LOAN NUMBER 2649-BAN (SF)

LOAN AGREEMENT (Special Operations)

(Second Crop Diversification Project)

between

PEOPLE'S REPUBLIC OF BANGLADESH

and

ASIAN DEVELOPMENT BANK

DATED 13 OCTOBER 2010

LAS:BAN 40534

LOAN AGREEMENT (Special Operations)

LOAN AGREEMENT dated 13 October 2010 between PEOPLE'S REPUBLIC OF BANGLADESH (“the Borrower”) and ASIAN DEVELOPMENT BANK (“ADB”).

WHEREAS (A) the Borrower has applied to ADB for a loan for the purposes of the

Project described in Schedule 1 to this Loan Agreement; (B) ADB has agreed to make a loan to the Borrower from ADB's Special

Funds resources upon the terms and conditions set forth herein and in the Project Agreement of even date herewith among ADB, Bangladesh Bank, BASIC Bank and Eastern Bank; and

(C) Bangladesh Bank, together with BASIC Bank and Eastern Bank, shall

carry out Component 3 of the Project, and for this purpose the Borrower shall make available to Bangladesh Bank a portion of the proceeds of the Loan provided for herein upon terms and conditions satisfactory to ADB.

NOW THEREFORE the parties agree as follows:

ARTICLE I

Loan Regulations; Definitions

Section 1.01. All provisions of the Special Operations Loan Regulations of ADB, dated 1 January 2006 (the “Loan Regulations”), are hereby made applicable to this Loan Agreement with the same force and effect as if they were fully set forth herein.

Section 1.02. Wherever used in this Loan Agreement, the several

terms defined in the Loan Regulations have the respective meanings therein set forth unless modified herein or the context otherwise requires. Additional terms used in this Loan Agreement have the following meanings:

(a) "Bangladesh Bank" means the central bank of the Borrower established pursuant to the Bangladesh Bank Order, 1972, and any successor thereto acceptable to ADB;

(b) “BASIC Bank” means Bangladesh Small Industries and Commerce Bank Limited, a state-owned bank operating under the Borrower’s Banking Companies Act, 1991, as amended from time to time, and any successor thereto acceptable to ADB;

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(c) "classified loan" means a loan held by a Wholesale Bank or Participating MFI which is classified by any such institution as non-performing;

(d) "Community Facilitators" means individuals resident in the upazila they are intended to serve, to be engaged by the PMU to support farmer community participation in the Project and awareness of advanced agricultural practices;

(e) "Component" means each and any of the Project components

described in Schedule 1 to this Loan Agreement; (f) "Consulting Guidelines" means the Guidelines on the Use of

Consultants by Asian Development Bank and its Borrowers (2010, as amended from time to time);

(g) "Consulting Services" means the services to be financed out of the

proceeds of the Loan as referred to in paragraph 3 of Schedule 1 to this Loan Agreement, but excluding any services provided in relation to Goods and Works;

(h) "Credit Line Implementation Summary" means the linked document 12

of the Report and Recommendation of the President for the Project relating to the implementation of the Crop Diversification Credit Line;

(i) "Crop Diversification Credit Line" means the credit facility in the

amount of SDR17,296,000 provided under Component 3 of the Project, as described in paragraphs 16-30 of Schedule 5 to this Loan Agreement;

(j) "Crop Diversification Credit Line Amount" means the amount in Taka

equivalent to SDR17,296,000 converted from time to time upon disbursement;

(k) "DAE" means the Department of Agricultural Extension within MOA, and any successor thereto acceptable to ADB;

(l) "EARP" means the environmental assessment and review procedures

prepared for the Project and approved by the Borrower on 1 February 2010; (m) "Eastern Bank" means Eastern Bank Limited, a private commercial

bank operating under the Borrower’s Banking Companies Act, 1991, as amended from time to time, and any successor thereto acceptable to ADB;

(n) “ERD” means the Economic Relations Division of MOF, and any

successor thereto; (o) "GAP" means the gender action plan for the Project agreed between

the Borrower and ADB; (p) “Goods” means equipment and materials to be financed out of the

proceeds of the Loan; and including related services such as transportation, insurance, installation, commissioning, training, and initial maintenance, but excluding Consulting Services;

(q) "HVC" means high value crops that yield higher returns per hectare

than dry season high yielding rice and may include potato, hybrid maize, legumes, spices,

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fruit crops, floriculture crops, and vegetable crops, as may be selected according to Project guidelines on an upazila-to-upazila basis;

(r) "IEE" means the initial environmental examination prepared for the

Project and approved by the Borrower on 1 February 2010; (s) "IPDF" means the Indigenous Peoples Development Framework

prepared for the Project and approved by the Borrower on 14 January 2010; (t) "MFI" means a micro-finance institution licensed by the MRA to

provide credit services as a microfinance institution; (u) "MFI Selection Committee" means the five-member committee to be

formed at the outset of implementation of the Project as described in paragraph 18 of Schedule 5 to this Loan Agreement;

(v) "MFI Selection Criteria" means the eligibility criteria for selection of

MFIs to participate in the Project set out in paragraph 19 of Schedule 5 to this Loan Agreement;

(w) "MOA" means the Ministry of Agriculture of the Borrower or any

successor thereto; (x) "MRA" means the Microcredit Regulatory Authority of the Borrower or

any successor thereto; (y) "O&M" means operation and maintenance; (z) "OFSSI" means low-cost, on-farm, small-scale infrastructure facilities,

such as post harvest handling centers, storage, processing, and market-related transport facilities;

(aa) "Onlending Agreements" means the loan agreements between either

Wholesale Bank and any Participating MFI relating to the Crop Diversification Credit Line, as provided in paragraph 26 of Schedule 5 to this Loan Agreement;

(bb) "PAM" means the project administration manual for the Project dated 3

June 2010 and agreed between the Borrower and ADB, as updated from time to time in accordance with the respective administrative procedures of the Borrower and ADB;

(cc) "Participating MFIs" means MFIs that have been designated for

participation in the Project in accordance with the procedure and the MFI Selection Criteria set out in paragraphs 18 and 19, respectively, of Schedule 5 to this Loan Agreement;

(dd) "PIU" means any of the two (2) project implementation units to be

established as provided in the PAM; (ee) "PMU" means the project management unit to be established within

DAE as provided in the PAM; (ff) "Policy on Gender and Development" means ADB's Policy on Gender

and Development (1998);

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(gg) “Procurement Guidelines” means ADB’s Procurement Guidelines (2010, as amended from time to time);

