Completion Evaluation

Introduction

The economy

The Apuseni Development Project (ADP) was designed and became effective at a time when Romania was still experiencing the aftershocks of the breakup of communism. The macroeconomic situation was volatile, with hyperinflation, negative real interest rates, commercial lending rates over 100 per cent, and an economy and financial sector still dominated by state entities and state intervention. In 2003, 38 per cent of the rural population lived in poverty, compared with 14 per cent in urban areas, with rural per capita incomes in the order of US$330 per annum.

Only in the last five years has economic reform, in the form of liberalization, privatization and deregulation, been systematically pursued as part of an overall coherent reform agenda.

Agriculture and rural development

Land privatization was one of first reforms to be carried out in the early 1990s as the country moved towards the adoption of a market economy. Combined with the collapse of markets, and a lack of working and investment capital, the resultant restructuring of the farm sector led to a reversion to low input, subsistence farming. The share of agriculture in a declining gross domestic product during the 1990s fell from about 20 per cent in 1990 to 12 per cent in 2002, while the proportion of agriculture in employment rose from 30 per cent to 40 per cent in the same period.

Rural finance

Because of the legacy of an extensive cooperative network, there was a system of financial intermediaries in rural areas after the 1989 revolution. However, agricultural credit faced major problems during the 1990s as a result of land reform and financial sector restructuring. Most agricultural credit was channeled as highly subsidized directed credit by the National Bank of Romania (NBR) through the Agricultural Bank. This inhibited the entry of other institutions. As loans were backed by state guarantees, there was little insistence on creditworthiness examination and collateral. Financial intermediation, i.e. the transformation of savings into credit, functioned poorly. In 1997, the National Bank ceased its involvement in the provision of directed credit and introduced basic changes in credit policy.

The Ministry of Finance announced a phased reduction over 3 to 5 years of all directed credit; credit allocation was made the responsibility of the banks, not the state; and defaulting clients, whether parastatal or private, were barred from credit until the default was cleared.

Savings mobilization and credit capacities of the credit cooperatives were limited by cooperative regulation. Their union, CentroCoop, had failed to function as an instrument for effective financial market integration; and BankCoop was reluctant to grant loans to the credit cooperatives. At the same time, when saving was made attractive by NBR after a prolonged period of negative real returns on savings, cooperative members absconded in large numbers and shifted their savings to commercial banks. Besides, cooperatives were viewed as a relic of the communist era and had a negative connotation, and BankCoop which was intended by the IFAD project design to be the main conduit for the IFAD loan, was closed in 2000.

The project

The ADP, funded on intermediate lending terms, is the only IFAD-funded project in Romania. The project was identified in 1995 and appraised during 1997. The project loan was approved by the IFAD Executive Board in September 1998 and became effective in November 1999.  The closing date for the project is 31 December 2006, following two extensions totaling two years.

Total project costs were planned to be US$34.11 million. The IFAD loan consisted of US$16.46 million comprising a revolving credit fund of US$16.0 million, and US$0.46 million for institutional support and project administration. A variety of co-financing was anticipated from the participating banks, beneficiary contributions, and donor co-financiers.

Most of this co-financing did not materialize, though the Federal Republic of Germany provided technical assistance, but not in the form of co-financing. A co-financier to provide grants linked to the IFAD loans was not found. As of 31 July 2006, IFAD loan disbursement at SDR 10.1 million (US$14.5 million) had reached 82 per cent of the total loan amount.  Loan repayment from the Government of Romania (GOR) to IFAD is currently ongoing and will be completed by December 2018.

Project objectives and components

Despite its title, the project is essentially a credit project. The overall objective was to:

"…improve and stabilize the economic environment of the rural communities of the Apusenis through the promotion and credit-funding of on- and off-farm enterprises and the provision of rural development services."¹

The project had two components:

• Rural credit, the immediate objective of which was "to establish a sustainable mechanism for the provision of capital and development credit for financing of rural enterprises, utilizing a revolving credit fund; and
• Institutional support the immediate objective of which was "to strengthen rural development services".

The evaluation

The evaluation aimed to assess the project performance in terms of relevance, effectiveness and efficiency, impact, sustainability and innovations.  An evaluation mission was conducted in-country from 30 September to 20 October 2006.  The evaluation mission held discussions with officials of the Ministries of Agriculture and Finance, with staff of the World Bank, the Commercial Bank of Romania and the Carpatica Commercial Bank. The mission visited five judets (administrative districts), met with present and former staff of the Department of Agriculture and Rural Development, with the branch staff of the participating banks, and with fourteen borrowers. In an ancillary study of backward linkages in the dairy sector, thirteen borrowers and twenty non-borrowers were interviewed by a local consultant.

