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The credit projects evaluated in Asia have generally been successful in terms of group formation/operation, credit recovery, promoting income-generating enterprises, and increasing incomes of the poor. However, the question remains whether these introduced achievements, the institutions created or modified to implement the credit interventions and systems, will be sustainable after the projects have closed, and whether the project itself or a version of it can be replicated.
Groups are the basic building blocks of the respective projects; sustainability rests on the foundation of solid groups. Many projects have shown a continuing dependence on group organizers (GOs), who are the motivators, mobilizers and trainers of the groups. This dependence has been found to continue even after more than five years of project operation; hence, sustainability also relies on the GOs continuing to be available to the groups, or the groups becoming completely self-reliant. Sustainability from the point of view of the credit lending agency depends on an appropriate interest-rate spread, so as to provide the necessary incentives for credit operations after the project has closed. The performance of various institutions during project implementation is a good guide to their ability to sustain project interventions after project closure; hence, institutional strengthening promotes sustainability [ref: Pakistan Country Portfolio Evaluation (CPE)].
In Nepal (166 NE), many of the groups were in disarray, seduced by the very credit which they themselves had been formed to promote. In this instance, the institutional basis for replicability and sustainability are lacking. In Sri Lanka (219 SR), although more attention was paid to group formation, the lack of adequate beneficiary training has compromised their sustainability. In Indonesia (215 ID), the project has been largely successful in forming groups of the poor on a cohesive and self reliant basis; also, the development of associations (a spontaneous combination of groups) is further likely to sustain the groups and their activities after project closure.
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The development of groups on a strong and self-sustaining basis is as
important as the credit: The sustainability of the credit operations depends
on the institutions that guarantee and sustain it. To develop and maintain
strong groups requires attention to group formation, size and composition,
regular group meetings, development of group solidarity and cohesion,
group savings and credit, and beneficiary training in all aspects of group
formation and operation.
- Experience from evaluations is that the more successful groups could be self-reliant after around seven years, (on the assumption that, after this period, satisfactory contacts and working relationships have been established with the formal banking sector). However, when the project is terminated, there could still be groups which are only one or two years old and still need the group organizers' support. This problem can be solved either by: (i) non-government agencies (NGOs) taking over the functions of the GO on a continuing basis; or (ii) functions being performed by an already existing cadre of extension workers, who will continue regardless of project closure. The first approach has been adopted in projects in Bangladesh and Sri Lanka. This model is replicable, even on a nationwide basis, provided the participating NGOs have a wide enough network. This model is also sustainable, since the costs may be absorbed by the supporting NGOs and the continuing presence of village-based organizations of NGOs can provide an umbrella of support (e.g., the Grameen Bank in Bangladesh).
- The most important consideration, from the point of view of the lending agency, is to get the interest-rate spread "right", so as to provide the necessary incentives for the sustainability of credit operations after project closure.
Select any of the following related project profiles for background information: 166 NE.
