Managerial issues

The wide geographical spread coupled with, in some cases, many components, IAs and groups of beneficiaries; the poor status of roads and communication and at times security problems, created difficulties in implementation, in the flow and control of funds and in coordination of project activities. For all projects designed after VORADEP, an overriding concern for the institutional arrangement has been the choice of management structure that would enhance the future sustainability of project activities and benefits, achieve managerial efficiency and maintain a reasonable degree of autonomy for managers.

All IFAD-initiated projects in Ghana have fully adhered to the GOG preference of excluding expatriate technical assistance. All Project Coordination Units (PCUs) are run by a core staff of nationals who receive, as an incentive, remuneration in dollars. These incentives vary from one project to the other without clear and established criteria. Overall, there has been a remarkable continuity of the national management teams of operational projects, and in particular the Project Coordinator (PC). In almost all cases PCs have been associated with these projects since their inception. The PCs are qualified, experienced, motivated and command authority.

In general the projects have adequate core staff in the management/coordination unit. The performance of projects in the control and coordination of project activities, in building institutional capacity of IAs, in the delivery of services to project beneficiaries and their organizations can be rated satisfactory. This rating should be attributed to the motivation of projects' management teams, their continuity, the incentive package provided by the GOG and IFAD to project management, and to the overall good performance of the Cooperating Institution (CI) in identifying and following up managerial issues.

Three broad organizational models can be distinguished in IFAD projects. Model I: The full absorption of the Regional Ministry of Agriculture by the project managerial structure represented by VORADEP, which was initiated and supervised by the World Bank with IFAD cofinancing. Model II: The semi-autonomous model represented by SRDP, SCIMP and REP. Model III: Integration of project coordination and management into the Regional Ministry of Food and Agriculture (MOFA), represented by LACOSREP and UWADEP in which the PCU is headed by the regional director of agriculture (RDA). While full integration of PCU in the regional ministry has not yet effectively materialized for various reasons, the CPE still favours the third model on the grounds that with necessary adjustments it is much more sustainable than the others. The fact that the RDA is the head of the PCU greatly facilitates project implementation.

Overall, despite the intention of the project designers, the linkage between the PCUs, and particularly the PCs, and the national ministry remains close and strong. Two reasons can be advanced for this: first, decentralization to the regional level is still in its initial stages, and second the national Minister maintains to date the ultimate authority to recruit and dismiss; and to determine the special pay-scale of the core staff of the PCU (for ultimate CI/IFAD approval). The main issue which should be dealt with concerns the structure of incentives and sustainability. The current lucrative terms for project management cannot be matched by the Government after project completion. It can also adversely affect cooperation with the IAs and increases the frustration of its staff. It would be more constructive if the Government continues to pay the salaries of the PCU staff and the project pays an attractive allowance from its own funds. The IAs' staff should also be paid in parity with incremental duties brought about by project activities.

Coordination. The PCU coordination role intensifies with the complexity of project design. In addition, after 1991 the GOG adopted an active policy of decentralization to the regional and district levels. As a result a very elaborate coordination mechanism has developed to synchronize the activities at district, regional, ministerial and national levels. These have not yet reached the desired effectiveness.

Government Counterpart Funds. Inadequate counterpart funding of project activities constitutes the most important implementation problem in the Ghana portfolio. Statistics show that it is not only the limited amounts of funds transferred to the projects which have deleterious effects on project implementation but also the untimeliness of those funds. Delays in the disbursement of counterpart allocations have negative effects on implementation of project activities. In order of importance, procurement delays are the next most important problem. Each project management attempts to circumvent the problem in its own way, but there exists no systematic approach to deal with the problem either at project or national level.

Institutional Support. In retrospect, IFAD projects have been very instrumental in providing institutional support and capacity-building programmes to the numerous government departments involved in project implementation. Projects become a major source of staff mobility, rehabilitation and construction of offices and accommodation facilities, training and operational funds. This should enhance the maintenance capacity of IAs, provided that adequate budgetary resources are made available on a timely basis. Consequently, competition developed among IAs, participating banks (PBs), NGOs and regional and district authorities to obtain a fair share of project resources. The projects are also supporting decentralization through the transfer of the responsibility for budgeting to the regional and district levels, which constitutes an important contribution to institutional development.

