Arable Lands Development Project

March 1992

Interim evaluation report

Despite an estimated real GDP growth of 10% an outcome of expansion on mining, 50% of the population live at below subsistence level. Agriculture remains the dominant sector, though by 1980 its share of GDP dropped from 40% to 20%. At appraisal time over 80% of the population still depend on agriculture for employment and subsistence. Yet due to semi-arid climate and erratic rainfall, arable land is limited to about 5% of the total area of the country; hence, the country relies heavily on food grain imports. The Arable Lands Development project (ALDEP) is designed within an overall programme in which other multilateral donors participate e.g., AfDB. The programme aimed at raising the production of food grains by small farmers and make the economy less dependent on imported food.

Project design and objectives

The project was based on the Arable Lands Development Programme originally conceived by the Government of Botswana as early as 1977. Within the context of this Programme a pilot phase was initiated in 1979. IFAD programming Mission (August 1979), ADB/IFAD/Identification and IFAD Preparation missions drew up the design for ALDEP from the experiences of this pilot scheme as well as from other research projects in Botswana.

Target group

Within the project area all farm families, except those with more than 40 head of cattle, constituted the target group of ALDEP. Targeting was articulated around cattle ownership because the number of cattle was taken as an indicator for access to draught power (and obviously cattle would be a proxy for wealth in such communities). Draught power is the single greatest non-physical or non-climatic constraint to arable farming in Botswana because of the bearing it has both on the total area a farmer can plough/plant in a season and on the timeliness of those operations. "Access" to draught power was therefore used to categorize the traditional arable farmers.

On the basis of cattle ownership and access to draught power the farmers of the target group were ranked into:

  • Model I - "No draught power" farmers - defined as those owning no cattle; 3 000 farmers (27%), each with an average total land area of 7 ha, cropping 5 ha annually.
  • Model II - "Inadequate draught power farmers" - defined as those owning 1-20 head of cattle; 3 000 farmers (27%) with an average holding of 9 ha, cropping 6 ha annually.
  • Model III - "Adequate draught powers farmers" - defined as those owning 21-40 head of cattle; 4 000 farmers (36%) with an average holding of 10 ha, cropping 7 ha annually.
  • Model IV - "Molapo" - dryland crop farmers;1 000 farmers (molapo, 9%) with an average holding of 4 ha cropping 3 ha annually.

Objectives and Components

Objectives. The principal objective of the ALDEP was to assist small subsistence farmers to increase the production of basic food grains (sorghum and maize) and legumes and sunflower in order to achieve self-sufficiency at household and national levels and raise rural revenues and improve income distribution.

Components. The project would comprise the following components: (a) on-farm investment; (b) seasonal inputs; (c) strengthening of the extension service; (d) strengthening of the credit service; (e) strengthening of the marketing input supply and distribution system; (f) project management and coordination; and (g) monitoring and evaluation.

Expected effects and assumptions

The incremental food grain production (maize, millet, sorghum) and pulses by these farmers would be about 18 500 tons annually a full development. Additionally, there would be incremental production of about 3 000 tons of cash crops (mainly sunflower) that would be directly marketable. At full development farmers would not only be self-sufficient in basic food grains but would also realize substantial marketable surplus to improve their income. The project would make a significant contribution to the GOB's goal of redistributing wealth from the mining sector to the poor segments of the rural population. Furthermore, the project would contribute to an improvement in national food self-sufficiency. The project's contribution through external and on-the-job training to institutional building would be considerable and would strengthen the extension service and agricultural credit institutions beyond the project life.

The benefits expected from the project are likely to be adversely affected by several conditions. These conditions relate to the level of subsidy to farmers and to measures designed to provide relief to farmers and credit institutions in the event of severe drought resulting in crop failure.


A team consisting of IFAD Senior Evaluation Officer and five IFAD consultants in the fields of extension, agronomy, credit, sociology, livestock, and monitoring and evaluation visited the project during January/February 1992 for a period of three weeks approximately. The objectives of the interim evaluation mission were to review project implementation, evaluate the extent to which project objectives were met and to review design and implementation of research policy and output of relevant agricultural technology. The mission reviewed extensively the project activities in the field, had extensive discussions with project and government officials, analyzed data on project impacts and beneficiaries participation. It consulted vast literature relevant to Botswana and the project as well as project reports.

Implementation context

The period during which the project was implemented had six years of consecutive droughts and eight years of drought out of ten. As a result, on-farm investment component was seriously impeded and the extension activities were mainly limited to input distribution and drought relief programme. In response to drought the Government of Botswana (GOB) initiated the Drought Relief Programme (DRP) and the Accelerated Rainfed Arable Programme (ARAP) through which GOB distributed subsidized inputs and grants to the project target groups jeopardizing project activities, particularly the input supply distributed through credit.

The GOB had windfall income from mining and has continued disbursement on project activities without requesting reimbursement from the financiers. For example, at interim evaluation the project disbursement from IFAD components have been estimated at 30%, but only 8% were requested for reimbursements. For AfDB loan disbursements were negligible prompting a cancellation of the loan, and the redesign of the project and its scaling down to about 50%. However, in terms of local counterpart fund the project experienced no problem.

Project achievements

Production effects. The project in many ways has performed well in institution building but expected production effects were not achieved, largely because of external factors. The immediate goal of ALDEP was to increase production among the low-income households, but firm data with which to determine positive effects are not available.

Raising potential food security on-farm. A very substantial physical participation of farmers in the adoption of implements and a building up of a reservoir of equipment among Botswana's poorest farmers. Some 43 000 packages were distributed to 32 000 farmers compared to planned 23 470 packages, i.e., an over-achievement of more than 80%

Institutional Strengthening

(a) A strengthened extension system with the position of the extension work (AD) in the village being reinforced.

(b) The conduct of national tillage trials whose results show promise for the future, but also confirm the difficulty in disseminating standardized recommendations for farmers in situations with pronounced location-specific variations in climate, moisture and socio-economic conditions.

(c) A management system that has grown in strength during implementation and has established, not without difficulty, satisfactory relations with other parts of the MOA.

Adoption of Draught Power. Draught power available immediately at the onset of rains for the typical range of 10-15 days of ploughing/planting is a primary requisite in arable farming. But a foremost concern has remained the low adoption of draught power; only 14% of the ALDEP beneficiaries adopted draught power compared with the appraisal objective of 54%.

Limited Adoption of Equipment. Less than 20% of households without cattle received packages compared with 27% envisaged at appraisal, and the 40% set out in the Reformulated Programme (there is now some evidence that adoption is rising among these farmers).

Credit and Stores. The credit component and the construction of the nine lock-up stores did not perform. This was not a fault in implementation, rather the capability of the National and Cooperative Development Banks was assessed too optimistically at appraisal.

Monitoring and Evaluation. The establishment of an M&E system which has been extremely valuable in monitoring the project in spite of limited computer support. If strengthened, it would be able to conduct useful in-depth evaluations.

Effects assessment and sustainability

Without the necessary statistical data, the mission itself compiled and processed data from some 400 available questionnaires. Analysis of these data for the years 1989, 1990 and 1991 (including a separate 1991 sample of female-headed households) does not attest clearly to difference in production achieved by ALDEP farmers compared with those who did not participate in the project. Nor could production increases be universally attributed to particular types or sequences of equipment.

The majority of rural households persist with their traditional methods - broadcasting the seed and ploughing it in - rather than adopting the ALDEP-recommended double ploughing and row-planting.

Beneficiaries. Model II farmers were the largest group to take up ALDEP packages. Model I participation remained low especially in the southern region where there are fewer such farmers. The Francistown region recorded slightly higher than average participation by Model I farmers.

Area cultivated was not a primary targeting variable and for all the three years of the impact surveys, more than half (52%) of farmers had land areas in excess of 10 ha. Less than one-third (28%) had fields below 6 ha. In 1991, 37% of all farmers fell within the appraisal target ceiling of up to 7 ha for Models I, II and III.

Food Self-Sufficiency. According to Impact Survey (1991), half of the sample (48%) produced no cereals in 1991. Of the cereal-producing households, only 16% produce more than 200 kg of cereal grain per resident member. Most of the remainder produce about half of the resident members' needs per season but 40% produce roughly a mere 15% of annual cereal needs. The food security situation at the household level is precarious. Farmers have to depend on other sources of food - either purchased or obtained from other sources. There is a dire need to look carefully at production systems and to develop sustainable income sources such as goats or small stock.

Specific Effects on Women. About 20% of the participating households are headed by females. This percentage is consistent across years and regions except for the Southern (7%) and Maun (9%) regions where a lower than average female participation was observed in the 1989/90 survey. Most female households are in the Model I category whose participation was low. An increase in Model I participation in the project would mean an increase in female household participation.

Credit. The credit component of the project failed and was abandoned unilaterally by the Government in October 1983. The high cost of servicing a large number of small loans. The National Development Bank (NDB) and the Botswana Cooperative Bank (BCB) were not staffed or structured to deal with small-scale rural credit; they had a poor network of branches and long distances were involved in reaching farmers, creditworthiness, and hence the rate of repayment by recipients was very poor.

Nevertheless, the NDB did in fact make olans for some 2 464 packages under ALDEP indicating that there was a considerable interest in credit amongst the farmers at the beginning of the project. It is also notable that the uptake of packages obtained on credit was better balanced (more draught power and planters than ploughs) than under the down-payment scheme. Subsequently, many of these loans were converted into grants less down-payment.

Extension. The project has been partially successful in implementing its extension component. The construction, early in the implementation period, of 130 houses with adjoining offices for extension workers has made a positive contribution to their morale and sense of job satisfaction. Many people under-estimate the difficulty facing extension workers in the ALDEP project. They are not dealing with progressive farmers keen to adopt new technologies and risk changes in their farming practices.

It may not be feasible for farmers to respond to the main extension messages. For example, since the mid-1970s, recommended practice has been to plough in spring and row-plant - sorghum at 50-70 000 plants per ha and maize at 35-40 000 plants per ha. Recommended fertilizer application is 250 kg of single super phosphate per ha. Recommendations on planting and fertilizer application have not been widely adopted by farmers, largely because they require more draught power and labour than the traditional plough/broadcast method and yields are not much higher. Farmers perceive little net benefit in changing from a well-understood traditional method.

Environmental Effects. The project has been gravely affected by the adverse climatic conditions, rather than the opposite. Consistent with the rainfall pattern, the number of farmers planting was on the decline. While 88% of farmers were able to establish a crop in any given year. However, only about 68% harvested their crop in 1991, because crops failed to reach their maturity. In 1989, because of good rains the harvest was particularly good, about 80%.

Sustainability. Given the competition from other government programmes, which have large grant elements, the sustainability of project activities is questioned. Indeed, the whole strategic orientation of the project would be seriously impaired, unless GOB reverses the grant-based rural interventions. Credit institution sustainability has been further undermined by this policy, in addition to the common perils which rural financial institutions are familiar: with lack of appraisal of rural enterprises; collaterals and creditworthiness; low repayments etc.

Some project activities were given significant assistance in physical terms, such as office buildings and housing to extension staff. Given that GOB does not have serious problems with funding at the time of the evaluation, extension service sustainability hinges on the availability of the technical messages, and on the mobility which the project and GOB put at their disposal. In the previous years, drought conditions did not allow extension to demonstrate its potential.

Main issues and recommendations

Target Group classification. The present target group classification based on number of cattle is simple, reasonable and equitable and should be maintained. Since draught power is the limiting factor in poverty alleviation, the case for shifting to livestock units including small stock is not supported.

Food security. It could be argued that there is little or no rationale for further assistance to the ALDEP target group through production support if food security is already guaranteed, but there is insufficient evidence to confirm this supposition. Indeed, the data suggest that household cereal production is not sufficient to obtain food security. The vast majority of farmers require outside sources of income to meet cereal consumption requirements. Although farmers have access to additional resources, there is no statistical base for the assertion that these resources are sufficient for a minimum standard of household food security. Furthermore, remittances from RSA have likely fallen over the last two years.

Development and dissemination of appropriate technical packages. The farm budget analysis confirms that at present technology levels donkey draft is superior to oxen draft for cash- and labour-constrained households, i.e., especially for the FHHs. Hence, a strong case can be made for credit provision for such households to purchase donkey draft. At the same time, efforts should be made to furnish donkeys to FHHs outside of the Maun area, where donkeys are in ample supply.

The National Tillage trials have yielded valuable information and should continue and be extended: (a) technology generation and refinement need continued support and should be viewed as an ongoing process; (b) with the technology tested to date, smallholders are more likely to see greater productivity gains during periods when rainfall is below rather than above average; and (c) tillage trials should also explore the possibilities inter alia of: reducing production cost through the use of a smaller number of better trained draught animals; and using alternatives to the mould board plough.

The demonstration farms represent worthwhile interventions but need to be supplemented by the setting up of a network of farmer-managed on-farm trials. In such trials, a representative selection of farmers is essential, and farmers, not researchers, should be in command. The reward structure should be neutral to the cultivation method used and farmers should not receive free or subsidized ploughing services. They should be encourage to adapt and improve upon available extension recommendations.

Diagnostic assessments are needed in order to better target project interventions. The project should support the setting up of diagnostic teams with the extension system to provide the in-depth feedback to the project management that is all too often missing. The diagnostic teams would also provide the information base for more effective research-extension linkage.

The evaluation report recommends a review of present extension policy. In part, such a review is predicated by the mismatch between the old and illiterate farmers and the mostly young and inexperienced extension workers (ADs).

Rural credit. There has always been a demand for credit amongst ALDEP target farmers; but the two main rural credit institutions (NDB and BCB) are not in a position to administer small farmer credit schemes. Local NGOs have particular advantages in the implementation of credit schemes. They are: (a) community based; (b) have local knowledge (for example, of the creditworthiness of groups and individuals); (c) have a self-interest in promoting the development of their areas; (d) often have management structures already involved in provision of small-scale credit; and hence, (e) have an even stronger self-interest in ensuring that any credit arrangements they operate are properly administered. Credit under a pilot scheme should therefore be administered through the same outlets that currently provide inputs to the farmers, i.e., the ALDEP/BCU-supported NGOs. The role of the AD and DAO would be to determine the eligibility of applicants and to make recommendations to the NGO. It is important that the extension staff not become debt collectors.

Credit should also be considered for the acquisition of small ruminants. The ownership of goats represents a security- and risk-reduction strategy, especially for poorer households. The feasibility of providing credit for the acquisition of small ruminants, not only for high-risk arable production, needs to be pursued.

Access to land and water resources. Meanwhile, as complementary activities, the project should target its interventions on the basis of availability of local micro-catchments and boreholes so as to ensure a minimum of drinking water for humans and animals. Government policy on groundwater use and boreholes should be reviewed to determine whether it can be amended to stem primary causes of rural poverty and better support GOB and IFAD objectives. There may even be a case for a temporary subsidy for borehole development that favours Model I and II farmers to offset climatic risk (instead of subsidy on-farm investment).

The broader conclusion emerges that government policy needs to be examined to see how it may be shaped to improve entitlements of small farmers-livestock owners and their access to common grazing and water resources; what are the trends with regard to their access to drinking water (boreholes) and to pastures for draught animals. Government policy on groundwater use and boreholes should be reviewed by a consultant to determine whether it can be amended to stem primary causes of rural poverty, and better support GOB and IFAD objectives.

Complementarily of project. The continued involvement of IFAD has assisted in promoting technology generation with a better focus on the risks involved in arable farming. The competing programmes, ARAP and DRP, have been closed. The GOB is intent on reducing and better targeting subsidies to alleviate poverty and wants to shift to a credit programme to achieve this objective. But at present productivity, the scope for reaching this objective is limited.

Lessons learned

IFAD's experience with ALDEP demonstrates the need for continuing involvement in order to obtain a lasting effect from technology generation and diffusion. A project that aims at poverty alleviation in fragile environments needs to have at least a 15- to 20-year perspective.

The Government's intention to reduce subsidies and shift towards the provision of implements and inputs on credit requires a finely orchestrated programme design based on data which are not yet available. The risk in such programme design is high. Pilot and phased projects are essential. The rationale for further IFAD support would have to rest in support for a shift in policy direction that serves to reduce costs associated with poverty alleviation and obtaining improved food security at the farm level. Hence, the rationale or economic justification should be clearly presented in terms of "cost savings", or "cost minimization" to achieve a given policy objective over a specified period of time.

Need of diagnostic studies. IFAD needs to pursue more in-depth the mechanisms and processes of rural poverty and regional and social mobility. It is especially important to understand the implications of present Government land tenure policy affecting access to drinking water, boreholes and the commons IFAD's mandate would be well served by such an analysis, in order to review with the GOB the primary causes of poverty and how to address them.

Household demand for on-farm investment is related to several factors. They comprise the need to acquire a minimum of basic food staples on-farm for household consumption, employment opportunities in non-agriculture in general and in the RSA in particular, risk in production, the availability and affordability of draft power, the availability of improved technology, and evolving GOB policy on subsidies. It is impossible to weigh in all these variables and to foresee production risk and location-specific variations so as to design in detail necessary technology and project interventions in advance.

For this reason, prior to passing from a small to a larger scale project, the technology proposed and generated needs to be based on a number of farmer-managed on-farm trials in representative sites to verify the improved technology generated. Such verification is essential since so many factors influence household demand for on-farm investment. The farmer managed trials become a natural point for extension meetings and demonstrations.

Implements as well as extension messages should only be disseminated if confirmed by financial and economic analysis. This has not been the case. The costs associated with the additional labour required for double ploughing and row planting should have come to the forefront at an earlier stage. A series of indicative farm budgets should have been prepared on an annual basis and been discussed with the extension service; they should have been specific to the different types of IFAD target groups and to regional variations, and then they should have been updated on an annual basis.




