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In most evaluated agricultural development projects in West Africa, implementation of the credit component has ended in failure in terms of sustainability of the financial service. Loan recovery rates, which are usually good at the start, soon deteriorate to rates of less than 70% and even as low as 50%. In Segou, Mali (103 ML), recovery rates for short and medium term loans were 518 in the first three years but fell to 46% and 36% by the fifth year. No project has ever been able to reverse an unfavourable situation. In fact, quite the opposite happens: The deteriorating loan recovery situation often leads to the complete halt of credit or the exclusion of defaulting borrowers from the system. In Senegal, following the M'bour Louga Project (026 SE), 800 farmers groups indebted to the Société de Développement et de Vulgarisation Agricole (SODEVA) became ineligible for credit by the Caisse Nationale de Crédit Agricole du Sénégal (CNCAS). In Siguiri, Guinea, after four years of 26% loan recovery rates for fertilizer and 69% for seed, the credit program was stopped. In other cases, project evaluations have revealed that the beneficiaries were not even members of the target group. In Fouta Djallon, Guinea (SRS 012 GU), the beneficiaries of credit provided by the village associations (VA) were usually traders or prominent citizens. There has been an insufficient capacity to redirect activities when they deviate from the original expected results.
- Basic financial indicators are often incomplete or not trustworthy (volume of loans, savings, rate of repayment...).
- Follow-up of individual loans is poor. Most of the time, the groups are not able to carry it out. In Segou, Mali, loans for animal traction were only registered with the VA; the amounts of individual loans were unknown to the project. As a result, cases of over-indebtedness went undetected.
- Reasons for non-payment are rarely examined. There is no follow-up or monitoring of the financial viability of the activities financed. The cost effectiveness of motorized pumps, in the Niger Valley under the Special Country Programme (SRS 009/023 NG) and the grain mills supplied to women's groups in Badaguicheri (SRS 009 NG) was never analysed.
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It is not always known whether beneficiaries belong to target groups.
The distribution of loans between men and women, for example, is often
unknown.
In the absence of a monitoring system for the management of the credit program, financial returns deteriorate over the life of the project. There is no examination of the difficulties encountered; thus there is no possibility of rectifying the situation.
- A suitable monitoring mechanism for the financial system should provide up-to-date information and allow the prevailing situation to be assessed and acted on accordingly:
. A good accounting system will provide the necessary data for determining the system's financial viability (income and bank charges, running costs and risks). The repayment rate - at the due date, after a month, after three months, after a year - is one of the most important indicators for acting quickly and making reliable comparisons.
. Follow-up of individual borrowers helps to determine whether or not there is a relationship between the type of borrower, the productive activities financed, and the type of loan. It is useful to establish the causes of eventual repayment problems. It also shows whether or not beneficiaries belong to the target group and how profitable their activities actually are. This sort of monitoring requires systematic analysis of loan records and in-depth, selected sample surveys.
- The effectiveness of the monitoring system depends on a clear division of tasks and responsibilities. The autonomy of the credit program should be preserved to avoid diffusing responsibilities that lead to inadequate credit recovery between the project, the bank and borrowing groups.
- Only progressive phasing for the provision of loans will allow the monitoring system to become fully operational. In Segou, rapid disbursement of a large-volume, medium-term credit early in the project meant that later attempts at reorganization were futile. On the other hand, in Atacora, Benin (101 BE), the implementation of medium-term credit by the Caisses Locales de Crédit Agricole Mutuel (CLCAMs) is done, initially, on a small scale; results are analyzed by the monitoring system; and the credit approach can be reorganized accordingly.
Select any of the following related project profiles for background information: 056 GU, 101 BE, 103 ML, 187 CG, 198 GH, SRS-011 BF, SRS-012 GU.