Human Skills Development. Training has been an essential feature of IFAD's portfolio in Ghana. Many project staff benefited from local and external training. Research and extension received the largest share of the training programme. A large proportion of senior staff of ongoing projects have been associated with VORADEP in the past and trained under its auspices. The results of some of this staff training were evident in the project work which followed. IFAD's portfolio in Ghana has therefore contributed significantly to human skill development at the project implementation level. It has also contributed, albeit with various degree of successes, to training beneficiaries, men and women.

Monitoring and Evaluation. The effectiveness of Monitoring and Evaluation (M&E) units was found to depend on many factors including the exposure and experience of the officers involved, the turnover of Monitoring and Evaluation Officers (MEOs), the timely response and cooperation from district and regional officers, the incentives they receive, the confidence and relations between the Project Managers and the MEOs, the availability of computing expertise of M&E staff and management's full appreciation of the role of M&E as an instrument for decision-making. It is to the credit of all ongoing and closed IFAD projects to have undertaken baseline studies within a relatively short period of project start-up. While the quality of these surveys varied, they no doubt contributed to the process of monitoring. All projects have successfully developed indicators to monitor project progress but emphasis has usually been on quantitative aspects. It was also noted that no clear methodology was followed in establishing a basis for impact assessment and beneficiary assessment of project services and whatever was done in this filed has not received adequate attention by project management. Monitoring systems in most projects have not been fully utilized as an effective management tool.

Cooperating Institution. All IFAD-initiated projects in Ghana have been assigned to the United Nations Office for Project Services. The performance of this CI has been satisfactory overall. Up to the end of 1993 all projects have been fully supervised twice a year. Since 1994, and as per agreement with IFAD each project received one full supervision mission per year (i.e. field visits) and one follow-up mission (only project headquarters visits). Reporting has been comprehensive, relevant and regular. Mission composition, however, has been dominated by technical expertise (agronomy/irrigation) at the expense of the social/community development fields. The CI has to be credited for taking initiatives which seem to have had a positive effect on project implementation. These include: (i) the recruitment of a group formation specialist for SCIMP not originally included in design; (ii) the appointment of a credit coordinator for all Agricultural Development Bank (ADB) activities in IFAD-supported projects; (iii) the regionalization of project budgets; (iv) exchanging technical inputs between projects (e.g. high-yielding cassava varieties and improved livestock breeds); and (v) initiating inter-country training through visits programmes for project management.

Performance of IFAD projets by main areas of interventions

(a) Technology Development and Dissemination

Food Crop Technology. While adequate technology exists for export crops (cocoa, oil palm, cotton and coffee) and reasonable information exists for maize and rice, the situation with the other main food crops (i.e. roots and tubers, and food crops of the northern regions) is unsatisfactory. Most crop packages are not adequately area-specific, usually incorporate inputs that are beyond the reach of the farmers and, in many cases, the packages are non-viable. IFAD supported a number of initiatives with respect to the generation and dissemination of food crops and livestock technologies in Ghana specifically through its own initiated projects. The Fund's activities reflected the critical importance of cassava (and other root crops) in the smallholders' farming system and its substantial potential to enhance household and national food security. Of the per capita grain equivalent supplied by cereals, roots and tubers and plantain, cassava alone supplies 30% . Between 1980 and 1995 growth in areas planted with cassava averaged 7% as compared with 3.5% for maize, which can be partly interpreted by the shift in cropping patterns observed as a result of changing relative prices.