Smallholders Credit and Marketing Project

March 1992

The Kingdom of Swaziland is a small land-locked country situated in the south-eastern part of the African continent and almost entirely surrounded by the Republic of South Africa (RSA). The economy is strongly dependent on that of RSA. The country is sub tropical, with wide variation in annual rainfall between 760 and 1 140 mm. Most of the precipitation occurs in summer (October-March). Supplementary irrigation is needed either to grow vegetables and perennial tree crops and/or to reduce uncertainties of rainfall. The agricultural sector is dualistic in nature, with the modern plantation export subsector, covering 45% of all rural land and the subsistence or traditional sub-sector occupying 55% . Mean farm size varied in 1987 between 1.6 and 2.5 ha. Most homesteads grow subsistence crops, principally maize, and cotton as cash crops and about 65% own cattle.

Project design and objectives

Target group

An estimated 22 900 homesteads comprising 226 000 people in the Rural Development Areas (RDAs) and about 700 homesteads growing vegetables on the Vuvelane and Magwanyane private irrigation schemes outside the RDAs were to be taken as the target group. From this group, 8 000 homesteads or about 80 000 people were expected to benefit directly from the project.

Objectives and component

Objectives. The project aims at assisting the Government of Swaziland (GOS) in its efforts to achieve food self-sufficiency and to improve farm incomes and standards of living among the rural population, in particular for low income smallholders. The main focus of the project was to be on institutional development, in particular the strengthening of the smallholder marketing and credit support services. The project also included the rehabilitation of twelve irrigation schemes.

Components: (a) Irrigation: rehabilitation of 12 smallholder-group irrigation schemes for the production of rice and vegetables; (b) Marketing: creation and establishment of a National Agricultural Marketing Board (NAMB); provision of market facilities for fruits and vegetables, and maize; and establishment of a Market Intelligence Office under the Ministry of Agriculture and Cooperatives (MOAC) Marketing Advisory Unit; (c) Smallholder Credit: improvement in the lending policy of and provision of funds to augment and sustain Swazi Development and Savings Bank (SDSB) smallholder Agricultural Advisory Credit Scheme; (d) Smallholder Inputs Distribution and Maize Purchases through strengthening the Central Cooperative Unions (CCU): provision of working capital and/or credit facilities to improve CCU's smallholder farm inputs distribution and maize purchase activities; (e) MOAC Tractor Hire Pool: provision of tractors and other facilities and improvement in the organization and management of the operations and services of the unit; (f) Technical Assistance and Staff Training; (g) Special Trial and Studies; (h) Monitoring and Evaluation.

Expected effects and assumptions

Expected Effects. The project intervention would increase significantly yields from year 3 onwards of all winter and summer crops, in particular maize (40%), rice (50%) while vegetables vary between 20% and 50%. Based on the yield projections and on the phasing of farmers participation and land utilization, it is estimated that incremental output would be about 2 780 tons of assorted vegetables and 583 tons of paddy rice. At the point of full development, 491 vegetable producers will be direct beneficiaries of the project. Farmers will benefit from enhanced levels of real and money income. The estimated increase in farm surplus of farmers will vary between 40% and 89% . The provision of marketing and communications facilities will reduce price and market uncertainties, and should enhance the bargaining power of farmers vis-a-vis larger traders, retailers, and institutional buyers.

Assumptions. The expected benefits of the irrigation component depend on timely implementation of the rehabilitation of the physical structures and the effective organisation of the farmers. It was implicitly assumed that the project would receive adequate counterpart funding (borrower's contribution is 25% of project costs) for the execution of these works. The availability and quantity of surface water was not considered a constraint to the development of the irrigation schemes. In marketing, it was assumed that remunerative prices will be obtained by farmers through the rationalization of imports by NAMB. Equally in the case of maize, it was assumed that a ready market exist and that CCU's functions will ensure the provision of inputs for maize and its marketing.


An Interim evaluation mission comprised of four experts on credit and marketing, water management, socio-economics and monitoring and evaluation visited the project for a period of about three weeks. The Mission used information from three sources: (a) national and project authorities (MOAC, CCU, SDSB, NAMB), international organizations (UN agencies), AfDB, bilateral aid agencies and NGOs; (b) project documents; MTE, MTR, supervision mission, progress and monthly performance reports and (c) field observations and undertaken a Rapid Farm-Homestead Survey. The objective of the survey was to develop a preliminary impression of the socio-economic characteristics of project area rural population, their access to project services and benefits.

Implementation context

The SCMP was designed to complement the Rural Development Area Programme (RDAP) then under execution by MOAC. Its unexpected termination in 1985 had led to retrenchment of MOAC staff and construction workers who were needed for the irrigation rehabilitation work under SCMP. Re-employment of MOAC construction workers did not occur until 1989. The RDAP, was also expected to assist Land Use Planning (LUP) financed by USAID, in the design of irrigation rehabilitation. But due to the termination of LUP funding, the Technical Assistance (TA) was terminated prematurely, and the anticipated land development equipment was consequently unavailable. These factors, which were beyond the control of the project, coupled with the slow release of counterpart funds and the lack of an effective full time project management, all contributed to an implementation context leading to delays.

Project implementation gained momentum after the mid-term evaluation in 1988. IFAD intensified efforts to put the project on track and closer supervision by AfDB, the Cooperating Institution was helpful. The eventual appointment of a full-time project coordinator in 1989 was instrumental in improving implementation environment.

Project achievements

The rehabilitation of irrigation schemes had not followed engineering procedures resulting in poor design and low quality construction works. There were diffusion of institutional responsibilities, with many differing lines of authority, in the rehabilitation work. Three separate MOAC departments were responsible for different aspects of the work of planning/design and implementation of rehabilitation work; while assistance to farmers organization was provided by staff from other foreign aid missions. Furthermore, in trying to compress all the rehabilitation works in two years (before loan closing) and execute construction simultaneously in all 12 schemes without adequate supervision, quality has suffered.

The delay in implementation of irrigation rehabilitation has adversely affected the farm-level organization and production. Land use rates estimated by IE and production in these 12 irrigation schemes are very much below appraisal estimates. This has, in turn, affected negatively the full utilization of other facilities and services, including the wholesale market and packing sheds.

Marketing. The impact of the market structures established by NAMB has been limited since smallholders had made little use of these facilities. Farmers have preferred to sell to private traders in the field against cash and not through the wholesale market and commission agents. The establishment of a subsidized wholesale market has primarily benefitted imports of fruits and vegetables, while its merit for smallholder marketing has not been proved.

For maize production in rainfed areas, the objective was to increase yields through improved marketing of inputs and purchase of maize. For this purpose the CCU, has been strengthened through the provision of working capital and funds to build two maize transit stores. The grants provided have facilitated the operations of CCU.

Credit. Financing has been provided to SDSB to strengthen its credit services to smallholders. The project is aiming to disburse loans to 7 000 smallholders. In spite of efforts made regarding improvement of operations by the bank, the number of smallholders who received credit amounted to only 750 in 1990/91. High collateral requirements, high transaction costs on the part of borrowers, the limited staff capacity, and the use of EC funds to serve smallholders are part of the explanation. Repayments rates were about 80% at the beginning of the project but declined to 74% in 1989/90. Most of the loans disbursed were for maize production and only a small number was for the production of vegetables in the irrigation schemes. There has been limited demand for vegetable production credit due to the delay in the rehabilitation of the irrigation schemes and to the fact that farmers use their own funds to finance a production process with a rapid turnover.

Monitoring and evaluation. While the monitoring of the physical and financial progress of the individual project components by the respective institutions has in general been adequate, the activities of the Monitoring and Evaluation Unit (MEU) have proved to be unsatisfactory. The main responsibilities of MEU with regard to the project, were a socio-economic survey of the irrigation schemes and the compilation of quarterly progress reports until 1990, when this was taken over by the Project Coordinator. A delayed draft report of the socio-economic survey was produced in March 1991. The main weakness of the survey design was the lack of a clear concept that could have sharpened the focus of the survey and increased its usefulness.

Effects assessment and sustainability

In the absence of a beneficiary contact monitoring system, there is hardly any quantitative or qualitative information available on the effects of the project on the target group. From field observations, it appears that the impact so far has been limited due to delays in irrigation rehabilitation, low input use, labour constraints, inclement weather, pests and diseases.

Beneficiaries and incomes. To have an idea about the impact of the project on the household income, the Mission attempted as a proxy, to measure the changes (improvements or losses) on crops cultivated. In maize, for example, the survey carried out in June 1991 found that the average maize yield among the sampled farmers was about 3 120 kg/ha. While this result from a small sample should be interpreted with care, the yields are considerably above the 2 000 kg/ha or less normally expected from smallholders. Although the gross margins for maize appear to have reached a satisfactory level, the extent to which it has improved as a result of improved project services cannot be quantified. In case of vegetables, the SAR projected that the cropping intensity would reach or even exceed 200% in the twelve irrigation schemes 5 years after implementation of the SCMP. Field observations supplemented by the sketchy and incomplete data available on vegetable productions on these twelve schemes suggest that this is unlikely to be achieved without major reorganization and further investment in these schemes. Net income from rice after deducting charges for irrigation operation and maintenance, repairs and depreciation of farm machinery and imported costs of household labour would be negligible. Rice production will not be a profitable undertaken, except with heavy subsidies.

Nutrition. The National Nutritional Survey undertaken in 1983, identified stunting as the most chronic nutritional problem in the country. Stunting is found to be closely linked to poverty and subsistence farming. Though SCMP lacked any specific focus on nutrition, its focus is on the poorest and most vulnerable groups in the country. The SCMP aims at reaching these people and is locationally well directed in terms of the most nutritionally-deprived groups. Further support in the provision of training in income-generating skills, for women's groups in particular could indirectly assist household nutrition.

Specific effects on women. Despite the omission of women as an explicit target group the Mission observed that a substantial part of the benefits from the rehabilitation of the schemes appears to be accruing to female farmers and their families. In fact, an estimated 80% of the labour on the irrigation schemes is provided by women on farms operated by themselves and in which they control the decisions. This has emerged as an important secondary benefit of the project with considerable developmental potential for income- generating activities and improving nutritional status.

Environmental Effects. The physical environment in the twelve irrigation scheme areas have not improved, and might actually have deteriorated over the project life. The irrigation rehabilitation did not incorporate any water protection or erosion control works in the catchment area. The river diversion structures were inadequate to prevent also inflows and sedimentation of dams and conveyance systems. None of the silted reservoirs in four schemes have been cleaned. Cattle grazing and felling of trees were continuing in the reservoir catchment areas. Though, increased farm incomes could lead to a higher stock of cattle, overgrazing and soil erosion, there is no evidence that the project has, so far, contributed to this.

Credit. No assessment have so far been carried out on the impact of the credit component on the target group's income due to the absence of an adequate M&E system. It can, however, be assumed that the maize farmers have not benefitted for a number of reasons: (a) the delay in irrigation rehabilitation; (b) vegetable growers appear to prefer financing from their own resources, since the turnover is fast; and (c) the main vegetable growers are women who have no direct access to credit. Furthermore, potential poorer borrowers had no access to credit because they could not meet the collateral requirements, i.e. cattle, or that access costs to credit were considered by them too high.

Participation and group formation. Despite the existing potential, groups in the irrigation schemes did not organise savings clubs and savings and credit unions which could improve rural financial services and reduce transaction costs. The groups did not administer their own irrigation schemes, nor provided for adequate water management, maintenance of irrigation infrastructure and charging of appropriate fees for water use. There is scope for encouraging support from qualified and low cost NGOs. The promotion of small voluntary groups could later contribute to the rehabilitation of the primary cooperatives. The IE found that in none of the project implementation institutions (PCC NAMB, SDSB) are the beneficiaries adequately represented. Although the CCU serves primary cooperatives, it has not held a general assembly in recent years. Project participation and implementation would be strengthened if beneficiaries were adequately represented at the district and national levels.

Sustainability. Sustainability of the irrigation systems is in question. The design of the irrigation structures and the quality of construction are such that they will need further rehabilitation in the near future. Farmers groups have not been adequately formed and trained for sustaining the schemes. Production of rice and vegetables is at present heavily subsidized, without which it is not profitable to the scheme farmers who are mostly women with only limited labour and other resources. Further investments and major reorganization of the production systems are needed for sustainability. By IE the project had insufficiently focussed on the sustainability and cost effectiveness of the support services. The credit programme is not sustainable and requires reorientation focusing more on self-help and joint liability groups administering their own savings and credit programmes. The grants provided to CCU have improved the quality of its operations. But, its financial viability and sustainability would be enhanced by charging import levies on marketing agents.

Main issues and recommendations

To improve the design of irrigation component.

a) Design and/or modify the existing river diversion structures to improve diversion efficiency and eliminate sediment inflow into the conveyance canals.

b) Clean and desilt storage reservoirs, improve system layout, distribution network, and field drainage to enable intensive cultivation.

c) Harness small-scale hydro-electric power for domestic use and processing of farm produce.

d) Establish in the irrigated schemes community-managed woodlands for watershed protection, erosion control, and production of scarce firewood and lumber.

e) Introduce in the irrigation schemes a "garden-style" farming system, incorporating fruit trees and inter-cropping of a variety of vegetable crops.

To enhance Marketing Processes.

a) Strengthen the vegetable marketing extension service.

b) Establish the Fresh Wholesale Market at Nokwane as an autonomous commercial operation which should not be eligible for any further subsidies.

c) NAMB should change payment procedures so that farmers can be paid cash upon delivery.

d) NAMB should earmark adequate funds from levies collected from wholesale agencies as well as importers to the smallholder production and marketing development.

e) CCU accounting system should be reformed to reflect its contribution to the development activities associated with smallholders.

To improve Credit services to smallholders and enhance the viability of credit system.

a) Establish a viable rural financial system for smallholder and improve their credit worthiness through the promotion of joint-liability groups, saving clubs and savings and credit unions.

b) Strengthen the collaboration between extension and loan officers to provide integrated services to smallholders.

c) Reduce the transaction costs and improve loan recovery rates through a performance/incentive system to its loan officers and/or cooperation with credible NGOs.

d) Replace the commission fee received by SDSB for administering the loans on behalf of the project to a system in which the Bank shares the risk of lending, so as to improve loans administration.

e) Adopt procedures that would allow women access to savings mobilization, working capital and credit extension.

To increase the Effectiveness of Monitoring and Evaluation.

a) Introduce a system of beneficiary contact monitoring.

b) Assess the scope for a system of self-evaluation of the irrigation scheme farmers.

c) Review the reporting system.

Lessons learned

Project Management. Complex rural/irrigation development need a highly coordinated management system because of the interdependencies between components. The SCMP lost valuable time at the beginning because in the absence of a full-time project coordinator and without an active PCC, the project lost the sense of direction. If anything had been achieved, it was because of its perceived value to the agency involved and not necessarily to the project or its beneficiaries.

Irrigation rehabilitation. Irrigation development and rehabilitation without assessing a priori the conditions of the watershed and the availability of water resources, and without making provisions in the project for their protection and conservation cannot be expected to be sustainable. Watershed degradation, erosion, and sedimentation are the major factors which impinge on the performance and sustainability of the irrigation systems. Standard engineering procedures for review and quality control of scheme preparation, design, construction and acceptance of completed works should be built into project design and insisted upon before loan disbursement. In no case should loan disbursement be made without the project providing a proper description of the irrigation scheme, the works required, cost estimates, and the design document including technical, economic and financial feasibility studies.

Marketing. Marketing is a process which is very much linked with the import/export, subsidies and pricing policies at the macro-level for all tradables. To achieve project objectives, implementation of project components designed to serve marketing purposes need to be synchronized with the national policy. The construction of a wholesale and packing sheds and provision of subsidies on their services proved counterproductive to the smallholder marketing prospects. The strengthening of the market information service has proved an effective instrument from the beginning of the project since it contributed effectively to improved market transparency and strengthened the bargaining position of smallholders.

Credit. The assumptions made in the SAR on the demand for credit among smallholders and their repayment rate (98 - 518), were unrealistically optimistic. There was insufficient awareness in the SAR of the high transaction costs of smallholder credit. More emphasis should be given to the promotion of voluntary savings and credit groups which have been operating in Swaziland over the last 30 years. Rigorous monitoring and evaluation of these programmes would prove essential for their success.

Participation. A participatory development approach is essential to ensure the involvement of the beneficiaries and their training to plan, design, construct, operate and maintain the project investment. Efficient operation and sustainability of the investment can be enhanced by imparting these skills and a sense of ownership to the beneficiaries. The involvement of beneficiaries in project activities form the design stage to their future maintenance and sustainability is a very specialized and skillful exercise. It needs not only highly trained and motivated staff, but also an accumulation of experience in the technical as well as the social aspects of the project investment. It also requires continuity, monitoring, evaluation, and follow-up. Such attributes are not likely to be readily found in bureaucratic government departments. In Swaziland, like elsewhere in the world, a large community of NGOs have accumulated experiences and could provide the service.




Atolls Credit and Development Baning Project (1991)

December 1991

Completion Evaluation

Project area

The project was designed to cover 15 out of 19 outer atolls in the Northern and South-Central regions. The project area comprised: Haa Alifu, Haa Dhaalu, Shaviyani, Noonu, Raa, Baa and Lhaviyani, in the Northern atolls; and Vaavu, Meemu, Faafu, Dhaalu, Thaa, Laamu, Gaafu Alifu and Gaafu Dhaalu in the South-Central atolls.

The project atolls contain 16 800 households with 97 700 inhabitants. This represents not less than 73 % of the total population in the outer atolls.

Project objectives and design

Target group

The project aimed to assist 3 250 atoll households directly from credit access and to benefit 6 000 indirectly through improved earning opportunities. The target group comprised households with a per capita income below Rf 2 000 per annum, equivalent to Rf 1 000 per month for a family of six persons. This poverty line was based on the average household income in the outer atolls derived from the various surveys. In 1993, the income ceiling for the target group was raised to Rf 2 000 per month reflecting the trends in economic and social change.

Objectives and components

The project was designed as the first phase of a long-term program to build up the Bank of Maldives (BML) as a development finance institution and help it to widen its geographic coverage to provide financial service to the population in outer atolls. The project was costed at USD 6 million with IFAD contributing 3 million and GOM 2.5 million and UNDP 0.5 million.

The project set out to: (i) lay the foundations of development banking in the Maldives and develop a credit delivery capability in the outer atolls; (ii) reduce income disparities between the outer atolls and Male by increasing the employment opportunities and income levels, with a particular focus on the lower income groups; and (iii) develop a framework for supporting future programs to improve nutritional standards in the outer atolls.