Project performance

Project rationale

The Appraisal Report implicitly assumed that lack of working and investment capital was a key constraint on rural productivity and livelihood enhancement. The ADP established a revolving credit fund (RCF) to provide development and seasonal credit for a range of improved on- and off-farm primary production and service activities.

Processing units for agricultural and livestock products were also included to add value and create local employment.

Disbursement was to be through local banks and cooperative institutions. The project would also support governmental institutions to promote the credit line and to provide technical and business support to beneficiaries.

The Appraisal Report referred positively to "the experience which IFAD had garnered in transitional economies …[whereby] … small-scale credit and rural financial services …provide the most appropriate niche for IFAD assistance; and in which it will have the most immediate impact".

Project implementation

For the first half of its life, the project was essentially non-performing, though there were vigorous efforts to stimulate it into life. The project became effective in November 1999, but by the time of the first project supervision mission, undertaken by the United Nations Office for Project Services (UNOPS) one year later, no loans had been disbursed. The second UNOPS supervision mission stated that the project remained "in a state of crisis" as only three loans had been approved 20 months after loan effectiveness and twelve months after the signing of the Subsidiary Financing Agreement with the sole participating credit institution, that is, the Commercial Bank of Romania. Three years after the project launch, there was a noticeable improvement in loan uptake, though at the two-thirds point through the project, only 16 per cent of the IFAD loan had been disbursed.

The design process

Some of the responsibility for this underperformance must be laid at the door of the design process. Following usual practice, the design process consisted of three stages (i) inception/identification, (ii) formulation/preparation, and (iii) appraisal. It could be argued that project start-up was also part of the basic design process in this case since it carried out some design adjustments. The design system used at IFAD places weight on ensuring continuity between the different stages. An effort is usually made to employ some of the same consultants from one stage to the next. In the case of the ADP, this continuity was maintained through the deployment of the team leader/credit specialist and through all four design stages.

The issue in this arrangement relates to the operation of checks and balances vis a vis the assessment of project design parameters and assumptions, through the project design cycle. In this case, the "appraisal" function was about "confirmation" of design features, rather than a "critical but constructive evaluation" of assumptions and parameters. The system hence emphasized stability in the evolution of project design, and was about "confirmation" rather than "objective evaluation" at appraisal.

The main sources of design review at IFAD are the Technical Review and the Operational Strategy Committees (TRC and OSC). However, the checks of these committees are carried out at the same time at the formulation stage. In this case, these checks were not followed through from formulation into appraisal, with the result that there were no changes in project design from one stage to the other.

Project assumptions relating to the macroeconomic and institutional environment were consistently overoptimistic, and fundamental design issues identified both by the TRC and the OSC, relating to effective demand by poor borrowers for project loans and the difficulties of identifying participating credit institutions, were not addressed. These aspects should have been the subject of risk assessment but were not.

And at the general level, the logframe was inadequately specified and was of minimal use as a managing and monitoring instrument.

Changes during implementation

As a result of the early failure of the credit component to disburse funds, mainly due to issues related to credit demand, credit delivery, communication and technical assistance (TA) for capacity building, radical changes were made to project design with the agreement of the GOR and IFAD. These affected operating parameters (terms and conditions) and implementation modalities. While the central objective of rural poverty reduction was retained, the geographical coverage was expanded three times, the life span of the project extended twice, and the targeting and impact approach was fundamentally altered. The geographical coverage was extended from six to fifteen judets, and prioritizing smaller borrowers was abandoned alongside the acceptance of heavily securitized lending approaches which prevented the poor from borrowing. Loan use was liberalized, bank co-financing dropped, borrower contributions reduced, and the life span of the project extended.

According to the project mid-term review carried out in 2003, the effect of the changes was to "seriously erode the smallholder focus".  Having inherited a credit project designed during macro-economic instability and with no clauses in the loan agreement related to lending targets and lending policies for enhancing access of smallholders to credit, the efforts of the IFAD and UNOPS missions in 2000 and 2001 were directed towards making the credit line operational rather than focusing on the issues related to smallholder focus. Hence, the credit line component started off as a general credit line rather than a project addressing the core concerns of IFAD related to smallholders' access to credit.