IFAD played a pivotal role in the area of technology development and adaptation for cassava as a result of the activities of the National Root and Tuber Crop Improvement Programme (NRTCIP) under SRDP. The programme successfully took advantage of the knowledge available both within Ghana (mainly through VORADEP) and internationally (mainly the International Institute for Tropical Agriculture (IITA) - Nigeria). Following four years of intensive field-testing, new varieties were produced with three times the yields of local varieties. Activities of biological control of cassava diseases under NRTCIP were equally successful with wide predator releases. However, while excellent technology with cassava has now been developed the multiplication, dissemination and distribution of these varieties are lagging and thus preventing smallholders nationwide from fulling reaping the benefits of the developed technology.

Livestock Technology. IFAD supported various other activities in the field of technology development, of a pilot nature, including the promotion of improved breeds of small ruminants, and draught animal programmes. The small ruminants activities are the most promising so far. These activities were only belatedly included as a sub-component of SRDP following the assessment and recommendations of the Mid-term Evaluation in 1989. The improvement of sheep growth rates and size through the infusion of Sahelian breeds, together with the promotion of better livestock husbandry and the provision of water, were the main thrusts of the activities. An interesting aspect of these activities is their replication in other ongoing IFAD projects following their initial success in SRDP. The small ruminants project showed satisfactory results and there is strong demand from the small farmers and women in particular. The draught animal project had very limited scope and few participants, and even though the ploughing and transport services are critical, not much progress was achieved.

IFAD's support to extension in terms of infrastructure, training and the development of modes of operations (particularly the stronger research/extension/farmer linkages), gave the Department of Agricultural Extension Services (DAES) a solid foundation on which to base its programmes. Under the Unified Extension Approach (UEA), begun in 1992, all extension messages are channelled to the farmers through a single Front Line Staff (FLS). The UEA is currently facing some problems which are affecting IFAD's operations. FLS appear to be in short supply whereas technical staff, within districts and regions, whose services could be of direct benefit to the farming community are relatively numerous.

Within the framework of the UEA, some of IFAD's projects have supported approaches that provide the link between the FLS and its beneficiaries formed into groups, therefore, filling a crucial gap in technology dissemination. Noteworthy examples are: (i) the project's use of Community Livestock Workers (CLWs) as a link to the community in dealing with small livestock. For the CLWs concept to be sustainable, the community must value its service and willingly provide reward. It follows that the CLWs will need to be adequately trained and have access to sought-after technologies; and (ii) the drastic reduction of FLS which negatively affected the activities of Women in Agricultural Development in some IFAD projects led them to support the Women Extension Volunteer concept, to act as a conduit between FLS and women farmers in IFAD's target groups. The experiment has received a good response from the communities and is worth replicating elsewhere. The progressive improvement of Research/Extension/Farmer linkages has been a positive feature of IFAD's experience in Ghana.

(b) Rural infrastructure

The infrastructure development activities in IFAD projects in Ghana have been generally successful and several aspects of IFAD's experience in this field are worth replicating. Significant adaptation of methodology to change unrealistic design features or to accommodate a changing implementation context was undertaken. Overall, the degree of success depends on the implementation approach adopted. The projects increasingly resorted to contracting work rather than relying on government agencies for physical implementation. Thus, much more of the road rehabilitation and maintenance work is carried out by private contractors supervised by the Department of Feeder Roads (DFR); construction of irrigation dams is being contracted and NGOs are implementing the construction of hand-dug wells in some project areas. Three projects - VORADEP, LACOSREP and UWADEP - included irrigation activities in their design, with the most in LACOSREP, where dam rehabilitation together with catchment area protection, accounts for 44.4% of total project costs.

Irrigation. Dam rehabilitation and construction in northern Ghana, characterized by low and variable rainfall, are valuable investment opportunities for the production of high value crops during the dry season and for livestock support. This is particularly true in areas far from major urban centres. Hence migration of labour is difficult and work opportunities not readily available. As long as the return to labour in irrigated activities is higher and more sustainable than labour opportunity costs elsewhere farmers will prefer these activities. The medium to long-term viability of small dams is dependent on adequate catchment area protection and sufficient attention to routine operation and maintenance of the dam infrastructure which, in turn, is dependent on the creation of strong Water Users' Associations (WUAs). As of the end of 1995 about 50% of LACOSREP appraisal targets for irrigated land had been achieved.