The project comprised five components:

  • Creation of a Development Banking Cell (DBC) in BML to establish credit delivery mechanism and mobilise savings in the outer atolls;
  • Credit to individuals and groups to finance investment in fishing boats, fish processing, agricultural activities, trades and cottage industries;
  • A pilot nutrition education program in an atoll to initiate a process of nutrition demonstration an education integrated with agriculture and extension;
  • Training of the project beneficiaries, assistance to NGOs for training in agriculture, handicrafts and other income generating activities; and
  • Provision of consultants for setting up a monitoring and evaluation system and to assist in design and analysis of baseline and impact evaluation surveys.

Ministry of Finance and Treasury (MOFT) was the co-ordinating agency. BML through DBC was the implementing agency. Ministry of Atolls Administration, the Ministry of Fisheries and Agriculture and the Department of Women's Affairs were designated as co-operating agencies to implement the training and nutrition components.

The Project was designed to establish the Project Co-ordinating Committee with the Minister of State for Finance as the Chair and officials from the Ministry of Planning and the Environment, Atolls Administration, Fisheries and Agriculture as members. The Project Co-ordinating Committee was expected to co-ordinate co-operating agencies, set policy guidelines for the project, review the project progress and approve the annual lending program.

Expected effects and assumptions

The project design reflected a series of assumptions about constraints affecting production and trade in the outer atolls in the Maldives archipelago. Limited access to credit and extension services was considered as the main obstacle impeding income generation. Due to insecurity, irregular transportation and perceived high transaction costs, existing financial institutions were not ready to operate outside of Male. Furthermore, the outreach of public sector extension services in the outer atolls and islands was very limited. The project assumed that access to credit services would enhance support for islanders to initiate income-generating activities. Implicitly, the project design assumed that empowerment coupled with the provision of agricultural credit would contribute to women's income generating opportunities. Empowerment and training of low-income producers at least implicitly was considered a prerequisite for credit uptake for the most vulnerable or most resource poor households.


Methodology of evaluation

Evaluation purpose and scope

An IFAD mission conducted a completion evaluation (CE) of the Atolls Credit and Development Banking Project in the Maldives from 28.2.1999 to 29.3.1999. This CE set out to analyse the final performance of the project compared to the objectives set out at the time of project design. Further, its lessons should be used to improve the performance of the current Southern Atoll Development Project (383-MV) as well as future similar IFAD projects.

Approach and methodology

The mission used several sources of data to analyse the performance of credit and other components. The data used by CE were: BML financial data, economic indicators of the Government of Maldives, and the Poverty Assessment Data collected by UNDP Maldives. The mission conducted the Rapid Impact Assessment Survey (RIAS) with the co-operation of MOFT and Bank of Maldives (BML) to measure the social-economic impact and target focus of the project. The mission designed three questionnaires, for beneficiaries, non-beneficiaries (control group), and to capture island socio-economic profile. The survey was conducted with 114 households in 18 islands representing all the 15 atolls serviced under the project. Fifty-eight beneficiaries and fifty-six non-beneficiaries were interviewed.

Implementation context

The project loan agreement became effective in January 1990 with a project duration of four years. Project activities were initiated towards the end of 1990, ten months after the loan agreement signed. During the first year no disbursements were made. Disbursements exceeded appraisal targets except for the first year of project implementation. The project was closed in December 1996. By this time, 96% of the total loans had been disbursed.

Project achievements

Credit delivery

The total value of DBC loan disbursements exceeds the SAR estimates. At the end of the project period, a total of Rf 116 million was disbursed, while the estimate of credit disbursement in SAR was Rf 77 million. The target group loans accounted for 43% of the total loan amount disbursed and 80% of the number of loans disbursed.

By the end of the project, the total target group loans amounted Rf 51 million in 2 515 accounts. In other words, 2 515 households, representing 70%-80% of the total number of households in the project area would have obtained credit. These households would not have been able to access credit without the project intervention.

The economic activities funded by DBC comprise fishing, small enterprises, trade/transport (boats) and agriculture. Lending to fisheries related activities was considerably lower than expected. The share of agriculture, small enterprise, trade and transport increased significantly reflecting growing importance of tourism related activities.

Institutional development

BML in 1990 established a Development Banking Cell (DBC) to provide outer atoll banking services. This was the first step in a long-term process engineered by the project to provide sustainable financial services to the low-income population in the outer atolls. In 1996, DBC was re-named as North Central Atolls Regional Unit (NCARU). DBC was set up as an autonomous operation within BML with separate accounting and reporting formats. This separate accounting and reporting system was an important precondition for measuring progress and contributed to successful performance.

The project successfully implemented the institutional strengthening component to undertake development-banking activities. DBC/BML established four branches and started mobile banking services for islands in the outer atolls.

In the original project design, DBC/BML was to open three branches (Kulhudhufushi, Naifaru and Mulee) and one sub-branch (Hihadoo) during the first year of the project. DBC/BML wisely decided to proceed more cautiously. It opened branch offices only when it was assured that it would have trained staff in place. It opened four branches over four years in Kulhudufushi, Naifaru, Mulee, and Fonadoo. The DBC/BML head office in Male has also extended development-banking services to Alifu and Kaafu atolls. DBC/BML built all branches on own premises using IFAD funds.

To provide financial services to some 50 islands, each branch office started mobile banking operations. Yacht dhonis equipped with safes were provided to each branch. The mobile banking staff was expected to visit islands periodically, collect loan applications, sanction loans and receive deposits and repayments.

Presently, the branches use the mobile banking service only to deliver and recover loans. The exception is the Naifaru branch; it collects savings from two near-by islands through the yacht dhoni banking service. Almost all savings at branch office level, or about 80%, are collected within the same island where the branch office is located.

The yacht dhoni operation turned out to be expensive. Operating and maintaining the yacht dhonis is expensive. A new dhoni costs around RF 1.2 million; it may have to be replaced every five years. To curtail costs, DBC/BML reduced the frequency of visits by the dhonis. It also withdrew the mobile loan officers (MLOs), who were based in atolls; instead, the MLOs were located at each branch office.

Effects sssessment and sustainability

Income generation

The credit furnished under the project is associated with significantly higher income of beneficiaries. The average initial monthly income of the target group beneficiaries was Rf 1 670; with or after the loan, it rose to Rf 3 990; this represents an increase of 138%. The median income for the target group beneficiaries before and after taking the loan was
Rf 1 700 and Rf 3 000, respectively; this reflects an increase of 76%.

Institutional sustainability

DBC/BML has consistently moved towards attaining sustainability of operations. The credit recovery of DBC/BML is excellent. The recovery performance hovers around 90%. Non-performing assets constitute less than 1% of the total loan disbursement. All branches mobilise savings though at a limited rate and make profit.

The interest rate on loans was negative in real terms, or minus 1.5%, during the initial phase of the project. But in 1994, DBC/BML raised the lending interest rate to 12% for its development banking lending; profit margins improved further since the inflation rate declined from 10% in 1994 to 6% in 1996; this meant a positive interest rate on lending of 6%.

The DBC/BML employed two credit delivery systems. In the first, in line with common commercial lending practice, loan applications are screened and sanctioned based on the bankable collateral. Borrowers provide collateral security equivalent to 200% of the loan value. Hypothecation of assets acquired with the loan is to form a part of the security. Assets such as boats, boat engines, and houses were accepted as collateral.

In the second system, credit is not collateral based. In most countries, for non-collateral credit, banks adopt group lending or joint liability approaches to cover risks. Instead, DBC/BML policy was to sanction loans up to Rf 15 000 without collateral or a group guarantee; but it carefully screened loan applications and the DBC central office controlled the approval process.

The recovery rate of loans under both systems of these credit delivery systems has remained high (around 90%) and it is important to understand the reasons. Four factors explain the high recovery rate: (i) the "graduation principle" built into the lending policy and procedure: the loan size is determined by economic activity as well as trustworthiness of the client; (ii) the "incentive" mechanism: prospect of receiving a new possibly larger loan, and with a longer repayment period; (iii) the rigorous credit recovery procedures; and (iv) the "sanctions" in the form of restrictions on further borrowing and legal actions resulting in auction of assets.

Saving mobilisation

DBC/BML has encouraged savings mobilisation and the performance reflects trust and the building up of social capital. Yet, saving mobilisation has not progressed as projected. Saving mobilisations in the outer atolls is associated with high transaction costs explained by saving promotion efforts and transport to collect savings in outlying islands. Maldives Monetary Authority (MMA) decrees that the interest rate on savings be 7 percentage points lower than the interest rate on loans (or 5%). At this rate, the interest rate on savings is negative. The public has little or no incentive to save apart from " the security aspect". Moreover, islanders already find cash availability for withdrawal to be restricted, since DBC/BML yacht dhonis visit islands occasionally and unpredictably. In short, DBC/BML find it easier to mobilise savings from commercial branches in Male rather than from outer atolls.

Factors explaining performance

Four factors stand out in explaining the performance of DBC/BML. First, it has rigorously screened the loan applications. Second, it has carefully monitored the portfolio and loan recovery. Third, the DBC/BML has inculcated a propensity for the islanders to save in financial instruments. Fourth, and finally GOM should be praised since it has provided BML the necessary autonomy, and independence of operation, for the latter to conduct its day-to-day operations without interference. In combination, this institutional setting has raised confidence and created trust among its customers.

This record contrasts sharply with the typical setting for credit projects attached to financial institutions that are controlled by governments. Internationally, development banking operations for government controlled banks have a record of poor profitability. Typically, such banking operations lend at subsidised rate of interest and incur high delivery and recovery costs. Loan recovery is mostly neglected. However, in this project, the DBC/BML operations have generated solid profits. DBC/BML has maintained its progression in outreach and the current level of operations. There is no upward trend in the cost of credit delivery. With current interest rates for loans and deposits, and cost of funds, the DBC/BML operation is institutionally sustainable.

Main issues and recommendations

One fundamental flaw in implementation – reflecting inadequate efforts also during design - affected negatively impact in poverty alleviation. GOM and the project authorities gave very limited attention to measures to empower, mobilise and train the most vulnerable households so as to permit also them to avail themselves of credit. The most vulnerable population was expected to become "aware" and receive sufficient training so as to link them to the emerging financial services. Although, the "lower" or "middle" poor households benefited from the project, the majority of the "bottom poor" or "most vulnerable" households were not assisted by financial services. Their loan demand remained limited for income generating activities.

The training component was only partially implemented for three reasons, first GOM's limited capacity to co-ordinate co-operating agencies; second, the target group definition was not precise. In turn, the absence of analysed socio-economic data contributed to the insufficient understanding of the extent of social and economic deprivation. Finally, the BML was not provided with financial incentives with which to compensate the higher transaction costs associated with reaching out also the poorer or most vulnerable households.

The modalities of co-financing are vital for success of the project but these modalities were not sufficiently developed at the time of design. The project was appraised and approved with merely an "in principle agreement" with UNDP. The project design allocated important components vital for assisting the "poor/vulnerable" households with limited entitlements, such as beneficiary training and pilot nutrition programme. But UNDP in consultation with GOM deleted the pilot nutrition component and prepared a separate project for technical assistance, training and beneficiary training. UNDP utilised the funds allocated for technical assistance and training. Beneficiary training was not conducted.

Lessons learned

Sustainability of Development Banking

Non sustainable elements in design

The absence of a proper policy context has caused immense damage to the sustainability of development-banking institutions and financial services across developing countries. Across development banking projects, two negative features stand out that have precluded financial sustainability and consequent institution building. First, development loans commonly have continued to be provided at low or negative rates of interest in real terms. The implicit or prevailing assumption was that a lower interest rate would increase the demand for credit and uptake by the poorer sections of the society. But this meant that financial margins have remained negative or insufficient to cover interest rates. Second, as a corollary, the already low or negative interest rates set for lending have provided little or no scope for positive interest rates with which to provide incentives for savings mobilisation. Conversely, the support for savings mobilisation is non-existent or weak. The banking institutions have not mobilised savings. Nor have they contributed to building up social capital through inculcating incentives in support of a behaviour among their clients towards regular savings and a longer term continuous transactions with the banking institution built on trust.

This adverse policy context, by and large, set the stage at the outset also for the current project. This project design following the custom at the time endorsed lower interest rates for target group lending in general and for agricultural loans in particular. At the time of project start-up, the lending rate in real terms (net of inflation) was even negative at a rate
of –1.5%, since at the outset the interest rate was 10.5%, whilst the inflation rate was 12%.

On the other hand, the design represented an improvement compared to other projects in that the DBC/BML would operate a weekly mobile banking service to outlying islands to deliver and recover credit as well as to mobilise savings. But the transaction costs of this mobile banking service were high.

Engineered shift towards sustainable financial services

The most important lesson learned from this project is the need of ensuring financial sustainability of banking operations at the time of project design. Most projects fail in this regard. Those in charge of design typically overlook sustainability aspects and the need for the development bank to generate positive financial profits. They accept the populist arguments for continued credit delivery credit at artificially low interest rates that do not cover total costs (fund cost, transaction cost and cost of bad debt).

The performance over time of this project amply demonstrates that the benefits of charging positive interest rates far outweigh the hypothetical negative effects such as public resentment and low growth in credit uptake. For smaller producers, access is more important than a subsidised cost of credit. It is necessary at the outset to build in critical features that will ensure sustainability, foremost charging rates of interest to cover total financial costs of development banking operations. DBC/BML took three measures in the right direction. First, it rigorously monitored the profitability of individual branch offices. Second, interest rates were raised. Third, it reduced the supervision and transaction costs for the mobile banking service.

Rigorous branch monitoring

DBC/BML established an unusually rigorous branch monitoring system. Its branches have continued to report on a monthly basis disbursements, recovery performance and profitability. To wit, this reporting system demonstrated the costs of providing loans at negative real rate of interest and of providing weekly mobile banking services.

Changes in interest rate policy

DBC/BML initial interest rate of loans was 2% less than the commercial rate of interest charged on loans granted by the commercial branches. The DBC/BML, in 1996 raised its interest rates, charging a uniform rate of interest across all types of loans. This was the first major step in introducing sustainability dimension into development banking.

Rationalising outreach and mobile banking service

DBC/BML improved the cost-effectiveness of its outreach services. First, it reduced the frequency of visits of the mobile dhonis from weekly to monthly. Second, it withdrew atoll based loan officers and posted them in the branch offices. The Loan Officers start from the branch office and return to the branch after completing their field trip. Costs of operation were cut and profitability improved.

Strategy for outreach

Analysis of lending and savings mobilisation

DBC/BML has followed a cautious policy of expansion and plans with which to establish volume of lending with which to cover costs of operations. To begin with, branches have been established first to cover the regional level, and second to cover atolls and islands with a minimum level of population and economic activity. At present, the four DBC/BML branches cover 13 atolls. Each branch covers three to four atolls and about 50 islands. The level of activity in the islands with branches and with close proximity to the branch office is high.

The data that have been analysed by the CE show that one third of the islands covered by the branches contribute not less than 80% of the target group lending and 70% of that to the non-target group. Savings are exclusively generated within the atoll in which the branch is situated. These findings have important implications for formulating the future strategy for expansion of branches and mobile banking.

Strategy for branch office expansion

First, DBC/BML has established branches at the regional level and these operations should now be consolidated. The next step is to open branches at the atoll level. But DBC/BML cannot afford to open branches in each and every island. Instead, a strategy is required with which to establish criteria for decisions to open low cost branches in the islands that have already possess a substantial client base. To this end, the break-even size of loan volume needs to be derived with which to generate a minimum level of revenue. The CE with actual data for the portfolio of the Kulhudufushi branch pursued this analysis. This analysis shows that a loan portfolio of Rf 4.2 million generates the minimum revenue for a branch to break, or about Rf 500 000.

The Kulhudufushi branch at present serves three atolls. The portfolio in each of these three atolls exceeds Rf 5.0 million, which is higher than the break-even portfolio volume of Rf 4.2 million. Opening branches in each of these atolls is viable. Similarly, it is possible to locate those atolls that are already served by other branches, and which have attained a minimum portfolio equal to or exceeding Rf 4.2 million.

Strategy for Mobile Banking with Dhonis (faster boats without branch expansion)

The benefits of mobile banking are more limited than first understood. The main thrust in outreach is based on the opening of new branches and developing manpower capabilities with which to expand the branch network. The mobile banking service is an effective complementary tool in providing financial services to islands located in the geographical proximity of the branch office. It is not effective in delivering financial services to islands located far away. Mobile banking with dhonis generates savings only within the atoll in which the branch is situated. It will not assist the branch office to mobilise savings in the more distant atolls, which is essential in the long term when the soft loan sources dry up. Finally, the costs of mobile banking need to be contained. The DBC/BML is considering buying faster boats. But faster boats are expensive to procure and also to operate.

Testing instruments for outreach

Maldives has 200 inhabited islands and most of these islands only comprise about 100 households. The DBC/BML cannot open branches in all the islands to provide financial service and mobile banking has its own limitations. Other complementary instruments need to be tested in the delivery of financial services to islands with a limited number of households. This project is now closed but any future support to the DBC/BML or similar programmes should contain incentives in the form of grants to experiment with new approaches.

Credit union or savings and credit society

A case can be made for establishing credit unions or co-operative societies in the more distant islands that are located far from the branches of DBC/BML. Most islands visited by the mission have women's committees, which undertake income-generating activities. These committees could form a nucleus for a financial service organisation. Any new organisation to be developed needs to come under the umbrella of DBC/BML for the latter to provide necessary backstopping including audit of account. DBC/BML will have to pilot test and then adjust this approach to suit Maldivian conditions. Three pre-requisites for implementing this approach emerge. They are: (i) preparing a legal framework for establishing a credit union/co-operative society; (ii) defining linkages with DBC/BML; and (iii) capacity building at DBC/BML to pilot test this approach.

