies may associate with the other credit agencies invited for this assignment only with approval of the NAD as indicated in the Section II pint 9.3.3. (i). The credit agencies must obtain the approval of NAD to enter into a joint venture with credit agencies not invited for this assignment. The credit agencies are encouraged to seek the participation of local consultants by entering into a joint venture with, or subcontracting part of the assignment to.

(ii) It is desirable that the majority of the key

professional staff proposed be permanent employees of the firm or have an extended and stable working relationship with it.

(iii) Proposed professional staff must, at a minimum,

have the experience indicated in Section II point 9.3.3. (iv), preferably working under conditions similar to those prevailing in the NAD country.

(iv) Alternative professional staff shall not be

proposed, and only one curriculum vita (CV) may be submitted for each position.

(v) Reports to be issued by the credit agencies, as part

of this assignment must be in the language(s) specified in Section II point 9.3.3. (vi). It is desirable that the firm’s personnel have a working knowledge of the Romanian.

3.4 The Technical Proposal shall provide the following

information using the attached Standard Forms (Section III B):

(i) A brief description of the firm’s organization and an outline of recent experience on assignments of a similar nature, as stated in Section V, TORs.

(ii) Any comments or suggestions on the Terms of

Reference and on the data, a list of services, and facilities to be provided by the NAD (Section III C).

(iii) A description of the methodology and work plan

for performing the assignment (Section III D). (iv) The list of the proposed staff team by speciality,

the tasks that would be assigned to each staff team member, and their timing (Section III E).

(v) CVs recently signed by the proposed professional

staff and the authorized representative submitting the proposal (Section III F). Key information should include number of years working for the firm/entity and degree of responsibility held in various assignments during the last ten (10) years.

(vi) Estimates of the total staff input (professional and

support staff; staff time) needed to carry out the assignment, supported by bar chart diagrams showing the time proposed for each professional staff team member (Sections III E and G).

(vii) A detailed description of the proposed

methodology, staffing, and monitoring of training, if Section II point 9.3.4. (vii).

(viii) Any additional information requested in Section II

point 9.3.4 (viii). 3.5 The Technical Proposal shall not include any financial

information.

Financial Proposal

3.6 In preparing the Financial Proposal, the credit agencies are expected to take into account the requirements and conditions outlined in the RFP documents. The Financial Proposal should follow Standard Forms (Section IV). It lists all costs associated with the assignment, including (a) remuneration for staff (foreign

and local, in the field and at headquarters), and (b) reimbursable expenses such as subsistence (per diem, housing), transportation (international and local, for mobilisation and demobilisation), services and equipment (vehicles, office equipment, furniture, and supplies), office rent, insurance, printing of documents, surveys, and training, if it is a major component of the assignment. If appropriate, these costs should be broken down by activity and, if appropriate, into foreign and local expenditures.

3.7 The Financial Proposal should clearly estimate, as a

separate amount, the local taxes (including social security), duties, fees, levies, and other charges imposed under the applicable law, on the consultants, the sub-consultants, and their personnel (other than nationals or permanent residents of the government’s country), unless the Section II point 9 specifies otherwise.

3.8 The credit agencies may express the price of their

services in the currency of any Bank member country or in the European Currency Unit. The credit agencies may not use more than three foreign currencies. NAD may require credit agency to state the portion of their price representing local cost in the national currency if so indicated in Section II point 9.3.8.

3.9 Commissions and gratuities, if any, paid or to be

paid by credit agencies and related to the assignment will be listed in the Financial Proposal submission form (Section IV).

3.10 The Data Sheet (Section II point 9) indicates how long the proposals must remain valid after the submission date. During this period, the credit agency is expected to keep available the professional staff proposed for the assignment described in TORs. NAD will make its best effort to complete negotiations within this period. If the NAD wishes to extend the validity period of the proposals, the credit agencies who do not agree have the right not to extend the validity of their proposals.

4. Submission,

Receipt, and Opening of Proposals

4.1 The original proposal (Technical Proposal and Financial

Proposal) mentioned at Section II point 1.2, shall be

prepared in indelible ink. It shall contain no inter-lineation or

overwriting, except as necessary to correct errors made by

the firm itself. Any such corrections must be initialled by

the persons or person who sign(s) the proposals.

4.2 An authorised representative of the firm initials all pages

of the proposal. The representative’s authorisation is confirmed by a written power of attorney accompanying the proposal.

4.3 For each proposal, the credit agencies shall prepare the

number of copies indicated in Section II point 9.4.3. Each Technical Proposal and Financial Proposal shall be marked “ORIGINAL” or “COPY” as appropriate. If there are any discrepancies between the original and the copies of the proposal, the original governs.

4.4 The original and all copies of the Technical Proposal

shall be placed in a sealed envelope clearly marked “Technical Proposal,” and the original and all copies of the Financial Proposal in a sealed envelope clearly marked “FINANCIAL PROPOSAL” and warning: “DO NOT OPEN WITH THE TECHNICAL PROPOSAL.” Both envelopes shall be placed into an outer envelope and sealed. This outer envelope shall bear the submission address and other information indicated in Section II point 9 and be clearly marked, “DO NOT OPEN, EXCEPT IN PRESENCE OF THE EVALUATION COMMITTEE.”

4.5 The completed Technical and Financial Proposals must

be delivered at the submission address on or before the time and date stated in Section II point 9. Any proposal received after the closing time for submission of proposals shall be returned unopened.

4.6 After the deadline for submission of proposals, the

Technical Proposal shall be opened immediately by the evaluation committee. The Financial Proposal shall remain sealed and deposited with a respectable public auditor or independent authority until all submitted proposals are opened publicly.

5. Proposal

Evaluation Methodology

and evaluation criteria for tehnical proposal

General 5.1 From the time the bids are opened to the time the contract is awarded, if any credit agencies wishes to contact the NAD on any matter related to its proposal, it should do so in writing at the address indicated in Section II point 9. Any effort by the credit agencies to influence NAD in the proposal evaluation, proposal comparison or contract award decisions may result in the rejection of the credit agency’s proposal.

5.2 Evaluators of Technical Proposals shall have no access

to the Financial Proposals until the technical evaluation, including any Bank reviews and issuance of a "no objection" letter, is concluded.

Evaluation of Technical Proposals

5.3 The evaluation committee, appointed by the NAD as a whole, and each of its members individually, evaluates the proposals on the basis of their responsiveness to the Terms of Reference, applying the evaluation criteria, sub-criteria (typically not more than three per criteria), and point system specified in Section II point 9.5.3. Each responsive proposal will be given a technical score (St). A proposal shall be rejected at this stage if it does not respond to important aspects of the Terms of Reference or if it fails to achieve the minimum technical score indicated in Section II point 9.5.3.

5.4 The public opening and evaluation of the Financial

proposals: ranking of the proposals on the basis of cost and quality selection.

Public Opening and Evaluation of Financial Proposals: Ranking (QCBS Method)

5.5 After the evaluation of technical proposals is completed, the NAD shall notify those consultants whose proposals did not meet the minimum qualifying mark or were considered non-responsive to the RFP and Terms of Reference, indicating that their Financial Proposals will be returned unopened after completing the selection process. The NAD shall simultaneously notify the credit agencies that have secured the minimum qualifying mark, indicating the date and time set for opening the Financial Proposals. The opening date shall not be sooner than two weeks after the notification date. The

notification may be sent by registered letter, cable, facsimile, or electronic mail.

5.6 The Financial Proposals shall be opened publicly in the presence of the credit agencies’ representatives who choose to attend. The name of the credit agencies, the quality scores, and the proposed prices shall be read aloud and recorded when the Financial Proposals are opened. NAD shall prepare minutes of the public opening.

5.7 The evaluation committee will determine whether the Financial Proposals are complete (i.e., whether they have costed all items of the corresponding Technical Proposals; if not, NAD will cost them and add their cost to the initial price), correct any computational errors, and convert prices in various currencies to the single currency specified in Section II point 9. The official selling rates used, provided by the source indicated in Section II point 9, will be those in effect on the date indicated in Section II point 9. The evaluation shall exclude those taxes, duties, fees, levies, and other charges imposed under the applicable law; and to be applied to foreign and non-permanent resident consultants (and to be paid under the contract, unless the consultant is exempted), and estimated as per para. 3.7.

5.8 In case of QCBS, the lowest Financial Proposal (Fm) will

be given a financial score (Sf) of 100 points. The financial scores (Sf) of the other Financial Proposals will be computed as indicated in Section II point 9. Proposals will be ranked according to their combined technical (St) and financial (Sf) scores using the weights:

T [%]= the weight given to the Technical Proposal; P [%]= the weight given to the Financial Proposal; T + P = 1 indicated in the Data Sheet: S St T Sf P= × + ×% % .

The credit agency achieving the highest combined technical and financial score will be invited for negotiations.

6. Negotiations 6.1 Negotiations will be held at the address indicated in Section II point 9. The aim is to reach agreement on all points and sign a contract.

6.2 Negotiations will include a discussion of the Technical

Proposal, the proposed methodology (work plan), staffing and any suggestions made by the credit agency to improve the Terms of Reference. NAD and credit agency will then work out final Terms of Reference, staffing, and bar charts indicating activities, staff, periods in the field and in the home office, staff-months, logistics, and reporting. The agreed work plan and final Terms of Reference will then be incorporated in the “Description of Services” and form part of the contract. Special attention will be paid to getting the most the credit agency can offer within the available budget and to clearly defining the inputs required from the NAD to ensure satisfactory implementation of the assignment.

6.3 The financial negotiations will include a clarification (if

any) of the credit agency’s tax liability in the Romania, and the manner in which it will be reflected in the contract; and will reflect the agreed technical modifications in the cost of the services. Unless there are exceptional reasons, the financial negotiations will involve neither the remuneration rates for staff (no breakdown of fees) nor other proposed unit rates in the cases of QCBS.

6.4 Having selected the credit agency on the basis of,

among other things, an evaluation of proposed key professional staff, the NAD expects to negotiate a contract on the basis of the experts named in the proposal. Before contract negotiations, the NAD will require assurances that the experts will be actually available. NAD will not consider substitutions during contract negotiations unless both parties agree that undue delay in the selection process makes such substitution unavoidable or that such changes are critical to meet the objectives of the assignment. If this is not the case and if it is established that key staff was offered in the proposal without confirming their availability, the credit agency may be disqualified.

6.5 The negotiations will conclude with a review of the draft

form of the contract (standard form is presented in Annex 4 to micro-credit scheme). To complete negotiations NAD and the credit agency will initial the agreed contract. If negotiations fail, NAD will invite the credit agency whose proposal received the second highest score to negotiate a Contract.

7. Award of

Contract 7.1 The contract(s) will be awarded following negotiations.

After negotiations are completed, NAD will promptly notify other credit agencies on the shortlist that they were unsuccessful and return the unopened Financial Proposals of those credit agencies who did not pass the technical evaluation (para. 5.3).

7.2 The credit agency(s) is/are expected to commence the

assignment on the date and at the location specified in Section II point 9.7.2.

8. Confidentiality 8.1 Information relating to evaluation of proposals and

recommendations concerning awards shall not be disclosed to the credit agencies who submitted the proposals or to other persons not officially concerned with the process, until the winning credit agency has been notified that it has been awarded the contract.

9. Data Sheet

Clause

Reference in LOI

9.1.1 The name of the Client is: “National Agency of Development and Implementation of the Reconstruction Programs in the Mining Regions” The method of selection is: Quality and Cost Based Selection (QCBS), according to selection procedures described in The Guidelines for selection and employment of consultants by World Bank Borrowers The Edition of the Guidelines is: January 1997 Revised September 1997 and January 1999

9.1.2

Technical and Financial Proposals are requested: Yes

See Terms of Reference for further details

1.3 The assignment is phased: Yes, the project will operate for the operating period of the scheme [months]. The activity of the credit agencies will be reviewed and renewed on an annual basis subject to satisfactory performance defined in the TORs and the contract will be annually revised according to results of the evaluation. See Terms of Reference for further details

9.1.4 NAD will held a pre-proposal conference before the date of proposals submission al: Date_______________ Time______________ Address: Ministry of Industry and Commerce, Calea Victoriei no. 152 – 154, Bucharest 1, Room __________________ The name, address, and telephone numbers of the Client’s official is: NAD official: Name: ___________________, Position:______________________ Address: _______________________________________________ Telephone: ________, Fax: ___________, E-mail: ______________

9.1.5 NAD will provide the following inputs: See Terms of Reference

9.1.7.2 NAD may decide for continuity for downstream work of the credit

agency for the same services when the continuity id essential, based on the performance criteria defined in the Terms of Reference (Section V)

9.1.11 The clause on fraud and corruption in the Contract is: Sub-clause 2.9.1(g) of the General Conditions of Contract (Annex 4 to micro-credit scheme – Standard form of contract)

9.2.1 The credit agencies may request clarifications before 21 days the submission date.

The clarifications will be requested to NAD official: Name: ___________________, Position:______________________Address: _______________________________________________ Telephone: ________, Fax: ___________, E-mail: ______________

9.3.1

Proposals should be submitted in English

9.3.3 (i) Shortlisted firm/entity may associate with other shortlisted firm Yes (ii) Not applicable

(iv) The minimum required experience of proposed professional staff is:

See Terms of Reference (vi) Reports that are part of the assignment must be written in the

following language(s): English and Romanian

9.3.4 (vii) Training is a specific component of this assignment:

Yes, see Terms of Reference (viii) All information requested in the Term of Reference is to be

submitted with the bid

9.3.7

Taxes: The credit agency shall be responsible for all taxes, duties etc resulting from the implementation of the contract, according to Romanian legislation

9.3.8 The credit agency will state local cost in the national currency of Romania

9.3.10

Proposals must remain valid 120 days after the submission date

9.4.3 The credit agencies must submit an original and three (3) additional copies of each proposal. Each envelope will be marked with “Original” and “Copy” as well as RFP 150/11/99/Area ___ –

Technical Proposal and Financial Proposal.

