Completion evaluation

Background

Between 1998 and 1999 the Government of Albania (GoA) and IFAD formulated the Mountain Areas Development Programme (MADP) with the objective to raise the standard of living for poor mountain area people. The programme became effective in July 2001 with completion date of 30 September 2007. In 2007, the IFAD Office of Evaluation (OE) conducted a Completion Evaluation of the Mountain Areas Development Programme. The evaluation was conducted in line with the IFAD Evaluation Policy and the general provisions contained in the evaluation Approach Paper. After a preparatory Mission in May 2007, evaluation field work was conducted in Albania in June 2007. A workshop was held to present the initial findings and the Aide Memoire to key stakeholders in Tirana on 20 June 2007.

The Agreement at Completion Point (ACP) reflects an agreement between the Government of Albania (represented by Mr Sherefedin Shehu, Deputy Minister and Chair, MAFF Board of Directors, Ministry of Finance) and the IFAD management (represented by the Near East and North Africa division, PN) on the main findings of the evaluation, as well as the evaluation recommendations that they agree to adopt and implement. The ACP builds on the evaluation’s results as well as the discussions that took place during the stakeholder workshop held on 8 July 2008 in Tirana with the participation of MADP staff, GoA, PN, OE and other stakeholders.

Main evaluation findings

Project design.  The MADP has been mostly relevant and, perhaps more importantly, it has shown the flexibility to learn from experiences gained, to adapt to changing circumstances and redesign key interventions to remain relevant to the rural mountainous areas. The programme was designed against the back-drop of the severe macro-economic and political crises after the collapse of the pyramid schemes in 1997, the huge influx of refugees from the Kosovo conflict in 1998-1999 and the trade disruption caused by the Macedonian crisis in 2001-02. The MADP was designed to continue, strengthen and expand the activities of the two previous IFAD-funded projects¹, which were implemented in the poorest part of the mountain areas. The organization and management of MADP was designed to shift IFAD’s support to mountain areas from the ad hoc spot application of area-based subsector projects to a long-term programmatic view of mountain areas development, to be based upon a rational and synergistic portfolio of investments.

The focus on improving productive potential in mountainous areas was relevant to the needs of the rural poor and to government priorities. However some of the modalities chosen - such as the use of collective action and formation of associations - were of limited relevance, as they were not in line with the country’s changing and evolving context.² Realising this, the mid-term review in 2003 made efforts to restore relevance by increasing focus on structural change in mountain areas and by emphasising support to the private sector both in the credit component, which began to phase out collective Village Credit loans, but also in the Agricultural Production component which tellingly and aptly was renamed the Private Sector Development component.

Also, the evaluation recognizes that the increased focus on promoting successful farmers (albeit not the poorest) and agri-business activities with high profitability and potential for increased commercialisation has been a relevant strategy for promoting sustainable and long term poverty reduction. In fact, empirically this has proven to be the only relevant growth strategy for mountainous areas, as the alternative of promoting incremental improvements in the poorest’ agricultural production techniques on very small plots, is unlikely to yield any substantial impact on poverty reduction, but rather delay an inevitable rural transformation process towards a higher degree of commercialisation and higher productivity. This strategic shift has successively promoted and increased relevance and looks set to be continued in the ongoing successor programme “Sustainable Development for Rural Mountainous Areas” (SDRMA), which is also supported by IFAD.