Self-help groups / rotation savings and credit groups

In islands with a limited number of households it is appropriate to test the concept of self-help groups and rotation savings and credit schemes. This would help the islanders to access credit from their own savings that they mobilise. Such mechanisms are important in assisting food insecure households to develop coping mechanisms to overcome periods of temporary distress. This approach does not require a legal framework to begin with. But capacity building is required at the level of DBC/BML to operationalise the importance of this instrument to assist the "bottom poor/vulnerable". The methodology need to be defined for creating and supporting the self-help groups / rotation savings and credit groups. The next step is to train the staff.

Regulatory environment

The Government holds a majority equity position in BML, yet it has in no way misused this position of financial control. Contrary to the situation in many other countries, the Government has not used its position to intervene in decisions on lending and in day-to-day banking operations. BML was permitted the necessary autonomy: it enforced sanctions by auctioning the assets mortgaged, suspended disbursement to under-performing sectors and inculcated a habit of repaying the loans. The DBC/BML provided successively larger loans to clients who repaid promptly. The legal environment was supportive of the BML's actions to repossess and auction assets of the defaulters. The strict monitoring of branch office operations contributed to this excellent record.

MOFT and MAA remain the GOM's regulators to oversee banking activities of BML. The regulators allowed BML full autonomy in its operations. GOM did not seek to enforce any populist or ill-conceived agenda to seek to lower DBC/BML lending interest rates or to ask it to provide loans to favoured clients. As a result, despite being a government owned bank, the general public considers it as a commercial bank. It is reported that BML even refused granting loans to island electrification under government guarantee once a few island committees defaulted. GOM did not put any pressure on BML to sanction these loans. This autonomy is currently an unwritten understanding between MOFT and BML.

The need for financial and development banking institutions to have full autonomy in providing financially profitable and sustainable services is a must. This is one of the necessary preconditions for success. Such best practices related to autonomy of the financial institution will have to be codified and incorporated as conditions for funding future financial services projects. This is lesson learned from the Maldives Atolls Banking Project.

Improving targeting modalities in financial services projects

Identifying target group and the "bottom poor/vulnerable"

An overall broad target group definition is a not an effective tool to reach the bottom-poor in a financial services project context. Future projects need to sharpen the poverty focus in identifying target groups. Targeting criteria need to be simple and location specific. Generally, four sequential steps will have to be followed to sharpen poverty focus in targeting. They are: (i) a community-based wealth ranking to identify the resource poor households; (ii) a diagnostic survey mapping the resource endowments of these households, and the causes to their poverty; and (iii) selecting a set of indicators associated with/or explaining poverty (household size, number of working members, material used to construct walls, receipt of "zakaath" etc.). Four income strata should be distinguished: bottom-poor, lower, middle and upper income groups.

In a financial service project context, the upper income group will have to be excluded from the purview of IFAD assistance. On the other hand, the financial institution need to serve also this clientele from its other resources, or the savings mobilised. The income strata consisting of the "bottom poor/vulnerable" and the lower and middle income groups form the overall target group in a financial service project. The project needs to have separate target group definitions for three socio-economic strata that fall under the overall target group of IFAD. This is essential so as to design precise interventions oriented to reach and assist the "bottom poor/vulnerable".

Complementarity of instruments to reach the "disadvantaged or vulnerable" households

The project at the outset used a narrow target group definition of Rf 1 000 per year and set out that lending to this group should represent 70%. In 1993, this proportion was reduced to 45% of total DBC lending. The earlier too narrow target group definition excessively restricted lending to the non-target group, overall lending and the profits with which to break even and permit sustainable outreach services to be set up. This narrow definition was coupled with the absence of effective measures and funding with which to empower and provide training to the target group and of incentives for staff to accelerate lending to this group.

DBC/BML revised the target group definition. The income ceiling was raised by 518; after this adjustment, the target group represented about one fourth of all households. But the other complementary measures, i.e. social mobilisation and skill training were not instituted. These interventions were to have been provided through the abortive UNDP funding. This was a missed opportunity: the project because of this omission did not reach the most vulnerable households.

Set of interventions to assist the "bottom poor/vulnerable" households in financial services projects

The "bottom-poor/vulnerable" households face many constraints and provision of credit is not sufficient to improve their standards of living. They have few economic activities and their demand for credit is limited. A low standard of education and few skills worsen their situation. This is evident even in this project, which is one of the most successful credit projects in the region. Targeting the "bottom poor/vulnerable" households requires a fuller complement of empowerment and support services. GOM support is necessary for identifying profitable activities and for conducting skill development training. Once such a platform is created, the demand of this group for financial service will increase. This in turn requires capacity building at BML and other development partners and also provision of assistance in the form of budgetary support or grants to shoulder the development responsibilities.

Incentives coupled with targets

Defining the target group alone with not be of much use to ensure flow of assistance to the "bottom poor/vulnerable". Financial institutions in general tend to give less attention to the "bottom poor/vulnerable" and the low-income groups. This is on account of the perceived high risk and cost of delivering financial service to these groups.

Most projects do not design incentives to the participating financial institution to reach the "bottom poor/vulnerable". But development finance theory certainly would permit practices to be introduced where incentives can be designed to cover at least initial costs and induce the financial institutions to reach the "bottom poor/vulnerable" and low-income groups. GOM should provide a lower on-lending rate to the DBC/BML on loans to the "bottom poor/vulnerable". Moreover, DBC/BML costs should be covered for appointing a person to exclusively deal with the "bottom poor/vulnerable" and to co-ordinate with other development agencies. Temporary grant funding for this purpose should be considered. Finally, precise targets need to be defined for lending to this socio-economic strata. Targets should be reviewed based on the experience gained during implementation.


Modalities of co-financing that are fully owned by stakeholders so as to become operational are vital for successful project implementation. In this project, co-financing modalities were not finalised prior to the project appraisal. The project was appraised and approved with a mere "in principle agreement" with UNDP. The project design allocated important components vital to "bottom poor/vulnerable" such as beneficiary training and pilot nutrition programme. But UNDP in consultation with the GOM deleted the pilot nutrition component and prepared a separate project for technical assistance, training and beneficiary training. UNDP utilised the funds allocated for technical assistance and training. Beneficiary training was not conducted. The activities funded by IFAD and UNDP were undertaken as stand-alone activities; an integrated service delivery was not achieved. Integrating the activities funded by the co-financier into the core components of the project requires joint preparation, joint appraisal, explicit agreements formulated at the time of loan negotiations and close consultation during project implementation.




Agricultural Marketing and Credit Project

December 1991

Lesotho, with a total area of around 30 000 Km2, is a landlocked country, surrounded by the Republic of South Africa (RSA). The average annual population growth rate is 2.63% over a population of around 1.66 million (1988), 83% of whom live in rural areas. A high proportion of male population work as migrant labour in the mines in the RSA and remittances are a high percentage of GNP. The population is concentrated mostly in lowlands which range in altitude from 1 500 to 1 800 m . Long-term average annual rainfall is about 740 mm, with a range of 550 mm in lowlands to 1 000 mm in the mountains. The most important food crops are maize, sorghum, wheat and beans. Some wheat is sold for cash and most of the beans are for export.

Project design and objectives

The Agricultural Marketing and Credit Project (AMCP) was designed as complementary to the Basic Agricultural Services Programme (BASP) which aimed to provide small farmers with farm support services and infrastructure essential to the increase of production of food. The AMCP appraisal team adopted the same BASP economic justifications in appraising the project.

Target group

The appraisal report estimated that about 13 000 families, i.e. 10% of farmers in the BASP areas would benefit directly from the AMCP through the use of farm inputs, partly on credit. These were identified as small farm operators, the majority of whom were women, cultivating an average farm of about five acres each. Average per capita income of this target group was estimated to be about USD 160, which was 60% of the national per capita income. The production inducing agricultural services provided by the project were expected to have particular importance to the relatively poorer strata of the rural population not receiving remittances and therefore totally dependent on agricultural income.

Objectives and components

Objectives. The project would contribute to the Government of Lesotho (GOL) programme to increase agricultural production. The project would particularly assist small farmers through provision of credit and improvement of marketing.

Components. The project was to provide: (a) working capital to Coop Lesotho, along with management and technical assistance; (b) a programme of seasonal, medium and long-term credit to be administered by LADB, along with management and technical assistance; (c) assistance for the monitoring and evaluation of the project; (d) studies covering the development of the cooperative sector and the feasibility of establishing a seed multiplication unit.

As the AMCP was considered a project complementary to the BASP programme which began in 1978 to provide services covering 75% of the cultivated land and some 128 000 farm families, the appraisal report attributed a portion of the benefits which would be derived from the BASP to the AMCP. Moreover, the AMCP was, in effect, a programme aimed at developing institutional capacity at national level. Therefore, its effect could not be confined solely to the IFAD target group.

Expected effects and assumptions

Expected Benefits. At the time of appraisal of BASP, the anticipated increases in production were 60 000 tonne (t) annual increase over a twenty-five year period (maize 24 000 t, wheat 13 000 t, beans 8 000 t, peas 1 000 t). However, two years after BASP commencement, slow project implementation together with a reassessment of the impact of declining soil fertility led to incremental crop production being re-estimated at half the original quantities. The AMCP appraisal team considered it premature to make a revised estimate for the project and estimated the economic rate of return at 13% .

Assumptions. The project was pegged to BASP and appraised accordingly but soon after BASP fell short of expectations. The basic assumptions relate to development organization capacity, security of land tenure systems and credit demand. The capacity to establish an operational and effective delivery institutions for credit and marketing was overestimated. The security of land tenure was lower than expected for two factors: (a) in principle, the land is owned by the King (the state) and (b) land use rights are dominated by male population even though 50% of them are migrant and 75% of farmers are women. Lastly, the project assumed that there would be effective demand for credit. In reality most customers would use LADB for depositing remittances received from abroad rather than for borrowing.


The evaluation mission visited the country during March/April 1990. The mission interviewed the authorities of LADB, Cooperative Lesotho as well as farmers, who benefitted from the project. The mission consulted the project completion report (CPR), about 18 supervision missions reports covering the period 1981 to 1988, quarterly progress reports; from the M&E section, survey reports and thematic studies.

Implementation context

The project components were implemented by three implementing agencies: Coop Lesotho, LADB and Planning and Evaluation Division (PED). Project coordination amongst the implementing agencies, was supposed to be undertaken by a Project Coordination Committee (PCC). The lack of a firm policy framework in which the project could operate hindered its effectiveness.

The recipient lack of compliance with the various conditions of the Financing Agreement did not help to produce an environment in which the project objectives could be readily achieved. LADB role was initially hampered by the confusion over government policy in relation to credit and the perceived duplication of effort in credit delivery under the Food Self-Sufficiency Project (FSSP). This was subsequently resolved by the government, with LADB being the agency appointed to disburse rural credit for the FSSP. In addition, LADB's impact in rural areas was weakened by its having no branches outside Maseru. This constraint was addressed by the LADB and increased ita rural branches to nineteen.

Coop Lesotho was required by government to manage more depots than the sixteen agreed upon, despite earlier assurances. These peaked at fifty-eight in 1983 and have never gone below thirty-eight. Furthermore, Coop Lesotho was required to undertake other activities which undermined its commercial viability, such as providing subsidised inputs to farmers under the FSSP.

Project achievements

Project Management. The financial and managerial performance of both LADB and Coop. Lesotho never reached the levels indicated at appraisal. Both agencies have registered significant losses. However, LADB has recovered its position at the time of evaluation, partly as a result of being authorised to accept public deposits without government restriction. Coop Lesotho handled increased volumes of inputs to farmers, particularly fertilisers, the annual quantities of which increased threefold. However, Coop Lesotho has continuously faced liquidity problems, and in 1987, IFAD financed a Capitalisation and Rationalisation Plan, thereby reprogramming AMCP funds undisbursed in the credit component. The capital injected was quickly eroded and the government eventually took a decision to privatise Coop Lesotho.

Agricultural Credit. LADB has significantly expanded its operations and has increased its lending capacity since the start of the Project. Since the beginning of the Project, in 1981, the LADB loan portfolio had increased manyfolds form M 2.3 million to M 16.7 million by 1989. Deposits also rose from M 0.63 million in 1985 to M 30.3 million in 1989, reversing the situation when loans were exceeding deposits initially. The latter is considered to have been determined by the increase in the number of LADB branches and the relatively high interest rates encouraging the deposit of remittances and savings in the bank. Loan recovery improved during the later years of the project and the LADB attributed this partly to having established branches outside Maseru.

LADB's financial losses have been significant in the recent project years. The last income and expenditure statement of LADB indicates a loss of M 1.4 million in 1989. LADB puts these losses down to a number of factors, including making provision for covering potential losses, investing in the opening and operating of new branches and agencies and being obliged to pay higher interest rates on deposits made with the bank. Moreover, LADB was not able to apply the higher interest charges to outstanding loans, but only to new loans.

The short-term loans disbursed by the LADB during the project period far exceeded in value terms the estimates made at appraisal (334%). However, the number of beneficiaries fell short by 49%. Thus more resources were made available to fewer borrowers. Drawings from the medium-term credit facilities for oxen contractors were never made and all other medium-term drawings were negligible. Long-term loans for tractor reconditioning were hardly utilised: seven loans were made throughout the project life. Reported reasons for the weak demand from oxen contractors were the growing farmer preference for power tillage and the fact that many farms are managed by women who are unable to operate ox-drawn plows, as well as for reasons of status.

Agricultural Input and Marketing. The volume of inputs marketed by Coop Lesotho increased markedly during the project. The quantity of fertilisers increased more than threefold, between 1982 and 1989. This increase occurred despite the removal of fertiliser subsidies in 1987/88. It is estimated that Coop Lesotho now supplies 70% of the country's fertiliser requirement. Sales of seeds increased in a slower but constant way. There was, however, an unjustified expansion in depots, particularly since a number of them were unviable. In contrast, crops marketed never reached appraisal estimates, even though these were modest. This was a result of a shift in the agricultural policy of the GOL, when private traders were allowed to compete in the market. In fact, the market has developed to such an extent that the Government has taken the view that a parastatal organisation is no longer necessary and embarked on a privatisation programme for Coop Lesotho.

Despite the shortfall in sales targets, Coop Lesotho's turnover increased significantly over the project period. However, the capital base did not increase in commensurate terms and the capital turnover ratio increased dramatically, causing Coop Lesotho to experience severe liquidity problems. The erosion of liquidity forced the cooperative to borrow on costly terms further exacerbating its position. This serious financial position was ultimately retrieved by an injection of funds from the GOL, as well as donors including IFAD.

Monitoring and Evaluation. The project design did not include systematic M&E framework. However M&E implementation programme was defined by IFAD consultants in the early stages of the project. The proposed activities proved too extensive following the withdrawal of funding from the BASP. In 1983 IFAD reviewed the programme and simplified the M&E reporting requirements. However, the implementation of the M&E component was hampered from the initial stages of the project due to (a) a misperception of the nature of the M&E, being considered as an eye on management instead of a tool of management, (b) the lack of precise information on the Project's target group, and (c) lack of financial and human resources.

Effects assessment and sustainability

In 1981 donors reduced their support to the BASP because of their dissatisfaction with progress made on economic restructuring. As a result AMCP was adversely affected since certain complementary activities in crop production and extension were not implemented.

Beneficiaries and theirs Incomes. The LADB estimates that by the end of 1988 loans had been made to 14 400 farmers as against the 13 000 at appraisal. However, no records were provided by the LADB to indicate beneficiary names or their location and, moreover, there is no analysis by farm size, income, or gender of borrower. There are no records at all as to beneficiary numbers from inputs sourced from Coop Lesotho. Various reports anticipated that the beneficiaries of the input supply component were most likely to be amongst the better off group of farmers.

Food self-sufficiency. Food self-sufficiency has not changed significantly during the course of the project, with the exception of wheat, where the ratio has declined from 36% in 1981 to 20% in 1988.

Specific Effects on Women. The appraisal report did not analyse the possible impact of the project on women, though it acknowledged that women were likely to be beneficiaries of the project lending programme. The legislation prevailing in Lesotho in the 1980s certainly added an institutional barrier for women to overcome, since some were not able to obtain their husband's signature for logistical or for cultural reasons. Furthermore, without a baseline survey the extent to which women were affected by this constraint or how they benefitted from the project could not be determined.

Environmental Effect. The environmental impact of the project was projected to be positive in that the adoption of fertiliser recommendations would result in improved soil fertility, increase vertical productivity and reduce the pressure for clearing more land. However, it is not possible to make any assessment as to the projects impact on the environment.

Sustainability of Institutions. LADB financial position at the time of evaluation is causing grave concern. There may also be a cause for concern as to whether it is the type of institution IFAD would have wanted to support. The weak financial position of Coop Lesotho and its privatization indicate that the institution could not be sustained in its existing form.

Participation. The target beneficiaries were never consulted during the design process, though the later credit survey during implementation involved interviewing potential credit beneficiaries.

Monitoring and Evaluation. The national staff in charge of M&E had no specific training nor experience in this field. The management of the project implementing agencies largely ignored the quarterly reports prepared by the monitoring unit. There were some attempts to improve cooperation and communication amongst the concerned parties, but with no apparent success. The M&E unit had not scored much success in the field of evaluation. An evaluation of the socio-economic situation of the beneficiaries after project completion has not proved possible, due to the absence of appropriate identification of the beneficiaries by the implementing agencies and the lack of socio-economic data on the target population. Information generated through the base-line survey conducted by the BASP M&E team was insufficient to allow detailed assessment impact.

Main issues and recommendations

Project design

a) Introduce flexibility in project design to accommodate changes in policy during project implementation and monitor policy environment very closely to suggest necessary changes timely;

b) Avoid over dependence on the implementation of activities which are not financed and not controlled by the project;

c) Conduct necessary surveys to generate data needed for proper design of targeted components;

d) Consider an implementation time-frame longer than five years, particularly for institution -building projects.

The role of supervision

a) Ensure that loan conditions which directly affect the implementation of the project are met;

b) IFAD should maintain a close involvement in supervision to ensure that its specificity criteria are met;

c) Ensure that in the supervision teams, expertise appropriate to the changing needs of the project, as they evolve, is provided.