9.4.4 The proposal submission address is: Director PIU First name ________________________, Name ________________National Agency for the Development and the Implementation of the Reconstruction Programs in Mining Regions, 152 –154 Calea Victoriei, Bucharest 1, Romania, Rooms ________, Floor _______, Telephone: ________, Fax: ___________, E-mail: ______________

9.4.5 Proposals must be submitted no later than the following date and time:on or before date _________, at _________ hours

9.5.1

The address to send information to the Client is: Director PIU First name ________________________, Name ________________National Agency for the Development and the Implementation of the Reconstruction Programs in Mining Regions, 152 –154 Calea Victoriei, Bucharest 1, Romania, Rooms ________, Floor _______, Telephone: ________, Fax: ___________, E-mail: ______________

9.5.3 The number of points to be given under each of the evaluation criteria

are:

Points Specific experience of the consultants related to the assignment

• Successful experience of credit agency in micro-crediting • Successful experience of credit agency in implementation of

similar projects I.

TOTAL: 100

Adequacy of the proposed work plan and methodology in responding to the Terms of Reference

• Proposed work plan and methodology • Proposed annual credit disbursements • Proposed interest rate levels

II.

TOTAL: 100

Qualifications and competence of the key staff for the Assignment • General qualifications • Experience in crediting and micro-crediting • Experience in Romania

III.

TOTAL: 100

Suitability of the transfer of knowledge to NAD, credit agency local stakeholders and other NGO. Long Term plans for ensuring continuity of the fund in mining regions; IV.

TOTAL: 100

Local participation (as reflected by nationals among key staff presented by foreign and local firms) V.

TOTAL: 100

Total

100

The minimum technical score required to pass:

9.5.7 The single currency for price conversions is: US Dollar

The source of official selling rates is: National Bank of Romania (NBR) Selling Rate of Exchange The date of exchange rates is: The date of submission of proposals The formula for determining the financial scores is the following: [Either Sf = 100 x Fm/F, in which Sf is the financial score, Fm is the lowest price and F the price of the proposal under consideration, or another proportional linear formula]

9.5.8 The weights given to the technical and Financial Proposals are: T= 0.8, and P= 0.2

9.6.1 The address for negotiations is:

Director PIU First name ________________________, Name ________________National Agency for the Development and the Implementation of the Reconstruction Programs in Mining Regions, 152 –154 Calea Victoriei, Bucharest 1, Romania, Rooms ________, Floor _______, Telephone: ________, Fax: ___________, E-mail: ______________

9.7.2 As stipulated in Terms of Reference the assignment is expected to commence in at various locations within Romania

Section 3. Technical Proposal - Standard Forms

IIIA. TECHNICAL PROPOSAL SUBMISSION FORM

[Location, Date]

Director PIU _________________________________________________________

(name) National Agency of Development and Implementation of the Reconstruction Programs in the Mining Regions 152-154 Calea Victoriei Rooms 18-19, Lobby Floor Bucharest Romania RFP no. _____________________ We, the undersigned, offer to provide the consulting services for the Management of Micro Credit Finance Schemes for the Mining Regions Area 1 in accordance with your Request for Proposal dated [Date] and our Proposal. We are hereby submitting our Proposal, which includes this Technical Proposal, and a Financial Proposal sealed under a separate envelope. If negotiations are held during the period of validity of the Proposal, i.e., before [Date] we undertake to negotiate on the basis of the proposed staff. Our Proposal is binding upon us and subject to the modifications resulting from Contract negotiations. We understand that NAD is not bound to accept any Proposal you receive, according to World Bank procedures. Yours sincerely, Authorised Signature __________________________________________________ Name and Title of Signatory _____________________________________________ Name of credit agency _________________________________________________ Address ____________________________________________________

IIIB. FIRM’S REFERENCES

Relevant Services Carried Out in the Last Five Years That Best Illustrate Qualifications

Using the format below, provide information on each assignment for which your firm/entity, either individually as a corporate entity or as one of the major companies within an association, was legally contracted.

Assignment Name:

Country:

Location within Country:

Professional Staff Provided by Your Firm/Entity (profiles):

Name of Client:

No of Staff:

Address:

No of Staff-Months; Duration of Assignment:

Start Date (Month/Year):

Completion Date (Month/Year): Approx. Value of Services (in Current US$):

Name of Associated Consultants, If Any:

No of Months of Professional Staff Provided by Associated Consultants:

Name of Senior Staff (Project Director/Co-ordinator, Team Leader) Involved and Functions Performed: Narrative Description of Project: Description of Actual Services Provided by Your Staff:

Firm’s Name:

All financial details should be provided including total value of funds, default and recovery rates, level of delinquency, reserves and margins

IIIC. COMMENTS AND SUGGESTIONS OF CONSULTANTS ON THE TERMS OF REFERENCE AND ON DATA, SERVICES, AND FACILITIES TO BE PROVIDED BY

THE CLIENT On the Terms of Reference: (comments and suggestions of credit agency will be numbered in alphabetical order from a to z) ___________________________________________________________________ On the data, services, and facilities to be provided by the Client: (comments and suggestions of credit agency will be numbered in alphabetical order from a to z) ___________________________________________________________________

III D. Description of the Methodology and Work Plan for Performing the Assignment

The credit agency will make a detailed description of proposed methodology and work plan and expected outputs, according to Terms of Reference (section V) _________________________________________________________________

2. Support Staff Name Position Task

III E. TEAM COMPOSITION AND TASK ASSIGNMENTS

1. Technical/Managerial Staff Name Position Task

III F. FORMAT OF CURRICULUM VITAE (CV) FOR PROPOSED PROFESSIONAL STAFF

Proposed Position: Name of Firm: Name of Staff: Profession: Date of Birth: Years with Firm/Entity: Nationality: Membership in Professional Societies: Detailed Tasks Assigned: Key Qualifications: [Give an outline of staff member’s experience and training most pertinent to tasks on assignment. Describe degree of responsibility held by staff member on relevant previous assignments and give dates and locations. Use about half a page.] Education: [Summarize college/university and other specialized education of staff member, giving names of schools, dates attended, and degrees obtained. Use about one quarter of a page.] Employment Record: [Starting with present position, list in reverse order every employment held. List all positions held by staff member since graduation, giving dates, names of employing organizations, titles of positions held, and locations of assignments. For experience in last ten years, also give types of activities performed and client references, where appropriate. Use about two pages.]

Languages: [For each language indicate proficiency: excellent, good, fair, or poor in speaking, reading, and writing.] Certification: I, the undersigned, certify that to the best of my knowledge and belief, these data correctly describe me, my qualifications, and my experience. Date: [Signature of staff member and authorised representative of the firm] Day/Month/Year Full name of staff member:______________________________________ Full name of authorised representative: ___________________________

III G. TIME SCHEDULE FOR PROFESSIONAL PERSONNEL

Months (in the Form of a Bar Chart)

Name Position Reports Due/Activities 1 2 3 4 5 6 7 8 9 10 11 12 Number of Months

Subtotal (1)

Subtotal (2)

Subtotal (3)

Subtotal (4)

Full-time: Part-time: Reports Due: Activities Duration:

Signature: (Authorised representative) Full Name:

Title:

Address:

3H. ACTIVITY (WORK) SCHEDULE

A. Field Investigation and Study Items [1st, 2nd, etc. are months from the start of assignment.]

1st

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

Activity (Work)

_______________

_______________

_______________

_______________

B. Completion and Submission of Reports Reports Date

1. Inception Report

2. Interim Progress Report

(a) First Status Report (b) Second Status Report

3. Draft Report

4. Final Report

Section 4. Financial Proposal - Standard Forms

IV A. FINANCIAL PROPOSAL SUBMISSION FORM

[Location, Date] Director PIU _________________________________________________________

(name) National Agency of Development and Implementation of the Reconstruction Programs in the Mining Regions 152-154 Calea Victoriei Rooms 18-19, Lobby Floor Bucharest Romania Ladies/Gentlemen: Hiring of Consultancy Services to Manage Micro-Finance Schemes for the Mining Regions RFP No: 150/11/99 We, the undersigned, offer to provide the consulting services for the Management of Micro Finance Schemes in accordance with your Request for Proposal dated [Date] and our Proposal (Technical and Financial Proposals). Our attached Financial Proposal is for the sum of [Amount in words and figures]. This amount is exclusive of the local taxes, which we have estimated at [Amount(s) in words and figures]. Our Financial Proposal shall be binding upon us subject to the modifications resulting from Contract negotiations, up to expiration of the validity period of the Proposal, i.e., [Date]. Commissions and gratuities, if any, paid or to be paid by us to agents relating to this Proposal

and Contract execution, if we are awarded the Contract, are listed below:

Name and Address of Agents

Amount and Currency

Purpose of Commissionor Gratuity

___________________ _________________ __________________ ___________________ _________________ __________________ ___________________ _________________ __________________

We understand that you are not bound to any Proposal you receive.

Yours sincerely,

Authorised Signature: ________________________________________

Name and Title of Signatory: ________________________________________

Name of credit agency: ________________________________________

Address:

__________________________________

IV B. SUMMARY OF COSTS

Costs Currency(ies)1 Amount(s) Subtotal Local Taxes Total Amount of Financial Proposal

______________________

1 Maximum of three currencies plus the local currency.

IV C. BREAKDOWN OF PRICE PER ACTIVITY Activity No.:____________________

Activity No.:_____________________

Description:_____________________

Price Component Currency(ies) Amount(s)

Remuneration Reimbursables Miscellaneous Expenses Subtotal

____________________________

IVD. BREAKDOWN OF REMUNERATION PER ACTIVITY Activity No._____________________________________ Name:______________________________

Names

Position

Input2

Remuneration

Currency(ies) Rate

Amount Regular staff Local staff Consultants Grand Total

___________________

2 Staff months, days, or hours as appropriate.

IV E. REIMBURSABLE PER ACTIVITY Activity No:_________________________________

Name:_____________________

No. Description Unit Quantity Unit PriceIn

Total Amount In

1. 2. 3. 4. 5.

International flights _____________________________ Miscellaneous travel expenses Subsistence allowance Local transportation costs3

Office rent/accommodation/ clerical assistance

Trip Trip Day

Grand Total

________________

3 Local transportation costs are not included if local transportation is being made available by the Client. Similarly, in the project site, office rent/accommodations/clerical

assistance costs are not to be included if being made available by the Client.

IV F. MISCELLANEOUS EXPENSES

Activity No._______________________________ Activity Name:

____________________________

No. 1. 2. 3. 4.