Implementation and outputs

MADP’s implementation performance has been mixed but with an improving tendency throughout the programme period. The overall objective of MADP was to achieve a sustainable long term economic growth and development in the mountain areas of Albania, and to raise the standard of living of 37500 mountain area-based households. According to MADP figures (2007) 56488 households have received MADP services and their living standards have been raised accordingly. However, while living standards have generally increased rapidly during the programme period, caution has to be taken when drawing a too close causal relationship between MADP’s interventions and this rise. Undoubtedly, MADP has played an important (and increasingly strategic) role, but there are some concerns about the degree to which necessary complementary actions by other actors (most notably by the government’s veterinary service and water user associations) have been sufficient to achieve the desired effectiveness. This especially concerns the interventions that started before 2003, most notably in the irrigation and vaccination sectors, which account for the majority of beneficiary households. In any case, exclusive focus on numbers may not capture important contributions from MADP both in terms of delivering tangible benefits to numerous households, but also in terms of piloting and demonstration activities especially within the private sector development and the credit sector, where MADP (through its credit component managed by MAFF) has proven the viability of rural financial services and introduced new products. Other interventions concerning the rural infrastructure component and the vaccination activities have had more limited effectiveness and almost no spillover effects and for most interventions the richer southern districts have been found to be the main beneficiaries.

Strengths

Generally MADP has accelerated successful aspects of the component portfolio and gradually phased out poor performing interventions. In particular, MADP promoted those interventions which were harnessing the key incentive in private sector development: the profit motive. This has helped ensure commitment to achieving the agreed outputs and, more crucially, ensured higher levels of sustainability and impact, as it has been in the beneficiaries’ self-interest to continue the intervention. An example of such interventions includes the Strategic Investment Plans (SIPs - introduced after the mid-term review) that have facilitated the introduction of crucial agricultural technologies, have increased the emphasis on a broader range of actors in the value chains, and thus have proved successful in raising agricultural productivity and, most importantly, profitability. Similarly, in relation to the rural credit component, the use of misguided collective (or ‘community as it was termed) approaches were replaced with individual and enterprise loans. This has strengthened MAFF tremendously and allowed it to pioneer new products and reaching clients who had not previously had access to financial services. Finally, and perhaps most strategically, is the establishment of the two core institutions of MADA and MAFF, that have proven relevant as key locally embedded and permanent institutions dedicated to advancing the course of mountain areas in general and the poor living there in particular. They have played a crucial role in raising the profile of the mountain areas on the policy agenda. Thanks to these two institutions, the general knowledge of the specific needs and problems of mountain areas, but also their opportunities and investment potentials, are now significantly enhanced among policy-makers, investors and the general public. Finally, recent legislative initiatives promoted by the government suggest that their institutional sustainability is rapidly improving.  

Weaknesses

The main weakness of MADP was the partly flawed design upon which some of the initial implementation modalities rested. This was especially pronounced in the initial phases of the irrigation, forest management and micro-finance activities, where the donor driven formation of various groups and associations proved to result in sustainability challenges, as well as limited incentives for achieving reasonable performance. These design challenges were aggravated by poor choices made in the selection of implementation partner in the case of irrigation. Moreover, the frequent changes in MADP management staff and delays in agreeing on replacements further undermined the programme’s ability to deliver, although the situation improved considerably in the last phase of the programme. Finally, the successful implementation of some interventions rested on the assumption that government would take necessary complementary actions (e.g. in the vaccination component where lack of an effective culling campaign reduced MADA’s effectiveness), which failed to fully materialize. This further weakened the performance of MADP.

Lessons learned

A key lesson learnt is the need to thoroughly examine the appropriateness of the aid delivery modalities, including the organizing principles and the incentive structures herein. The MADP experiences suggest that there are significant dangers in following ‘imported’ approaches as the evidence from rural infrastructure, forest management and group-based microcredit testify. These may have worked in other countries and context, but it cannot be assumed a priori. This clearly calls for a careful analysis of the various interests involved, solidly grounded in the local context. Finally, through the introduction of SIPs, focus was redirected away from supporting essentially economically doomed small-scale subsistence farmers, towards strengthening commercial farmers with a strong potential to up-scale. Often SIPs have catalysed the realisation of this potential. This holds an important lesson in relation to IFAD’s more traditional approach to poverty reduction, which tends to argue for continued support to incremental improvements for small-scale farmers’ agricultural production.