Project management processes

a) When a number of implementing agencies are involved in a project, and it is not feasible for one agency to take the lead role, a coordinator should be appointed;

b) For effective guidance and coordination make certain that the PCC, is performing its designated functions as agreed;

c) To allow the implementers to associate the project objectives and goals with implementation process and to provide precise and realistic indicators for the assessment of project achievements, a M&E system should be designed in detail to meet these objectives.

Credit Delivery

The implementation of credit indicated that the provision of loans is not a sufficient condition for the development of agricultural production and the improvement of farm family life. Three variables deserve special attention to ensure the success of the credit programme. First, security of land tenure to ensure that users have legal rights on land. Second, extensive share-cropping arrangements would limit investments, since share croppers give up part of the incremental product to owners of land rights. Thirdly, for a woman to obtain a loan she needs the consent of the male head of household, but males are normally absent (migrant labour). The decision-making capacity is severely constrained by these factors, especially for credit with medium and long term liabilities on the households.

Lessons learned

The need to adjust project design to accommodate changing policy environment, for diligent implementation of project and realization of its benefits. The AMCP was linked to the BASP, which has been supported by donors on specific macro-economic framework. Logically, the loss of support to BASP hindered the implementation of AMCP. Moreover, during the 1980s there were serious macro-economic distortions: high rate of inflation, high price subsidies on inputs and an economy dominated by parastatals. In the course of project implementation, the GOL attempted some corrective steps, such as privatization of markets, directly affecting AMCP. It would be more appropriate to adjust the project during implementation to overcome structured difficulties caused by changing policy environment.

Credit effectiveness could be enhanced if the factors specific to the country/project area are given due attention. A common wisdom is that credit services should be demand-driven. In Lesotho, most rural households needed the LADB services to deposit remittances received from migrant labour than to obtain credit. Small-farmers and female headed households who are by their nature risk-averse shied away from borrowing and loans were left for the better off farmers. Those were not interested in animal traction (and as well because it was socially unaccepted), which the project thought to promote. But on the other hand deposit rates are kept low on the face of prevailing high inflation rates which did not encourage savers to deposit, thus endangering the viability of the credit institution. When deposit rates were increased, the lending rates on old loans could not be corrected which negatively impacted LADB.

Beneficiaries Participation should be pursued at design and implementation. There was little or no consultation with potential beneficiaries during project design. Planned medium- and long-term loans for animal traction and tractor repair were not requested by farmers. More attention to their actual needs and discussion as to how the project could service these would have altered the design and scope of AMCP. Similarly, there was little or no consultation with beneficiaries during project implementation. This would have improved coordination, focussed the project on beneficiary needs and resulted in the AMCP having a more positive impact on IFAD's potential target group.

Monitoring and Evaluation should be viewed as a management tool. The M&E system should be designed, prepared and appraised in detail as an integral part of the work programme of the project. In so doing, project designers are forced to examine the project objectives against the practicalities of achieving these objectives and to specify indicators for measuring the achievements. These indicators should be clearly defined in order to allow the identification of the target group and project beneficiaries, to monitor project implementation and to assess project impact. The inclusion of beneficiary consultation in the M&E of project activities will provide information on the impact of the project.



South Simbu Rural Development Project (1991)

September 1991

Interim Evaluation Report


The project area consists of two quite diverse districts, particularly in terms of access, population pressure and ethnic groupings. The districts lie south of the provincial capital Kundiawa to which only the Gumine District is linked by road. Gumine is characterized in some area by population pressures, increasing land degradation, a deficit (at times) in food production. Karimui is generally at a lower altitude, climatically warmer (and thereby liable to malaria), underpopulated and accessible only by air or foot. Both districts are characterized by limited income opportunities and inadequate health, agriculture and education services.

There are some 36 700 people living in Gumine District and 12 100 people in Karimui District. Most are rural villagers who are dependent on subsistence agriculture but the majority have some modest involvement in cash cropping. Sweet potato is the main staple food in both districts and is the most important crop grown by villagers, while in Karimui sago is also of importance. Land use intensity in Gumine District varies from low to high. Land use in Karimui District is much less intensive than in Gumine District and soil fertility, in the latter district, is still maintained by forest fallows of long duration (10 to 20 years). Coffee is the main cash crop in both districts with the majority of the population receiving some benefit from this crop while cardamom is an important cash crop in the Karimui District.

Project desing and objectives

Target group

According to the Staff Appraisal Report (SAR) about 5 680 households (52% of the total households) would benefit through participating in increased and better cash cropping programmes (as a result of improved extension efforts), while an estimated 2 400 households would, by adopting an improved crop rotation model, improve their nutritional status. The road upgrading programme would provide better year-round access to facilities to the 37 000 people in the Gumine district while 960 adults and pre-school children would benefit from library education in Karimui. An estimated 1 400 households would benefit through upgrading of roads to all-weather standard and through project promoted commercial vegetable production.

Institutions would benefit through an upgrading of their capacity to plan and implement development projects both at the provincial and district levels.

Objectives and components

The project objectives were to increase the incomes and employment of the population; improve their health and nutritional status; promote the role of women within society; and strengthen the institutional framework for provincial planning and execution of district-based investments in rural development. The basic assumption was that the target population will improve its living conditions and income if it has access to essential social and development services. More equal distribution of economic benefits and of government services among different areas was at the core of project justification.

The project would seek to achieve its objectives through investments in agricultural activities, health and nutrition services, education and training, rural infrastructure, management support and media information services. The project would concentrate on improvement and expansion of existing activities in recognition of the limited implementation capacity of the Government of Papua New Guinea (GOPNG) agencies and local organizations. Project activities were to be phased over a six-year period to ensure the workload was compatible with implementation capacity. The project was to include the following components:

Agricultural Development

  • Strengthening agricultural extension services
  • Commercial vegetable production and marketing

Nutrition and Health Development

  • Improvement of nutrition and health services
  • Water supply to Karimui Station

Rural Infrastructure Improvement

  • Road improvement and rehabilitation
  • Footbridge construction
  • Airstrip improvement at Karimui

Education and Training

  • Literacy programmes
  • Promotion of education for women
  • Construction of a staff development and training centre
  • Agricultural training
  • Health training

Management Support and Medical Services

  • Planning and management support
  • Medical information service unit
  • Monitoring and evaluation

Taking into account past experience with integrated Rural Development Projects in PNG, it was decided that this project will be implemented through Government structures, i.e., by the Department of Simbu using the South Simbu Management Team (SSMT). These arrangements were meant to ensure the sustainability of project achievements after its completion.

Expected Results and Assumptions

The SAR indicated that seed multiplication gardens, coffee nurseries, cardamon nurseries, pyrethrum nurseries, cardamom driers, demonstration gardens and a poultry distribution centre were to be established. In Gumine about 1 400 households were to cultivate vegetables for sale over an area of about 42 ha.

Incremental production, as a result of project interventions, was estimated as follows:

  • the total expected annual incremental production of food crops would be 600 mt by Year 5 and 1 760 mt by Year 10. Commercial vegetable production in Gumine is expected to reach 250 mt p.a. by year 5. Incremental livestock production derived from the project would amount to 55 000 chicken eggs, 3 000 duck eggs, and 1 200 kg of duck meat p.a. within five years; and
  • at full production it is expected that incremental coffee production would be about 135 mt p.a. of parchment coffee. The 90 ha of cardamom planted would produce about 32 mt p.a. of dried cardamom.

Infrastructure building, particularly through upgrading and extending the facilities of the Division of Primary Industry (DPI), was a major activity.


Starting from the findings of a Mid-term Review (MTR, 1989), the aim of the Interim Evaluation was to make a further assessment of the performance, efficiency and relevance of the project in the context of the objectives stated in the SAR. In so doing, the mission's intention was to draw lessons from the project's experience and make recommendations relevant to future IFAD operations in the northern districts of the Simbu Province with particular reference to the replicability of the model developed in South Simbu.

As the project has been reviewed regularly, a substantial amount of information was available particularly on the physical implementation of its infrastructural components. The mission's approach was to review this information in order to rapidly assess the overall status of the project and then to devote maximum time to field investigations and to focus on key issues. A very candid internal evaluation of the project presented to the mission on its arrival at Kundiawa was of great assistance in assessing the project's status.

While the project's activities and outputs had been monitored regularly, little information on the effects and impact of the project was available. In order to gain information of effect and impact, the mission developed interview questionnaires for both farmers and project staff. Informal group interviews were also conducted, particularly with women groups. Twenty farmers, most of whom were living relatively close to rural extension centres were interviewed. While the sample was obviously insufficient for any quantitative analysis, the interviews allowed the mission to check assumptions and statements particularly regarding the relationship between the project and its general environment.

The mission also conducted 15 formal interviews with project staff involved in field activities (these represent 53% of the total agricultural field staff). Individual staff members were generally keen to participate as they appeared to view the exercise as an opportunity to fully express their views. Extensive informal interviews were held with senior district and provincial staff as well. The mission believes that those interviews provided a fairly accurate picture of the project (and of the agricultural production component in particular).

While the mission would have liked to develop a more substantial analysis of the project's impact it has concentrated on the people's perception of the relevance of the project and the efficiency of its delivery mechanisms. The MTR (1989) recognised that the lack of reliable data on beneficiaries as well as on their productivity and incomes made it difficult to provide meaningful information in this respect. Project design and implementation methods are also emphasized as they have been seen as possible models for similar developments elsewhere.

Project implementation context

The major investment expenditures have now been completed generally within the original estimates and approximately USD 3 million (IFAD and AIDAB Funds combined) are still available for future project expenditure. This is considered sufficient to meet all future funding requirements. Expenditure has not been constrained by any lack of project funds as such but by government budget allocations. In 1991, for instance, the project's request for Kina (K) 919 000 was reduced to K 500 000 under the governments budgetary policies.

Uneven performance characterised project activities. However, the overall performance of the SSRDP must be viewed in the context of difficulties imposed by government budget cuts (as the bulk of the project's funding was incorporated in the national budgets) in 1990 and 1991 and the re-organisation of the Department of Simbu which had substantial effects on project staffing. These occurrences curtailed some project activities substantially.

Project achievements

In relation to its stated objectives the project's main measurable achievement has been the strengthening of the provincial administrative structure and an improvement in the geographical distribution of government services. For a number of reasons (the effects of the de-centralisation process on staff, the relative shortages of funds due to budget cuts, less farmer involvement with a decrease in the free supply of inputs) the project has lost some of its initial momentum. The main conclusions by component are summarised in the following:

Infrastructure. With the exception of the water supply subcomponent (not yet implemented), the project has been very successful in fulfilling the SAR's infrastructure building objectives. The 26 km of road has been upgraded, eight footbridges built and the Karimui airstrip improved. As well, in virtually all cases, facilities for agricultural extension and health staff (including the upgrading or establishment of DPI base camps, kit houses for staff, marketing centres, nurseries and seed multiplication centres) were upgraded or built in accordance with SAR specifications.

Staffing. In May 1991, only 16 of the 23 and 9 of the 16 positions proposed for agriculture and health, respectively were filled. This situation is unsatisfactory but, again, must be seen in the context of budgetary restrictions and upheavals bought about by the decentralisation process. Until the departure of the Staff Development and Training Advisor (SDTA) staff training had been carried out well, while the Wara Simbu Training Centre (WSTC) which had been upgraded by the project had stimulated staff training as a whole in the province.

Agricultural Development. Although some of the data in the various project reports must be treated with caution the SAR target (which seems quite modest) for planting and rehabilitating coffee and cardamon appear to have been achieved. While some production increases attributable to rehabilitation could have been expected by now, most of the plantings are too young, at this stage, to have substantially affected production.

Efforts to bolster food crop output and improve nutrition by promoting new crop rotations have been unsuccessful largely because both farmers and extensionists appear unconvinced both by the need for this activity and the appropriateness of the technology offered.

Advisory services provided by DPI have generally not reached a large part of the target population. Some antagonism by farmers towards DPI exists and a change in attitude by many of the staff, together with intensive training in extension methodology, is needed if extension is to function effectively.

Health and Nutrition. The delivery of health services to the target population is largely related to the timely supply of medicines to Health Centres and Aid Posts, the inaccessibility of many areas and the presence of sufficient staff. Several "key indicators" supplied to the mission failed to show an appreciable increase in services delivered presumably because one of several factors affecting delivery of services have often been lacking.

Education and Training. According to the International Evaluation Report (May 1991) prepared by the project management team, there are 40 literacy schools established in the project area (which has only 6% of the province's population) against only 14 in the other districts of the Province. Over 1 000 children and 760 adults have attended literacy schools in the Karimui district and although this activity was not prescribed for the Gumine district the SSRDP has supported five schools in that district as well. With a limited project input targets have been well exceeded basically because the population sees the need for literacy education and because management has been effective.

The provision of training infrastructure together with the appointment to a three year period of a SDTA has allowed over 60 courses in a variety of fields to be carried out. Over 1 500 people (including more than 400 women) participated. Agricultural training has lost some momentum since the departure of the SDTA and the unfortunate transfer of this understudy.

Management Support. Long-term technical assistance proved to be crucial in the successful implementation of workable framework for project programming and budgeting. The consistency of the approach from project design to implementation has been remarkable thanks to the continued involvement of a small number of national and expatriate staff who were able to establish an effective team spirit and working relationship. However, the departure of the expert programme planner and a major reshuffling of staff due to decentralisation has decreased the planning capacity of the administrative structure significantly.

Project Effects - Immediate and Lasting

Monitoring and Evaluation. The project's monitoring system was closely tied to the planning and budgeting process, at all levels. While it contributed to the establishment of improved planning and implementation review procedures, it was generally not used for decision-making. Evaluation was limited to an MTR in 1989, a nutritional survey, finalised in 1989, which allowed a comparison with a similar survey conducted in 1980 and a ‘baseline survey' which was still in the process of finalisation at the time of the mission. While the survey contains some interesting information of cropping practices and land use, it is unlikely to be of any great help in assessing project impact in the future. Partly because the SAR's working definition of evaluation activities differed substantially from evaluation as a periodic, critical assessment of project relevance, performance and impact in the context of its stated objectives, there is little objective data on performance and impact.

Effects on Target Group. The conclusion of the MTR (1989) that awareness of the project activities among men (or at least those in contact with SSRDP) is widespread is confirmed. However, women are less aware of the project's extension work and its possible benefits. The project supported health facilities are extensively used while the literacy programmes have been received with enthusiasm. However, the mission's impression was that interest and participation in cash cropping activities were waning (if not receding) due to the following main reasons.

  • The notion of the project and what can be reasonably expected from it are not yet fully understood. Therefore once free handouts are stopped, contact with extension staff and advice from project are not perceived as vital "inputs" for production. Free handouts had set a negative precedent that the project will have to try to undo.
  • A communication gap exists between some staff and population. This is due to ethnic and cultural barriers and to the relative youthfulness of the staff. This is compounded by the fact that sometimes public servants do not stay enough in one area to become familiar with the people and their customs.
  • Despite the recommendations of the MTR (1989), groups and in particular women's groups are neither encouraged nor assisted by the project. Their number is decreasing and their potential as extension foci is not being used.

Sufficient extension visits to farms are not being carried out by staff. This causes a negative perception of staff and the project by farmers and contributes to poor communication. While some extensionists state that visits to farms and houses are hampered by road conditions and unavailability of vehicles, and insufficient direction and encouragement from headquarters, there is also a psychological reluctance on the part of the staff vis-à-vis "on field extension and visits".

There is a strong indication that some of the farmers in contact with the project (vis. the procurement of free inputs) are in fact "new style big-men" who position themselves in such a way as to acquire project inputs. If this is so, it makes for difficulties in some activities of the project effectively reaching the target population under its current design and management.

Thus, in terms of achieving a widespread and mean coverage with regard to agricultural advice and providing access to inputs, the project has not achieved its objectives.

The project has improved physical access to some areas, provided a better basis for nutrition and health services to operate and assisted in improving literacy in some remote areas. While the project has provided health staff with better living conditions there is little evidence of an increased delivery of health services to the population. The effectiveness of health services is closely linked to staff numbers, availability of medicines and funding; one or several of these essential ingredients has often been lacking.

Largely because the approach to promoting the role of women was indirect and non-specific (and ignored the social context) the situation of women has generally not improved. Some specific benefits through literacy schools has occurred especially in the Karimui district.

Effect on Crop Production. By distributing coffee and cardamon planting material and promoting the rehabilitation of existing coffee stands the project has certainly had some effect on production /, however, the extent of the effect cannot be measured with some representative samplings of these plantings. The commercial vegetable production by the project is unsustainable in its present form. The envisaged increases in food production and additives to the species of crops grown were unrealistic in the context of the situation in Southern Simbu.

Effect on Institutions. Starting from a low level of institutional capacity, the project has succeeded in developing a workable framework for district-based investment programming and budgeting. While the projects' physical facilities and infrastructure were implemented, further attention (including the use of technical assistance) will be needed if this achievement is to be sustained.

The achievements of institutional strengthening have been overshadowed by weaknesses in managerial skills which resulted in better planning not being adequately reflected in better operation of facilities and delivery mechanisms.


Recommendations Consistent with the Present Project Structure and Rationale

Institutional Strengthening. To improve the manner in which project management is implemented and to strengthen the province's institutions, the following recommendations are made.

  • in addition to further staff training appropriate personnel management methods providing for career development plans which recognise performance and minimise both external influences and subjective considerations should be promoted;
  • revolving funds and/or accounts should be established to facilitate the marketing of cash crops, the payment of patrol allowances and funds and the provision of finance for selected non-recurrent expenditure items;
  • to overcome "decentralisation shock" and help the project regain momentum, short-term technical assistance should be used as necessary;
  • a project liaison officer should be appointed to support the District Managers and their District Management Teams; and
  • to evaluate project impact more project-specific surveys should be undertaken. Additionally, as project output data are incomplete, quarterly field reports (in particular) should be re-checked and output data revised.

Agriculture Development. Extension should undertake the following general actions now that its primary role of providing agricultural inputs is being phased out:

  • re-examine its current thrust as far as policies are concerned and define them more clearly. It is anticipated that an approach entailing more involvement by extensionists at the village level would be adopted;
  • develop and prioritise a structured training programme; and
  • rationalise the staffing situation so that frequent staff transfers are minimised.