(hh) “Procurement Plan” means the procurement plan for the Project dated

3 June 2010 and agreed between the Borrower and ADB, as updated from time to time in accordance with the Procurement Guidelines, the Consulting Guidelines, and other arrangements agreed with ADB;

(ii) "Project Area" means the area encompassed by 43 upazilas in 18

districts of Barisal, Dhaka, and Khulna divisions in the southwest, and 9 upazilas in 9 districts of Rajshahi and Rangpur division in the northwest of the territory of the Borrower, as agreed between the Borrower and ADB;

(jj) "Project Executing Agency" means for the purposes of, and within the

meaning of, the Loan Regulations, (i) in relation to Components 1, 2, 4, & 5 of the Project, DAE; and (ii) in relation to Component 3, Bangladesh Bank through its Agriculture Credit Department, in each case which is responsible for the carrying out of the Project;

(kk) "Project facilities" means the facilities to be provided under the Project; (ll) "Project Implementation Period" means the period of 6 years

commencing on 1 July 2010 and terminating on 30 June 2016; (mm) "Qualified Farmer" means a marginal, small or medium farmer that

satisfies the eligibility criteria set out in paragraph 21 of Schedule 5 to this Loan Agreement;

(nn) "Qualified Subproject" means a project for HVC diversification or value addition that satisfies the eligibility criteria set out in paragraph 22 of Schedule 5 to this Loan Agreement; (oo) "Service Provider" means each and any individual, entity or governmental agency, having HVC experience and selected by a committee including the PMU director to participate in the Project in support of Component 2 of the Project;

(pp) "Service Provider Agreement" means each and any of the agreements concluded between DAE and the Service Providers for purposes of implementing Component 2 of the Project, which agreements shall have terms and conditions acceptable to ADB;

(qq) "Subborrower" means a Qualified Farmer which receives a Subloan under the Project; (rr) “Subloan” means a loan extended to a Qualified Farmer in respect of a Qualified Subproject with the characteristics set out in paragraph 23 of Schedule 5 to this Loan Agreement provided by a Participating MFI to a Qualified Farmer; (ss) “Subloan Agreement” means each and any of the agreements entered into between a Participating MFI and a Qualified Farmer with the characteristics set out in paragraph 27 of Schedule 5 to this Loan Agreement for the financing of a Qualified Subproject;

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(tt) "Subsidiary Loan Agreement" means the loan agreement between the Borrower and Bangladesh Bank under which the Borrower relends to Bangladesh Bank the Crop Diversification Credit Line Amount;

(uu) "Taka" or "TK" means Taka in the currency of the Borrower; (vv) "upazila" means an administrative sub-district of the Borrower; (ww) "Wholesale Banks" means BASIC Bank and Eastern Bank; (xx) "Wholesale Bank Financing Agreements" means the Wholesale Bank

financing agreements between Bangladesh Bank and each of the Wholesale Banks pursuant to Section 3.01(b)(ii) and paragraph 25 of Schedule 5 to this Loan Agreement; and

(yy) “Works” means construction or civil works to be financed out of the

proceeds of the Loan, including services such as drilling or mapping, and project related services that are provided as part of a single responsibility or turnkey contract, but excluding Consulting Services.

ARTICLE II

The Loan

Section 2.01. ADB agrees to lend to the Borrower from ADB's Special Funds resources an amount in various currencies equivalent to twenty-seven million one hundred thirty-one thousand Special Drawing Rights (SDR27,131,000).

Section 2.02. (a) The Borrower shall pay to ADB an interest

charge at the rate of 1% per annum during the grace period, and 1.5% per annum thereafter, on the amount of the Loan withdrawn from the Loan Account and outstanding from time to time.

(b) The term "grace period" as used in paragraph (a) of this Section

means the period prior to payment of the first principal amount of the Loan on the payment date in accordance with the amortization schedule set forth in Schedule 2 to this Loan Agreement.

Section 2.03. The interest charge and any other charge on the Loan

shall be payable semiannually on 15 June and 15 December in each year. Section 2.04. The Borrower shall repay the principal amount of the

Loan withdrawn from the Loan Account in accordance with the amortization schedule set forth in Schedule 2 to this Loan Agreement.

Section 2.05. The currency of repayment of the principal of the Loan

and the currency of payment of the interest charge for the purposes of Sections 4.03(a) and 4.04 of the Loan Regulations shall be the Dollar.

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ARTICLE III

Use of Proceeds of the Loan

Section 3.01. (a) The Borrower shall cause the proceeds of the Loan to be applied to the financing of expenditures on the Project in accordance with the provisions of this Loan Agreement.

(b) In respect of Component 3 of the Project:

(i) the Borrower shall relend to Bangladesh Bank under the Subsidiary Loan Agreement a portion of the Loan proceeds equal to the Crop Diversification Credit Line Amount, upon terms and conditions satisfactory to ADB. Except as ADB shall otherwise agree, the terms for onlending the Crop Diversification Credit Line Amount to Bangladesh Bank shall include interest at the rate of 2.0% per annum inclusive of foreign exchange risk and a repayment period of 16 years inclusive of a grace period of 8 years;

(ii) the Borrower shall cause Bangladesh Bank to relend to each of the Wholesale Banks 50% of the Crop Diversification Credit Line Amount pursuant to the Wholesale Bank Financing Agreements, upon terms and conditions satisfactory to ADB. Except as ADB shall otherwise agree, the terms for on-lending such amounts shall include interest at 3.0% per annum and a repayment period of 16 years inclusive of a grace period of 6 years;

(iii) the Borrower and Bangladesh Bank shall cause each Wholesale Bank to onlend its share of the Crop Diversification Credit Line Amount to Participating MFIs at 6.5% per annum under the Onlending Agreements, and the Borrower, Bangladesh Bank and the Wholesale Banks shall cause such amount to be further on-lent to Qualified Farmers under Subloan Agreements upon terms and conditions satisfactory to ADB, including the terms and conditions set forth in paragraph 27 of Schedule 5 to this Loan Agreement; and

(iv) such Subsidiary Loan Agreement, Wholesale Bank Financing Agreements, and Onlending Agreements shall be without prejudice to, and without limitation on, the obligations of the Borrower under this Loan Agreement. Section 3.02. (a) The proceeds of the Loan shall be allocated and

withdrawn in accordance with the provisions of Schedule 3 to this Loan Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and ADB.

(b) Except as ADB may otherwise agree, the proceeds of the Crop

Diversification Credit Line Amount shall be applied exclusively to the cost of Goods, Works, Consulting Services and other items of expenditure required to carry out the crop diversification activities in respect of which any Subloan is made.