Description Communication costs between ______________________and _________________________ (telephone, facsimile & e-mail,) Drafting, reproduction of reports Equipment: vehicles, computers, etc. Software Grand Total

Unit Quantity Unit Price Total Amount _____________

IV G SPECIMEN BUDGETS FORMAT

Operational Budget - Year 1 Office No. xxxx Cost Head Designation Cost Staff Office Manager x 1 (1) Credit Executive x 1 (1) Credit Executive x 1 (1) Administrative Assistant x 1 (1) Other (specify) (1) Total - Staff A Travel Local (2) Air (2) Per diem expenses (2) Total – Travel B Consultants Legal (2) Accountancy (2) Translations (2) Other (specify) (2) Total – Consultants C Administration Office rental (2) Building services / utilities (2) Office supplies (2) Postage / carriage / courier (2) Copying services (2) Printing services (2) PR and Marketing services (2) Telecommunications (tel. Fax, e-mail) (2) Office repairs and maintenance services (2) Equipment repairs and maintenance services (2) Insurance (2) Bank commissions (2) Other (specify) (2) Total – Administration D Total Operational Costs A+B+C+D Note (1) - state gross of all costs, e.g., taxes, insurance, levies, etc Note (2) - state bases and assumptions and express net of any VAT returnable

Depreciations - Year 1 Office No. xxxx

Items Cost Office furniture (detail) (3) Office furnishings (detail) (3) Office equipment (detail) (3) Other (specify) (3) Total E

Note (3): Express net of refundable VAT Note (4): The depreciation will be calculated based on Romanian

legislation Budgets Summary - Year 1

Office Operational Capital Totals No. 1 No. 2 No. No. No. Totals

SECTION V Terms of Reference

A. Introduction A1. Background

1. The Government of Romania (GOR) has obtained a loan from the International Bank for Reconstruction and Development (IBRD, hereinafter referred to as the “Bank”) to implement a Mine Closure and Social Mitigation Project (MCSMP). The project comprise the first phase of a longer-term strategy to restructure the mining sector which includes diversification of the economic base of the mining areas and phasing out subsidies so that mining becomes viable in the long run. The restructuring will entail closing non-viable mines, undertaking social mitigation for mining sector workers adversely affected by sector restructuring and institutional strengthening to establish a framework for private sector development in the mining areas. The Social Mitigation component of the project consists of US$ 20.84 million (US$ 13.88 million IBRD financing). 2. Mining sector restructuring has already caused considerable negative social impact within Romania, beginning in 1997 with mass layoffs encouraged by a generous severance package to induce voluntary redundancies. The nature of the social impact to date is described by the findings of a Social Assessment Study, which was undertaken during project preparation.

3. GOR has created through Emergency Government Ordinance no. 64/1997, approved with changes by Law 43/1998 and modified through Emergency Government Ordinance no. 68/2000, a specialized agency, the National Agency for Development and Implementation of the Reconstruction Programs in Mining Regions (NAD), to co-ordinate the entire range of social mitigation activities in the mining regions. A Project Implementation Unit (PIU) has been established at NAD to oversee implementation of the Social Mitigation component within the MCSMP. The other two components of the project, “Mine Closure” and “Institutional Strengthening” have parallel PIUs. A Project Management Unit (PMU) was established under the Ministry of Industry and Commerce and co-ordinates project implementation through the three PIUs. The PIU at NAD is the lead agency contracting and supervising of the social mitigation component of the project, with assistance from the Bank. Emergency Government Ordinance no. 68/2000 stipulates NAD will be organized under the Ministry of Industry and Commerce (MOIC) for a better co-ordination of the mining sector restructuring process. 4. The head office of NAD is located in Bucharest within the premises of MOIC. NAD has 14 regional offices in the mining areas from Romania with a

staff of 65 compared with a total authorized complement of 80. Of this, 24 staff are based at headquarters and 41 located in the regional offices. NAD operates under the auspices of the Ministry of Industry and Commerce and its mandate includes:

(i) Facilitation and promotion of social mitigation measures in Romanian mining communities affected by restructuring and mines closures;

(ii) Public information regarding Government policies and actions towards social mitigation to miners in the mining regions,

(iii) Promotion of dialog and information exchange among stakeholders responsible with administration and development of mining regions;

(iv) Providing of facilities for stimulating business development in affected regions, including enterprise support and enabling local access to capital for enterprise development,

(v) Co-ordination of Government and donor support in affected regions, and

(vi) Systematic social dialogue and monitoring the social impact of the mining sector restructuring.

5. In order to accomplish its mandate satisfactorily, NAD is receiving technical assistance from the Bank and from the UK Department for International Development (DFID) for: (i) staff training, (ii) procurement of equipment and services, (iii) establishment of a Management Information System (MIS) and (iv) undertaking of specific social mitigation measures in the mining regions. DFID has also appointed advisors to assist NAD in implementing the Social Mitigation component of the project. 6. The small business enterprise sector in Romania has not developed its full potential. Many small enterprises have insufficient knowledge of marketing strategies, are unable to access development credits or to achieve production efficiency. Modern management techniques and business planning are not systematically used in Romania and there are insufficient professional consultancy services available to industry. All these factors diminish the ability of Romanian businesses to enter different markets, as suppliers or purchasers. These deficiencies are even more marked within the mining regions.

7. One of the most important impediments to development in Romania is the institutional constraint in the banking sector, which inhibits credit availability for micro and small enterprises. Many small entrepreneurs who set up their business after 1990 have now arrived at a stage where they need to obtain credits in order to develop, but fail to locate a credit source. In addition, access to start-up capital for individuals or families who want to enter the private sector is practically non-existent. Within the mining areas, facilitating access to preferential credit is seen as a vital measure in economic renewal.

A2. Social Assessment of Mining Sector Restructuring

8. The mining industry is the most heavily subsidized sector in Romania, which was in receipt of an estimated 56% of the subsidies provided to state owned industries in 1997. The sector employed around 173,000 workers in August 1997. To undertake sector restructuring, the Government promulgated two Ordinances - Emergency Government Ordinance 9/1997 concerning some measures of protection for persons having individual labor contracts terminated as a result of mass layoffs following restructuring, privatization, liquidation, and Government Ordinance 22/1997 concerning some measures of protection for the mining and geological survey personnel, promulgated at the request of mining unions that gave miners the right to seek voluntary redundancy in exchange for generous severance benefits. At that time a protocol was also signed with the unions whereby agreement was reached to: (a) create a specialised agency for social mitigation and job creation in the mining regions; (b) enact a special law declaring the mining regions disadvantaged regions and providing a tax incentive for prospective investors; (c) initiate active measures to create jobs for ex-miners.

According to the Government Ordinance no. 9/1997, the persons layoffs following restructuring have beneficiated by a severance amounted to six salaries. Government Ordinance no. 22/1997 gave to mining workers severance payments in the amount of 12-20 salaries in the sum of medium salary in the mine sector (which was twice higher than the average national wage). Government Ordinance no. 22/1997 also provided for severance payments by way of a lump sum with the intention of enabling workers to invest their severance productively in exchange for not seeking employment within the sector for the following 12 months. 9. Following the issuance of Government Ordinance 22, around 40% of mine workers accepted the package nationwide within four months compared with the general expectation of around a 15% redundancy rate. In the primary study areas of Hunedoara and Gorj County, a total of 45,530 workers (38%) were laid off in the last four months of 1997 out of 119,385 employed in August 1997. Nationwide, an estimated 74,000 workers were laid off in 1997. By end 1998, the numbers laid off under Ordinance 22 were estimated to be 83,000. The large number of voluntary layoffs caught the authorities by surprise and unprepared to provide the supplementary support for re-training and job creation programs. Since then, the Government have made efforts to respond by creating a specialized agency (NAD) to promote and co-ordinate social mitigation measures in the mining areas, and by deploying funds available under the Bank’s Labor Redeployment Program. 10. Six months after redundancy, it emerged that most workers had been under the illusion that, after industry restructuring, they would again find jobs in the mining sector - Ordinance 22 prohibited them from seeking jobs in the

sector for a period of one year only. Most workers had spent their severance pay unproductively, on household consumption, purchase of appliances, or repayment of past debts. Only 5% had attempted to start their own business, while only 30% still had some savings from the severance pay. Although 64% had been seeking new employment, only 5% had succeeded in finding jobs. Mining being the dominant activity in the survey areas, downsizing in the sector had also adversely affected all related industries, increasing unemployment rate.

11. The responses of workers depended on economic alternatives available in their particular locality. The highest rate of despondency and, consequently, militancy was in the Jiu Valley where there were very few jobs outside the mining sector and where 95% of workers had originally migrated and settled from other parts of the country. A few of them tried to return to their original homes but did not find economic opportunities there. Most were compelled to return to the Jiu Valley where, at least, they owned an apartment. In Gorj County, redundant workers had something to fall back on as some 60% of the population lived in surrounding villages and owned or shared small plots of agricultural land. Overall 5% had migrated out of Jiu Valley but less than 3% from Gorj.

12. The layoffs were not gender neutral. In the Jiu Valley, male and female laid off workers were roughly proportional to their size in the mining labor force (laid off women accounted for 17.3%, out of 18% female labor force). However, in Gorj County, 53% of female employees were discharged while only 33% of the men left the labor force. Women in Gorj reported management pressure to accept voluntary redundancy. Being less labor market mobile and having no immediate employment alternatives, the redundant women expressed a high preference for establishing micro-enterprises as an important redressing strategy.

13. The study from which these findings are drawn again quoted the absence of accessible credit as a major development constraint. Credit available through commercial banks is prohibitively expensive and normally requires collateral as high as 150% of the credit advance. In these circumstances, more accessible credit is essential for employment generation.

14. The study also found considerable dissatisfaction with the apparent slow pace of delivery of remedial measures. Although NAD was created in February 1998, it was not provided with any program funds. The Disadvantaged Areas ordinance was issued finally in September 1998, and the active labor market measures that were undertaken did not achieve outcomes commensurate with the scale of the problem. Job re-training opportunities organized by the Ministry of Labor have not met the universal approval since the perception was that they were not realistically linked to immediate employment possibilities.

15. However, NAD has succeeded in attracting donor interest in the mining regions. The Bank’s Labour Redeployment Program has invested almost 40% of its funds in the mining regions, the EU has pledged ECU 10 million and 2.1 million, respectively, under two separate programs for enterprise and infrastructure development, and the UK Know How Fund is providing co-finance for the Bank’s social mitigation component. The lack of information in the mining regions is the main obstacle in convincing people on the necessity to phase out the subsidies for the mining sector and deploying the so made available funds to finance the active and short term measures, including establishment of micro-credit funds. B. Micro-credit Fund B.1. Aims and objectives of micro-credits lending 16. The whole program is aimed to facilitating the creation of sustained measures for remediation, addressed to affected mining regions and to persons which lost their livelihood following the restructuring of the mining sector. Thus, the objectives of the micro-credit scheme are: a) Support of companies having less than 50 employees, hired with individual labour contracts, persons authorised to perform independent activities and to family associations established according to Law Decree 54/1990 or other laws, and of any individual submitting a substantiated proposal to start and develop a business in the operational area of the micro-credit scheme; b) Stimulate the employment of redundant persons having residence in the operating area of the micro-credit scheme; c) Stimulating the diversification of the economic environment through private sector development and profit generating activities for the unemployed persons who are located in the operating area of the micro-credit scheme; d) Support self-employment of redundant people, by transforming them into entrepreneurs through micro-credits granting, in order to assist them in setting up small businesses and developing the businesses they required micro-credits for; e) Support of entrepreneurs developing their businesses in the workspace centres that are to be established in 14 localities from the operating area of the micro-credit scheme, within the “Workspace Centres” program, which is part of the “Social Mitigation” component; f) Establishing the criteria for selecting the credit agencies and authorising the selected credit agencies to grant micro-credits to beneficiaries from the mining areas, through a revolving financing mechanism and according to the provisions of the present micro-credit scheme; g) Encouraging individuals providing economic activities to register them according to legal provisions in force.

17. Expected outcomes include: a) Creating a favourable environment for private enterprise development; b) Developing the entrepreneurial capacity of mining areas inhabitants; c) A high rate of loan reimbursement according to the best practice of

micro-credits fund; d) Creating a large number of new jobs in two cycles, through small and

micro businesses for which micro-credits are lent. The new jobs are expected to be occupied by former miners and/or their family members, in a proportion of 80%;

e) Facilitating the development of independent and financially viable credit agencies, which will be able to continue long-term micro-credits administration in order to support SME-s development.

B2. Micro-credit fund establishment 18. In order to achieve the aims and objectives of the micro-crediting activity, proceeds from the IBRD loan have been allocated for the establishment and functioning of the fund for micro-credit lending. The so allocated proceeds, as stipulated in the Loan Agreement are the Micro-credit fund (MCF) amounting to US$ 3.60 million, together with the service charges for the administration of the fund for a decided period of time. This period called inception period will be negotiated with NAD but it shall not exceed six months. According to Governmental Ordinance no. 40/2000, the maximum amount that can be given in administration as micro-credit fund to credit agencies is maximum 1 million Euro per one contract. 19. The credit distribution sample is not predictable at this stage, but about 85% of the total demand is expected to come from businesses already existing in mining areas or from area branches of companies headquartered in other areas of the country, and the rest from new businesses under start up. B3. Operating Area 20. For project management purposes, the mining regions have been grouped into 5 areas, depending on the location of the NAD regional offices, follows:

Area Regional Offices 1 Targu Jiu, Gorj county 2 Petrosani, Hunedoara county 3 Alba Iulia- Abrud- Baia de Aries, Alba county

Anina, Caras Severin county Deva-Brad, Hunedoara county Moldova Noua, Caras Severin county

4 Baia Borsa, Maramures county Baia Mare, Maramures county Gura Humorului, Suceava county Rodna, Bistrita-Nasaud county Voievozi, Bihor county

5 Balan, Harghita county Comanesti, Bacau county Ploiesti, Prahova county

This project will select the credit agencies under international public bidding in order to licence them for administering micro-credit funds in each of the mining areas, as listed above. The potential contractors are invited to one bid for micro-credit administration for each of the areas listed above .Each of the areas will be subject of a separate bid. Potential contractors must submit technical and financial proposals, for each of the areas wishing to bid for. B4. Qualification and experience of the credit agencies

21. In order to be selected and licensed, the credit agencies need to prove

relevant experience in micro-credits lending in Romania and/or in any other European country with a transition economy. Experience in regions, counties and cities that have been adversely affected by mining sector restructuring would be an advantage.