At the end of the project, disbursement had improved to the point where the project loan will be fully disbursed but with a lending portfolio which has gone mostly to the non-poor.

Relevance

The project's development objective was highly relevant to the needs of rural communities in mountainous areas. At the time of design, two fifths of the rural population was living below the poverty line of US$3.30 per day, and the mountainous areas were judged to be particularly disadvantaged. Yet, the project presented faults at the level of immediate objectives and operational design. The rationale for involving the poor in a formal credit arrangement was not spelt out and the target groups' "effective" demand was uncertain. The modalities and conduits for dispensing credit to small borrowers were quickly proved not to be viable. Over time, the project design has become more relevant to an environment which is macro-economically and institutionally more stable, and government rural development policies which are aligning to EU membership, and large scale enterprise development. The introduction of major design changes in the project in 2003 addressed in part the original design issues and reinstated the relevance of the project.

Effectiveness

The effectiveness of the project is mixed. It has eventually been successful in establishing a system for disbursing its loans, which is a significant achievement, although it has not been able to do so to the target group of small borrowers. Major modifications were instituted in project design with the Loan Amendment of 2003; these were driven by an impact hypothesis which was not adequately analyzed and explained, due to lack in time and by pressures for disbursement. It should be noted that the project continued having difficulty in disbursing its loans even after these modifications. After six and a half years, just over 1,000 loans have been disbursed, a figure which constitutes a small portfolio. Thus, the project has spread itself thinly through the 15 judets.

Given the paucity of loans in a given community, the effectiveness of the project in terms of its original intention of transforming poor communities in marginal areas is low. However, for most borrowers, the loans received appear to have been effective in terms of additional income and growth of assets, less so in terms of employment generation.

Efficiency

The slow start-up of the project generated efficiency losses through financial and human resources being tied down in a non-performing use. As far as the IFAD funds are concerned, the opportunity costs were limited since the project quickly moved to an arrangement whereby IFAD reimbursed the Government after end-loan pre-financing by the participating credit institution. The direct operational costs provided by the project for administering the loan are relatively low at an average of US$250 per loan. However, this does not take account of the operational and overhead costs incurred by participating banks and the Ministry of Agriculture judet agencies. The overall efficiency concerning the involvement of the Commercial Bank of Romania as measured by its IFAD lending relative to its overall outreach is minimal as BCR has five million clients out of which less than 1,000 are IFAD borrowers.

In contrast to the low efficiency in terms of the transaction costs of the banks and the involvement of other agencies, efficiency in terms of returns to investment as proxy-indicated by the low loan arrears ratio, has been excellent. The project has shown that rural and agricultural lending is feasible, and that the risks involved can be managed.

Performance of IFAD

IFAD underestimated the difficulties of operating in Romania, and overestimated its transition country experience. Contextual difficulties were compounded by lack of in-country presence and country analysis capabilities. For these reasons, IFAD was a weak player in the foreign assistance field. Weaknesses manifested themselves at the design stage where the process appears to have been mechanistic, with inadequate attention to macroeconomic, financial sector, and institutional aspects, and associated risk assessment. The quality assurance system of checks and balances operated through TRC and OSC were not fully utilized. However, to its credit, once it was clear that the project had major implementation problems IFAD moved pro-actively. The rationale for moving from a pro-poor to a growth-based project borrower strategy was not adequately analyzed.

During 2002, the IFAD Country Programme Manager (CPM), together with the Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ), seriously considered a link up with the Kreditanstalt fur Wiederaufbau (KfW) small and medium enterprise lending activity. However, the Ministry of Public Finance (MOPF) disagreed and the option was dropped. Thus, the opportunity to move to a more flexible lending strategy was lost. Subsequently, with a change of CPM, IFAD, along with its cooperating institution (UNOPS) agreed to the full collateralization of loans under the project. Little emphasis was put on credit technologies that would comply with modern micro-finance through commercial banks, such as cash flow lending. While at the same time, KfW continued to establish new cash-flow-based lending technologies into emerging Romanian banks.

