Project ID: 1052
Executive Board Document: EB-98-64-R-24-Rev-1

Apuseni Development Project

This five-year IFAD-initiated project will pioneer a new concept, an Apuseni revolving credit fund (ARCF), which will function as a discount facility for the provision of both investm ent and working loans for qualifying beneficiaries. The activities eligible for financing include improved livestock production, small processing plants, and income and employment facilities, such as agrotourism and other small business activities. Given the reasonably well-functioning banking system, no more than 90% of project funds will be directly available to beneficiaries. The ARCF discount facility will refinance about 50% of capital investment loans, while participating financial institutions, which assume the full risk of the operation, will provide 20%; the remainder to be provided by the beneficiaries and a minor capital grant. The objectives of the project, which is the first IFAD intervention in the country and is in line with government policies for the development of the rural sector, will be to:

(i) improve the incomes, material conditions and the standard of living of the rural population of the Apuseni Mountains, a region with a high incidence of poverty; and

(ii) promote improved and profitable farming- and livestock-development-related cottage and village industries. The project area will initially cover 40 mountain communes.

Approximately 24 000 rural families - which have an estimated annual household income of USD 550 (well below the national GNP per capita of USD 1 480) and face the prospect of a continuing decline in their standard of living - will have access to project services. Principal project benefits will flow fro m the range of economic ventures financed through the project credit facility. Innovative Features: Discounting provides a mechanism through which domestic cofinancing can be attracted to the funding of project activities. It requires a relatively sophisticated banking system, something which Romania possesses. The flexibility of the project's discount facility ensures its ability to provide incentives in lending conditions and rates to satisfy the expectations of both credit institutions and sub-borrowers. The discount mechanism also guarantees the active participation of the private sector in terms of the sharing of risks and establishment of an overall sustainable delivery mechanism. Since financial monitoring of beneficiary credit will be assured by the terms of a subsidiary financing agreement and its accounting provisions, the project will establish a seamless linkage between project loans and impact monitoring. Substantial data are required and recorded in loan processing and, with minimal additional formatting and follow-up on-site visits, regular and orderly impact monitoring will be assured.

Loan amount:

SDR 12.4 million (approximately USD 16.5 million) on intermediate terms.

Total project costs:

Estimated at USD 34.1 million, of which a grant of USD 2.5 million will be provided by Germany, USD 2.6 million by a grant cofinancier still to be identified, USD 0.4 million by the Government, USD 7.0 million by a national financial institution, and USD 5.2 million by the beneficiaries.

Cooperating institution:

UNOPS.