Key recommendations

Recommendation 1. Accelerate the strategic shift supporting a private sector led structural transformation

This should form the backbone of the mountain areas growth and poverty reduction strategy. However, all partners should remain clear that this process will produce both winners and short-term losers. In the agricultural sector, this new strategic direction will entail support to land concentration, commercialisation and industrialisation, a process that is likely to temporarily marginalise the least resourced farmers, as they cannot meet the increasingly demanding standards of modern agriculture. This process is likely to be intensified as Albania seeks the European Union (EU) approximation to food safety standards (in particular the Sanitary and Phytosanitary Standards (SPS) and the Hazard Analysis Critical Control Point (HACCP), which in turn will force farmers to meet quantity, quality, timeliness and traceability requirements of new supply chains. Small scale, under-capitalised and often under-educated farmers have only limited prospects in this scenario, even with IFAD’s assistance. Assisting them in managing the transition out of small-scale farming is probably a more relevant support area, as argued in the next recommendation.

Responsible institutions

The lead institution for this recommendation is MADA, in collaboration with relevant ministries (such as Ministry of Economy, Trade and Energy, and Ministry of Agriculture, Food and Consumer Protection responsible for providing a conducive framework) and, most crucially, the private sector in mountainous areas. Moreover it will be important also to facilitate accelerated technology transfer and adaptation by partnering with relevant organizations and enterprises both in and outside Albania. The beneficiaries should be commercially oriented farmers with a documented potential to up-scale. IFAD will provide assistance to the process, including identification of international partners for technology transfers and piloting.

Time frame

Current activities aiming at this transformation should be continued and possibly accelerated within the time frame of SDRMA.

Recommendation 2. Increase the poorest labour market mobility enabling them to exploit emerging non-agricultural opportunities

Perhaps too often, IFAD (both in Albania and globally) has attempted to improve existing, mostly agriculture-based livelihoods of the poorest. Thus initial emphasis in MADA was to improve - marginally – the productivity of small-scale farmers by e.g. irrigation. Such a strategy is likely to only delay an inevitable process of agricultural concentration and commercialisation.

Instead, more efforts should be made to complement the above mentioned private sector led growth strategy with targeted efforts aimed at improving the poorest people’s skills and competencies, enabling them to take advantage of the new opportunities emerging in both rural and non-rural settings. Retraining, vocational education and targeted courses could form part of such a complementary strategy, especially in subjects where labour shortages exist as identified during SIP preparatory work.

Responsible institutions

MADA will hold responsibility for identifying gaps in competences using e.g. the SIP preparatory process as one vehicle. MADA should subsequently partner with relevant vocational education institutions capable of addressing such skills gaps.

Time frame

MADA will only approach relevant educational institutions once the skills gaps have been identified through e.g the SIP. This is likely to be a continuous process as different investments require different skills.

Recommendation 3. Prioritize districts with higher than average poverty rates

MADP was designed to start in the south due to the presence of two previous IFAD-funded projects (NDRDP and SSIRP) which were still ongoing at MADP start up and were located in Albania’s northeast and centre-east areas, but then at the phasing out of these two projects, the MADP was supposed to move to the poorer northern mountain areas. However, after the closure of NDRDP and SSIRP projects, the investments and activity level of MADP remained largely concentrated in the relatively substantial richer southern mountain areas, allocating only around 16 per cent of investment funds (i.e. sourced from MADA) to northern ones. If MAFF funds are also included, the MADP (i.e. MADA + MAFF) figure becomes 27% distributed funds for the north and 73% funds for the south, which is still a considerable imbalance. It is unfortunate that MADA in particular has focused efforts on relatively better off areas, leaving out poorer ones. This needs to be corrected and more investments will need to be directed to northern mountain areas.

Responsible institutions

IFAD should closely monitor the geographically-based resource allocation and should not allow a repetition to occur, but ultimate responsibility rests with MADA.

Time frame

Within the future projects and programme implemented in Albania, special efforts should now be made in order to ensure an appropriate geographical allocation of resources, according to poverty rates.