Thus, IFAD abandoned the pursuit of a lending strategy which would accommodate poor borrowers. Because of the sole participating bank's lending practices, IFAD agreed to the full collateralization and securitization of loans, a barrier to poor borrowers with few assets and little income. Little emphasis was placed on credit technologies which would comply with modern lending practice to poor borrowers. However, once the new lending strategy was adopted, it was pursued with vigor by IFAD, UNOPS and MOPF. IFAD scores well on communication and information sharing, coordination, flexibility, and supportiveness, but only within the boundaries of the project.

However, four changes of CPM during the life time of the project has not been a good basis to provide for continuity and coherence. Of particular concern is the fact that different CPMs had different views on how the project should be reshaped, reflecting a lack of guidance and strategy.

Performance of Government

The National Plan for Agriculture and Rural Development prepared in 1999 did not provide a good back-drop for ADP. The Plan, which was heavily oriented to Romania joining the EU, contained no policy and approach for a rural finance system, which addressed the poor or otherwise. Given the transitory state of government institutions, government was unable to play an active role in project design. Once the project deficiencies became clear, the MOPF was galvanized into action, and played a crucial role in steering the project onto a track which would increase disbursement. The transfer of responsibilities of the Project Implementation Unit into the Project Coordination Unit in the Ministry of Public Finance was an unprecedented measure to resolve the issues encountered by the project. The Government scores well in relation to its pro-active coordination at the country and judet level during the course of the project crisis. However, its policy backstopping in relation to rural finance was weak, and its relationship with GTZ, a main partner, was at times tense. After a slow start, the Ministry of Agriculture played a key role in promoting and executing the IFAD loan product, though performance varied widely between judets.

Performance of UNOPS

UNOPS was the cooperating institution, responsible for loan administration and supervision. Because of non-performance by the project, its focus of attention became project redesign.  Since supervision missions are provided only once a year, its ability to play a decisive role in this area was limited. While it was a good team player and offered constructive advice, UNOPS should, likewise IFAD, have done more to articulate and analyze the shift from a pro-poor borrower to a growth based lending strategy. Given the early difficulties of the credit component, it is questionable that a rural finance or credit specialist was not mobilized until four years after project effectiveness. UNOPS assisted in tackling many of these issues proactively with a series of revisions (which required numerous loan and SFA amendments), including the streamlining of project implementation modalities, the elimination of CARD as a project agency, and the eventual inclusion of additional participating banks.

Performance of participating credit institutions

The Commercial Bank of Romania is the original, and for five years, the sole participating financial institution in the ADP. Being the largest commercial bank in the country, its reasons for participating in the project are somewhat unclear, and its approach towards rural lending somewhat ambivalent judging by the declining trend in numbers of IFAD loans disbursed over time, although the current performance may have been influenced by its ongoing privatisation process and review of all ongoing programmes being carried out in this regard. Until very recently, BCR was a state commercial bank, operating along conservative lines, influenced by a combination of National Bank of Romania regulations, and its own traditional banking culture. BCR applied a fully collateral- and guarantee-based approach to the IFAD loan product, which, while in line with NBR regulations at that time, was a barrier to rural borrowers both poor and non-poor. Nevertheless, BCR deserves commendation for having been one of the key players in enabling the ADP to happen at all, and in working with IFAD and Government in the early years of the project's life to overcome a number of difficulties which impeded implementation.

The Carpatica Commercial Bank joined ADP in 2005. BCC is a young, much smaller bank, with a more innovative and flexible approach to small-scale lending, placing more emphasis on cash flow based lending and loan appraisal. For the moment, it has taken up the slack in the declining IFAD lending portfolio and is helping to keep up the overall level of disbursement. BCC has been a welcome arrival to the ADP.

Partnership performance and organizational incentives

Relationships between partners were characterised at times by lack of consensus and unclear partnership arrangements. Most fundamentally, the shift from a pro-poor to a growth-based lending strategy was not properly articulated, and was a failure of partnership responsibility. Ultimately, the partnership will have fully disbursed the project, but to a certain cost to its development and immediate objectives.

Project impact

Agricultural productivity and beneficiary analysis

There is strong evidence of improved productivity for the non-poor individual and corporate borrowers who now constitute the primary beneficiaries of IFAD loans. Many of these are early movers taking advantage of the post- communist era vacuum of appropriately-scaled rural technology for a market economy. The Project Impact Assessment exercise, undertaken by IFAD in 2006, indicated that the financial results of all farms were positive, and that borrowers had succeeded in obtaining improved gross margins. This finding is corroborated by the Backward Linkages Survey commissioned by IFAD's Office of Evaluation, by the separate program of interviews carried out by the evaluation mission, and circumstantially by the very low arrears rates associated with IFAD loans.

