LAC-IEE-17-39

ENVIRONMENTALTHRESHOLD DECISION

ActivityLocation: Haiti

ActivityTitle: $9.5 million Loan Portfolio Guarantee (LPG) to SOFIHDES to support lending to small and medium-sized enterprises (SMEs) in various sectors, including construction and agriculture.

ActivityNumber: 521-DCA-12-013

Life-of-ActivityFunding: $1,859,501

Life-of-Activity: September 2012 – September 2019

IEEPreparedby: Marie-Renee Vertus, DCA Activity Manager

Reference Env. ThresholdDecisions: LAC-IEE-13-17

RecommendedThresholdDecision: Negative with Conditions

BureauThresholdDecision: Concur

  1. Purpose

The purpose of this Environmental Threshold Decision (ETD), in accordance with Title 22, Code of Federal Regulations, Part 216 (22 CFR 216), is to approve the Threshold Decision and concur on the attached Initial Environmental Examination (IEE) which provides a preliminary review of the reasonable foreseeable effects on the environment, define risks and mitigating measures for this activity. This is not a new activity;the Mission is amendinga condition of this Loan Portfolio Guarantee (LPG) agreementwhich was covered initially by the Initial Environmental Examination (IEE) for the Post Earthquake Program (LAC-IEE-13-17). The maturity date of the agreement with SOFIHDES is September 2019; however, there was a condition that limited putting loans under guarantee coverage after September 30, 2016, to support the disbursement of longer-term loans. This IEE amendment reflects theextension of the Final Date for Placing Loans Under coverage to September 30,2018.This ETD amendsthe earlier IEE and provides for the new stand-alone IEE for the continuing implementation of this $9.5 million LPG agreement.

  1. Background

The $9.5 million LPG agreement to SOFIHDES is implemented in support of the Intermediate Result 3 of the Economic Security Activity Approval Document: “Investment and Access to Capital Increased” that was developed with the support of USAID/Washington and the Regional Legal Advisor.

SOFIHDES is a private development bank that has been providing capital to small and medium-sized enterprises (SMEs) in Haiti since 1983. SOFIHDES is a long-standing partner of the DCA guarantee Program.

This LPG agreement that is being amended was designed to provide longer-term loans to SMEs to accommodate their cash flow, particularly the ones working in the construction and agribusiness sectors. The agreement utilization was planned as follows: 60% for the construction value chain, 25% for SMEs in various sectors and 15% for agribusiness.

  1. Summaryof EnvironmentalDetermination and Conditions

Pursuantto 22 CFR 216.3(a)(2)(iii), a Negative Determination with Conditions was issued for this SOFIHDES LPG to support lending to SMEs for their expansion. The proposed activity has the potential to have a negative impact on the environment; therefore, the activity falls under a Negative Determination with Conditions.

The following conditions and the other requirements and conditions of the attached IEE shall be implemented:

  • USAID/Haiti’s ActivityManagerwillreview thelegalagreementwith theSOFIHDES,regardingnon-admissible loans or loansthatmayhave adverse impacton the environment(thatare subject to USAID approval) to make sure that SOFIHDES understands the loanenvironmental criteria.
  • Aspart ofthe regular projectmonitoring, theActivityManagerand/or theMissionEnvironmentalOfficer will review a sample ofloanfilesto help the institution make sure that its loans satisfy the criteria for a qualifying loan under Section 2.02.
  • USAID/Haitihas provided and will continue to providetrainingtopartner institution’sstaffon environmental managementand onloanselectioncriteria; USAID/Haiti will review SOFIHDES procedures for addressing environmental issues and provide support to SOFIHDES on this issue if needed.

Each Activity Manager orCOR/AOR is responsible for makingsure that these activities are implemented in an environmentally sound manner(ADS204.3.4).

  1. Amendments

AmendmentstoInitialEnvironmental Examinations(IEE)shallbesubmittedforLACBureauEnvironmentalOfficer(BEO)approvalforanyactivitiesnotspecificallycoveredintheIEE,whichinclude:

  • FundinglevelincreasebeyondETDamount,
  • TimeperiodextensionbeyondETDdates(evenfornocostextension),or
  • Achangeinthescopeofwork,suchastheuseofpesticidesoractivitiessubjecttoForeignAssistanceActsections118and119(e.g.procurementofloggingequipment),amongothers.