Social Organization. The experience of WUAs in the Upper East Region presents a particularly useful example of participatory development. In contrast to VORADEP, full participation of the beneficiaries is sought for small-scale irrigation schemes under LACOSREP. As a prerequisite of rehabilitation, irrigation farmers and potential users had to organize themselves into WUAs. Existing informal WUAs were used where possible rather than forming new ones. In some instances communities with a tradition of group formation and self-help were targeted to facilitate the formation of these associations. Adequate staff training and motivation proved essential in the successful formation of WUAs. The WUAs provide labour for construction with support from food-for-work rations provided by the World Food Programme.

A standard procedure for animating communities around the rehabilitated dam sites has been developed as a result of project efforts. Concerned government departments along with NGOs, conduct the initial animation prior to the detailed survey and design work by the Irrigation Development Authority (IDA). The basis for WUAs is thus formed and built upon by the District Facilitators and other field officers. Detailed regulation and by-laws were developed in close participation with the WUAs. Representatives of the WUAs are being gradually integrated into local government administration and will shortly become members of the District Assemblies.

The land reclaimed on rehabilitated dams was relatively limited due to the region's agro- ecological conditions. It was divided into small plots and distributed according to the local tradition. All farmers were extremely eager to have a plot. It was noted, however, that women in particular had a very meagre share, not even commensurate with their 33% share of WUA membership. The low level of women's representation in the WUAs has also led to their low participation in decision- making in these groups, including the allocation of irrigable land. This phenomenon is consistent with observations throughout West Africa that land under improved technology is, by tradition, managed by men.

Beneficiary involvement at the construction stage has been a main prerequisite to help in assuring that the beneficiaries establish ownership interests in the dam infrastructure. Increasingly however, communities around the dams were reluctant to work without reward. It is the assessment of the CPE that it is feasible to construct irrigation infrastructure using labour intensive methods provided the workers are rewarded. It is unrealistic to expect potential beneficiaries to contribute labour without remuneration. This is particularly true since construction activities are undertaken during the dry season when food security is at its lowest and household members are groping for any source of income (in their locality or urban centres) to satisfy the basic household food requirements. The opportunity cost of working in the construction activities must be considered. While the use of machinery will allow construction to be carried out at a faster rate compared with labour-intensive methods, relative costs will vary with circumstances including the cost and availability of labour and machinery, the value of the developed asset, the expected streams of income produced and the availability of employment opportunities elsewhere.

Catchment Area Protection. Environmental protection on irrigation schemes has not yet achieved its intended objectives. Despite efforts to establish nurseries only about 25% of the seedlings planted survived. The difficulties of protecting seedlings during the dry season, when stock are usually allowed to roam free, were underestimated. Farmers using the catchment area saw little point in restricting the movement of their stock. The revised policy of restricting catchment protection strips to about 20 ha, immediately above the full supply level of all dams, while by no means ideal is more realistic given the prevailing situation. Similarly, the recent assignment of responsibility for catchment protection to WUAs who in turn allocate responsibility, on a reward basis, to individuals rather than communities is a positive move. The success or failure of catchment area protection will depend on the establishment and empowerment of effective WUAs.

Potable Water. Most of the projects did not give sufficient weight to the importance of potable water in their designs, but during implementation the projects successfully introduced potable water at the request of the beneficiaries. The technical method of accessing potable water varied with the geo-physical situation. Beneficiaries, especially women valued this activity highly, because of the time saved, and as a result showed surprising persistence in the efficient operation and maintenance of the wells through village water committees. The formation of community village water committees together with a financial commitment by the community has always been a prerequisite to initiate project-promoted potable water activity. The higher the value (or the utility) of the service provided the more forthcoming is the participation of beneficiaries and the sustainability of the structures. Communities' participation in selecting the location and construction prepared them to take over management of the facility as quickly as possible.