The spread of benefits is narrowly confined. ADP has impacted on about 1,000 non-poor borrowers, the primary beneficiaries who will have most to gain in term of the ability to build household physical, financial and social assets. However, the investment activities of the primary borrowers has created around 1,300 jobs which are mostly taken up by the unemployed, who are likely to be asset and income poor. In addition to this group of poor secondary beneficiaries, there is a group of tertiary beneficiaries in the dairy sector. These are the milk suppliers to two milk-processing plants who have taken out substantial IFAD loans. These processors have provided an assured market for about 700 non-borrower milk producers for whom an estimated 1,050 further jobs have been ensured or created. About half of these jobs are in households owning less than five cattle, who are categorized as poor. Thus, about half of these jobs would be for family labor in poor families. Thus in total, a range of 1,900 to 2,300 jobs have been created for the poor, compared with an original target for poor beneficiaries of 6,000 – 6,500.

Physical assets

Because of the revised project strategy, only one third of the number of poor beneficiaries originally targeted have benefited from the project in terms of income or employment generation. Data to assess whether this has allowed these poor benefiting from the project to build their assets is limited. For the unemployed who take up jobs and whom it is assumed to be poor, it is likely that their wages will be used for consumption. For the (tertiary) non-borrower beneficiaries involved in producing milk for the processors, income generated would be used for consumption (clothing, health and schooling costs, etc.), but there is a possibility that some may be able to invest in asset building.

Financial assets

Again, because the project shifted its targeting strategy to the non-poor, it has had limited impact on the financial assets of the poor. Those poor who have benefited indirectly from the project are the unemployed who are unlikely to have surplus income after taking care of basic consumption needs, or small milk producers who are non-borrowers. Some of the poorer non-borrowers may be able to accumulate to invest. Neither of the two groups has fully benefited from financial services for the poor.

Human assets

The main impact of ADP with respect to human assets (nutrition, health, knowledge) has been in terms of building up knowledge and exposure of formal banking systems, norms and procedures by non-poor borrowers, and an exposure of banks to the need to develop products geared towards borrowers seeking small amounts of credit. It is not obvious that the project developed skills in the participating credit institutions in creating products that meet the needs of a new client base. A limited group of non-poor borrowers, on the other hand, has developed knowledge of the procedures involved in formally accessing credit. Training of banks staff, government agencies and borrowers has also taken place.

Social capital

As the project shifted its targeting strategy to the non-poor, it has had little impact on the empowerment of the poor.

Institutions and services

In a development sense, the project has been effective in providing access for the first time to borrowers who were hitherto not integrated into rural financial markets. This is an important achievement. However, because of the revised project orientation, when measured against improving the enabling environment for the poor, little has been achieved, most crucially with pro-poor credit terms and conditions.

Markets

In the dairy sector, IFAD loans for both individuals and companies have played a role in helping to restructure the dairy industry in those judets where loans have been disbursed to processors. During the 1990s, the state-owned dairy sector processors attempted to survive and transform, but ultimately failed and were liquidated. Production scales and technology were outmoded and inappropriate for the market economy. New processors including those financed by the IFAD project emerged to replace the defunct state processors, and these and their suppliers, who include a substantial proportion of poor, have been helped significantly by IFAD loans in two judets, Alba and Hunedoara.

Sustainability and ownership

The rating for this is determined by whether the results of the project will be sustained in the future without external assistance. Bearing in mind that the results of the project have limited impact on the poor, the assessment is nevertheless that some supporting factors (ownership, technical and financial sustainability) make the prospects for the systems put in place by the project in the medium term quite good, even though the future of the revolving credit fund remains uncertain.

Innovation, replicability and scaling up

The project was driven towards disbursement through a conventional, non-innovative, commercial banking operation. Yet, some innovative elements are visible in the project, which could be taken and applied elsewhere.  Had it stayed the distance with a smallholder and small enterprise focus, it may well have found a solution of lending to small borrowers.  Essentially the project is not to be repeated since it didn't build a system which supported the rural poor, although it was instrumental in introducing a rural finance system in Romania.

Conclusions and recommendations

Overall assessment

ADP was designed and implemented under difficult conditions of macroeconomic and financial sector volatility, and institutional uncertainty. However, the evaluation raises a number of questions about the design system that is operated by IFAD. These relate to the trade-off between maintaining continuity between the different phases of design, and the objective assessment that is needed at appraisal to confirm the main design parameters and assumptions of the project.