22. The credit agencies shall: • Have mentioned in their statute as scope of activity the administration of

funds to be lent as micro-credits; • Have qualified and specialised staff, with a minimum work experience of 3

years in the financial and banking field, having relevant experience in credit running, without criminal record for fraudulent administration, trust abuse, forgery and use of forgery, fraud, defalcation, false testimony, bribe offering or receiving, fraudulent bankruptcy;

• Have been in operation for at least three years, evidenced by at least two reports cleared by the Inland Revenue Authority;

• Bring evidence of a good performance activity in credit lending with a credit recovery rate of 85% as a minimum, that can be demonstrated by results;

• Submit letters of guarantee issued by a bank or by a guarantee fund, amounting to at least 10% of the micro-credit fund they applied for;

• Submit details of their past performance in implementing micro-credits fund, specifying the management portfolio, the micro-credits unpaid in due time, reimbursement, loan loss rates and profitability;

• Supply names of all organisations from which they have received contracts or assistance awards for similar activities and shall present reference information for them - including addresses, current telephone numbers, persons of contact - as well as a brief description of the work performed and outcomes, as compared with the planned objectives;

• Nominate an operational partner that is legally registered in Romania and present the judicial decision attesting the partner` s right to operate in Romania, together with a copy of the Official Gazette where the authorisation for its functioning was published, and a copy of its fiscal code;

• Present a description of the way existing micro-credit funds are administered and copies of audited balance sheets for the last three years, or for the most recent period they are available for, referring to micro-credit funds administered in the past or to more recent ones;

• Present a description of their accounting monograph or of any other relevant book keeping method;

• Present relevant aspects of the results obtained in initiating projects for enterprises, project assessment methodology and credit monitoring procedures (with examples);

• Provide a copy of the credit agency` s organisational chart; • Provide a plan that will clearly define the project implementation methodology

as well as the way to attain the targeted results together with the implementation time schedule;

• Submit a description of the proposed training and development programs for the agency’s personnel and the local organisations, implementing the micro-credit scheme;

• Provide: a) the level of the interest charged on micro-credits for the implementation period of the micro-credit scheme; b) estimated annual level of micro-credits that will be paid in that area; c) estimated annual reimbursements and their breakdown, on micro-credit and interest;

• Provide a forecast of annual operating costs (that will be part of the financial proposal - Annex no. 4, Section IV G), out of which operating costs for the inception period;

• Present the CV-s of the persons being in key positions and that will be involved in the project implementation. It is desired that staff have demonstrable practical field experience in setting up and managing successful micro financing programs and the ability to develop collaborative relationships counterparts, partners, and organisations (Annex no. 3 - Section III F); it is expected that the staff proposed by each credit agency include a team leader, two credit officers and an assistant. Qualifications and experience of the personnel are presented in Annex no. 3, Point 9.5.3.

23. Credit agencies should include in their offers an evaluation of the target area

characteristics, stressing on the specific features, demographical situation of the target population as well as any other relevant information regarding the rationality and viability of the project. The offers will give details regarding the mechanism for collecting and analysing additional information, which are necessary for successfully implementation of the project, to give assurances that the project responds to economical and social needs of the mining area.

24. Credit Agencies will be employed by contract and the services they provide will be paid: a) for a limited period of time, necessary for initiating the micro-

credit scheme in that area, from the project specified fund (PAD - Project Appraisal Document - Annex no.6, package no.12); b) for the operational micro-credit scheme period of time, from interests charged from the micro-credits beneficiaries. The object of the bidding is represented by the value of the operational costs for the micro-credit scheme during its implementation, out of which the operational costs for the inception period, specifying the interest charged on micro-credits.

25. The necessary period of time for initiation of micro-credit scheme

implementation into a mining area , means the necessary time for a credit agency employed by contract, within this one should organise itself and start granting micro-credits, until the micro-credits portfolio it is created in order to assure the operational costs from the interests paid by beneficiaries, as it was agreed in the contract.

26. The operational costs for administrating micro-credits fund stipulated in the contract, for initiating micro-credits scheme period, represents calculated costs by each credit agency and presented in financial offer, formed by: a) IBRD funds financing, as they are stipulated in the Request for Proposals, Section IV, Financial offer IV G - Standard budget format; b) costs financed from Romanian contribution to the project implementation, according to OG 11/2000 approved with modifications by Law no. 168/2000.

27. Costs afferent to scheme operating period of time are organised in the

same structure as in initiation micro-credit scheme period and will be financed from the interests paid by beneficiaries.

28. Credit Agency will receive the agreed amount of money from NAD to

pay administrative costs for the inception period, according to micro-credit scheme.

29. Credit Agency will take into account that after the micro-credit scheme

inception period, operating expenses will be covered from micro-credits interest and will be subject to contract negotiations. The charged interest shall be kept into a separate bank account.

30. The winning credit agency will be hired through contract for a period

between the date of contract signing and completion of the micro-credit scheme, if not otherwise stipulated in further regulations. The contract will be annually revised on NAD initiative, depending on the results from the evaluation reports based on the performance criteria defined in the TOR-s at paragraph 35.5. The public fund to be transformed in micro-credits will be advanced to the CA as specified in chapter VIII of the micro-credit scheme. Contracting agencies are expected to require the whole fund allocated to the operating area in maximum 24 months from the contract signing and

financing will continue based on a revolving mechanism for the following years.

31. NAD takes the right to transfer amounts from the public fund to be

transformed in micro-credit from areas with small request to areas with high request.

32. NAD through Project Implementation Unit (PIU) and the involved

departments will ensure the tracking of micro-credit scheme implementation and the monitoring of credit agency, according to micro-credit scheme provisions.

33. Micro-credit fund will operate according to other support measures

included in social mitigation component, as workspaces centres , financial incentives paid to employers in order to employ and train redundant people, enterprise support/workspace centres management, which will contribute to fulfil the main objective of micro-credit scheme. Credit agencies should be aware by progress of these measures, to collaborate NAD headquarters and regional offices and to fulfil the operating function of the micro-credit scheme such as successfully administrating MCF in mining areas , and also, transmitting regularly the official reports to PIU, about micro-credit administration fund.

B5. Conditions for granting and types of micro-credits ( micro-credit specifications )

34. The credit agency must fulfill its activity according to the following

specifications: a) The estimated value of the micro-credit for any project will be Euro

5,000. For special projects (e.g. projects with job creation high and realistic potential) the credit agency may take the financing decision in a maximum limit of Euro 10,000;

b) Reimbursement of micro-credits and interests will be done in installments, payable on pre-established intervals, but not more often than monthly. The reimbursement period is foreseen to be 12 months from the date of granting, with the possibility to be extended to 36 months, depending on the credit agency’s assessment;

c) Micro-credits will be paid in ROL, at the exchange rate ROL/Euro established on the day prior to the order of payment made to beneficiaries. Reimbursement of micro-credits and interests will be also done in ROL, at the exchange rate ROL/Euro established on the day prior to restitution.

d) Collateral will be requested for each micro-credit, with a value established by the credit agency depending on each project, so that it may cover to a maximum possible extent the nominal value of the micro-credit and

make, also, the micro-credit accessible to beneficiaries. The credit agency is exclusively responsible for assessing each micro-credit’s guarantee value;

e) It is intended that the interest corresponding to the micro-credit paid by the beneficiaries to be preferential to fees claimed by commercial banks; the interests claimed by the credit agency from the micro-credit beneficiaries cannot exceed the value of the micro-credit fund provided by NAD, administration costs, as they are stipulated in the contract; the credit agency will not make profit out of the micro-credit scheme application. C. Description of tasks

35.1 Elaborating of the promotion strategy of the micro-credit scheme. Proposed promotion strategies will cover the entire period of the micro-credit scheme. Successful promotion of the micro-credit scheme before its launching is seen as very important for the project’s success. The winning credit agency will co-operate with NAD in order to implement promotion strategies that will have input in making public relevant information for applicants, so as to stimulate their interest. NAD has local consortia formed of representatives from local and county councils, private companies, consultants, trade unions, etc. The proposals will be prepared to attract the local partners in the micro-credit scheme’s promotion. According to the budget, promotion will be also done during the micro-credit scheme’s implementation, in the aim of encouraging potential applicants to access micro-credits. 35.2 Micro-credit applications receiving and processing. The credit agency is exclusively responsible for receiving and processing the micro-credit applications. All applications must be professionally taken into consideration and processed, based exclusively on the value of each application, without considering third parties influence and according to the specifications of the micro-credit scheme. Applications receiving and processing will be done in due time, in accordance with Government Ordinance 40/2000. The application forms and any other auxiliary informational material must be accessible and correspond to the requested information for application processing. The credit agency must predict the volume of the micro-credit that will be lent, based on the volume of the applications received and processed on a certain period of time. 35.3 Credit decisions. The credit agency is exclusively responsible for this component and the decision will be made according to the specifications of the micro-credit scheme and to the best professional standards in respect of micro-credits management. The credit agency will prove that it is applying objective, credible and systematical methodology to process the financing applications.

35.4. Micro-credits granting. The credit agency is exclusively responsible for applying the decisions of granting micro-credits and this will be done according to legal provisions and will ensure the applications of all terms and conditions stipulated in the micro-credit contracts. It is very important to ensure that the micro-credit contracts terms are applied and correspond to Romanian legislation and the fund will be use by the beneficiaries according to the credit application provisions. 35.5 Administration of micro-credits portfolio. The credit agency is responsible for monitoring the use of all approved and paid micro-credits, including reimbursement of those micro-credits. D1. Credit agency responsibilities in micro-credits fund administration 36. The credit agency’s responsibilities include:

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•

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Identification of potential beneficiaries of micro-credits, supporting of applicants in preparing of micro-credit applications and granting micro-credits to beneficiaries in the terms of the micro-credit scheme; Fund administration according to the micro-credit scheme’s provisions and to the best standards for micro-credits management; Achieving of the performance standards agreed and stipulated in the contract signed between NAD and credit agency; Payments to beneficiaries of micro-credits in agreed terms and conditions and tracking reimbursement of micro-credits and interest, according with repayment schedules specified in the contracts between credit agency and beneficiaries; Tracking, evaluation and decision making concerning using of micro-credits lent in the carrying on of the contract between credit agency and beneficiaries; Monitoring of the performance criteria of the credit agency like results of the micro-credits lending activity; Ensure financial administration of the fund and fund accountancy, with due diligence; Making all necessary measures to reimburse the micro-credits through civil and criminal procedures; Preparation and submitting of reports agreed through contract, as stipulated in paragraph D3, Terms of Reference; Entire implementation of the micro-credit scheme tasks; Collaborate with NAD regional offices concerning public information, counseling of applicants, monitoring of the micro-credit activity and in maintaining of a favorable relationship with local communities; Providing promptly notices to NAD, in writing, about any event that interferes or is about to interfere and affects the credit agency’s performances or the contractual terms;

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To distinctly register in accountancy the activity under the contract and to keep evidence regarding the funds operation and also other financial and monitoring situations that NAD reasonably might request; To permit the access of person or persons named by NAD’s General Director to all monitoring and accounting documents based on NAD’s notice. To ensure audit on all annually financial records and funds use by an independent auditor, and to submit copies of these documentation and of the audit report to NAD, on a term of four months from the end of the referring financial year; To facilitate annual audit performing for MCF, by an independent auditor appointed and paid by NAD; To facilitate, in any moment, performing by NAD of an informal audit on bookkeeping and funds use.

D2. Performance standards in micro-credits fund administration 37. NAD ask the credit agency to respect the performance standards, as so these are defined through the following performance indicators:

• Institutional capacity - legal registering of the credit agency, business plan (strategic plan with realistic and high standard objectives);

• Financial Management Systems - accountancy and internal control system, a system of loan monitoring, financial design systems;

• Governance - ethical and operational guidance; • Human Resources - correct and prudent administration of the micro-credit

fund in the frame of a defined organizational structure; • Services for clients - identification and serving of target clients; • Financial performance - quality of the credit portfolio, profitability, participation

with local resources.