Road Improvements. Road improvement has been successful in Ghana and targets have mostly been exceeded. Better strategies for feeder road maintenance appear to be evolving. One of the main features evolving is that the role of the DFR should be limited to design and, perhaps, supervision except in situations where suitable contractors are unavailable. Furthermore, the assumption that villagers will provide free labour for work on roads servicing their communities proved untenable. Depending on circumstances, food-for-work and/or cash remuneration, speeded up and improved implementation. Road improvements unlike improvements to irrigated land, do not represent a well defined physical asset that will directly add to individual household resources and income. Remuneration of labour, in whatever form, is therefore essential in this case.

(c) Rural credit

All IFAD-initiated projects in Ghana included a credit component; first under SRDP, and then with further refinement under SCIMP, LACOSREP, REP and UWADEP based on previous experience. As at end December 1995, credit had enabled a total of 5 568 groups with nearly 60 000 beneficiaries (of which 60% are women) under three projects to participate in rural financial intermediation. Credit helped them to buy farm inputs and to undertake marketing, processing and storage, as well as to meet emergency consumption needs. Despite this, the credit components have had mixed results and the CPE considers credit the weakest element in IFAD's project portfolio in Ghana.

Group Credit. Credit was delivered to individuals through the mechanism of groups and this provided collective collateral for lending agencies as compared with conventional asset-based lending. However, in practice, credit was mostly supply-driven and target -based, rather than demand-induced. Members joined groups primarily as a way to obtain institutional credit. NGOs/line agencies initiated groups with the ultimate purpose of acquiring credit. This resulted in promoting essentially credit groups rather than groups with cohesion and participation, which ironically limited their creditworthiness. The main factors which reduced group effectiveness were: illiteracy of members, absence of uniform guidelines to various NGOs/line agencies for group formation, inadequate training in bookkeeping and financial management, too much emphasis on receiving credit, haste of NGOs in reaching the targeted number of groups, and splitting of existing groups into smaller ones simply to conform to project stipulation.

The formation and animation of groups to receive credit has been found to be an extremely difficult task. Despite so much emphasis being placed on it under IFAD projects and support provided to NGOs and other agencies for it, one of the major weaknesses in successive IFAD projects continues to be the large presence of weak and inadequately trained groups. On the one hand this has led to the reluctance of credit institutions to approve loans for these groups and on the other has increased the incidence of group dispersion and unsustainability after receiving the credit. Non- cohesion of groups was also found to play an important role in the low level of servicing and repayments of loans. Groups, so far, have not evolved into cost effective units for obtaining credit services from the formal banking sector which threatens the profitability of this service from the financial institutions perspective.

Savings Mobilization. In more recent projects, the credit group training and development was to have been linked to savings mobilization. However, in practice savings mobilization was neither systematic nor regular. The requirement of a 10% deposit to qualify for loans was not implemented in its spirit. The intention was to establish the savings habit within rural communities. Mandatory group savings requirements for lending has caused difficulties for the groups. Several factors such as low household income, high inflation, a preference to keep savings in the form of livestock, inaccessibility of bank branches, flexibility of services offered by informal lenders have contributed to lower financial savings deposited in banks. Deducting mandatory savings from loans has affected the economic viability of the loan and in this sense is counterproductive. Credit groups have not acted as a catalyst for effective self-sustaining intermediation between savers and investors.

Notwithstanding, some bankers in the project areas, otherwise reluctant to accept the poor as their customers, appear to have begun to see in them a market niche with some potential. They are beginning to recognize that group collateral may substitute conventional asset collateral, but only if groups are strong, cohesive and responsible.

Participating Banks. One of the dominant features of IFAD's ongoing credit components is the utilization of multiple formal credit institutions in the delivery of credit. These include the Agricultural Development Bank (ADB), the Rural Banks (RBs) and some commercial banks. There has been only a limited attempt to incorporate informal lending sources. The limited number of retailing units (around 25) of participating banks in the project areas restricted the outreach and increased the borrower's transaction costs. One participating bank, ADB, financed 76% of all groups under the three ongoing projects, loaned 75% of all credit and covered 71% of all beneficiaries, as of December 1995. During the same period RBs had financed only 12% of beneficiaries under the same three projects.