To increase the income of farmers the project should consider the following possibilities:

  • devote more resources to rehabilitating coffee and increasing yield per unit area rather than planting new areas, particularly in the Gumine district;
  • seek private operators involvement in agricultural inputs supply; and
  • examine the feasibility of setting up a revolving fund, initially financed by IFAD, by which DPI or its agents can market cash crops in remote areas.

The proposed feasibility study on commercial vegetable production should be carried out as a priority. If it becomes apparent that the venture cannot be made commercially viable, the project should withdraw support immediately rather than further raise false expectations.

Health and Nutrition. The project should urge provincial authorities to recruit medical staff (including a volunteer nutrition worker for Karimui), provide better transport for health workers and address the issues of both shortages of vaccines and funds for Maternal and Child Health (MCH) clinics.

Training and Education. The following measures should be considered under the training and education component:

  • more consideration should be given to self-funding for literacy programmes, including the possibility of the project establishing a crop marketing service to be run by the organisers of the Karimui programme;
  • actual staff training needs should be developed in detail (in the case of DPI after a re-examination of its priorities) through technical assistance. Special assistance should be given to the training needs of women; and
  • in order for the Media Unit to become more effective in serving community needs, it should be closely integrated with the Simbu Extension Support Programme (SESP).

Recommendations for Consideration in the Future

The assumption should not systematically be made that project implementation is to be carried out through government agencies (as was the case with SSRDP). The selection of implementation channels or delivery mechanisms should be based on an assessment of the comparative strengths and weaknesses of the various possible implementors with respect to each major action considered by the project. The end result of such an approach would most likely be an adjustment of project objectives to existing capabilities and the involvement of a larger number of operators. Consequently, institution capacity building should be proportionate to the contribution that public services can realistically be expected to make to the project objectives.

Because churches and some non-government organisations (NGOs) are will entrenched in many PNG communities they should, where feasible, be used as a link between the project and the population. This should lead to more involvement by the target groups as most non-government agencies have a better awareness of the population's specific needs and capabilities than public servants do.

Technical assistance should be used as necessary and it should not be terminated abruptly as was the case with SSRDP.

Extreme care should be taken before new technologies are included in projects. Even if this is the case, they should first be demonstrated then phased in.

In the PNG context, renewed attention should be given to the involvement of women and women's groups in project planning. The mission believes that women's groups and the issue of women's involvement was not considered seriously enough by the project implementors.

Lessons learned

The assumption that the public service, if given sufficient support through project instigated institutional building, would be able to deliver a wide range of services should not be made. For services which involve complicated interactions between the project and the target group, NGOs which are more intimately involved with the communities, should be used as one channel for project implementation. This approach should be given sufficient weight in project design particularly in situations (such as PNG) where churches and NGOs are well entrenched.

The introduction of new technologies without proper testing and without a thorough understanding of the target groups social and economic needs should never be contemplated. A realistic need assessment should be mandatory in project design and new technologies should be carefully tested and slowly introduced.

Project designers should not be reluctant to use and persevere with TA where a need is identified. TA should not be abruptly terminated particularly if adequate local expertise has not been developed. Project design should have sufficient flexibility to increase (or decrease) the amount of TA provided according to implementation experience.

Institution strengthening, particularly training, should not be treated as a one-off activity, but rather as a continuous intervention which is capable of responding to the project's changing needs. For training to be effective, be it at senior, field or farmer levels, training needs should be developed in detail and prioritised. TA should be used as necessary for training.

Project design and implementation should give sufficient weight to the issue of women's involvement both as beneficiaries and implementers of activities. In situations were women are, effectively, the most disadvantaged in both material and social senses (such as PNG) adequate attention to women's involvement in project design and implementation should be a condition for loan effectiveness and continued disbursement of project funds. Without such a proviso it is probable that the issue of women's involvement will not be adequately considered by project implementors.




Small Farmers Credit Project (1991)

September 1991

Completion Evaluation

Given that a second phase of the Small Farmers Credit Project (SFCP) for Jamaica (Loan No. 100-JA) was under consideration, IFAD's Monitoring and Evaluation Division carried out a completion evaluation of that project. The field work was combined with an Identification Mission organized by the Fund's Latin America and the Caribbean Division, in order to ensure that the results of the Evaluation Mission would be effectively incorporated into the design of a new project. In fact, a main recommendation of the Evaluation Mission was that there should not be a second phase of the SFCP. What is recommended, instead, is a project in which the emphasis should be on the diversification of financial services for the rural poor.


In the early 1980's, Jamaica's economy was in a critical situation due to the long-term decline in export prices for its bauxite-aluminia mining and processing industries. The need to reactivate traditional agricultural production to boost exports and reduce imports, especially of food products, motivated the Government of Jamaica (GOJ), to assign a more important role to agriculture in its policy decisions. It was assumed that if sufficient credit and technical assistance was provided to the country's small farmers (those with farms under 25 acres), they would then be in a position to apply improved production techniques, thereby increasing yields and production, and achieving the stated policy goals.

The situation of the agricultural credit institutions at the time, however, was very precarious due to a longstanding policy of providing funds to farmers at subsidized interest rates and accepting low loan recovery rates. The institutional organization consisted of a national level agricultural bank (the Jamaica Development Bank (JDB) up to 1982, and the Agricultural Credit Bank (ACB) thereafter), and over one hundred Peoples Cooperative Banks (PCBs) at the local level.

The GOJ invited IFAD to assist in developing a rural development project for the country focusing on agricultural credit. The Fund requested the Inter-american Development Bank (IDB) to carry out the appraisal and to cofinance the project. The final design followed previous IDB experience with credit in Jamaica. During appraisal, the need to change the existing institutional structure led to some delay in completing this phase. IFAD's Executive Board approved the project in late 1982 and IDB's Board did likewise early in 1983. Project start-up took place in mid-1983, and the final closing date was December 1989.

Project design characteristics

The project had dual objectives. First, to strengthen the agricultural credit delivery system, by providing the first important support to the new ACB. This was done by supplying loanable funds with an interest spread which was assumed would be sufficient to cover the costs to ACB of administering the sub-loans. This spread was deemed also sufficient to cover the costs of the PCB's in their role as financial intermediaries. Secondly, the project strategy proposed, through supervised credit and the introduction of improved farming techniques, a substantial increase in crop yields of small farmers, thus generating higher incomes from on-farm activities.

The project design proposed a supervised credit system, with ACB-supported farmers receiving technical assistance from the Ministry of Agriculture (MINAG), both in the introduction of improved farming techniques and in soil conservation works, to allow for an increase in short- and long-term yields. Project beneficiaries would consist both of institutions (ACB, PCBs and MINAG), as well as small farmers cultivating between 2 and 10 acres of land. Institutional coordination was a responsibility of ACB as executing institution, and resources were assigned for project monitoring and evaluation (M&E) activities, to be carried out by MINAG.

The total cost was estimated at USD 25 million, with GOJ providing 20% and IDB and IFAD each 40%. The project would be implemented over a four year period, concentrating activities in four distinct geographic areas corresponding to four watersheds.

Once under implementation, the project underwent considerable modifications from its original design. In particular, two major changes were introduced. During the first year, GOJ requested a change in project focus, from the limited pilot-project area originally designed, to a nationwide, all-island encompassing project. A further change, introduced also at GOJ's request in the second year, was essentially aimed at widening the target group, by increasing the upper size limit of eligible farmers from 10 acres to 25 acres. GOJ's motivation in asking for these changes, reflected the new policies of promoting export and import substituting crops. It was also justified as necessary given the low level of project disbursements in the early years and furthermore, the large devaluation of the Jamaican Dollar (JMD) that took place in November 1983, had increased the amount of loanable funds threefold in the short run. These changes to the project's internal design logic were very important, and consequently also complicated the evaluation of project results.

Main project results

The project was actually implemented over a six year period, 50% longer than originally planned. IFAD's loan was 87% disbursed when the project closed in December 1989. The main results will be presented below, both in terms of effects on institutions as well as on the small farmer beneficiaries. The role of loan supervision on project implementation will also be discussed.

Effects on ACB. With the project, ACB has been developed and strengthened as a viable and profitable credit institution. However, it must be pointed out that ACB's main source of income has increasingly been investments in government securities and fixed deposit accounts, rather than income from its agricultural credit operations. Without the income from these non-agricultural credit activities, the ACB would not be the financially successful institution it is today. In addition, ACB has benefitted from not having to absorb the foreign exchange risk. Secondly, the ACB has transferred the risk of sub-loan default mainly to the PCBs.

Effects on the PCBs. Under the project the loan portfolio of all 42 participating PCBs expanded very substantially, but these banks on the whole did not benefit. A limited number of PCBs (about 10 out of 42) did improve their financial situation in relation to what it had been previous to the project, but in 75% of the cases their losses increased. The PCBs in the aggregate remain weak financial intermediaries, many now facing high arrears rates.

Effects on MINAG. During some years, especially when its field staff was being reduced due to cuts in its budget, the MINAG benefitted from the project, as it received funds for staff, operational expenses and for the purchase of vehicles. MINAG was thus able to maintain its services to farmers, although these drastically fell off once project funds were exhausted. In terms of improving MINAG's capability to introduce changes in farm technology, the project did not have much success. Yield increases were meager and on-farm soil conservation adoption was disappointing. Community soil conservation works carried out did exceed the original project goals, but unfortunately these were not integrated into other project activities, so their overall contribution to attaining objectives was of little relevance.

Effects on Project Management, Monitoring and Evaluation. While the managing of the individual components was in general adequate, overall project management and coordination was weak. The monitoring and evaluation activities carried out served mainly to record events that took place but were of little use in assisting management.

Effects on Credit to Small Farmers. The project contributed very substantial funds for small farmer credit, supplying about 30% of all ACB funds in the years 1984 to 1987. Thereafter, project funds constituted a small portion of the total as other external sources of funds were supplied to ACB.

In terms of the number of sub-loans, some 14 150 of these were granted to small producers. However, since ACB was not able to provide the number of actual beneficiaries (many repeat borrowers occurred), the Evaluation Mission arrived at an estimate that between a minimum of 8 500 to a maximum of 9 800 farmers were effectively reached. This compares favourably with the 4[500 that were targeted at appraisal.

In 92% of cases the sub-loans went to farmers that possessed a total area of under 25 acres (the definition of small farmer used by ACB), and all sub-loans complied with the Credit Regulation which indicated that the area cropped be under 25 acres. With regard to the original target group (those farmers having under 10 acres), 77% of all sub-loans went to this group. Available data suggests that 51% of sub-loan recipients increased their incomes and 64% increased their demand for labour. The Evaluation Mission's findings tend to indicate that sub-loan beneficiaries were farmers who, while poor, had better access to land and other resources.

Project credit funds went primarily to the financing of export crops (50%), to the purchase of livestock (30%), to food crops (16%), and for farm infrastructure. This distribution corresponds to GOJ's stated priorities. There is no evidence, however, that the project contributed to increasing crop yields as originally planned at appraisal. While production was increased through the use of credit, this was achieved by increasing the area cropped.

Project Supervision. In general, while field supervision by IDB was adequate, with multiple visits being made to PCBs to ascertain that project activities conformed to those included in the loan agreements, there was insufficient supervision of other loan related matters, such as the use of loan recoveries for providing further credit to farmers. The major implications of the changes suggested by GOJ and approved by IDB were not adequately anticipated. The extent to which those modifications could alter the project's original focus was not anticipated.

Conclusions and lessons learnt

The overall assessment of the project was complicated because of the important changes introduced during implementation. These changes can be seen as an adaptation of the project to the GOJ evolving priorities. But, at the same time, because of these changes, the project as implemented did not reach its initial objectives. Nevertheless, given the achievements described in the report, both the GOJ and the IDB have considered the project successful. In addition, the project has yielded a number of important lessons for future projects, the most important of which are presented in the following paragraphs.

Lessons Concerning the Macro-economic Policy Environment. In the case of Loan No. 100-JA, there is a clear lesson for IFAD on the need to monitor more closely the evolving economic situation in the countries, in order to adapt its projects when important policy changes take place. When this type of situation occurs, the Fund should be flexible enough to redefine projects when the original design has become obsolete, but taking care that the needs of its target group are not adversely affected.

Lessons Concerning Definition of Beneficiaries. IFAD should have a clear understanding of country priorities with regard to the target group before carrying out the preparation and appraisal of a project. This requires that at identification, the definition of which groups will be the beneficiaries, should be worked out in detail with the staff of national institutions that will later implement the project. Eligibility criteria to be applied to project beneficiaries should be operationally applicable and as precise as possible.

Lessons on Project-proposed Technical Solutions. The credit needs and production possibilities of the target group have to be analyzed critically in greater depth, to ascertain if the project's proposals correspond to the beneficiaries' actual needs. The increased production capacity of poor small farmers should be based on a realistic assessment of available improved technology for their type of land, their crops and their resources. The project results indicate that a mistake was made in proposing exaggerated increases in production and yields, when the technology available was only adequate for producing modest increases. The capacity of the extension system to disseminate new technology, should also be carefully assessed. Provision should be included in future projects to periodically review the proposed project's crop and technical packages, to ensure that agronomic recommendations remain in harmony with changes in input and output prices.

Lessons on the Need for Diversified Financial Services. The project's focus on credit delivery mechanisms alone should not be repeated, as no attention was paid by ACB towards generating savings. A balanced approach is required to promote savings in rural areas, thus reducing the need for additional external funding, while providing new loans in a manner such that higher loan recovery is achieved.

Lessons on Building up Institutional Capabilities. The capacity of institutions to adapt to new project demands can easily be overestimated. The development of institutional capacity requires time and resources which the project should provide for. Institutional support services to the project, from agencies not used to providing these to development projects oriented to rural poor populations, should not be left as the undetermined responsibility of the government, as it is easy for the latter not to take the actions required. The insufficient support to the PCBs is a case in point, as there was no explicit provision in the project concerning how these were to be strengthened and who was responsible for this.

Lessons on Project Monitoring. Project monitoring should be explicitly integrated with project management. Otherwise the result is a divorce between the monitoring staff and the project manager who is the direct user of monitoring information, and no positive benefits are obtained.

Lessons on Project Evaluation. The limited usefulness of the evaluation studies based on farmer surveys, highlights the need to make greater use of loan application forms and other project records, in carrying out evaluation activities. Surveys should be used to complement these other sources of data, and care should be taken to ensure the use of short questionnaires that refer only to that data not available from other sources. The length of time required to process survey data would be reduced and non-sample errors would be minimized. Case studies should also be used.

Lessons on Project Sustainability. From the previous lessons, it is clear that the project has a reduced long-term capacity to continue making loans to small farmers. Given the high rate of arrears, which evolved from an average 62% in the first two years of the project's implementation to an average of 28% in the project's last two years, the loan funds will continue to diminish.

Nevertheless, the project did allow ACB to strengthen its financial situation, by using sub-loan recovery to purchase government securities and invest in fixed term deposits. This use of the funds, while unorthodox, did permit ACB to generate income to continue to function, and thus would allow the further recycling of loan funds in the future.

Lessons on Supervision. IFAD requires substantially more involvement in project supervision, if it is to avoid the kind of problems which the project faced when the policy environment underwent substantial changes. The long-distance supervision through a cooperating institution, while useful for handling regular project implementation matters such as loan requests and disbursements, did not function adequately when dealing with more crucial project issues. In addition, there was an insufficient flow of project-related information and reports from IDB to IFAD. As experience with the project demonstrates, certain supervision aspects should not be delegated completely to the cooperating institution, whose orientation may not be the same as the Fund's. In addition, in credit projects, IFAD should ensure that agricultural credit experts participate in supervision missions. Finally, close attention should be paid during project supervision to the further use of credit funds recovered.

Incorporation of lessons learnt in the New Jamaica project

After the completion evaluation of the Small Farmers Credit Project a new project for Jamaica is being designed. The new project is formulated within the framework of an overall structural adjustment programme which emphasizes trade liberalization and an increase in lending rates to the small farm sector. The project design follows the general policy of privatization. Thus, agricultural extension would be subcontracted by the ACB to assist its clients, according to their demands, instead of the public sector supply led approach followed in the SFCP.

The analysis of the target group has been given much more importance in the preparation of the new project than in the SFCP. The target group would include the rural poor (not only the farmers). In addition, the eligibility criteria would include household income instead of being restricted to acreage, and credit ceilings will be established.

Beneficiary participation is intended to be of essential importance in the new project. The ACB/PCB network would become a cooperative banking network. More and more decisions will be transferred from the ACB to the PCBs, which played too modest a role in the SFCP. Moreover, the role of the management committees within the PCBs would be strengthened, therefore allowing for a direct involvement of the rural poor at the decision making level.

The project will not include a specific community soil conservation works component. These issues will be promoted as part of the extension messages. In this way those activities will be integrated with the rest of the project and project coordination will be simplified, allowing thus for greater efficacy and efficiency than in the SFCP.

The new project is based on the development of a sustainable cooperative banking system, introducing savings as a new element to the ACB/PCB system and strengthening the PCBs through appropriate technical assistance and training.

As has been done in the Hillside Farmers Support Project (Loan[No.[217-JA), the monitoring and evaluation functions will be separated. Monitoring will be undertaken by the ACB/PCB system. Most of the indicators would be based on data available within the ACB/PCB information system. On the other hand, evaluation would be the responsibility of the Project Analysis and Monitoring Company. The lack of separation of the monitoring and the evaluation function was a key reason for their lack of appropriate functioning in the SFCP.

As project coordination was one of the major problems in the past, the project would have only one executing agency, the ACB. All other services would be subcontracted via the Project Management Unit.




The Northern Region Agricultural Rehabilitation Project (1991)

September 1991

Interim Evaluation


The project area consists of a narrow fringe of land along the Nile in northern Sudan and covers about 120 000 feddans (fd) or 50 000 hectares with about 100 villages. The climate is extremely dry with very hot temperatures from April to September - irrigation is essential for cropping. Wheat, legumes (faba beans, chick peas, field beans, lentils), vegetables, spices, sorghum and maize are the main annual crops while dates (by far the most important crop), citrus and lucerne (alfalfa) are the important perennial crops.