NAD will track the level of the performance indicators that should be kept at least on the level required in contract, for entire duration of the scheme. It is important that the whole micro-credit portfolio to be professionally administered so the following key performance indicators are respected:

Performance Indicators

Years Value of granted micro-credits

(thousands Euro)

Percentage of due

mc (%)

Percentage of non-

recoverable mc (%)

Differences from the agreed interest

with NAD

Respecting the

initiation period

From the Fund

From reimburs

ements Year 1 50% of the

total fund 85%

Revolving

� 15% � 7,5% Calculated by NAD

Yes/No

Year 2 100% of the total

fund

85% Revolvin

g

� 15% � 7,5% Calculated by NAD

Year 3 85% Revolvin

g

� 15% � 7,5% Calculated by NAD

Year 4 85% Revolvin

g

� 15% �7,5% Calculated by NAD

The indicators mentioned in the table will be defined as follows:

Value of granted micro-credits - the value of all micro-credits from the fund adding 85% of reimbursed sums (in the first year the credit agency must grant at least half of the value of available revolving fund).

Percentage of due micro-credits – the percentage of micro-credits due from the portfolio and cannot exceed 15%;

Percentage of non-recoverable micro-credits – the percentage of micro-credits that was declared lost and was written off;

Interest – the respecting of interest defined by the credit agency and stipulated in the contract;

Respecting the initiation period - the credit agency must respect the negotiated initiation period;

In the meaning of the above indicators, the subsequent terms are defined as follows:

• Portfolio - value of granted credits from which reimbursements are extracted;

• Due Micro-credits - the micro-credits that have not been paid in due time but that can be recovered;

38. In case of negative performance, the credit agency must submit a detailed report to NAD containing the reasons for those changes and solutions for problems. The credit agency must take part on the performance check meetings that will be initiated by NAD. 39. NAD wants to include performance indicators in respect of jobs creation, to what extent jobs are occupied by ex-miners and/or their family members, non-accomplishments of tasks, loans recovery and guarantees, policy of

deduction of lost credits and division of losses. The following aspects are to be mentioned:

a) the number of new jobs to be created within the project is estimated to be 2.000 , distributed for the five mining areas and commensurate with the number of unemployed people.

b) 80% of the new jobs are expecting to be occupied by the target population;

c) micro-credits recovery rate should be over 95% of the total micro-credit portfolio of credit agency, total portfolio is the value of all micro-credits granted from the fund and from reimbursements;

d) loan losses will be equally divided between the credit agency and NAD, for operational reasons, as specified in the micro-credit scheme;

The Credit Agencies will include their own points of view on these issues on the Technical Proposals. D3. Deliverables and Reporting 40. The Credit Agency will provide NAD with the following documents:

a) Monthly financial and quarterly progress reports and the final report drawn up at the end of the project. All reports will be written using processing soft agreed with NAD, either in Romanian and English and will be submitted both on hard copy and disk/e-mail, as specified in annex 8 within micro-credit scheme;

b) A progress annual report that will be submitted in 30 days after the end of the financial year, containing particular references concerning the attainment of agreed objectives.

41. Progress reports. Will be done monthly progress reports and quarterly reports concern financial matters and sent to NAD, drawn up on the report standard format. As the micro-credit scheme is implemented, NAD can modify these formats, following consultations with the credit agency. All these reports will be submitted to NAD before or on the 15th day after the last day of the month they refer to. If required by NAD, the credit agency ought to take part on the meetings checking the implementation of the project and make available all records and evidence requested by NAD to confirm or deny the conformity with the credit agency’s mandate. E. Client’s Responsibilities

a) The Client will appoint a person who will be the main partner of the credit agency on behalf of NAD.

b) NAD will ensure the credit agency’s access to its offices (central and regional).

c) NAD will ensure the credit agency’s access to all data and information concerning the project and will facilitate access to available information from MOIC and National Agency for Mineral Resources the credit agency might need for the project implementation;

d) NAD will ensure the cooperation with its members and with the consultants selected for Social Impact Monitoring.

F. Other micro-credit funds of the credit agency 42. In case that the credit agency is administering other micro-credit funds in Romania, it will have to declare and guarantee that will make an exact description of these funds, in writing, and may continue their administration. The credit agency are allowed to administer any other new micro-credit fund in Romania without getting written approval from NAD, as long as the following conditions are accomplished:

a) such activities do not affect the credit agency’s capacity to fulfill its obligations to NAD;

b) NAD is informed about the size and objectives of the new micro-credit fund before the start of implementation of such program;

c) Respect of provisions of GO 40/2000 in case of administration of micro-credit funds from public funds.

ANNEX No. 4

to micro-credit scheme

SECTION VI

Standard form of contract VI. 1 Form of Contract LUMP-SUM REMUNERATION This contract, hereinafter called the Contract is made today [date ] between, on the one hand, NAD hereinafter called the Client and, on the other hand, [name of consultants] hereinafter called the Credit Agency. [Note: If the Credit Agency consist of more than one entity, the above should be partially amended to read as follows: “…hereinafter called the Client and, on the other hand, a joint venture consisting of the following entities, each of which will be

jointly and severally liable to the Client for all the Consultants’ obligations under this Contract, namely, [name of leader consultants] and [name of associated consultants] hereinafter called the Credit Agency .]1 WHEREAS

(a) the Client has requested the Credit Agencies to provide administration services for the fund to grant micro-credits in sum of ………. to grant micro-credits to the beneficiaries, according to the provisions of GO 11/2000 and GO 40/2000 in the conditions stipulated in the micro-credit scheme, respecting the methodology presented in the proposal, as defined in the General Conditions of Contract attached to this Contract hereinafter called the Services;

(b) the Credit Agencies, having represented to the Client that they have the

required professional skills, personnel and technical resources, have agreed to

provide the Services on the terms and conditions set forth in this Contract;

(c) the Client has received a Loan from the International Bank for

Reconstruction and Development hereinafter called the Bank for financing of the mine closure and social mitigation project, and intends to apply a portion of the proceeds of this loan to eligible payments under this Contract, for:

- service charges for the micro-credit inception period - parts of the micro-credit fund being the object of this Contract

and it being understood (i) that payments by the Bank will be made only at the request of the Client and upon approval by the Bank; (ii) that such payments will be subject, in all respects, to the terms and conditions of the agreement providing for the loan between Romania and the Bank ( GO 11/2000 ); and (iii) that no party other than the Client shall derive any rights from the agreement providing for the loan or have any claim to the loan proceeds;

NOW THEREFORE the parties hereto hereby agree as follows: 1. The following documents attached hereto shall be deemed to form an integral

part of this Contract:

(a) The General Conditions of Contract; (b) The Special Conditions of Contract; (c) The following Appendices:

Appendix A: Description of the Services

1 Text in brackets is optional; all notes should be deleted in final text.

Appendix B: Reporting Requirements Appendix C: Key Personnel and Subconsultants Appendix D: Breakdown of Contract Price in Foreign Currency Appendix E: Breakdown of Contract Price in Local Currency, for the inception period and for the micro-credit scheme operating period Appendix F: Services and Facilities Provided by the Client Appendix G: Other micro-credit funds administered by the Credit Agency Appendix H: Performance standards

2. The mutual rights and obligations of the Client and the Credit Agency shall

be as set forth in the Contract, in particular:

(a) The Credit Agencies shall carry out the Services in accordance with the provisions of the Contract;

(b) the Client shall make payments to the Credit Agencies in accordance with the provisions of the Contract.

IN WITNESS WHEREOF, the Parties hereto have caused this Contract to be signed in their respective names as of the day and year first above written. For and on behalf of NAD [Authorized Representative] For and on behalf of [name of Credit Agency] [Authorized Representative] [Note: If the Credit Agency consist of more than one entity, all these entities should appear as signatories, e.g., in the following manner:] For and on behalf of each of the Members of the Credit Agency [name of member] [Authorized Representative] [name of member] [Authorized Representative]

VI.2 General Conditions of Contract

1. General Provisions

1.1 Definitions Unless the context otherwise requires, the following terms whenever used in this Contract have the following meanings: (a) “Applicable Law” means the laws and any other

instruments having the force of law in the Government’s country (or in such other country as may be specified in the Special Conditions of Contract (SC)), as they may be issued and in force from time to time;

(b) “Bank” means the International Bank for Reconstruction

and Development, Washington, D.C., U.S.A.; (c) “Contract” means the Contract signed by the Parties, to

which these General Conditions of Contract (GC) are attached, together with all the documents listed in Clause 1 of such signed Contract;

(d) “Contract Price” means the price to be paid for the

performance of the Services, in accordance with Clause 6;

(e) “Foreign Currency” means any currency other than the

currency of Romania ; (f) “GC” means these General Conditions of Contract; (g) “Government” means the Government of Romania; (h) “Local Currency” means the Romanian Lei ; (i) “Member,” in case the Credit Agency consist of a joint

venture of more than one entity, means any of these entities; “Members” means all these entities, and “Member in Charge” means the entity specified in the SC to act on their behalf in exercising all the Credit Agency rights and obligations towards the Client under this Contract;

(j) “Party” means the Client or the Credit Agency, as the

case may be, and “Parties” means both of them; (k) “Personnel” means persons hired by the Credit Agency or

by any Subconsultant as employees and assigned to the performance of the Services or any part thereof;

(l) “SC” means the Special Conditions of Contract by which

the GC may be amended or supplemented; (m) “Services” means the work to be performed by the Credit

Agency pursuant to this Contract, as described in Appendix A; and

(n) “Subconsultant” means any entity to which the Credit

Agency subcontract any part of the Services in accordance with the provisions of Clauses 3.5 and 4.

1.2 Law Governing

the Contract This Contract, its meaning and interpretation, and the relation between the Parties shall be governed by the Romanian Applicable Law.

1.3 Language This Contract has been executed in the language specified in the SC, which shall be the binding and controlling language for all matters relating to the meaning or interpretation of this Contract.

1.4 Notices Any notice, request, or consent made pursuant to this Contract shall be in writing and shall be deemed to have been made when delivered in person to an authorized representative of the Party to whom the communication is addressed, or when sent by registered mail, telex, telegram, or facsimile to such Party at the address specified in the SC.

1.5 Location The Services shall be performed at such locations as are specified in Appendix A and, where the location of a particular task is not so specified, at such locations in Romania , as the Client may approve.

1.6 Authorized Representatives

Any action required or permitted to be taken, and any document required or permitted to be executed, under this Contract by the Client or the Credit Agency may be taken or executed by the officials specified in the SC.

1.7 Taxes and Duties Unless otherwise specified in the SC, the Credit Agency, Subconsultants, and their Personnel shall pay such taxes, duties, fees, and other impositions as may be levied under the Romanian Applicable Law, the amount of which is deemed to have been included in the Contract Price.

2. Commencement, Completion, Modification, and Termination of Contract

2.1 Effectiveness of Contract

This Contract shall come into effect on the date the Contract is signed by both parties or such other later date as may be stated in the SC.

2.2 Commencement ofServices

The Credit Agency shall begin carrying out the Services thirty (30) days after the date the Contract becomes effective, or at such other date as may be specified in the SC.

2.3 Expiration of Contract

Unless terminated earlier pursuant to Clause 2.6, this Contract shall terminate at the end of such time period after the Effective Date as is specified in the SC.

2.4 Modification Modification of the terms and conditions of this Contract, including any modification of the scope of the Services or of the Contract Price, may only be made by written agreement between the Parties and shall not be effective until the consent of the Bank has been obtained.

2.5 Force Majeure

2.5.1 Definition For the purposes of this Contract, “Force Majeure” means an event which is beyond the reasonable control of a Party and which makes a Party’s performance of its obligations under the Contract impossible or so impractical as to be considered impossible under the circumstances.

2.5.2 No Breach of Contract

The failure of a Party to fulfill any of its obligations under the contract shall not be considered to be a breach of, or default under, this Contract insofar as such inability arises from an event of Force Majeure, provided that the Party affected by such an event (a) has taken all reasonable precautions, due care and reasonable alternative measures in order to carry out the terms and conditions of this Contract, and (b) has informed the other Party as soon as possible about the occurrence of such an event.

2.5.3 Extension of Time

Any period within which a Party shall, pursuant to this Contract, complete any action or task, shall be extended for a period equal to the time during which such Party was unable to perform such action as a result of Force Majeure.

2.5.4 Payments During the period of their inability to perform the Services as a result of an event of Force Majeure, the Credit Agency shall be entitled to continue to be paid under the terms of this Contract, as well as to be reimbursed for additional costs reasonably and necessarily incurred by them during such period for the purposes of the Services and in reactivating the Service after the end of such period.

2.6 Termination

2.6.1 By the Client

The Client may terminate this Contract, by not less than thirty (30) days’ written notice of termination to the Credit Agency, to be given after the occurrence of any of the events specified in paragraphs (a) through (d) of this Clause 2.6.1 and sixty (60) days’ in the case of the event referred to in (e): (a) if the Credit Agency do not remedy a failure in the

performance of their obligations under the Contract, within thirty (30) days after being notified or within any further period as the Client may have subsequently approved in writing;

(b) if the Credit Agency become insolvent or bankrupt; (c) if, as the result of Force Majeure, the Credit Agency is

unable to perform a material portion of the Services for a period of not less than sixty (60) days; or

(d) if the Credit Agency in the judgment of the client has

engaged in corrupt or fraudulent practices in competing for or in executing the Contract.

