Economics & Development

Financial Sector Strengthening and Modernization Project for West Bank and Gaza has the development objective to increase access to finance for micro, small, and medium enterprises (MSMEs). Component 1: MSME Finance supports additional sound lending to MSMEs and sustains the viability and operational capacity of financial institutions (FIs), especially microfinance institutions (MFIs), in the West Bank through risk sharing and operational support, with a focus on underserved segments including women-led enterprises. Sub-components include Sub-component 1.1: De-risking credit to MSMEs by offering partial credit guarantees (PCG) on eligible loans extended by participating financial institutions, initially emphasizing MFIs to swiftly unlock credit to vulnerable micro and small enterprises; guarantees may provide up to seventy-five percent coverage using either portfolio or loan-by-loan modalities, include swift claim settlement after good-faith collection efforts, and apply transparent, consistent pricing; eligibility criteria will ensure soundness in credit origination and performance and adherence to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) standards, and a dedicated window may also de-risk bank lending to solid MFIs to address liquidity constraints; Sub-component 1.2: Supporting MFI operations by providing time-bound operational grants to otherwise sound MFIs to sustain core functions, staffing, outreach, and digital service delivery during economic distress, based on pre-assessments that confirm pre-crisis health, ongoing viability, demonstrable need, and adherence to principles that avoid market distortion and equitably allocate support. Component 2: Project Management, Monitoring and Evaluation, Capacity Building, and Technical Assistance finances a Project Implementation Unit at the European Palestinian Credit Guarantee Foundation (EPCGF) to deliver project and grant management, fiduciary functions, monitoring and evaluation, audits, and consulting services; it also provides technical assistance to EPCGF and participating institutions to strengthen credit risk management, portfolio monitoring, reporting, operational systems, and compliance, and supports Environmental and Social Framework implementation through Environmental and Social Management System enhancement, stakeholder engagement, grievance redress mechanisms, and associated monitoring and reporting. Component 3: Contingent Emergency Response Component (CERC) enables rapid support for an eligible emergency crisis when required.