Project design and objectives

Target group

Staff Appraisal Report (SAR) estimated the project beneficiaries to be 40,000 low income farm families, with an average family size of six persons. The average family holding was estimated as 2.8 fd with 2.0 fd cultivated and 0.8 fd fallow. The annual income was estimated in 1983 at Sudanese Pound (LS) 665 per family or USD 85 per capita. In addition to the farmers, the following institutions were expected to benefit through institutional strengthening:

  • Agricultural Bank of Sudan (ABS)
  • Regional Ministry of Agriculture (RMOA)
  • Agricultural Research Corporation (ARC)
  • Northern Agricultural Production Corporation (NAPC)

Objectives and components

The project was designed specifically to raise the productivity and income of small farmers and cooperatives, increase food production and thereby substitute for imports. These objectives were to be achieved through intervention in three areas; investing in irrigation rehabilitation, funding incremental annual inputs in the irrigated schemes through credit and by strengthening the service institutions in the project area.

Credit for investments and incremental annual farm inputs were to be provided through the ABS following the procedures already established under the on-going World Bank-supported Agricultural Services Project (ASP). NAPC's pumping stations in the Northern Province were to be repaired and kept operational until the implementation of a full rehabilitation scheme to be funded by IFAD and ODA under separate arrangements. The main project components were:

  • Agricultural Credit and ABS Institutional Support (USD 2.3M)
  • Agricultural Services, Extension and Training (USD 4.5M)
  • Adaptive Agricultural Research (USD 2.2M)
  • NAPC Pumping Station Repairs (USD 2.5M)

Expected results and assumptions

The total area cultivated was expected to rise from 90 000 to 11 600 fd as a result of improved water supply reducing fallow from 32% to 25% of the area. New land would be brought under cultivation through the establishment of project-financed wells for irrigation. Production of broadbeans, wheat, sorghum, berseem, citrus and dates was expected to increase by 79, 147, 58, 152, 24 and 33%, respectively, by project year 6.


An intention of this report is to provide an evaluation of the NRARP for the appraisal mission to the Northern Province Irrigation Rehabilitation Project (NPIRP - Phase II). The report also focuses on any directional changes or corrective measures that could still be taken before the implementation of the NRARP is completed. Although the mission would have liked to develop a more substantial analysis on project impact on farmers it chose to focus on project performance and its impact on the institutions, these being a significant beneficiary. This approach is partly a result of the mission's view that as institutions would be critical in the follow-up project they warrant a substantial amount of attention and partly because the mission found it difficult to quantitatively isolate the project's impact on farmers since:

  • other programmes were involved;
  • independent private investments and favourable producer prices have had a significant influence; and
  • there is a shortage of consistent time series data on prices, production and consumption.

In order to assess the overall status of the project, the mission reviewed the supervision reports as well as a Mid-term Review (February, 1988), a Mid-term Evaluation (Feb/March 1990) as well as several other reports pertaining to the project area. The mission visited Sudan from the 17 May 1991 to 7 June 1991 during which time it spent ten days in the project area.

Implementation context

Agriculture which is the predominant sector in the Sudanese economy grew by only 0.5% per annum from 1975 to 1980 and has subsequently declined further. The main reasons for the decline were low producer prices for export crops, a shortage of foreign exchange for agricultural inputs and a deteriorating infrastructure. In the context of the Northern Region, difficulties in obtaining agricultural inputs and ageing irrigation equipment were the major causes of a deterioration in productivity. The Government of Sudan (GOS) attached priority to rehabilitating the irrigation sector of the Northern Region and requested IFAD assistance.

Four project implementing agencies (PIA's) have been involved in project execution: NAPC, ABS, RMOA and ARC. Each agency was given the responsibility of implementing its respective component. This arrangement of using existing GOS departments was the only practical way of implementing the project.

Coordination problems arose between the agencies and it became apparent that the Regional Coordinating Committee (RCC) was unable to perform its coordinating and directive functions properly. It became obvious also that the PIA's found it very difficult to deal separately with the funding agencies, (GOS, IFAD) in matters of procurement, disbursement and training. A Project Coordination Unit (PCU) was created in July 1987 (i.e. three years after IFAD Loan became effective). It proved to be an adequate response to shortcomings on project coordination and liaison.

In order to ensure that the annual work programmes and periodic reports are submitted regularly, and in the proper format, PCU was given some executive powers and control over the implementing agencies particularly with respect to the preparation of work programmes and budget and the release of funds.

The IFAD loan became effective in July 1984 while the OPEC Fund loan became effective in May 1985. However, because of previous GOS arrears on OPEC Fund loans, a suspension of disbursement of the OPEC Fund loan was imposed simultaneously with loan effectiveness. Due to the joint financing arrangements stipulated in the Loan Agreement, IFAD was also forced to curtail foreign exchange disbursements. Because of the suspension the project was able to undertake important start-up activities with the limited funds available, including the appointment/re-deployment of required field staff, finalization of the main procurement arrangements and the establishment of credit and extension programmes. IFAD resumed its disbursements in October 1986, and vital farm inputs and machinery was finally procured for the project. Effectively, therefore, project implementation commenced in the 1986/87 financial year. Disbursement of the OPEC loan caused problems throughout the implementation phase.

Project achievements

The overall performance of the project must be viewed in the context of the difficulties imposed by problems with OPEC funding, which effectively delayed implementation until 1986/87, as well as by the country's economic situation. For this reason some important sub-components including construction of training and research facilities, have not been started. The 1988 flood also affected project implementation and caused some temporary change in its direction.

Largely because of unforeseen changes in funding arrangements, disbursements are well below SAR allocations. However, some 80% of a revised IFAD contribution agreed to between the donors and GOS and has been disbursed. About SDR 1.88 million remain to be disbursed.

Production. While the appraisal projected a total cultivated1 land of about 100 000 fd and a total annual irrigable area of 135 000 fd by project completion an estimated 210 000 fd were cropped in 1990. The project contributed an estimated 26 000 fd of cultivated area either by maintaining cultivated area (replacement of pumps both in NAPC and private schemes) or extending irrigation to previously uncropped land. An estimated 210 000 t of incremental crop production was expected to result through the project's contributions to irrigation capacity from 1986/87 to 1990/91. Incremental production was projected to peak at about 77 000 t in 1990/91 when the full effects of the pumps supplied in 1989 and 1990 were felt. This is similar to the 70 000 t of extra production projected for year 6 by the SAR. An estimated 10 000 t of incremental production can be attributed to project-provided fertilizer.

Institutional Strengthening. While the project undoubtedly helped strengthen some implementing agencies, the sustainability of some of these improvements remains in doubt.

  1. NAPC. The use of external loans from ODA and IFAD to finance a crash irrigation grants rehabilitation programme was instrumental in improving water delivery and, consequently, in raising funds by being able to increase (and improve collection of) water charges. While increased charges may be viewed as a first step towards sustainability, the corporation's structural problems which relate to sustainability were, by definition, not addressed (the structural problems include overstaffing, low efficiency of the irrigation network, inefficient water management practices, etc.).
  2. ABS. The bank is a centralised organisation which integrates trade and banking activities. It provides strategic goods and services at subsidised prices through the mechanism of overvalued official exchange rate and negative real interest rates. ABS's services are, not surprisingly, in high demand. Any external loan, such as IFAD's present one, is primarily viewed as a contribution to the overall organisation's objective and consequently pooled with other available resources. IFAD has basically contributed directly to the ABS operating funds and by doing so has helped the bank to expand its operations. ABS performance in the project area has been significantly improved both through the funding of its operations and the provision of office buildings and storage facilities.
  3. RMOA. The IFAD project brought two major changes. First, it provided a substantial amount of resources in the form of transport, equipment, capital goods and incremental operational costs. Secondly, it introduced the T&V system within the extension service and allocated the major share of the additional resources made available to the RMOA for this purpose.
  4. ARC. Provision of transport to the Hudeiba Research Station (HRS) has allowed it to supervise off-station trials related directly to the project more effectively.

Monitoring. Project monitoring failed because the various implementing agencies have narrow and divergent perceptions of the project in line with their own policies and constraints. The inadequacy of project coordination and monitoring arrangements at the regional level as well as the marked weakness of the RMOA in charge of those tasks also contributed significantly to the problem. The project, as a result, relied heavily on substitutes for effective monitoring. This is illustrated by the increasingly intensive involvement of PCU and to a lesser extent of consultants reporting on project achievements in addition to the significant involvement of supervision missions.

Project effects

Effects on production. An estimated 26 000 fd of cultivated area was either maintained or added to previously uncropped land. Incremental production, as a direct result of IFAD's interventions was projected to peak in 1990/91 when the full effects of the pumps supplied in 1989 and 1990 were expected to be felt. This increase will only be sustainable if allowances are made for adequate maintenance and periodical renewal of irrigation equipment. Project-provided fertilizer represented a one-off injection which resulted in an estimated 10 000 t of incremental crop production.

Effect on target group. A socio-economic report in 1991 estimated a net income of about LS 36 000 for a farmer with a gross income of LS 55 000. This compares to an estimated net income of LS 665 per family of USD 85 per capita in the SAR. While it is difficult to compare the estimates because of inflation, the figures strongly suggest that the farmer today is much better off. This content is supported by socio-economic report (1991) which states "... it could be safely concluded that the quality of life of the farming population in the project is highly satisfactory. People have access to the basic needs of life in terms of housing, utilities and food. They also have access to the basic community services ..." The extent to which the project contributed to this favourable situation is unclear, but its assistance with inputs (through the provision of credit to ABS), support to NAPC's pumping operations and emergence contributions through pumps, jute bags and drainage after the 1988, was significant. It is believed that at least 28 000 farmers out of an estimated total of 110 000 farmers have benefited directly from project interventions. An estimated 50 to 60% of the beneficiaries in the private schemes belong to the target group while most of the NAPC schemes farmers are small farmers.

Effects on institutions. While the project has undoubtedly helped strength some aspects of the implementing agencies, the sustainability of some of these improvements remains in doubt.

(i) NAPC. Basically, the project contributed to the corporation's survival strategy by financing a bridging operation. This, in fact, was the project's intention. The organisation's structured problems which relate to sustainability were not addressed by definition.

(ii) ABS. Its performance in the project area has been improved significantly as a result of the financing of office buildings, housing and storage facilities. However, despite the effectiveness of ABS as an agency for disbursing inputs and credit, unless adjustments in price and exchange rate policies are made so that agricultural inputs are sold at market prices and on-lending rates are made positive, the ABS's current operations are not sustainable.

(iii) RMOA. The RMOA is responsible for providing a wide set of agricultural services to the Northern Region. Its administrative structure follows the Regional Government structure with Headquarters at Ed Damer, and representation at the provincial, district and rural council levels. The Ministry's culture is typically that of a public bureaucracy experiencing budget austerity, staff frustration and a lack of sense of direction. Decision-making is quite a laborious process in this context as the problem is compounded by difficult communications between offices (no telephone, distances and rough roads, etc.) and generally poor working conditions.

IFAD project brought two major changes to this situation. First, it provided a substantial amount of resources in the form of transport, equipment, capital-goods and incremental operational costs. Secondly, it introduced the T&V system within the extension service and allocated the major share of the additional resources made available to the RMOA for this purpose. It is estimated that the IFAD project provides up to 70% of RMOA resources (not taking the salaries into account). This dependency upon external resources which remain, however, below the needs, clearly indicates the limits of this pattern of development.

(iv) ARC. Provision of transport to HRS has allowed it to better supervise off station trials related directly to the project. However, until a complement of research staff is based at the soon to be built Dongola research station the impact on ARC's ability to effectively carry out project-oriented work will remain limited.

Environmental Impact Effects. The project has contributed to the proliferation of irrigation wells (mataras) both in the Nile flood-plain areas and the slightly elevated land (upper terrace) adjoining the flood-plains by providing pumpsets. While it is unlikely that mataras near the Nile will, as such, harm the agricultural land in their vicinity, the sustainability of mataras in some high terrace areas is questionable.


The project has been successful in its main aim of helping increase agricultural production and raising the incomes of small farmers in private and cooperative irrigation schemes. Some import substitution through increased production of food, particularly wheat, has been achieved. The ability of the PIAs to operate, has been enhanced mainly through a generous provision of transport and funds to operate the vehicles. However, it is unlikely that this increased productivity is sustainable for the following reasons:

  1. the combination of an overvalued official exchange rate (five to six times lower than the black market rate) and of negative real interest rates for credit, has heavily subsidised the imported agricultural inputs, equipment and machinery. These arrangements are not sustainable under Sudan's conditions of ever-decreasing foreign exchange earnings and acute budget deficit;
  2. because of the shortage of foreign exchange, the physical availability of fuel, spare parts, fertiliser and pump sets, most of them imported, is dependent to a significant extent, on the project resources; and
  3. implementing agencies face a number of structural problems which reflect on their managerial performance and their capacity to use equipment and vehicles provided by the project capacity to use equipment and vehicles provided by the project efficiently. Unless new resources are injected into the system, the operational capacity of the implementing agency to follow-up after the project will be unavoidably reduced.

Main recommendations

In defining a rationale on which to base recommendations for improving project performance and impact, it should be first recognised that the structural nature and the magnitude of the constraints identified are to a large extent beyond project control2.

The obvious recommendation is that the macro-economy be adjusted so that agricultural inputs are sold at market prices, leading to the disappearance of parallel markets and that lending rates are made positive. Such a recommendation seems far-reaching for a project at micro-level, yet this issue is critical to sustainability.

As far as the on-going project is concerned, it is recommended that the following corrective measures which are likely to minimise the effects of the above-mentioned constraints and increase the commitment of various implementing agencies to the achievement of project objective be taken:

  • hold annual programming workshops at district and provincial levels and establish, in close cooperation with RMOA, ABS and NAPC, set performance targets and make the release of funds linked to minimal achievements in this field; and
  • adopt a substantial staff incentive framework based on staff's effective contribution to the project.

A basic recommendation is that the agricultural component concentrates its efforts on implementing an effective T&V system as its priority during the remaining period of the project. The effectiveness and impact of the T&V system should be assessed in the second half of 1992 (at which stage the system will have been implemented for two years in the Central District).

With regard to future IFAD projects, decentralisation of implementing agencies should be encouraged as part of the project's objective. To achieve this, project resources should be allocated to task managers at the provincial, district and scheme levels.

Component recommendations

NAPC/Irrigation. The survival strategy applied through necessity to date, by NAPC management is not sustainable. Structural adjustments in addition to rehabilitation are needed. The fact that GOS has decided to privatise NAPC but has not clearly defined its modalities has created a wait-and-see situation. It is the mission's opinion that the follow-up project's aim should be to help GOS devise a functional way of privatising NAPC.

In view of the proliferation of mataras and the significant lowering of watertables in some locations within the project area, a hydro-geological study which could develop a groundwater utilisation plan is recommended.

Credit. ABS should make every effort to improve recovery rates and rates and replenish the resolving fund as a pre-requisite to the expansion of its operation. ABS should improve its record keeping to firstly separate disbursements from various credit sources; secondly to distinguish between the demand for credit and for inputs which farmers could buy with their own cash resources; thirdly ensure that the revolving fund is credited with loan repayments properly; and fourthly collect data and analyse credit impact on beneficiaries.

Agricultural Services. To effectively install the T&V system, the following measures are considered essential:

  • a motivated and experienced Team Leader (Extension) must be appointed to work with the T&V system. Sufficient incentives3 must be provided to attract such a person;
  • an Extension Consultant to work in total cooperation with the Team Leader must be employed as a priority; and
  • a system of developing annual work programmes and budgets from the field level upwards must be installed so that consolidated Annual Work Programmes (AWPs) and budgets can be delivered

Agricultural Research. When the proposed Dongola research facility is established, agricultural socio-economic work on small farm management should receive priority together with the issue of salinity/sodicity in matara situations.

Forestry. Prior to a commitment of further support to the Northern Province Community Forestry Project (NPCFP), a consultant specialising in desert control should assess the long-term effectiveness of control measures taken by NPCFP to date.

As noted in para 17, project monitoring was not effective. The following recommendations aim at creating a situation which will increase the awareness of line managers and critical tasks operators of the need for an effective monitoring mechanism as a support to decision-making. More delegation of authority (and of the corresponding resources) to the lower levels of the hierarchy within all implementing agencies, and particularly within RMOA and NAPC, is a prerequisite in this regard. It is further essential that line managers and critical tasks operators be responsible for defining their information needs in accordance with performance targets set at their level of responsibility. Monitoring indicators should be primarily based on these performance targets. The latter should be agreed on annually in the framework of an enhanced programming process starting from the rural council/scheme level. In-service training and technical assistance are extensively needed to implement the above recommendations. However, it should be ensured that assistance does not lead to substitution: concerned managers should be the one to take the decisions regarding their information needs.

Lessons learned

Although the project has increased productivity this increase is not sustainable as it is dependent largely on heavily subsidised imported agricultural inputs, equipment and machinery. The subsidies are untenable under the country's acute budget shortfalls and lessening foreign exchange earnings. IFAD should, along with other aid agencies, urge GOS to make macro-economic adjustments including market prices for inputs, which would lead to the disappearance of parallel markets, and the imposition of positive bank lending rates.

Without structural adjustments large-scale irrigation schemes controlled by parastatals are not sustainable. Before further aid funds are invested in such schemes, given the GOS's intention of privatising parastatals involved in irrigation, the economics of sustaining such schemes under a realistically prices user-pays system should be assessed.

The lack of decentralisation, particularly in the matters of financial delegation, and the ineffectiveness of linkages between the task manager at the field level, the region and the central authorities have been major impediments to project implementation. The decentralisation of implementing agencies, in future IFAD projects, should be encouraged with project resources allocated to managers at the provincial, district and scheme level.