Recommendation 4. Make a clear, sequenced and time specific privatisation plan for MAFF

While there was an argument for using public funds (IFAD and government) for reaching poor mountain households when the programme started, this argument is now starting to lose validity. Commercial banks are, partly taking their cue from MAFF, investing heavily in mountain areas, and MAFF should be given the full operational and management freedom needed to remain competitive, as only a full privatisation process could offer. In this process MAFF should be assisted to define its comparative advantages vis-à-vis its competitors which are probably still related to the less affluent market segment in the mountain areas. Consequently MAFF should be dissolved as a foundation and created as an initially 100% government owned for-profit non-bank financial institution (probably a Financial Development Company, FDC), with the clear intention of selling the shares to a strategic investor.

Responsible institutions

Ministry of Finance, as chair of MAFF’s board and as borrower, is a key stakeholder capable of driving the process forward. However, both MAFF and IFAD will need to assist in making the detailed planning needed to ensure a smooth, transparent and fair process. IFAD, in particular, will need to provide specialized technical assistance of international quality to ensure this outcome.  Bank of Albania will need to provide the restructured entity with full license as a non-bank financial institution. Finally the Albanian Parliament will have to pass necessary legislation allowing for the dissolution of MAFF and the creation of a for-profit non-bank financial institution, initially owned by the government.

Time frame

It will be very important to have a carefully sequenced plan for the conversion of MAFF, respecting all legal requirements. Also, in order to attract the best possible strategic investor, the privatisation should not be rushed. A first step should be the establishment of the for-profit non-banking financial institution (e.g. a FDC) as a legal entity.

This could be completed within a year.

Concurrently there is a need to develop a business plan for the conversion period in order to ensure that MAFF does not loss momentum and market share during this critical period. Furthermore, to minimise uncertainty the identification of a strategic investor should also receive priority and probably be completed before the end of 2009.  This would allow for the gradual privatisation of the new for-profit entity over a period of a few years.

It is important that IFAD complements this process by providing assistance in upgrading MAFF’s product portfolio ensuring alignment to the objectives of the for-profit entity. This will also include staff and management training.

Recommendation 5. Ensure more realistic analysis of incentives and political economy issues

The MADP experience testifies to the need to critically analyse both economic and political incentives of all stakeholders (including possible losers) especially when designing interventions based on collective approaches. The MADP experiences also suggest that there are significant dangers in following donor fashions as the evidence from irrigation, forest management and micro-credit testify. Too often such approaches have been used as a blue-print that may have had relevance in another context, but not in Albania. Interventions relying on the establishment of new groups and associations need to be carefully evaluated, utilising both insight from the political economy of collective action and more simple incentive analysis grounded in the local realities.

Responsible institutions

MADA is a key institution for ensuring this outcome, but IFAD can assist in providing technical expertise (e.g. both economists and political economists) if demanded. GoA at both local and central level also has a responsibility to restrain political pressures and ensure that investment decisions are based on sober assessments of needs, feasibility and potential sustainability.

Time frame

Should be applied before all major investments, especially in relation to public infrastructure where collective action is needed.

Recommendation 6.  Increase the voice of the poorest mountain people in policy making and allocations of importance to them.

At the moment the key vehicles for promoting voice and accountability - the Fora - are not representing the rural poor, and there is the risk that attempts to broaden Fora membership will undermine cohesiveness and sustainability. Going forward, IFAD and MADA may need to devote more resources in analysing how to better ensure the representation of the poor in lobbying efforts, perhaps by supporting Civil Society Organizations (CSOs) and other more pro-poor groups directly, as a complement to Fora support.

Responsible institutions

MADA with the assistance of IFAD and possibly other donors, international CSOs and national organizations representing the poor.

Time frame

Throughout SDRMA programme period.

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1/The North-eastern Districts Rural Development Project (NDRDP) and the Small-Scale Irrigation Rehabilitation Project (SSIRP).

2/Other donors, most notably the World Bank, also followed and recommended this approach which clearly influenced the design of MADP.