Section 3.03. Except as ADB may otherwise agree, the Borrower

shall procure or cause to be procured items of expenditure in accordance with the applicable provisions of Schedule 4 to this Loan Agreement.

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Section 3.04. Withdrawals from the Loan Account shall be made only on account of expenditures relating to:

(a) Goods which are produced in and supplied from and Works and

Consulting Services which are supplied from such member countries of ADB as shall have been specified by ADB from time to time as eligible sources for procurement; and

(b) Goods, Works, and Consulting Services which meet such other

eligibility requirements as shall have been specified by ADB from time to time. Section 3.05. The Loan Closing Date for the purposes of Section 8.02

of the Loan Regulations shall be 31 December 2016 or such other date as may from time to time be agreed between the Borrower and ADB.

ARTICLE IV

Particular Covenants

Section 4.01. In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement.

Section 4.02. (a) The Borrower shall maintain and shall cause

Bangladesh Bank to (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement as well as on the use of the procedures for imprest account and statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

(b) The Borrower shall enable ADB, upon ADB's request, to discuss the

Borrower's and Bangladesh Bank's financial statements for the Project and their financial affairs related to the Project from time to time with the auditors appointed by the Borrower pursuant to Section 4.02(a) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower or Bangladesh Bank unless the Borrower or Bangladesh Bank, as applicable, shall otherwise agree.

Section 4.03. In addition to the reports and information set forth in section 6.05 of the Loan Regulations, the Borrower and the Bangladesh Bank shall furnish, or cause to be furnished, to ADB all such reports and information as ADB shall reasonably request concerning (i) the Subborrowers, the Qualified Subprojects and the Subloans; and

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(ii) the administration, operations, and financial conditions of the Wholesale Banks and the Participating MFIs.

Section 4.04. The Borrower shall enable, and shall cause the Wholesale Banks and Participating MFIs to enable, ADB’s representatives to inspect the Project, the Goods and Works, and the Subborrowers, Qualified Subprojects and Subloans financed out of the Crop Diversification Credit Line and any relevant records and documents.

Section 4.05. The Borrower shall take all actions which shall be

necessary on its part to enable each of Bangladesh Bank, the Wholesale Banks and the Participating MFIs to perform its obligations under this Loan Agreement, the Project Agreement, the Subsidiary Loan Agreement, each Wholesale Bank Financing Agreement, and the Onlending Agreements, and shall not take or permit any action which would interfere with the performance of such obligations.

Section 4.06. (a) The Borrower shall exercise its rights under the Subsidiary Loan Agreement, shall cause Bangladesh Bank to exercise its rights under the Wholesale Bank Financing Agreements, and shall cause the Wholesale Banks to exercise their rights under the Onlending Agreements in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan.

(b) No rights or obligations under the Subsidiary Loan Agreement or the

Wholesale Bank Financing Agreements shall be assigned, amended, or waived without the prior concurrence of ADB.

ARTICLE V

Suspension; Acceleration of Maturity

Section 5.01. The following are specified as additional events for suspension of the right of the Borrower to make withdrawals from the Loan Account for the purposes of Section 8.01(m) of the Loan Regulations:

(a) the charter of Bangladesh Bank or any Wholesale Bank shall have

been repealed, suspended or amended in any manner which, in the reasonable opinion of ADB, will or may adversely affect the carrying out of the Project or the ability of any Wholesale Bank to perform any of its obligations under the Project Agreement or the Wholesale Bank Financing Agreement to which it is a party;

(b) the Borrower or Bangladesh Bank shall have failed to perform any of

their respective obligations under the Subsidiary Loan Agreement or the Project Agreement; (c) Bangladesh Bank or any of the Wholesale Banks shall have failed to

perform any of their respective obligations under the Wholesale Bank Financing Agreements; or

(d) any of the Wholesale Banks shall have failed to perform any of their

obligations under the Onlending Agreements.

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Section 5.02. The following is specified as an additional event for acceleration of maturity for the purposes of Section 8.07(d) of the Loan Regulations: any of the events specified in Section 5.01 of this Loan Agreement shall have occurred.

ARTICLE VI

Effectiveness

Section 6.01. The following is specified as an additional condition to

the effectiveness of this Loan Agreement for the purposes of Section 9.01(f) of the Loan Regulations: the Project Agreement shall have been duly authorized by, and executed and delivered on behalf of Bangladesh Bank and each Wholesale Bank, and shall have become fully effective and legally binding on the parties thereto in accordance with its terms, subject only to the effectiveness of this Loan Agreement.

Section 6.02. The following is specified as an additional matter for the purposes of Section 9.02(d) of the Loan Regulations, to be included in the opinion or opinions to be furnished to ADB: the Project Agreement shall have been duly authorized by, and executed and delivered on behalf of Bangladesh Bank and each Wholesale Bank, and shall have become fully effective and legally binding on the parties thereto in accordance with its terms.

Section 6.03. A date 90 days after the date of this Loan Agreement is specified for the effectiveness of the Loan Agreement for the purposes of Section 9.04 of the Loan Regulations.

ARTICLE VII

Delegation of Authority

Section 7.01. The Borrower hereby designates DAE its agent for the purposes of taking any action or entering into any agreement required or permitted under Sections 3.02, 3.03 and 3.05 of this Loan Agreement and, in respect of Components 1, 2, 4 and 5 of the Project, under Sections 5.01, 5.02, 5.03 and 5.04 of the Loan Regulations. The Borrower hereby designates Bangladesh Bank its agent for the purposes of taking any action or entering into any agreement required or permitted, in respect of Component 3 of the Project, under Sections 5.01, 5.02, 5.03, and 5.04 of the Loan Regulations.

Section 7.02. Any action taken or any agreement entered into by DAE

and/or Bangladesh Bank pursuant to the authority conferred under Section 7.01 of this Loan Agreement shall be fully binding on the Borrower and shall have the same force and effect as if taken by the Borrower.

Section 7.03. The authority conferred on DAE and Bangladesh Bank

under Section 7.01 of this Loan Agreement may be revoked or modified by agreement between the Borrower and ADB.

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ARTICLE VIII

Miscellaneous

Section 8.01. The Secretary, Economic Relations Division, of the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.02 of the Loan Regulations.

Section 8.02. The following addresses are specified for the purposes

of Section 11.01 of the Loan Regulations: For the Borrower Economic Relations Division Ministry of Finance Sher-e-Bangla Nagar Dhaka, Bangladesh Facsimile Number: 880-2-8113088. For ADB Asian Development Bank

6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines

Facsimile Numbers: (632) 636-2444 880-2-815-6018.