For the purpose of this Clause 2.6.1.(d) :

“corrupt practice” means the offering, giving, receiving, or soliciting of any thing of value to influence the action of a public official in the selection process or in contract execution.

“fraudulent practice” means a misrepresentation of facts in order to influence a selection process or the execution

of a contract to the detriment of the Borrower, and includes collusive practice among consultants (prior to or after submission of proposals) designed to establish prices at artificial non-competitive levels and to deprive the Borrower of the benefits of free and open competition.

(e) if the Client, in its sole discretion, decides to terminate this Contract.

2.6.2 By the Credit Agency

The Credit Agency may terminate this Contract, by not less than thirty (30) days’ written notice to the Client, such notice to be given after the occurrence of any of the events specified in paragraphs (a) and (b) of this Clause 2.6.2: (a) if the Client fails to pay any monies due to the

Consultants pursuant to this Contract and not subject to dispute pursuant to Clause 7 within forty-five (45) days after receiving written notice from the Credit Agency that such payment is overdue; or

(b) if, as the result of Force Majeure, the Credit Agency is

unable to perform a material portion of the Services for a period of not less than sixty (60) days.

2.6.3 Payment upon Termination

Upon termination of this Contract pursuant to Clauses 2.6.1 or 2.6.2, the Client shall make the following payments to the Credit Agency : (a) remuneration pursuant to Clause 6 for Services

satisfactorily performed prior to the effective date of termination;

(b) except in the case of termination pursuant to paragraphs

(a) and (b) of Clause 2.6.1, reimbursement of any reasonable cost incident to the prompt and orderly termination of the Contract, including the cost of the return travel of the Personnel and their eligible dependents.

3. Obligations of the Credit Agency

3.1 General The Credit Agency shall perform the Services and carry out their obligations with all due diligence, efficiency, and economy, in accordance with generally accepted professional

techniques and practices, and shall observe sound management practices, and employ appropriate advanced technology and safe methods. The Credit Agency shall always act, in respect of any matter relating to this Contract or to the Services, as faithful advisers to the Client, and shall at all times support and safeguard the Client’s legitimate interests in any dealings with Subconsultants or third parties.

3.2.1 Credit Agency not to Benefit from Commissions, Discounts, etc.

The remuneration of the Credit Agency pursuant to Clause 6 shall constitute the Credit Agency sole remuneration in connection with this Contract or the Services, and the Credit Agency shall not accept for their own benefit any trade commission, discount, or similar payment in connection with activities pursuant to this Contract or to the Services or in the discharge of their obligations under the Contract, and the Credit Agency shall use their best efforts to ensure that the Personnel, any Subconsultants, and agents of either of them similarly shall not receive any such additional remuneration.

3.2.2 Credit Agency and Affiliates Not to be Otherwise Interested in Project

The Credit Agency agree that, during the term of this Contract and after its termination, the Credit Agency and their affiliates, as well as any Subconsultant and any of its affiliates, shall be disqualified from providing goods, works, or services (other than the Services and any continuation thereof) for any project resulting from or closely related to the Services.

3.2.3 Prohibition of Conflicting Activities

Neither the Credit Agency nor their Subconsultants nor the Personnel shall engage, either directly or indirectly, in any of the following activities: (a) during the term of this Contract, any business or

professional activities in the Government’s country which would conflict with the activities assigned to them under this Contract; or

(b) after the termination of this Contract, such other activities

as may be specified in the SC.

3.3 Confidentiality The Credit Agency, their Subconsultants, and the Personnel of either of them shall not, either during the term or within two (2) years after the expiration of this Contract, disclose any proprietary or confidential information relating to the Project, the Services, this Contract, or the Client’s business or operations without the prior written consent of the Client.

3.4 Insurance to be Taken Out by the Credit Agency

The Credit Agency (a) shall take out and maintain, and shall cause any Subconsultants to take out and maintain, at their (or the Subconsultants’, as the case may be) own cost but on terms and conditions approved by the Client, insurance against the risks, and for the coverage, as shall be specified in the SC; and (b) at the Client’s request, shall provide evidence to the Client showing that such insurance has been taken out and maintained and that the current premiums have been paid.

3.5 Credit Agency Actions Requiring Client’s Prior Approval

The Credit Agency shall obtain the Client’s prior approval in writing before taking any of the following actions: (a) entering into a subcontract for the performance of any

part of the Services, (b) appointing such members of the Personnel not listed by

name in Appendix C (“Key Personnel and Subconsultants”), and

(c) any other action that may be specified in the SC.

3.6 Reporting Obligations

The Consultants shall submit to the Client the reports and documents specified in Appendix B in the form, in the numbers, and within the periods set forth in the said Appendix.

3.7 Documents Prepared by the Credit Agency to Be the Property of the Client

All plans, drawings, specifications, designs, reports, and other documents and software submitted by the Credit Agency in accordance with Clause 3.6 shall become and remain the property of the Client, and the Credit Agency shall, not later than upon termination or expiration of this Contract, deliver all such documents and software to the Client, together with a detailed inventory thereof. The Credit Agency may retain a copy of such documents and software. Restrictions about the future use of these documents, if any, shall be specified in the SC.

4. Credit agency Personnel 4.1 Description of Personnel

The titles, agreed job descriptions, minimum qualifications, and estimated periods of engagement in the carrying out of the Services of the Credit Agency Key Personnel are described in Appendix C. The Key Personnel and Subconsultants listed by title as well as by name in Appendix

C are hereby approved by the Client.

4.2 Removal and/or Replacement of Personnel

(a) Except as the Client may otherwise agree, no changes shall be made in the Key Personnel. If, for any reason beyond the reasonable control of the Credit Agency, it becomes necessary to replace any of the Key Personnel, the Credit Agency shall provide as a replacement a person of equivalent or better qualifications.

(b) If the Client finds that any of the Personnel have (i)

committed serious misconduct or have been charged with having committed a criminal action, or (ii) have reasonable cause to be dissatisfied with the performance of any of the Personnel, then the Credit Agency shall, at the Client’s written request specifying the grounds thereof, provide as a replacement a person with qualifications and experience acceptable to the Client.

(c) The Credit Agency shall have no claim for additional

costs arising out of or incidental to any removal and/or replacement of Personnel.

5. Obligations of the Client 5.1 Assistance and Exemptions

The Client shall use its best efforts to ensure that the Government shall provide the Credit Agency such assistance and exemptions as specified in the SC.

5.2 Change in the Applicable Law

If, after the date of this Contract, there is any change in the Applicable Law with respect to taxes and duties which increases or decreases the cost of the services rendered by the Credit Agency, then the remuneration and reimbursable expenses otherwise payable to the Credit Agency under this Contract shall be increased or decreased accordingly by agreement between the Parties, and corresponding adjustments shall be made to the amounts referred to in Clauses 6.2 (a) or (b), as the case may be.

5.3 Services and Facilities

The Client shall make available to the Credit Agency the Services and Facilities listed under Appendix F.

6. Payments to the Credit agency 6.1 Lump-Sum Remuneration

The Credit Agency total remuneration shall not exceed the Contract Price and shall be a fixed lump-sum including all staff costs, Subconsultants’ costs, printing, communications, travel, accommodation, and the like, and all other costs incurred by the Credit Agency in carrying out the Services described in Appendix A. Except as provided in Clause 5.2, the Contract Price may only be increased above the amounts stated in Clause 6.2 if the Parties have agreed to additional payments in accordance with Clause 2.4.

6.2 Contract Price

(a) The price payable in foreign currency is set forth in the SC. (b) The price payable in local currency is set forth in the SC.

6.3 Payment for Additional Services

For the purpose of determining the remuneration due for additional services as may be agreed under Clause 2.4, a breakdown of the lump-sum price is provided in Appendices D and E.

6.4 Terms and Conditions of Payment

Payments will be made to the account of the Credit Agency and according to the payment schedule stated in the SC. Unless otherwise stated in the SC, the first payment shall be made against the provision by the Credit Agency of a bank guarantee for the same amount, and shall be valid for the period stated in the SC. Any other payment shall be made after the conditions listed in the SC for such payment have been met, and the Credit Agency have submitted an invoice to the Client specifying the amount due.

6.5 Interest on Delayed Payments

If the Client has delayed payments beyond fifteen (15) days after the due date stated in the SC, interest shall be paid to the Credit Agency for each day of delay at the rate stated in the SC.

7. Settlement of Disputes 7.1 Amicable Settlement

The Parties shall use their best efforts to settle amicably all disputes arising out of or in connection with this Contract or its interpretation.

7.2 Dispute Any dispute between the Parties as to matters arising pursuant

Settlement to this Contract that cannot be settled amicably within thirty (30) days after receipt by one Party of the other Party’s request for such amicable settlement may be submitted by either Party for settlement in accordance with the provisions specified in the SC.

VI.3 Special Conditions of Contract Number of GC

Clause Amendments of, and Supplements to, Clauses in the General

Conditions of Contract 1.1(a) The words “in the Government’s country” are amended to read “in

Romania”

1.1(i) The Member in Charge is [name of Member].

1.3 The language is English.

1.4 The addresses are: Client: Attention: Telex: Facsimile: Consultants: Attention: Telex: Facsimile:

1.6 The Authorized Representatives are: For the Client:

1.7 For the Credit Agency

2.1 The date on which this Contract shall come into effect is [date].

2.2 The date for the commencement of Services is [date].

2.3 The period shall be [length of time] between the date of contract signing until the date of micro-credit scheme ending [date], if another regulation will not stipulate different. The Contract will be annually revised by the Client initiative, depending on the results of Credit Agency activity evaluation, based on the performance criteria defined in the Terms of Reference at point 37 and according to the performance standards presented in Annex H to this Contract. Obligation at expiration In the case when this Contract is not renewed according to Clause 2.3. the Client may, during [ period ] to take any of the following measures: a) definitively terminate all the rights of the Credit Agency and all

the obligations of the Client under this Contract. b) Claim and obtain from the Credit Agency: (i) repayment of all

the unspent amounts from the service charges and from the interest from the micro-credit, incomes from micro-credits or incomes from investments; (ii) payment of any obligation to the client, (iii) payment of the equivalent of all credits declared non recoverable and written off , above the negotiated limit; (iv) repayment of all expenditures made from the service charges and from the interest, from incomes from micro-credits or investments from the Credit Agency accounts that do not fall within the provisions of this contract;

c) Taking over the right to redeem the collateral, any fixed assets or material properties procured from the service charges and from the interest and taking ownership over them.

d) any other measures permitted under the Romanian legislation.

2.5.1.

None of the parts shall be responsible for failure to perform its obligations under this contract to the extent that such failure arises from events that are beyond the control of the respective party. Such events include, without being limited to, and when they are beyond the control of the Party in charge, the following: fire, flood, earthquake, riot, acts of aggression, war, lack of availability of approvals, authorizations, governmental licensing, and modifications or unfavorable interpretations of the laws, regulations and standards. The Party whose activity is hindered by such an event or events shall promptly notify the other Party in

2.6.

writing as soon as possible after the occurrence of such event, presenting the following: (i) a complete description of the occurred event or events; (ii) the reasons why such events are beyond the control of the affected Party and that prevents the respective Party to fulfil its obligations. Following the termination of the present contract the client may, immediately or in any moment, undertake any of the following activities: a) definitively terminate all the rights of the credit agency and all

the obligations of the client under this contract. b) Claim and obtain from the credit agency: (i) repayment of all

the unspent amounts from the service charges and from the interest from the micro-credit beneficiaries, incomes from micro-credits or incomes from investments; (ii) payment of any obligation to the client, (iii) payment of the equivalent of all micro-credits declared lost at the date of termination of this contract, above the negotiated limit; (iv) repayment of all expenditures made from the service charges and from the interest, that do not fall within the provisions of this contract;

c) Taking over the right to redeem the collateral, any fixed assets or material properties procured from the service charges and from the interest and taking ownership over them.

d) any other measures permitted under the Romanian legislation.

3.2.3 For a period of two years after the expiration of this Contract, the Credit Agency shall not engage, and shall cause their Personnel as well as their Subconsultants and their Personnel not to engage, in the activity of a purchaser (directly or indirectly) of the assets on which they advised the Client under this Contract, nor shall they engage in the activity of an adviser (directly or indirectly) of potential purchasers of such assets.

3.4 The risks and coverage shall be:

(i) Third Party motor vehicle

(ii) Third Party liability (iii) Employer’s liability and workers’ compensation

(iv) Professional liability (v) Loss or damage to equipment and property

3.5(c) The other actions are : [as negotiated ]

3.7 3.8. 3.9. 3.10.