Signed

______Date ______

GeetaUhl

Acting Bureau Environmental Officer

Bureau for Latin America & the Caribbean

Copyto:Veena Reddy, AMD

Rhonda Shire, ADMD

Michael Wyzan, EGAD C

Marie Renee Vertus, AM

Jennifer Graetz, PCPS C

Abdel Abellard, MEO

Rob Clausen, Regional Environmental Advisor, USAID/DR

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INITIAL ENVIRONMENTAL EXAMINATION

Activity Location:Haiti

Activity Title:$9.5 million Loan Portfolio Guarantee (LPG) with SOFIHDES to support lending to small and medium-sized enterprises (SMEs) in various sectors, including construction and agriculture.

Activity Number:521-DCA-12-013

Life of Project Funding: $1,859,501

Life of Activity: September 2012-September 2019

IEE Prepared by:Marie-Renee Vertus, DCA Activity Manager

Date prepared:December2016

ReferenceEnv.ThresholdDecision:LAC-IEE-13-17

Recommended Threshold Decision:Negative Determination with Conditions.

  1. Background and Activity Description

The $9.5 million LPG with SOFIHDES implemented in support of the Intermediate Result 3 of the Economic Security Activity Approval Document (AAD): “Investment and Access to Capital Increased” that was developed with the support of USAID/Washington and the Regional Legal Advisor.

SOFIHDES is a private development bank that has been providing capital to small and medium-sized enterprises (SMEs) in Haiti since 1983. SOFIHDES is a long-standing partner of the DCA guarantee Program.

This IEE reflects the extension of the Loan Portfolio Guarantee agreement that is being amended to provide longer-term loans to accommodate SMEs’ cash flow, particularly in the construction and agribusiness sectors. The agreement utilization was planned as follows: 60% for the construction value chain, 25% for SMEs in various sectors and 15% for agribusiness.

1.1Purpose and Scope of the IEE

The purpose of this Environmental Threshold Decision (ETD), in accordance with Title 22, Code of Federal Regulations, Part 216 (22 CFR 216), is to approve the Threshold Decision and concur on the attached Initial Environmental Examination (IEE) which provides a preliminary review of the reasonable foreseeable effects on the environment, define risks and mitigating measures for this activity. This is not a new activity; the Mission is amending a condition of this Loan Portfolio Guarantee (LPG) agreement which was covered initially by the Initial Environmental Examination (IEE) LAC-IEE-13-17. The maturity date of this agreement with SOFIHDES is September 2019; however, there was a condition that limited putting loans under guarantee coverage after September 30, 2016, to support the disbursement of longer-term loans. This IEE amendment reflects the extension of the Final Date for Placing Loans Under coverage to September 30, 2018. This ETD amends the earlier IEE and provides for a new stand-alone IEE for the continuing implementation of this $9.5 million LPG agreement.

1.2 Background

In order to further support access to credit for underserved SMEs,USAID/Haiti hadsignedin September 2012, this$9,531,015,7year LPG to encourage lending to SMEs particularly in the construction and agribusiness sectors.

Type of Guarantee Facility:Loan Portfolio GuaranteeAgreement(LPG)

Aggregate Principal Amount:US$ 9,531,014

Guarantee Ceiling:US$ 4,765,507

Term of Guarantee:7 years (September 2019)

Currency of Guarantee:Haitian Gourdes

SOFIHDES has advised that for the past year and a half, it had difficulties utilizing the guarantee agreement as planned because of an economic slowdown particularly, in the construction sector. Not only did the Haitian Government significantly reduced investments in public works but it also owed over a year of payments to many contractors. Therefore, many SOFIHDES clients could not obtain new construction contracts and faced delays in receiving payments for work done. Nevertheless, SOFIHDES is confident that with the new government in place,demand for new credit will resume before the end of the 2017 fiscal year.

1.3 Description of Activities

Sofihdes-Construction, Agriculture and SME agreement will increase access to credit for specific USG-supported value chains such as construction and agriculture and for Haitian small and medium-sized enterprises (SMEs) in various sectors. The agreement will be allocated as follows: 60% for the construction value chain, 25% for SMEs in various sectors and 15% for agribusiness.