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SCHEDULE 1

Description of the Project

1. The primary objectives of the Project are to (i) increase rural income through increased production of high value crops (HVCs) and more efficient marketing; and (ii) build sustainable partnerships and capacities among marginal, small or medium farmers, Participating MFIs and the public sector in the provision of HVC training and credit support to marginal, small or medium farmers.

2. The Project shall be implemented within the Project Area and shall comprise the following components:

Component 1: HVC Production Support will involve facilitating converting land under cultivation to production of HVCs through (i) development of programs for training marginal, small or medium farmers in HVC diversification and related gender, environment and climate change awareness; (ii) workshops on Project implementation for DAE and Sub-Assistant Agricultural Officers (SAAOs); (iii) surveys of community groups to establish farmers’ needs for HVCs; (iv) institutional and field-based farmer training in HVC production and commercialization technologies including climate change adaptation; organization of demonstration plot training, farmer field days and farmer tours to HVC sites, agricultural fairs on HVC diversification and commercialization; and (v) pilot-testing of climate change adaptation options, consultations on development of climate change adaptation technologies in partnership with a research institute.

Component 2: Value Addition Support will involve reducing HVC post-harvest losses and increasing product quality and market access through (i) increasing community awareness of value addition opportunities and OFSSI investments; development of programs for training marginal, small or medium farmers in post-harvest value addition, market access and efficiency; (ii) mobilization of farmer groups for training and extension support; institutional and field-based farmer training in post-harvest value addition, market access and efficiency; Service Provider training and support of farmer groups on crop selection, post harvest handling techniques, group management, and agricultural marketing; and (iii) support to farmer groups for identifying, proposing and implementing the construction and operation of OFSSI facilities. Component 3: Credit Support will involve provision and supervision of credit by Participating MFIs for Qualified Farmers to engage in HVC diversification and related value addition activities, and coordination of agricultural extension services with the credit support services.

Component 4: Institutional Strengthening will involve (i) strengthening of long-term capacity of DAE to offer training to HVC farmers through development of training for trainers in HVC production and value addition, including gender awareness and climate change adaptation, and through rehabilitation and equipping of DAE district and upazila offices and Horticulture Development Training Centers (HDTCs); and (ii) performance of a feasibility study regarding the possibility of establishing a quality standards certification system for fruits and vegetables at farm level.

Schedule 1

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Component 5: Project Implementation Support will involve (i) Project promotion to mobilize small farmers through awareness workshops for Project staff tofacilitate their organization of campaigns and dissemination of information on the Project; (ii) staffing and equipping of PMU and regional PIUs; and (iii) training and support for selection of consultants, Service Providers, Community Facilitators, Project implementation and management.

3. The Project will finance Consulting Services relating to Components 1, 2, 4, & 5 above. The Project is expected to be completed by 30 June 2016.

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SCHEDULE 2

Amortization Schedule

(Second Crop Diversification Project)

Payment Due Date Payment of Principal

(expressed in Special Drawing Rights)*

15-Dec-2018 565,229 15-Jun-2019 565,229 15-Dec-2019 565,229 15-Jun-2020 565,229 15-Dec-2020 565,229 15-Jun-2021 565,229 15-Dec-2021 565,229 15-Jun-2022 565,229 15-Dec-2022 565,229 15-Jun-2023 565,229 15-Dec-2023 565,229 15-Jun-2024 565,229 15-Dec-2024 565,229 15-Jun-2025 565,229 15-Dec-2025 565,229 15-Jun-2026 565,229 15-Dec-2026 565,229 15-Jun-2027 565,229 15-Dec-2027 565,229 15-Jun-2028 565,229 15-Dec-2028 565,229 15-Jun-2029 565,229 15-Dec-2029 565,229 15-Jun-2030 565,229 15-Dec-2030 565,229 15-Jun-2031 565,229 15-Dec-2031 565,229 15-Jun-2032 565,229 15-Dec-2032 565,229 15-Jun-2033 565,229 15-Dec-2033 565,229 15-Jun-2034 565,229 15-Dec-2034 565,229 15-Jun-2035 565,229 15-Dec-2035 565,229 15-Jun-2036 565,229

Schedule 2

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Payment Due Date Payment of Principal (expressed in Special

Drawing Rights)*

15-Dec-2036 565,229 15-Jun-2037 565,229 15-Dec-2037 565,229 15-Jun-2038 565,229 15-Dec-2038 565,229 15-Jun-2039 565,229 15-Dec-2039 565,229 15-Jun-2040 565,229 15-Dec-2040 565,229 15-Jun-2041 565,229 15-Dec-2041 565,229 15-Jun-2042 565,237

Total

27,131,000

_____________________________ * The figures in this column represent SDR equivalents determined as of the respective

dates of withdrawal. The arrangements for payment of each maturity are subject to the provisions of Sections 3.04 and 4.03 of the Loan Regulations.

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SCHEDULE 3

Allocation and Withdrawal of Loan Proceeds

General 1. The table attached to this Schedule sets forth the Categories of Goods, Works and Consulting Services and other items of expenditure to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan to each such Category (hereinafter called the Table). (Reference to "Category" or "Categories" in this Schedule is to a Category or Categories of the Table and reference to "Subcategory" or "Subcategories" in this Schedule is to a Subcategory or Subcategories of a Category) Percentages of ADB Financing 2. Except as ADB may otherwise agree, the items of the Categories and Subcategories listed in the Table shall be financed out of the proceeds of the Loan on the basis of the percentages set forth in the Table. Interest Charge 3. The amount allocated to Category 9 is for financing the interest charge on the Loan during the implementation period of the Project. Reallocation 4. Notwithstanding the allocation of Loan proceeds and the withdrawal percentages set forth in the Table, (a) if the amount of the Loan allocated to any Category appears to be insufficient to finance all agreed expenditures in that Category, ADB may, by notice to the Borrower, (i) reallocate to such Category, to the extent required to meet the estimated shortfall, amounts of the Loan which have been allocated to another Category but, in the opinion of ADB, are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made; and (b) if the amount of the Loan then allocated to any Category appears to exceed all agreed expenditures in that Category, ADB may, by notice to the Borrower, reallocate such excess amount to any other Category. Disbursement Procedures 5. Except as ADB may otherwise agree, the Loan proceeds for financing Goods, Works and Consulting Services and other items shall be disbursed in accordance with ADB’s “Loan Disbursement Handbook” dated January 2007 (ADB’s Loan Disbursement Handbook), as amended from time to time.