This evaluation points to the major shift in the project lending strategy from a small to a medium- and large-size borrower emphasis. It also points out that the impact paradigm that was implicit in moving from smaller to larger borrowers, and the assumed benefits from backward and forward linkages, were not adequately analyzed as a basis for the shift in strategy. Nor was an associated growth-based operational strategy put in place to ensure that poverty impacts would be maximized. And given the fundamental change in the impact paradigm of the project, there should have been a formal re-appraisal.

The table below shows the project ratings for performance, impact and overarching factors:

Performance ratings of the Apuseni development project

a/    IFAD uses a rating scale of 1 to 6, where 1 represents the lower score and 6 the highest.
b/    The rating for project performance is, as per OE project evaluation methodology, calculated as the average of relevance, effectiveness and efficiency.
c/    The overall project achievement rating is, as per OE methodology, given by the evaluation team taking into consideration its assessment of project relevance, effectiveness, efficiency, rural poverty impact, sustainability, innovation, replication and up-scaling.

Recommendations agreed upon by all partners

There are no specific recommendations for the project per se since further IFAD loans are not in the pipeline, given the fact that Romania has become a part of the European Union. However, the following recommendations are offered to IFAD and the Government of Romania for the design and implementation of future projects and programmes similar to the ADP.

Design process

The evaluation has highlighted a number of issue areas in the IFAD project design process. These relate to the appraisal function, to the internal accountability process involving the Technical Review Committee (TRC) and the Operational Strategy Committee (OSC), to organizational incentives relating to disbursement as the driver of performance, and to the issue of re-appraisal of a non-performing project.

IFAD is currently revisiting its overall design process through the Action Plan to ensure the quality and enhancement of its products, performance and processes. Within this context, the Fund should:

• Review the role of appraisal in the overall design process, distinguishing between its use for "critical assessment" or for "confirmation" of design parameters and assumptions;
• Ensure an appraisal function which is independent of formulation;
• Review the manner in which comments provided by TRC and OSC are dealt with in relation to project appraisal and finalization, possibly having OSC comment at the appraisal stage;
• Review organizational incentives relating to disbursement as an implicit driver and measure of portfolio and loan performance; and
• Consider a trigger mechanism for automatic re-appraisal of non-performing projects, possibly based on supervision performance ratings.

It is expected that some of the above recommendations will be addressed by the new independent Quality Enhancement mechanism (already operational) and the Quality Assurance mechanism (recently established in January 2008) which will come under the responsibility of the IFAD Vice-President's Office.

Partners involved: IFAD

Targeting and monitoring and evaluation

Several findings on the issue of Targeting and Monitoring and Evaluation (M&E) stem from the evaluation of the ADP. Recommendations to this regard include the following:

• The need for IFAD to develop a clear target group at the stage of project/programme design in a defined area and remain focused in line with the provisions in its targeting policy;
• Consider, where appropriate, the undertaking of a baseline before implementation start-up;
• Identify quantitative and qualitative Objectively Verifiable Indicators (OVIs) and include these in the log-frame; and
• Ensure that an M&E system is a core activity of any project.

Partners involved: GOR, IFAD

The revolving credit fund

One question raised by the evaluation with regard to the sustainability of the credit component relates to the future of the Revolving Credit Fund, that is, to ensure that it will continue to revolve as planned until 2018.  The project partners seem willing to continue using the revolving funds. This implies that lending will be on a declining scale, given the schedule of repayments to IFAD and the fact that there has been no contribution of own bank resources. Representatives of BCR confirm that they will stay with the project until its end and will utilize all the remaining available funds. Furthermore, BCR expects to expand its rural portfolio, building on the experience with the IFAD loans when using EU restructuring funds in all its branches; Banca Carpatica (BCC) has also been very active in this regard and has utilized access to ADP funding to support the expansion of its branch network.

Based on the above, the following recommendations pertain to the Revolving Credit Fund (RCF):

• Avoid extending the RCF to additional banks; and
• The PCIs should consider leveraging any funds (or funds from other donors) to maintain RCFs and/or develop new product or services of relevance to the target group

Partners involved: GOR, PCIs

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1/ ADP Appraisal Report, IFAD, 1998, p. 11.