Other factors influence the effectiveness of ADB's operations in reaching IFAD's target groups. These include: (i) Bank's procedures in approving loans causing delays in credit delivery; (ii) multiple charges over and above the interest rate which affect the viability of loans; (iii) rigidity in loan amounts approved to farmers; (iv) lack of transparency in dealing with groups particularly with respect to the issue of rebate for timely repayment; (v) inadequate loan disbursement patterns and loan repayment schedules; (vi) unrealistic loan appraisal procedures; and (vii) the preference occasionally displayed by ADB to allocate its resources to cash crop areas (cocoa).

Five major issues were raised by ADB as major obstacles to the bank in participating in IFAD-supported projects: (i) inadequate margins available on loans and high transaction costs; (ii) delay in reimbursement of funds from project to meet operating expenses; (iii) delay by the Bank of Ghana in reimbursing against IFAD loans; (iv) because of poor recovery rates ADB is having difficulties in meeting its repayment obligations to GOG; and (v) groups not conforming to the required standards of training and animation.

In principle, being locally based and having capital originating from rural communities the RBs seem ideal candidates to participate as credit institutions in IFAD projects. However, for several reasons RBs are not evolving into strong and viable rural financial intermediaries which can fulfil this role effectively. Too many non-performing loans, high overhead costs, limited scale economies due to the low volume of business, lack of trained staff, insufficient supervision by GOG, an ineffective Board of Directors, and an inability to raise stipulated capital are some of the major constraints facing RBs. Most RBs prefer to limit their risk by lending to Government salaried workers for consumer goods, rather than expanding their lending to smallholders.

Sustainability of Credit Operations. With the current constraints on rural credit operations in Ghana, the components are facing serious sustainability problems. The major issues with a direct bearing on the sustainability of the credit operations and institutions are the timely recovery of loans, and remunerative lending terms and margins based on appropriately determined lending costs. The determination of these costs to achieve positive real rates of interest is particularly important during periods of high inflation.

Recovery Rates. As of the end of December 1995, recovery rates varied between 55% and 83% and averaged 72% for the three projects. Some of those defaults were involuntary, due to either conflicts, floods or drought. Other reasons include diversion into consumptions, failure of enterprises, recycling into next planting seasons, insufficient yield, low prices for the produce, untimely loans, and wilful default. Recovery rates varied widely with the activities covered by credit. Under SCIMP repayment was highest at 518 for input retailing, followed by marketing at 82%, inventory at 77%, processing at 75% and crop production (the largest category of loans) at 60% . Recovery was lowest for SCIMP at 66% and highest in SRDP at 84% .

Recovery rates are likely to improve if PBs devote more attention to synchronizing loan release and repayment with the cashflows of investment activities of smallholders. Many production loans were given too late in the planting season, marketing loans were given for a full year, etc.. The computation of unit costs of financed activities and loan requirements were often unrealistic, leading to low productivities of the loans and low recovery rates. Recoveries showed a marked improvement when banks monitored loans more closely and regularly.

There were no empirical data to show the actual intermediation cost of various banks under the projects, and the operating margins and support they need from the project. These were decided on an ad hoc basis and varied considerably from bank to bank. To improve the allocation of project resources, more transparent systems reflecting the actual cost of different banks should be installed.

IFAD's support to PBs administrative costs takes four forms: (i) a margin between borrowing rates from revolving credit fund and lending rates; (ii) support to physical infrastructure for loan monitoring; (iii) meeting recurring expenditure for salary, fuel, etc., for a specific period; and (iv) training support to bank staff. This has considerably helped PBs to pursue smallholder credit. The CPE mission concluded that such support is adequate at the moment, but careful monitoring is required to ensure that it is used appropriately.