Schedule 3

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Imprest Account; Statement of Expenditures 6. (a) Except as ADB may otherwise agree, the Borrower shall establish immediately after the Effective Date, 2 separate imprest accounts for the Project in Bangladesh Bank: one in the name of PMU relating to Components 1, 2, 4, and 5 of the Project, and the other in the name of Bangladesh Bank relating to Component 3. The imprest accounts shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon among the Borrower, Bangladesh Bank, and ADB. The currency of the imprest accounts shall be the Dollar. The initial amount to be deposited into the imprest accounts, collectively, shall not exceed the lower of (i) the estimated expenditure to be financed from the imprest accounts for the first 6 months of Project implementation; or (ii) the equivalent of 10% of the Loan amount. (b) The statement of expenditures procedure may be used for reimbursement of eligible expenditures and to liquidate advances provided into the imprest accounts, in accordance with ADB’s Loan Disbursement Handbook and detailed arrangements agreed upon between the Borrower and ADB. Any individual payment to be reimbursed or liquidated under the statement of expenditures procedure shall not exceed the equivalent of $100,000. Retroactive Financing 7. Withdrawals from the Loan Account may be made for reimbursement of reasonable expenditures incurred under the Project before the Effective Date, but not earlier than 12 months before the date of this Loan Agreement in connection with Consulting Services or Community Facilitators, subject to a maximum amount equivalent to 5% of the Loan amount. Conditions of Withdrawals from Loan Account 8. Notwithstanding any other provision of this Loan Agreement, no withdrawals shall be made from the Loan Account until the Project director acceptable to ADB shall have been engaged and the PMU established and made operational in a manner satisfactory to ADB. 9. Notwithstanding any other provision of this Loan Agreement, no withdrawals shall be made from the Loan Account in respect of Component 3 of the Project until (i) the MFI Selection Committee for the selection of the Participating MFIs shall have been established with 5 members, approved by ADB, representing the Project director, Bangladesh Bank Agriculture Credit Department, MRA and each of the Wholesale Banks; (ii) at least 1 Participating MFI shall have been selected by such committee in compliance with the MFI Selection Criteria; and (iii) the Subsidiary Loan Agreement, the Wholesale Bank Financing Agreements, and at least 1 Onlending Agreement with a Participating MFI shall have been duly executed and delivered on behalf of the parties thereto in form and substance satisfactory to ADB, and shall have become fully effective and legally binding on the parties thereto in accordance with their terms. Notwithstanding the foregoing, ADB reserves the right to disallow disbursements to any Wholesale Bank or Participating MFI not conforming to any of the eligibility criteria applicable to it during implementation until such time as compliance is achieved.

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Attachment to Schedule 3

TABLE

ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS (Second Crop Diversification Project)

CATEGORY ADB FINANCING

Amount Allocated Percentage and Basis for

Withdrawal from the Loan Account

(SDR)

Number Item Category Subcategory

1 Extension Services and Community Development

3,777,000 100 percent of total expenditure*

2 Civil Works 1,610,000

2A Field-Level Agriculture Office Building Rehabilitation

814,000 50 percent of total expenditure

2B On-Farm Small Scale Infrastructures 796,000 75 percent of total expenditure

3 Credit Line 17,296,000 100 percent of total expenditure

4 Vehicles and Motorcycles

736,000 72 percent of total expenditure

5 Equipment and Furniture

307,000 72 percent of total expenditure

6 Consulting Services 1,896,000 100 percent of total expenditure*

7 Value Addition Service Providers

204,000 100 percent of total expenditure*

8 Surveys, Studies, and Evaluation

208,000 100 percent of total expenditure*

9 Interest Charge 655,000 100 percent of amount due

10 Unallocated 442,000

Total 27,131,000

* Exclusive of taxes and duties imposed within the territory of the Recipient.

19

SCHEDULE 4

Procurement of Goods, Works and Consulting Services General 1. All Goods, Works and Consulting Services to be financed out of the proceeds of the Loan shall be subject to and governed by the Procurement Guidelines, and the Consulting Guidelines, respectively. 2. All terms used and not otherwise defined in this Loan Agreement have the meanings provided in the Procurement Guidelines and/or the Consulting Guidelines, as applicable. Procurement for Goods and Works 3. Except as ADB may otherwise agree, Goods and Works shall only be procured on the basis of the methods of procurement set forth below:

International Competitive Bidding National Competitive Bidding Shopping Community Participation

The method of procurement is subject to, among other things, the detailed arrangements and threshold values set forth in the Procurement Plan. Each Project Executing Agency may only modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan. 4. Domestic Preference. Each Project Executing Agency may grant a margin of preference under national competitive bidding procedures in the evaluation of bids under international competitive bidding in accordance with paragraphs 2.55(a) and 2.56 of the Procurement Guidelines for domestically manufactured Goods and paragraphs 2.55(b) and 2.56 of the Procurement Guidelines for domestic Works. 5. National Competitive Bidding. The Borrower and ADB shall ensure that, prior to the commencement of any procurement activity under national competitive bidding, the Borrower’s national competitive bidding procedures are consistent with the Procurement Guidelines. Any modifications or clarifications to such procedures agreed between the Borrower and ADB shall be set out in the Procurement Plan and are hereby incorporated by reference in this Loan Agreement. Any subsequent change to the agreed modifications and clarifications shall become effective only after written approval of such change by the Borrower and ADB. 6. Subloan Procurement. The Bangladesh Bank and the Wholesale Banks shall ensure that each Participating MFI requires the Subborrower to undertake procurement of Goods, Works, and Consulting Services to be financed with a Subloan with due attention to economy and efficiency and in accordance with established private sector or commercial practices, acceptable to ADB, and which are in compliance with the provisions of ADB's Anticorruption Policy (1998, as amended to date).

