Building Beirut Businesses Back & Better (B5) Fund - Additional Financing

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The Building Beirut Businesses Back and Better (B5) Fund is a US$25 million grant that aims to support the recovery of Micro and Small Enterprises (MSEs) damaged by the Port of Beirut (PoB) explosion of August 4, 2020, and sustain the operations of Microfinance Institutions (MFIs). It is financed by the Lebanon Financing Facility (LFF), a multi-donor trust fund established in December 2020 and managed by the World Bank to pool and coordinate grant resources from donors in support of the immediate socio-economic recovery of vulnerable people and businesses impacted by the explosion in August 2020. Initially, the B5 was designed with an overall target allocation of US$70 million. Given the limited financing available under the LFF initially and due to the urgency to start disbursing, the project adopted a phased implementation approach, prioritizing a subset of activities, focusing on supporting micro and small enterprises and part of the operational expenses of eligible MFIs.The project is seeking approval for a US$3 million additional financing, to include new activities that aim to continue supporting selected MFIs and contribute to their path to sustainability, which will brings total allocation for the Parent and AF project to US$28 million.The project has 3 components. COMPONENT 1: GRANTS TO MICRO AND SMALL ENTERPRISES (Allocation: US$ 18.50 MILLION)This component provides grants to viable Miro and Small Enterprises (MSEs) affected by the explosion. Grants will be provided following defined selection and prioritization criteria to ensure support reaches the most vulnerable. Initially it was expected that 4,300 MSEs will benefit from the B5 recovery grants, of which 30 percent will be women-led businesses, however the target is reduced to 3600 MSEs, of which 30% will be women-led businesses based on outcomes of the Mid Term review.COMPONENT 2: GRANTS TO MICRO FINANCE INSTITUTIONS (Initial Allocation: US$ 5.00 MILLION – Revised Allocation under AF - US$ 7.70 MILLION)Subcomponent 2.1: Grants to MFIs for OPEX US$ 4.9 MILLION: Initially Component 2 was only financing once activity, provision of grants to select MFIs to ensure their short-term sustainability. The grants finance part of MFIs operational expenses over a period of 18 months. Eligible MFIs are selected based on a specialized third-party assessment, according to a methodology approved by the World Bank. 3 MFIs were found eligible to benefit from the grants support. Two new activities or sub-components are added in the AF.Subcomponent 2.2: Grants to MFIs for on-lending US$ 2.65 MILLION: the subcomponent will finance grants to MFIs for on-lending purposes. The additional funds will allow three selected MFIs (Al Majmoua, Vitas, and Ibdaa) to deploy new financing products for micro entrepreneurs with a focus on women and youth, based on market needs and demand. The additional funds will allow the deployment of around 2,650 new USD loans in 1 year with an average of US$1,000. It is expected that 30% of micro borrowers to be women owned or led businesses.Subcomponent 2.3: Capacity building for select MFI US$ 0.05 MILLION: the subcomponent will finance Technical Assistance (TA) to one MFI, AEP, to help strengthen their strategy, controls, and business plan.COMPONENT 3: PROJECT MANAGEMENT AND GENDER SUPPORT (Initial allocation: US$ 1.50 MILLION, Revised Allocation under AF – US$ 1.8 Million). This component finances project management costs over the project life. The recipient and Project Implementing Agency (PIA) is Kafalat S.A.L. Costs of the PIA includes management and consultancy fees, operations and administrative costs for the management and supervision of the project activities. It also finances capacity building support to women led businesses (tailored crisis-management, effective financial management and digital sales trainings). The additional funds allocated under the AF will allow the PIA to manage the new activity until the revised closing date.