1.4Locations Affected:

SOFIDES activities will be implemented in U.S. Government supported development corridorsof Plainedu Cul-de-Sac, Saint-Marc and Cap-Haitian.

1.5Financial Institution Policies, Procedures or Regulations:

Financial institutions in Haiti are becoming more aware of environmental guidelines and a few have reported working on environmental review procedures. SOFIHDES has participatedin an environmental awareness sessionprovided by theUSAID/Haiti Mission. A new sessionis planned for thethird quarter of FY2017 and all the DCA current partners will be invited to attend.

2.Evaluation of Environmental Impact Potential:

SOFIHDES finances diverse sectors, including the construction where developing housing units may have impacts on the social and biophysical environment. Even though SOFIHDES is not significantly involved in financing residential housing construction, it is important that it understands the USAID and the Government of Haiti environmental guidelines and procedures and that the Mission help strengthen its internal environmental policies and procedures as needed.

3.Recommended Threshold Decisions and Mitigation Actions:

Pursuantto 22 CFR 216.3(a)(2)(iii), a Negative Determination with Conditionsis issued for the SOFIHDES LPG to support lending to SMEs. The proposed activity has the potential to have a negative impact on the environment; therefore, the activity falls under a Negative Determination with Conditions.

The Mission recommends these conditions:

  • USAID/Haiti’s ActivityManagerwillreview the legal agreementwith SOFIHDES,regardingnon-admissible loans or loansthatmayhave adverse impacton the environment(thatare subject to USAID approval) to make sure that SOFIHDES understands the loan environmental criteria.
  • Aspart of the regular projectmonitoring, theActivityManagerand/or theMissionEnvironmentalOfficer will review a sample of loanfilesto help the institution make sure that its loans satisfy the criteria for a qualifying loan under Section 2.02.
  • USAID/Haitihas provided and will continue to providetrainingtoinstitutions partner staffon environmentalmanagement and onloanselectioncriteria; USAID/Haiti will review SOFIHDES procedures for addressing environmental issues and provide support to if needed.

Each Activity Manager orCOR/AOR is responsible for makingsure that these activities are implemented in an environmentally sound manner(ADS204.3.4).

Environmentally and Socially Responsible construction contracting is strongly encouraged to best assure implementation of appropriate mitigation measures in any construction activity.Mitigation measures may be particularly helpful for increasing adaptive capacity, or for decreasing sensitivity or exposure to potential climate changes:

  • Ensure that waste/litter baskets are located on-site and that the waste generated on-site feeds into the municipal solid waste management system
  • Concentrate noisiest types of work into as short a period as possible, and during least disruptive times of the day. Take measures to keep dust to a minimum
  • Minimize disturbance of native flora during construction
  • Minimize impact to ecosystem services that may provide an important buffer to climate change impacts, especially in areas where those buffers will most be needed
  • Design facility and apply construction practices that minimize risk, e.g., use hay bales to control erosion during construction. Pay particular attention to potential erosion and redirection of water flows during design and construction
  • If site contamination is suspected, obtain a professional assessment, including remediation recommendations and host country compliance requirements. Remediate contamination before beginning construction.
  • Design for energy efficiency in building design and equipment selection
  • Follow host country occupational safety and health standards for construction
  • Set protocols for vehicle maintenance such as requiring that repairs and fueling occur elsewhere or over impervious surface such as plastic sheeting. Prevent dumping of hazardous materials.
  • Remove or bury all abandoned construction materials and rubble. Fill in and close all latrines and septic systems

3.2Monitoring and Evaluation:

Monitoring and compliance measures are necessary to ensure that no adverse environmental impacts occur during or after the activities are implemented. USAID/ Haiti’s Office for Economic Growth and Agriculture Development (EGAD) will monitor the activities conducted under this DCA to ensure that they are effectively conducted according to agreed procedures. This will be achieved through review of loan documents and periodic field visits to clients.

3.3Additional Determinations:

If any other actions not included above are subsequently proposed that have a potential negative impact on the environment, as determined by the MEO, then an amendment to this IEE will be prepared.

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