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Selection of Consulting Services

7. Except as ADB may otherwise agree, and except as set forth in the paragraph below, the Borrower shall apply quality-and-cost-based selection for selecting and engaging Consulting Services (including from Service Providers). 8. The Borrower shall apply the following methods for selecting and engaging the specified Consulting Services (including from Service Providers), in accordance with, among other things, the procedures set forth in the Procurement Plan:

(a) Least-Cost Selection for contracts in amounts less than or equal to $100,000;

(b) Consultants’ Qualifications Selection for contracts in amounts less than

or equal to $200,000; and (c) Quality and Cost-Based Selection for contracts in amounts over

$200,000. 9. In the case of Service Providers who are individuals, the Borrower shall recruit such persons in accordance with procedures acceptable to ADB for recruiting individual consultants. Industrial or Intellectual Property Rights 10. (a) The Borrower shall ensure and shall procure that Bangladesh Bank and DAE shall ensure that all Goods and Works procured (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party. (b) The Borrower shall and shall cause Bangladesh Bank and DAE to ensure that all contracts for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph 10(a) of this paragraph. 11. The Borrower shall and shall cause Bangladesh Bank and DAE to ensure that all ADB-financed contracts with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party. ADB's Review of Procurement Decisions 12. All contracts procured under international competitive bidding procedures and contracts for consulting services shall be subject to prior review by ADB, unless otherwise agreed between the Borrower and ADB and set forth in the Procurement Plan.

21

SCHEDULE 5

Execution of Project and Operation of Project Facilities; Financial Matters

I. PROJECT EXECUTION ARRANGEMENTS 1. The Borrower, DAE and Bangladesh Bank shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the PAM. Any subsequent change to the PAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the PAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail. 2. The Borrower shall ensure that no later than 30 days after the Effective Date, the Borrower and DAE shall have appointed key staff to the PMU and PIUs, including the Project director, a regional project manager for each of the 2 PIUs, and the senior monitoring and evaluation officer in a manner satisfactory to ADB. The Borrower shall ensure that no later than 90 days after the Effective Date, the Borrower and DAE shall have appointed the remaining required staff of the PMU and PIUs. The Borrower shall provide the support necessary to the PMU and PIUs for them to supervise the Project and shall ensure that adequate financing is made available in DAE’s annual budget for the operation of the PMU, PIUs, HDTCs and participating DAE district and upazila offices throughout Project implementation. 3. Within 3 months after the Effective Date, DAE shall have recruited all the Community Facilitators for the Project. II. PROJECT IMPLEMENTATION MATTERS A. Counterpart funds 4. The Borrower shall make available, and shall ensure that DAE makes available, adequate budgetary allocations of the required counterpart funds in respect of the Project on a timely and regular basis. B. Social and Safeguard Policy Matters 5. Environment. The Borrower shall, and shall ensure that DAE, Bangladesh Bank, the Wholesale Banks and Participating MFIs shall ensure that (i) the Project (including design and construction of any facilities) shall comply with all applicable environmental laws and regulations of the Borrower and ADB’s Environment Policy (2002) and the environmental assessment and review procedures pursuant thereto; and (ii) that the environmental mitigating measures and environmental management and monitoring plans in the IEE and EARP shall be implemented in accordance with their terms. The Borrower and DAE shall ensure that environmental requirements shall be incorporated in bidding documents and civil works contracts. 6. Gender Policy. To ensure that women benefit equally from the Project and interventions avoid gender bias, the Borrower shall, and shall procure that the Wholesale Banks and Participating MFIs, comply with and implement the GAP in accordance with its

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terms, shall allocate adequate resources for such implementation, and shall monitor and report to ADB on key gender outcome and output targets in accordance with the project performance and monitoring system described in the PAM (PPMS). 7. Health; Labor. The Borrower shall ensure, and shall procure that DAE, Bangladesh Bank, the Wholesale Banks and Participating MFIs ensure, that (a) the performance of the Project shall comply with; and (b) all Works contracts and bidding documents under the Project shall include specific provisions requiring contractors to comply with, all applicable labor laws and core labor standards on (i) equal pay for equal work of equal value, regardless of gender and ethnicity; and on (ii) prohibition of child labor. 8. Land Acquisition; Resettlement; Indigenous Peoples. The Borrower shall ensure, and shall procure that DAE, Bangladesh Bank, the Wholesale Banks and Participating MFIs ensure, that no Project activity will entail land acquisition or any involuntary resettlement, including relocation. 9. The Borrower and ADB have agreed upon an indigenous peoples development framework (IPDF) prepared in accordance with ADB's Policy on Indigenous Peoples (1998). The Borrower and DAE shall ensure the involvement of indigenous peoples, if any are identified through a survey to be conducted in each project upazila, in crop diversification and value addition project activities by developing, submitting to ADB for approval, and implementing, an indigenous peoples' action plan in accordance with the terms of the IPDF. 10. Grievance Redress Mechanism. Within 9 months of the Effective Date, PMU shall prepare a grievance redress mechanism, acceptable to ADB, and appoint a credit management officer in the PMU to receive and resolve complaints or grievances or act upon reports from stakeholders on misuse of funds and other irregularities, including relating to interactions between Participating MFIs and project beneficiaries. The PMU shall inform stakeholders of their right to submit complaints or grievances relating to the Project. C. Vehicles 11. The Borrower shall, and shall procure that DAE shall, ensure that the double cabin pickup trucks to be funded by the Project are under the control of the upazila agricultural offices and used exclusively for upazila field activities. D. Anti-corruption; Transparency 12. The Borrower shall, and shall procure that DAE, Bangladesh Bank, the Wholesale Banks and the Participating MFIs shall, (i) comply with ADB's Anticorruption Policy (1998, as amended to date), and cooperate fully with any investigation by ADB and extend all necessary assistance, including providing access to all relevant books and records for the satisfactory completion of such investigation; and (ii) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of all contractors, suppliers, consultants, and other Service Providers as they relate to the Project. 13. Project Website. Within 9 months after the Effective Date, the PMU shall establish and maintain a project website to disclose information about Project activities, including procurement, and shall include information on the list of participating bidders, name

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of the winning bidder, basic details on bidding procedures adopted, amount of contract awarded, and the list of goods and services procured. DAE and Bangladesh Bank shall ensure that all relevant information and documents, including on procurement procedures and contract awards, which are required to be made public under ADB's Public Communication Policy are made readily available to any member of the public from the Project offices and the Project website. 14. The Borrower shall ensure that Anti-Corruption Commission will investigate all cases of irregularities, including financial irregularities, as well as corruption of government officials and officers and employees of autonomous bodies, and may at its discretion carry out random spot-checks of the Project. E. Midterm Review 15. ADB and the Borrower will undertake a comprehensive midterm review of the Project 36 months after the Effective Date to identify problems and constraints encountered and suggest corrective measures, as described in greater detail in the PAM. Based on results of the review, design or other modifications in the Project could be considered, including adjustments in the scope of the Project Area. III. LENDING AND ONLENDING OF CROP DIVERSIFICATION CREDIT LINE AMOUNT A. Eligibility Criteria for Wholesale Banks and Participating MFIs 16. Eligibility Criteria for Wholesale Banks. In order to participate in the Project, each Wholesale Bank must upon entry and throughout Project implementation:

(a) be duly licensed to operate as a bank in the territory of the Borrower; (b) hold and maintain a bank rating in the A category (A- to A++) as

determined by Credit Rating Information and Services Limited or an equivalent rating by a credit rating agency acceptable to ADB;

(c) have at least 3 years experience in lending to not less than 5 MFIs; (d) hold a current loan portfolio of not less than Tk700 million in MFI

lending with an aggregate total of classified loans to MFIs of less than 5%;

(e) be prepared to maintain in place Onlending Agreements with

Participating MFIs for approximately 11 years (in accordance with the Credit Line Implementation Summary);

(f) have (i) acceptable corporate and financial governance and

management practices that clearly demonstrate an ability to manage and account for financial intermediation operations separate from, and independently of, its other activities, and (ii) transparent financial disclosure policies and practices;

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(g) have a record of satisfactory compliance with all Bangladesh prudential, regulatory and supervisory indicators, standards and instructions applicable to it as a bank in the territory of the Borrower;

(h) maintain classified loans at less than 10% of total loans outstanding;

and (i) have adequate policies, systems, and procedures to assess and

monitor the economic, social, and environmental impact of subprojects in accordance with parameters established by ADB for this purpose.

17. The Project shall commence with BASIC Bank and Eastern Bank as the designated Wholesale Banks. 18. Formation of MFI Selection Committee. The Borrower shall ensure that the MFI Selection Committee shall be formed as soon as reasonably practicable but in any event prior to the first disbursement of the Loan proceeds under Component 3. It shall consist of 5 members, approved by ADB, representing the Project Director, Bangladesh Bank ACD, MRA and each of the Wholesale Banks. The MFI Selection Committee shall make a selection of up to 10 MFIs to participate in the Project. The Borrower shall (i) provide a due diligence report for each MFI to be considered by the MFI Selection Committee, subject to ADB prior approval; (ii) ensure that the MFI Selection Committee shall complete its review and selection of proposed MFI candidates promptly but in any event within a period of 6 months after the Effective Date; and (iii) ensure that any MFI that is selected to participate in the Project shall satisfy the MFI Eligibility Criteria set forth below. 19. Eligibility Criteria for Participating MFIs. In order to be eligible to participate in the Project, and to be eligible for selection by the MFI Selection Committee, an MFI must upon entry and throughout Project implementation:

(a) hold a current license issued by MRA to hold itself out as a provider of credit;

(b) have a capital adequacy ratio of at least 15%;

(c) have a net worth of not less than Tk100 million;

(d) have total net loans outstanding equal to at least 1.5 times total

borrowing;

(e) have classified loans of less than 10% of total loan portfolio;

(f) be the subject of a due diligence report provided by the Borrower and satisfactory to ADB;

(g) have an average expenses to revenue ratio over the last 3 years of

less than 90%;

(h) have at least 3 years of satisfactory financial performance and operational experience in managing donor and project funding and

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providing services to individual borrowers in the agricultural sector as shown in financial statements and satisfactory external audit reports;

(i) have a total loan portfolio of at least Tk500 million and an agricultural

loan portfolio of not less than Tk100 million; (j) have not less than 15,000 active borrowers;

(k) have not less than 10 head office professional staff and 40 field credit

staff; (l) have a board of directors with at least one director with more than 5

years experience in financial planning, and with at least 2 directors with not less than 5 years experience in the oversight of microfinance or banking operations;

(m) have a chief executive officer with at least 10 years in microfinance

with at least 5 years in a management position and chief financial officer with a tertiary degree, at least 5 years of satisfactory work experience in accounting and finance with not less than 3 years experience in and preferably a professional accounting qualification;

(n) have acceptable corporate and financial governance and management

practices that clearly demonstrate (i) an ability to manage and account for financial intermediation operations separate from, and independently of, its other activities, and (ii) transparent financial disclosure policies and practices;

(o) have a record of satisfactory compliance with all Bangladesh

prudential, regulatory and supervisory indicators, standards and instructions applicable to it as a microfinance institution in the Borrower’s territory;

(p) have demonstrated a commitment to the development of financial

services for landless and small-scale farmers through a strategy statement in its corporate plan; and

(q) have adequate policies, systems, and procedures to assess and

monitor the economic, social, and environmental impact of subprojects in accordance with parameters established by ADB for this purpose.

20. Suspension of Disbursements. ADB reserves the right to disallow disbursements from the Crop Diversification Credit Line for or relating to any Wholesale Bank or Participating MFI not conforming with any of the above criteria applicable to it until such time as such entity is able to satisfy the criteria. Such entity shall be required to remedy any default of eligibility criteria within 6 months of default and in any event, within the disbursement period of the Crop Diversification Credit Line.

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B. Onlending by Participating MFIs 21. Eligibility Criteria for Qualified Farmers. A farmer qualifies as a Qualified Farmer under the Project if he or she:

(a) has land under cultivation and located in the Project Area not exceeding 3.0 hectares in size;

(b) has undergone HVC diversification training or demonstrates having

carried out at least 2 seasons of HVC diversification and production activity; and

(c) meets such reasonable financial or commercial viability criteria as may

be imposed by the Participating MFI providing the Subloan. 22. Qualified Subprojects. A subproject qualifies as a Qualified Subproject under the Project if it involves:

(a) a proposal to convert agricultural land under the Qualified Farmer's cultivation to cultivation of an approved HVC; or

(b) a proposal by a Qualified Farmer to establish or undertake HVC value

addition activities or processes developed by the Project (excluding the construction of any OFSSI).

23. Subloans. Participating MFIs shall make Subloans to Qualified Farmers for Qualified Subprojects having the features specified for Subloans as set out in the Credit Line Implementation Summary, including without limitation the following:

(a) the term and schedule of repayments of the Subloans shall be adapted to take into account the schedule for harvesting and post-harvesting activities, and seasonal patterns of income-generation typical for the particular HVC to be financed; and

(b) the interest rate charged to the Qualified Farmer will fully take into

account the recovery cost of lending, including any increase due to inflation, plus a spread to cover administration expenses including project and technical support, the provision of grace periods to Qualified Farmers, and Subborrower credit risk; without limiting the foregoing, Bangladesh Bank regulation may apply to set a ceiling acceptable to ADB on the interest rate to Subborrowers.