Neither Party shall use these documents for purposes unrelated to this Contract without the prior written approval of the other Party. Track records and accountants The Credit Agency shall track records and accountants to reflect all accounting and financial activities, so as any other record that the Client might request Possibilities of remediation after the notification of the assignment failure. Following the event of assignment failure , the Client may, immediately or any time, to stop all the rights of the Credit Agency and Client obligations as a result of the present Contract, until the remediation by the Credit Agency. During any such period of stop proceedings the Credit Agency will continue to accomplish all the obligations according to the present Contract. Tasks and delegations; successors The Credit Agency shall not assign or empower or impose any obligation within this Contract without the prior written approval by the Client. The Client may assign, may empower or impose any obligations within this Contract. The legal successors of the parties will be bound to accept the terms of the present Contract.

5.1 Note: List here any assistance or exemptions that the Client may provide under Clause 5.1. If there is no such assistance or exemptions, state “not applicable.”

6.2(a) The amount in foreign currency or currencies is [insert amount].

6.2(b) The amount in local currency is [insert amount].

6.4 The accounts are:

for foreign currency: [insert account] for local currency: [insert account]

Payments shall be made according to the following schedule [ to be negotiated ]

6.5 Payment shall be made within [number] days of receipt of the

invoice and the relevant documents specified in Clause 6.4, and within [number] days in the case of the final payment. The interest rate is [rate].

7.2 Any dispute, controversy, or claim arising out of or relating to this contract, or the breach, termination, or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force.

IV. 4 Appendices [ to be inserted at contract signing ]

Appendix A—Description of the Services Give detailed descriptions of the Services to be provided, dates for completion of various tasks, place of performance for different tasks, specific tasks to be approved by Client, etc. Appendix B—Reporting Requirements List format, frequency, and contents of reports; persons to receive them; dates of submission; etc Appendix C—Key Personnel and Subconsultants List under: C-1 Titles [and names, if already available], detailed job descriptions

and minimum qualifications of foreign Personnel to be assigned to work in the Government’s country, and staff-months for each.

C-2 Same as C-1 for Key foreign Personnel to be assigned to work

outside the Government’s country. C-3 List of approved Subconsultants (if already available); same

information with respect to their Personnel as in C-1 or C-2. C-4 Same information as C-1 for Key local Personnel.

Appendix D—Breakdown of Contract Price in Foreign Currency List here the elements of cost used to arrive at the breakdown of the lump-sum price—foreign currency portion:

1. Monthly rates for Personnel (Key Personnel and other Personnel). 2. Reimbursable expenditures.

This appendix will exclusively be used for determining remuneration for additional services.

Appendix E—Breakdown of Contract Price in Local Currency List here the elements of cost used to arrive at the breakdown of the lump-sum price—local currency portion:

1. Monthly rates for Personnel (Key Personnel and other Personnel). 2. Reimbursable expenditures.

This appendix will exclusively be used for determining remuneration for additional services.

Appendix F—Services and Facilities Provided by the Client

Appendix G - Other Micro-Credit Funds Administered By The Credit Agency If at the date of signing of present contract the credit agency administer micro-credit funds, these funds will be listed List for each separate micro credit fund, as of the date of this Agreement: (i) the name of the micro-credit fund in administration; (ii) the primary source or sources of capital for the micro-credit fund in administration; (iii) the bank or banks used in the operation of the micro-credit fund in administration; (iv) the general geographic location of the projects financed from the micro-credit fund in administration; (v) the general target populations served by the micro-credit fund in administration; (vi) the average and maximum loan size of micro-credits extended from the micro-credit fund in administration; (vii) approximate value of the micro-credits that had not been reimbursed; (viii) approximate aggregate outstanding principal balance of all micro-credits extended from the micro-credit fund in administration; (ix) capital source available in the micro-credit fund in administration;

(x) approximate total operating costs of the micro-credit fund in question, and the primary source or sources of payment for such operating costs

Appendix H – Performance Standards

AREA OF OPERATION STANDARD TO BE ACHIEVED INSTITUTIONAL CAPACITY

LEGAL REGISTRATION Currently legally registered and able to be legally registered as a credit agency in accordance with GO 40/2000.

FINANCIAL MANAGEMENT SYSTEM

ACCOUNTING and INTERNAL CONTROL SYSTEM

Accounting system, which meets national and international standards and internal control system.

LOAN TRACKING SYSTEM Loan tracking system able to provide weekly situation on total loan portfolio.

FINANCIAL PROJECTION SYSTEM

System that provides reliable financial forecasting for the institution, especially cash flow.

GOVERNANCE Statutes which require an independent Board of Directors and give clear ethical and operational guidelines

HUMAN RESOURCES Staff necessary for prudent management of a financially viable MFI within in a defined organizational structure

CLIENTS IDENTIFY CLIENTS Clear commitment in finding viable beneficiaries with viable

business plans LOAN SIZE Respecting the average loan size of less than 10,000 US$ FINANCIAL PERFORMANCE

PORTFOLIO QUALITY Less than 5% portfolio at risk after 30 days Less than 3% write off (of average outstanding portfolio – annually) Less than 5% rescheduled loans within active portfolio

PROFITABILITY Cover all costs from non-grant sources (ie. Income from operations) including loan loss reserve.

CAPITAL REQUIREMENT Minimum 10% of equity compared to earning assets.

ANNEX No. 5A to micro-credit scheme

ANNEX No. 5B to micro-credit scheme

ANNEX No. 6

to micro-credit scheme

Credit Applications

Credit application formats should serve two main functions: • to be sufficiently comprehensive to allow the applicant to furnish all of the key

information necessary to convey the applicant's case, and • to facilitate evaluation of the project. A specimen application format follows which specifies minima key data that should be sought in any application. The content is oriented to a manufacturing project but it can be easily adapted for, e.g., a service industry.

Credit Application form - Key data 1. Proposal Summary • Expansion / start up • Brief description of project • Job targets (number of additional jobs to be created; number of new jobs to be

sustained) • Funding needs and sources • Legal status of enterprise 2. Product / Service • Description • Technical processes • Status of technology • Capacity utilization 3. Marketing, Sales and Distribution

• Marketing strategy • Main competitive advantages • Market size • Market trends • Projected market share • Pricing policy / quality / delivery systems • Main customers • Competition and possible reaction • Order book (firm orders, letters of interest, enquiries) • Sales build up projected

4. Production • Machinery and equipment • Technology status • Capacity utilization • Key suppliers / reliability / lead times / cost trends • Quality standards 5. Personnel • Key management • Lead promoters • Scope of skills available • Total employment / phasing • Adequacy of financial controls / reporting system • Costs 6. Premises • Location • Size / suitability • Tenure • Physical and environmental permissions • Costs 7. Financials • Projected Profit and Loss Accounts • Projected Cash Flow Statements • Projected Balance Sheets • Statement of forecasts' facts and assumptions • Summary of funding needs and sources 8. Security • Existing charges • Security offer options with realizable values

Evaluation methodology

The importance of evaluation is underlined by the causes of small enterprise failures as evidenced by a number of international research studies with common findings as follows : Factors that should be within control of entrepreneur • Lack of relevant business experience reflected in such weaknesses as the

absence of specific goals, crude or no strategic planning, poor judgement, lack of adequate controls over the business, inadequate marketing skills, reluctance to make difficult decisions.

• Management's lack of financial skills, absence of even basic knowledge of

record keeping and inability to plan cash flow • Under capitalization by underestimating funding needs or inadequate provision

of funding • Lack of succession planning where the key skilled person gets ill or dies

without a replacement being available External factors These include government regulation, adverse changes in the economic environment, increases in interest rates and a stiffer competitive environment. The external factors may be legislated for to some extent by pre start up sensitivity analyses. Those within the control of the entrepreneur should have been eliminated through professional pre approval appraisal. One systematic evaluation methodology has been widely adopted among Credit Unions and other micro credit providers under which six evaluation principles known as the '6 Cs of Credit' are applied.

The '6 Cs of Credit' are: 1.Character/Compliance. This relates to the integrity, honesty and responsibility of the borrower as immediately reflected in the cooperation extended by the applicant relating to information he/she is asked to proffer in support of the application. Key test factors to determine entrepreneurial characteristics are the degree of self confidence, perseverance, initiative and self reliance which the applicant demonstrates as well the extent to which the applicant is goal and results oriented. The past record of the applicant in relation to honoring previous borrowings is also a good indicator. In regard to micro credit, character is probably the most important attribute to consider and can be assessed by past behavior or by the guarantees which other individuals with credibility within the community are prepared to provide. 2.Capacity to repay (Cash flow). The enterprise, even after prudently discounting for unseen set backs, must demonstrate the capacity to generate sufficient cash flow to pay its debts. Consequently, it is crucial to review the expertise of the applicant and the acceptance of the product / service in the marketplace so as to evaluate whether the enterprise can reasonably attain sufficient sales revenue to service the credit and manage its operations. Should the level of income be insufficient, the credit should not be advanced. 3.Capability. This measures whether the applicant or other key persons in the enterprise possesses the managerial and technical skills which will underpin the business and, therefore, its ability to repay the credit. The lender must address any concerns with the applicant upon whom rests the responsibility for the success of the business. There must be a high level of confidence in the management team, its ability to manage, the caliber of its technical resources and its entrepreneurial qualities. 4.Capital Structure. This invariably involves an assessment as to whether the entrepreneur is able or willing to invest sufficient capital by way of cash or other assets into the business to warrant borrowing at the level required. If invested capital, i.e., owner's equity, is low, it is necessary to determine if any loan finance would be at excessive risk relative to the risk attached to the equity - even in the case of projects that are otherwise commercially attractive. 5.Collateral. This relates to available assets to cover the credit advanced, i.e., the assets that the borrower owns that can be pledged in the event of loan default. The amount of collateral sought will reflect policy in relation to the extent of the risk, which the lender will accept - the higher the risk, the higher the level of realizable collateral that will be sought. 6.Conditions. This relates to the economic environment within which the enterprise will operate. It is necessary to assess the present and to determine the future economic conditions in order to judge how this will affect the client's

business, matching the results to the level of risk being considered. Areas of focus include changes in purchasing power, inflation, interest and foreign exchange trends, tax changes and other government / political decisions. Market conditions must also be scrutinized N.B. An overall assessment based on these principles is important - not just that the project is strong under two or three headings. However, for micro loans, Character, Capacity to repay (Cash flow) and Capability tend to be the most important areas of focus.

Credit Decisions Best practice principles ordain that the final decision on a credit application should not rest exclusively with the appraiser(s). Normally, decisions are taken by a Credit Committee/Board consisting of senior Fund executives who have not had any connection with the evaluation process. (Non executives who may offer particular expertise may be co-opted as members of the Committee/Board. In some circumstances, particularly where there is a high volume of applications, decision making powers may be delegated to executives, usually within clearly defined monetary limits.). The final decision stage, in effect, obliges the evaluator(s) to justify the findings on the application and the evaluation report becomes a final credit decision submission. The format of the report/submission will vary depending on the policy priorities of the Fund. The following format is a reasonable example of the form that such a submission should take : • Name, age address of promoters • Promoters work experience, qualifications • Legal status of enterprise • Brief description of project • Annual output - units / value / utilization rate • Markets / sales :

Targets - units / value Main customers Competition Market description / trends Competitive advantages

• Materials / components Suppliers Reliability / delivery Alternatives Cost / price trends

• Employment Number / skills Availability Cost

Machinery and equipment List / justification Cost including installation Technical status / capacity Spares supplies / maintenance

•

• Management Structure / functions / expertise

Control systems • Financing

Needs - fixed assets / working capital / other (e.g. stand by credits) Sources - equity / credit sought / other Analysis - performance to date (if existing enterprise), forward projections

• Collateral Security offered / utility / realizable value

• Appraiser report SWOT analysis Credit recommendations Special conditions (e.g., strengthening of accounting function)

This example relates to a manufacturing project. It can be easily adapted for other types of enterprises. Likewise, provision can be made for special conditions - employment targets to include numbers of miners or their immediate family. It is also useful to include a project checklist to ensure that project policy guidelines and procedures are satisfied. This could take the following form :

Yes / No 1. Credit recommended within $5,000 limit 2. Percentage of credit funding does not exceed 60% 3. Application form completed and signed off 4. Interview(s) held with promoter(s) 5. Sensitivity analysis on market / sales 6. Internal consistency - employment / output / sales 7. Profit and Loss A/c projection(s) furnished 8. Cashflow projection(s) furnished 9. Balance Sheet projection(s) furnished 10. Peak borrowing in cashflow at … is covered 11. Promoter(s) equity agreed and confirmed 12. Collateral realisable 13. Collateral valued at …. v credit of …… 14. Management capacity acceptable 15. No adverse finding in personal references 16. Means of providing management accounts 17. Miners/family members will comprise …% of labourforce

ANNEX No. 7

to micro-credit scheme

Specimen format of a Credit Agreement is as follows:

AGREEMENT DATED ……….200X BETWEEN

a) Insert name and address of company ('the Client'), and b) Insert name and address of Lender WHEREAS (A) DEFINITIONS (1) In this Agreement unless the context requires otherwise: - (i) The expressions 'the Client' and 'the Lender' include their respective successors in title; (ii) The masculine shall include the feminine and the singular shall include the plural and vice versa and, where there are two or more people included in the expression 'the Client ', obligations entered into by the Client shall be deemed to be made by them jointly and individually; (iii) 'the Credit' means the credit referred to in Recital (C) below including any accrued interest; (B) PARTICULARS OF THE CLIENT The Client proposes to carry/carries on the business of (insert description), hereinafter 'The Business' (C) THE CREDIT FACILITY The Lender has agreed, at the request of the Client, to make a credit to the Client of (state amount) ('the Credit') with accrued interest (state interest) for the benefit of the Business. IT IS NOW AGREED AND DECLARED by the Client and the Lender as follows

EXTENT AND AVAILABILITY OF THE LOAN 1. The Lender shall advance the Credit to the Client and the Client shall repay the Credit together with interest on the outstanding balance of the Credit from time to time in the way and at the rate specified in the First Schedule to this Agreement LATE PAYMENT OF INTEREST 2. If any interest payable by the Client remains unpaid for 28 days after its due date for payment, then such interest shall be added to and form part of the Credit (or such part of the Credit that remains unpaid) and shall subsequently be subject to interest and all other terms of this Agreement. EVENTS GIVING RISE TO IMMEDIATE REPAYMENT 3. The Credit shall become immediately repayable without demand by the Lender in any of the following events: - 3.1 If the Client is in default for ___ days in payment of an installment of, or any interest, on the Credit; 3.2 If the Client defaults in observing or performing any of the obligations contained in or implied by this Agreement; 3.3 If a Receiver shall be appointed over the Client 's assets or any part of such assets; 3.4 If a Judgement or Order of any Court is made against the Client for payment of any sum of money and is not complied with within ___ days; 3.5 If execution or distress is levied upon or against any of the possessions or property of the Client and is not paid within ___ days; 3.6 If the Client ceases or threatens to cease to carry on all or, in the opinion of the Lender, a material part of the Business; 3.7 If the Client shall, without the prior written consent of the Lender, create or attempt to create any mortgage or charge or other form of security in any way upon the property or assets or any part of the property or assets of the Client except as may arise in the normal course of carrying on the Business of the Client; 3.8 If the Business is relocated outside the region in which the Lender’s remit applies.

CONTINUING OBLIGATIONS OF THE CLIENT 4. Until the whole of the Credit has been repaid to the Lender together with all interest (and due cost and expenses) accrued up to the date of repayment, the Client undertakes with the Lender in the terms set out in the Second Schedule to this Agreement. WARRANTIES BY THE CLIENT 5. The Client now warrants to the Lender as more particularly set out in the Third Schedule to this Agreement Jointly signed and sealed

THE FIRST SCHEDULE

INTEREST AND REPAYMENT TERMS Repayment This Credit will be repayable over (insert) months together with interest on the outstanding balance from time to time as set out below: By ___ monthly repayments of ___, commencing on (date) of the month following draw down of the Credit. Interest The Credit is currently subject to interest at the rate of ___ per annum.

THE SECOND SCHEDULE

UNDERTAKINGS OF THE CLIENT PURSUANT TO CLAUSE 4 1. To use the proceeds of the Credit solely for the requirements of the Business 2. To carry on and continue the Business and not change the nature or the place of the Business 3. To ensure that no action is taken to sell or transfer the Business, its trade, shares or assets.

4. To provide the Lender or to any agency nominated by the Lender a copy of the Balance Sheet and Profit and Loss Account showing the true position of the affairs of the company (certified by the auditors of the company) as soon as may be practicable and, in any event, not later than 4 months after the end of the annual accounting period in every year and a copy of such other Accounts as may be required by the Lender and also from time to time such other information relating to the Business as the Lender may reasonably require. 5. To allow the Lender and person or persons nominated by the Lender to investigate the affairs of the Client at any time and to allow reasonable access to all documents and premises as the Lender considers relevant for such investigation. 6. To report to the Lender immediately any financial or other circumstance which might reasonably be expected to prejudice the repayment of the Credit or interest on the Credit. 7. To keep all equipment and machinery used in the Business in good repair and condition and insured to its full value against loss or damage by theft, fire, storm, explosion and impact and such other risks as the Lender may advise the Client in writing. 8. To comply with the requirements of all employee, safety and environment control legislation 9. To attend such meetings and provide such information as required by the Lender to enable the Lender to monitor the progress of the Client 10. To provide security / guarantees for the Credit by way of (specify) 11. To ensure that the company will not without the Lender 's prior approval in writing a) conduct any business other than through itself or through a wholly owned subsidiary b) pay emoluments to directors other than at a level agreed with the Lender c) create any mortgages, charges or other encumbrances over the company's assets d) raise any further borrowings e) alter its accounting period f) incur significant capital expenditure other than that provided for in the credit application g) appoint additional directors or remove existing directors

THE THIRD SCHEDULE

WARRANTIES OF THE CLIENT PURSUANT TO CLAUSE 5

1. That the Client satisfies the Lender that the company is properly and legally formed 2. That the Client certifies the amount of shareholdings held by each investor in the company 3. That there is no litigation or other proceedings outstanding or pending or threatened against the Client, which might materially affect the agreement by the Lender to make the Credit 4. There are no long-term contracts or agreements other than normal trading agreements that would affect the Business 5. That the Client will duly perform and observe all obligations of the Client set out in this Agreement 6. That the Client will devote substantially the whole of his/her time and attention to the Business 7. That the Client is not aware of any events that would materially and adversely affect the future of the company 8. The Client shall furnish to regional offices all the necessarily information for monitoring of the micro-credit scheme, upon their request.

ANNEX No. 8

to micro-credit scheme

The Mechanism for reporting, evaluation, supervision and control of CA’s activities

Internal Controls Principal operational control areas are

Function Object

Recording / tracking credit enquiries Potential project pool Gauge processing standard

Recording / processing applications

Appreciation of proposed projects Gauge Fund financing / future cash flow

Applications approved

Deals closure Basis of credit contracts Receipt of collateral Measure of program success

Tracking of client performance Repayments record Arrears actions

Operational funding Corporate efficiency control Profit measurement Reserve building capacity

All of these functions are amenable to manual administration. Customized software enhances efficiency and is particularly effective in timely flagging of credit delinquency.

Problem Credits Two primary corporate factors are crucial

• The image and philosophy of the Fund which ordains that staff and clients accept that arrears will not be tolerated,

and • An Information and Internal Management Control System which flags arrears

immediately they occur

Contact Contact with the delinquent client may take different forms

• Past due notices - these can be computer or manually generated once loan default exceeds one cycle

• Letters - these are dispatched when the customer cannot otherwise be contacted

• Telephone calls - these may be the most cost effective method • Personal visits - these are the most costly but also the most effective.

Process

• Determine the reasons for the default • Record any new information. Obtain financial updates • Jointly explore means of resolution • Ensure that the client both stays in touch and take agreed action

Possible actions

• Return of stock, calling a sales of surplus finished goods, pressure on debtors • Sale of surplus equipment • Cost savings • Introduction of new low cost capital • Sale of shareholding • Takeover • Reschedule loan period / terms

At all times, it is necessary to ensure that the collateral is valid and not allowed to deteriorate so that it can be relied on, if it is necessary, to make the maximum possible recovery if the collateral is realized.

Form of Quarterly Summary Micro-credit Fund Activity Report RATIO ANALYSIS

Name of Organization: Month and Year:

Current Quarter

Cumulative for Year

Target

PROFITABILITY RATIOS Income Financial costs + Loan loss provision+Op.costs Income Total Loan Income Average outstanding portfolio* Net income from operations Average total assets* Financial income Average Earning Assets** Cost of funds Average Earning Assets** Loan loss provision Average Earning Assets** Operational Costs Average Earning Assets** Net income from operations Average Earning Assets** Net Excess/Deficit Average Earning Assets** FINANCIAL STRUCTURE Outstanding portfolio Total Assets Cash + Bank Accounts Total Assets Current Assets Current Liabilities Excess(Deficit) of Income over Expenses Total Assets Total Equity Total Assets PORTFOLIO RATIOS Outstanding balance of loans in Arrears Gross outstanding portfolio Amount of loan written off Average outstanding portfolio Loan loss reserve Gross outstanding portfolio OPERATING EFFICIENCY RATIOS Operating Costs Total amount disbursed Operating Costs Number of loans disbursed Operating Costs Gross portfolio Total number of active clients Number of loan officers Total gross outstanding portfolio Number of loan officers

*Average outstanding = Opening balance for 1st Month + Ending balance each month in period Divided by number of month in period plus 1 ** Earning Assets = Cash + Bank Accounts +Investments+Outstanding portfolio

Balance Sheet Organization Name: Month and Year:

Cumulative for Year ASSETS Cash AC Portfolio Bank Account Other Bank Accounts Interest-bearing Deposits Loans Outstanding AC Loans Outstanding: Current AC Loans Outstanding: Non-Performing AC Loans Outstanding: Rescheduled

Total AC Loans Outstanding Other Loans Outstanding: Current Other Loans Outstanding: Non-Performing Other Loans Outstanding: Rescheduled

Total Other Loans Outstanding Total Loans Outstanding: AC and Other

(AC Loan Loss Reserve) (Other Loan Loss Reserve)

(Total Loan Loss Reserve: AC and Other) Net AC Loans Outstanding Net Other Loans Outstanding

Net Loans Outstanding (AC and Other) Accounts Receivable Other Current Assets TOTAL CURRENT ASSETS Long-term investments Property and Equipment (Accumulated Depreciation) Net Property and Equipment TOTAL LONG-TERM ASSETS TOTAL ASSETS

LIABILITIES AND NET WORTH LIABILITIES AC Loan Short-term debt Client Savings: passbook Client Savings: time deposits Deferred Revenue AC Payable Cost of Capital Other Payables TOTAL CURRENT LIABILITIES Long-term debt Other Long Term Liabilities TOTAL LONG TERM LIABILITIES TOTAL LIABILITIES CAPTIAL Grant Capital Shareholder Capital/Paid In Capital Excess (Deficit) of Income over Expenses (prior years) Excess (Deficit) of Income over Expenses (current year) TOTAL CAPITAL TOTAL LIABILITIES AND CAPITAL

Form of Monthly Summary Micro-credit Fund Activity Report

Monthly Report (CA FUND) – Financial __________________________ Month: ________ a1 a2 a3 a4 = a1-

a. Micro-credit Fund - + =

Cumulative Transferred Deposited Cumulative Previous This Report b1 b2 b3 B4 b5 = b1-

b. Loan unpaid Portfolio

- + - =

Outstanding unpaid Balance

New Write-Offs

New Loans Repayments Principal

Outstanding Balance Previous Principal This Report

c c. Interest, commissions, fees from loans

d d. Recoveries of Previously Written Off Loans

e e. Other Credits (explain)

f f. Interest Transferred to revolving fund

g g. Other Debits (explain)

h1 h2 = b3 h3 h4 = h1-

h. Bank Balance in hard currency

- + =

Previous Total Debits Trances Current (to be reconciled with bank i1 i2=b3 i3 i4 = i1-i2+i3

i. Bank Balance At treasury + - +

Previous Balance

Credit paid in ROL

Trances in ROL

Current Balance

j1 j2 j3 j4 j5 = j4/a4j. Write-off loans + - =

Net write-off loans

New write-off loans

Cover Net write-off loans

Previous reporting

Principal only

Current report

Monthly Report (CA FUND) – Portfolio Month: a b c d e No. of Outstanding % Portfolio Reserves Required

Loans loan amount at Risk policy (%) reserves (USD)

1 Current Loans

2 Delinquent Loans

3 1 - 30 days 20%

4 31 - 60 days 60%

5 61 - 90 days 80%

6 over 90 days 100%

7 I. Sub-Total Delinquent Loans

8 TOTAL

Monthly Report (CA – FUND) – Breakdown by Borrowers Month:

1 2 3 4

ITEM Current Month Cumulative Total No. Amount No. Amount

a. Loans disbursed b. Average loan size* c. Loans made to men d. Loans made to women e. Loans made to lay off people f. Loans made to unemployed people g. Loans made to lay off people’s families h. Loans made to other categories h. Loans made to resident population f. Loans made to nonresident population g. Loans made to resident population i. Loans for agriculture j. Loans for services k. Loans for retail or wholesale l. Loans for small scale production m. Loans up to 1,500.00 USD n. Loans 1,501.00 - 3,000.00 USD o. Loans 3,001.00 - 5,000.00 USD p. Loans 5,001.00 - 7,000.00 USD q. Loans 7,001.00 - 10,000.00 USD r. Number of jobs created s. Number of jobs sustained t. Income generating activities u. New businesses v. Existing businesses