C. Revolving Funds 24. Repayments of principal under the Onlending Agreements made by Participating MFIs to Wholesale Banks shall be made into a revolving fund opened by the Wholesale Bank for each Participating MFI borrowing from it and shall be accessible for reborrowing in accordance with the Credit Line Implementation Summary (a “revolving fund” or collectively, “the revolving funds”). On 1 July 2016, the outstanding balances under the Onlending Agreements and borrowing by the Participating MFIs from the revolving funds will be combined and converted, for each Participating MFI, into a single loan tranche with a

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tenor in the range of 5 years, to be finally determined by the relevant Wholesale Bank, and equal quarterly repayments of interest and principal as required for full repayment over such multiple year period. Thereafter, principal repayments received by the Wholesale Banks from the Participating MFIs will be paid to Bangladesh Bank in accordance with the obligations agreed under the Wholesale Bank Financing Agreements. D. Principal Terms of Wholesale Bank Financing Agreements, Onlending Agreements, and Subloan Agreements 25. Wholesale Bank Financing Agreements. Without limiting the generality of Section 3.02 of this Loan Agreement, the Borrower and Bangladesh Bank shall ensure that each of the Wholesale Bank Financing Agreements contains, among other things, clear provisions pursuant to which each Wholesale Bank shall:

(a) establish, operate and maintain the revolving funds, as described in paragraph 24 above;

(b) be prepared to maintain in place Onlending Agreements with the

Participating MFIs for approximately 11 years (in accordance with the Credit Line Implementation Summary);

(c) maintain, during Project implementation the prudential financial

performance indicators set by Bangladesh Bank, including classified loans less than 10% of total loans outstanding;

(d) ensure that no material organizational changes (either financial,

operational, or structural) will be approved or implemented by the Wholesale Bank without prior approval of ADB, the Borrower and Bangladesh Bank, where “material organizational change” means for the purposes of this clause (d) a change or changes in the Wholesale Bank or a merger, amalgamation, acquisition, winding-up or dissolution of the Wholesale Bank which would hinder or prevent the respective Wholesale Bank from performing its obligations under the Project Agreement, the Wholesale Bank Financing Agreements, or the Onlending Agreements; and

(e) maintain, and require the Participating MFIs to establish and maintain,

sound operational procedures and policies to ensure the achievement of the Project objectives, including (i) guidelines and procedures for evaluating, processing, monitoring, reporting, and administering Subloans; and (ii) project performance management systems.

26. Onlending Agreements. Unless otherwise agreed by ADB, the terms and conditions for onlending the proceeds of the Crop Diversification Credit Line by the Wholesale Banks to the Participating MFIs shall comply with the Credit Line Implementation Summary and shall include, among other things, the following provisions pursuant to which each Participating MFI shall:

(a) determine the amount and the terms of each Subloan in accordance with its own loan management procedures;

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(b) establish and maintain sound and operational procedures and policies for supervision and monitoring of Subloans to Qualified Farmers to ensure the achievement of the Project objectives;

(c) (i) establish and maintain separate accounts for the Project in

accordance with sound accounting principles, (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses) audited annually in accordance with appropriate auditing standards consistently applied by an independent auditor selected and engaged in accordance with the competitive selection procedures, acceptable to ADB, and (iii) have such auditor’s report, related accounts and financial statements (all in English) submitted to ADB annually within the deadline stated in Section 3.08(b) of the Project Agreement;

(d) ensure that the auditors’ opinion shall include (i) an assessment of the

adequacy of accounting and internal control systems with respect to Project expenditures and other financial transactions, (ii) a determination as to whether the Participating MFI has maintained adequate documentation for all financial transactions, specifically including the revolving fund procedures, and (iii) a confirmation of compliance with the financial covenants set forth in this Loan Agreement;

(e) ensure that no material organizational changes (either financial,

operational, or structural), will be approved or implemented by the Participating MFI without prior approval of the relevant Wholesale Bank, where material organizational change means for the purposes of this clause (e) a change or changes in the Participating MFI or a merger, amalgamation, acquisition, winding-up or dissolution of the Participating MFI which would hinder or prevent the respective Participating MFI from performing its obligations under the Onlending Agreement or Subloan Agreements; and

(f) at all times during Project implementation, continue to satisfy the

eligibility criteria for Participating MFIs set out in paragraph 19 above. 27. Subloan Agreements. Unless otherwise agreed by ADB, the Participating MFIs shall ensure that, and the Wholesale Banks shall cause the Participating MFIs to ensure that, the Subloan Agreements shall comply with the Credit Line Implementation Summary and, without limiting the foregoing, shall include, among other things, the following provisions pursuant to which:

(a) no Subloan is extended with Project funding other than to a Qualified Farmer for a Qualified Subproject;

(b) each Subloan is denominated in Taka in an amount not exceeding

300,000 Taka;

(c) each Qualified Subproject is selected in accordance with the Environmental Assessment and Review Procedures prepared for the

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Project and agreed by ADB, is carried out in compliance with applicable environmental laws and regulations of the Borrower and ADB’s Environment Policy, and does not entail any negative environmental impact as defined in ADB’s Environment Policy, land acquisition and/or involuntary resettlement impact as defined in ADB’s Policy on Involuntary Resettlement (1995); and

(d) each Qualified Subproject is implemented in accordance with sound

administrative, social, environmental, and governance principles.

E. Debt Amnesty 28. Except as the Borrower, ADB, Bangladesh Bank, the Wholesale Banks and the Participating MFIs may otherwise agree, the Borrower shall not plan or grant, or cause to be planned or granted, any debt amnesty or forgiveness of loan repayment obligations with respect to the Subloans under the Crop Diversification Credit Line provided under the Project. F. Accounts of Wholesale Banks and Participating MFIs 29. The Wholesale Banks shall engage reputable external auditors acceptable to Bangladesh Bank (i) to examine and verify the accuracy of their accounts, including in respect of the Crop Diversification Credit Line; and (ii) audit their annual financial statements and their operations relating to the Crop Diversification Credit Line. The Participating MFIs will maintain computerized records that show, separately, Subloans made under disbursements from Bangladesh Bank and loans made out of the revolving funds. In addition, the Wholesale Banks and Participating MFIs will provide quarterly reports to ADB and the PMU, through Bangladesh Bank, detailing amounts and numbers of project loans disbursed for that quarter and cumulatively, and loan classification by numbers of active borrowers and amounts of loans outstanding. 30. The Wholesale Banks will take the credit risk in lending to Participating MFIs. The Participating MFIs will absorb the credit risk in lending to Subborrowers.