The development of annual work annual work programmes (AWPC) through workshops at the district and provincial level, involved project implementation agencies (in the case of NRARP the line agencies RMOA, ABS and NAPC) are necessary to ensure better coordination and use of scarce funds. The eventual allocation of funds should based on the quality of the AWPs submitted by individual agencies and the immediate past performances of the respective agencies. The scope of the AWPs should be strictly related to the likely funding available.

With regard to the T&V system its successful implementation requires systematic planning, motivated and experienced leadership, regular flows of budgeted funding and sufficient incentives for field workers. Incentives are particularly critical in isolated, remote areas. These ingredients are all dependent on incremental funding which the GOS will not be able to provide through its normal revenue sources. Logically a system with fewer, but better motivated and supported personal, should be developed which is commensurate with the available level of funding.

1/ "Irrigable area" is larger than "cultivated land" because the same "culltivated land" maybe cropped more than once in a calendar year.

2/ Particularly the macro-economic and policy constraints.

3/ IFAD should consider paying at least part of the necessary incentive.




Oaxaca Integrated Rural Development Project - Ex-post evaluation(1991)

May 1991

Ex-post evaluation


IFAD's Monitoring and Evaluation Division conducted an ex-post evaluation of the Oaxaca Integrated Rural Development Project in October, 1991. The evaluation's purpose was to assess the project's impact on target beneficiaries, as well as to draw lessons from this experience on how to improve rural development assistance efforts applicable both to future project design and implementation in Mexico, and to a wider context.

Background and socio-economic context

The project area is one of the poorest in the State of Oaxaca, which in turn is the poorest state of Mexico. Oaxaca has largest concentration of indigenous populations. With over 12 languages, a poorly developed infrastructure, and only 10% of the arid land cultivable, Oaxaca represents a particularly difficult context for project implementation.

Although the project was designed by IFAD at the end of the 1970's during Mexico's economic boom fuelled by the increase in petroleum prices, the project implementation period (1981-1988) coincided with one of the worst and most prolonged economic crisis suffered by Mexico in the last five decades. From a period of growth with relative price stability, the Mexican economy entered a period of unprecedented hyperinflation, which tripled from 30% in 1981 to 518 in 1982, with a 40% devaluation over the same period. At the same time Mexico's terms of trade deteriorated from a level of 185.4 in 1982 to 87.4 in 1988 (1987=100), as world interest rates rose steeply.

The effects of hyperinflation led to a considerable increase in local currency, while the Government policy of public expenditure austerity reduced the availability of counterpart funding. Project disbursements were negatively affected by the contraction of public spending, both in terms of decreased amounts and increased delays in releasing funds. Funds were not released at the federal level for periods of up to seven months, halting all project activity underway.

Project description

The Oaxaca Rural Development Project was initiated by IFAD in May, 1980 as a five year project (subsequently extended by three years) with IFAD providing USD 22 million of the total estimated project costs of USD 57.2 million. IFAD's loan terms were for a 15 year loan, at an annual interest rate of 8% and a three year grace period. Remaining funds in the amount of USD 35.2 million were to be provided by the Government of Mexico. The World Bank was IFAD's cooperating institution.

The project represents IFAD's first initiative in Mexico, and was intended as a follow-on to the earlier World Bank financed PIDER project. Although PIDER was a nation-wide effort, the Oaxaca project was limited initially to the rural poor of the Chatina region (in the districts of Juquila and Sola de Vega), and in Miahuatlan and Pochutla. As of 1984, the project extended into the districts of Putla, Yautepec and Jamiltepec.

Project objectives and components. The Oaxaca project aimed to reach the smaller and less privileged farmers in remote areas who were not adequately reached by PIDER. The principal objective was to increase the standards of living of the poor population of the inland and coastal zones through economic and social improvements. The project design assumptions were that the indigenous population was strongly motivated to remain in the area, and the under-exploited resource base would be able to support the population on a sustainable basis. The project intended to:

i) Substantially increase food crop and livestock production;

ii) generate employment and income opportunities through agri-cultural diversification;

iii) increase fish production and consumption, and increase poor fishermen's income;

iv) improve living and working conditions of the target population through improvements in health, infrastructure, service provision;

v) protect the natural resource base through soil conservation.

Project objectives would be met through the following components:

i) agricultural production services (increased and improved extension services, land titling, credit provisions, institutional strengthening of INI (National Institute for Indigenous People);

ii) agricultural development (pasture improvement and livestock development, fruit and coffee production, small-scale irrigation programs, soil conservation;

iii) forestry development (aerial photography, nursery establishment, reforestation);

iv) fisheries development (training and infrastructure development, fish marketing assistance);

v) community development, farmers' participation and project management (promotion of community organizations, beneficiary involvement and participation in planning and execution, project management, monitoring, evaluation, coordination, etc.);

vi) improvement of infrastructure (rural road rehabilitation and construction, basic community health services through water supply provisions).

Target Beneficiaries. The project was expected to benefit 15 000 small farmer families, or 84 000 of the poorest people, mostly indigenous, with an average per capita income at the time of appraisal of USD 60 for farmers, and USD 100 for fishermen.

Project Implementation. The project was implemented by a consortium of 15 federal and state agencies, under the coordination of the Ministry of Programming and Budgeting (SPP). As an attempt at decentralization, major responsibility for planning, execution and supervision was placed at the State level, with disbursements made at the federal level. A Coordinating Unit was established within each of the two project regions to coordinate between the SPP delegation in Oaxaca and project beneficiaries.

Project implementation

The project's implementation strategy characteristics were as follows:

A concentration of highly diversified activities in a few limited areas, and fragmented activities dispersed over a large number of communities;

Inopportune and fully subsidized provision of inputs, with insufficient and inadequate complementary technical assistance;

A combination of federal and state institutions supporting various and at times the same activities, with progressive responsibility given to the state agencies;

Provision of services considered priorities by the target communities, even if outside the defined realm of project activities, as a means to penetrate the project area. An example is the construction of basketball courts, or municipal buildings.

Project Implementation Mechanisms

Resource Approval and Allocation Process. The delay in funds approval and disbursement was one of, if not the key, factor negatively affecting the project's implementation. Funds were often disbursed at inopportune moments which did not correspond to the agricultural cycle. Inputs were not delivered in the critical periods in the agricultural cycle. In addition, the executing agencies lacked competent personnel with the ability to develop the work plans with adequate leeway to go through the procedures and channels for the timely release of funds.

The project had a late start, with only 7% of funds disbursed in the first two years. Activity increased in 1983. By 1985, the initial close of the project, only two thirds of total IFAD funds had been disbursed.

Beneficiary Participation in Project Implementation. Although on a limited scale, the project introduced a series of participative mechanisms, such as ‘participative planning forums' in 1985; collaboration with the Regional Council of Marginalized Peoples which represented 16 communities in the project area; planning of project activities in consultation with elected representatives of the target population; such as the municipal authorities, and with elected representatives of indigenous groups.

Supervision. The multiple strata of supervision complicated project implementation, without resolving problems identified, given the clear lack of accountability for performance to institutions. The key problems repeatedly identified were the delays in fund disbursement, and the lack of coordination among the executing agencies. The various layers of supervision were provided by the project's Coordination Unit; 15 state and federal level executing institutions; and the World Bank. In some instances, such as in the case of road construction, there was direct beneficiary supervision.

Despite the high degree of supervision, recommendations made by the 14 World Bank and IFAD supervision missions over the project life often were not relayed to the executing agencies or to the Coordination Unit to be acted upon.

Monitoring and evaluation. Although the project appeared to have a large M&E apparatus, with two M&E units; one each for the Chatina and Miahuatlan/Pochutla regions, this component was not adequately implemented and utilized for project management purposes. Despite the large amount of resources apparently dedicated to M&E and the large structure for this function (nine professionals, administrative staff and two vehicles) in reality these resources were thinly spread over many other activities as well. No computers were available for data synthesis.

The M&E units processed information received from the executing agencies and the supervision memorandums. Monitoring by executing agency, program component, and community was presented in semestral reports with data on physical advances and, in some cases, financial expenditures. The Coordination Unit proposed recommendations on the basis of monitoring reports to the various executing agencies which were at times considered and acted upon.

Key indicators established at the time of appraisal were not utilized to measure project performance. The M&E unit did not collect the type of data necessary for this team to have measured the project's impact on beneficiaries. While ‘output' data on project activities was maintained, such as ‘kilometers of roads constructed,' indicators were measuring the impact of these activities on project beneficiaries were neither established nor measured. External factors affecting project performance such as product prices, input prices, climate effects, etc. were not tracked or analyzed through the M&E system.

Project Coordination. The complex project implementation structure and the lack of coordination of project components repeatedly cited by the supervision missions as a critical problem affecting the project. The project design established a Coordination Unit linked to the State Government as a mechanism to support the Government's decentralization efforts. Tensions between the federal and state governments exacerbated by the funds disbursement problem negatively affected the project's implementation.

The Coordination Unit was able to better coordinate activities in the State of Oaxaca with the 1984 creation of the regional subcommittees of the State Planning Committee for the Development of Oaxaca. The Project Coordinator was nominated as Technical Secretary in the subcommittees for Sierra Sur and Costa. This permitted integrated planning of the diverse state coordination meetings. The new coordinator since 1987 was also designed the State government delegate in Miahuatlan, which included areas not in the project zone.

The complexity of the project design called for intense coordination, without adequately considering the existing administrative and institutional constraints limiting the coordination Units' maneuverability.

Project results

Economic Analysis. The project's internal rate of return (IRR), calculated using 1979 deflated prices as the base year to facilitate comparison with the appraisal IRR conducted in 1979 was 25%, as compared to the appraisal's projected IRR of 18%. This can be attributed in large part to higher prices for project produced goods, and lower labour and input costs than estimated at the appraisal stage.

Nutritional Impact. The Duval method to assess nutritional impact determined that in all areas of the project, ranging from low to high intervention, the population's nutritional status improved over the implementation period. Greater impact was achieved in high intervention over low intervention areas. Positive impact in this area was also achieved through DIF's interventions in nutritional and hygiene education.

Productive Diversification. One of the project's explicit objectives was to diversify the employment and income-generating activities through fruit, coffee, honey, and other types of cultivation. While fruit cultivation had a limited impact, given the untimely supply of trees, inadequate technical supervision, and poor coordination among executing agencies, the limited success has had a demonstration effect. The honey production activities were not successful, again, in large part, due to the lack of technical assistance accompanying the provision of inputs. The coffee component had very positive results, leading to expanded surfaces cultivated, production, municipalities and producers involved and yields. This was in large part due to the efforts of IMMECAFE, the National Coffee Corporation, in developing an appropriate technical package.

The project led to agricultural diversification, since the increase in the area dedicated to coffee production did not lead to a decrease in food crop (primarily maize) production.

Increased Access and Reduced Costs. The construction of 639 kilometers of rural roads has reduced transportation costs, and the price of goods, while increasing access to markets and urban centres.

Slowdown of Migration. The project appears to have slowed down the patterns of out-migration, through having created economic opportunities in the project area. Population in the four districts where the project had a major presence; Juquila, Sola de Vega, Miahuatlan, and Pochutla increased in the 1980s in a significantly higher proportion than the State of Oaxaca as a whole. The increase in Oaxaca between 1980 and 1990 was 28%, while in the four districts mentioned it was 35, 38, 34 and 53 percent respectively over the same period.

Small Enterprise Development. Although not initially planned, the project assisted in the development of various sustainable microentrepreneurial activities, in diverse sectors, such as wood, textiles, and agro-processing. The majority of these activities employed primarily women.

Sustainable Irrigation Development. Two of the five irrigation works have created irrigator's committees, which collect user fees to cover operating, maintenance and water costs.

Institutional Development. The project constructed two rural development centres (CADERs) in Sola de Vega, and Santa Reyes Nopala, the poorest and most indigenous areas respectively in Oaxaca. Both centres were operating at the time of this evaluation as offices for the various executing agencies, serving as a focal point for the integration and coordination of State development efforts.

Demonstration Effects. The project has had a positive demonstration effect in several areas. Fruit cultivation although not realized during the project, is now being realized. The project has led to a sustained effort by government institutions in the area where they were not previously active, and forced attention to meeting the needs of indigenous peoples.

Limited Impact Due to Scale of Activitites. The fragemented delivery of project interventions limited the magnitude of the potential impact. Although the project appears to have bettered conditions, the dispersion and minuteness of the interventions did not lead to overall noticeable changes, with the exception of the coffee producers.

Lack of Deliverables Reaching the Target Groups: In many cases, the project's deliverables never reached the intended beneficiaries. The fisheries component provides such an example. The project intended to give some 70 boats and 100 outboard engines on credit to individual and cooperative fishermen. Of the reportedly 22 engines given, not one was functioning by early 1987. No credit recovery was enforced by the Dirección de Desarrollo Pesquero del Estado. The two of four planned refrigeration units were underutilized, one for lack of catch and one for being out of order since 1985, according to the February 1987 mission supervision report. A visit to coastal fishery sites by this mission found that reported deliveries had never been made.

Conclusions and lessons from the experience


The project was designed at the end of the 1970s when Mexico was enjoying an economic boom fuelled by increased petroleum prices, but was implemented from 1981 to 1988, a period of one of the worst economic crisis faced by Mexico in the last five decades. As can be expected, project implementation and expected results differed significantly from its design.

Despite limitations in the release and availability of counterpart funding due to the stringent policies applied by the government during the crisis, the project had a positive impact in several areas, as indicated in the previous section. These include: surpassing established goals for production, yields, and incomes of coffee producers, resolution of agrarian conflicts, construction of rural roads and bridges in previously inaccessible areas, beneficiary management of irrigation works, the development of appropriate technologies for basic grains production, the establishment of CADERs in rural marginalized areas, economic diversification, use of aerial photography for the planning of integrated development of natural resources and forestry, soil conservation efforts with the planing of maguey, and development of non-farm activities.

The project was negatively affected by the delay in the release of funds, which did not coincide with the agricultural cycle. Construction of physical works were severely hampered as well, with work in progress left until the next release of funds. A lack of technical assistance accompanying the delivery of inputs negatively affected the project, as in the case of livestock, bees, fruit trees, etc.

There were 15 federal and state agencies involved in implementing the project, with a Coordination Unit of the state government to coordinate and orchestrate activities among all. On the other hand the SPP state Delegation played a key role in releasing funds, thus limiting the role of the Coordination Unit. Despite these constraints, the Coordination Unit was better able to coordinate activities through active participation on regional planning subcommittees.

The project demonstrates the complexity of working with indigenous groups in terms of language, cultural and access problems. It raises the issue of the need to train or include indigenous people in the project design, as IFAD is doing under the Guaymi project in Panama.

Although incorporated at the design phase, the project did not use the services of anthropologists in an area with highly diverse ethnic populations. Since the project began in the Chatina area, it became known as the ‘Chatina project," creating false expectations among the Chatino ethnic group that it was to serve only them, whereas they were the predominant group in only one of the several sub-areas of the total project area. The project also worked with Zapotec, Mixe and Mestizo ethnic groups. INI was assigned a major role as the representative of the various indigenous groups in the area, and as the mediator between them and the various government institutions. In practice it did not perform this function well.

Although the monitoring and evaluation units collected useful information, key indicators were not applied to measure project impact on beneficiaries. The project overemphasized the delivery of inputs in status reports and annual reports, rather than the actual application and results of application or utilization of inputs delivered.

The ex-post IRR of 25% surpassed appraisal projections of 18%. The nutritional impact was positive, and higher in areas of high project intervention than in areas of low intervention.

The project had a positive effect on strengthening federal and state organizations' personnel in implementing rural development projects, and in working with indigenous populations. In addition, non-government community organizations were strengthened through their participation in project activities.

Activities were too dispersed and small to have an impact of any magnitude in any one area (with a few exceptions), given the fragmented approach to providing services.

Lessons and recommendations

In order to speed the process of funds release, the fiscal and agricultural cycles have to be made more compatible through existing or new methods. Assistance could be provided to train staff in the preparation of work plans to expedite the process required for fund release. Another mechanism would be for IFAD to operate a ‘special funds' account which could by-pass the lengthy government procedures.

Project managerial, informational and financial transparency is necessary for effective implementation. This implies establishing clear lines of communication and institutional responsibility for project performance by components. A system of managerial accountability needs to be developed early on in the project life, with overall supervision and decision-making responsibility given to a principal institution or unit, with the leverage to exercise its authority. The number of executing agencies involved should be minimized, in order to increase efficiency, and reduce cumbersome and costly coordination needs. A ‘too many cooks' structure and lack of clear implementation accountability mired project implementation.

A diagnosis of the existing institutional capacities to implement a project of this size and complexity should be conducted prior to project initiation. An institutional strengthening component may be the necessary first step to lay the groundwork for project implementation.

If the target population includes indigenous peoples, the project design phase should consider cultural aspects of the target population which have important implications for rural development project design and implementation; such as division of labour, household structure, production and cultivation methods, appropriate technical packages, range of economic activities, etc. Financial resources for monitoring project performance on this population through case studies etc. should be committed. Such projects should employ extension workers who are fluent in the language of the populations they are to assist. It is critical to consult with and involve representatives of the target population in all decisions pertaining to the project.

Although the project made some strides towards increased beneficiary participation, the objective of participation is for beneficiaries to assume ‘ownership' of the development process. While this occurred in some cases (irrigation), in general it did not. The project did not make use of existing forms of communal participation, such as the prevalent ‘tequio' system of community members providing voluntary labour for communal projects. Instead, ‘participation' was encouraged through paying wages to beneficiaries to construct project-financed infrastructure.

The project provided all services gratuitously, thus debilitating the ‘beneficiary ownership' process, and not institutionalizing the process or making it even partially self-sustaining. Rural development projects such as this one should strive to achieve at least partial financial self-sustainability, in order to ensure sustained benefits beyond the project's funded life. Cost-recovery can be achieved through charging user fees, partial or no subsidization of inputs and credit, and fees for technical assistance. Such a demand-driven approach also makes project services more responsive to the target group's needs.

The sequencing of activities is crucial to successful project implementation. Too many activities were conducted simultaneously. Sequencing of activities, although planned, did not occur. A ‘pilot test' approach where a host of activities are concentrated in a limited area, with sufficient time for a ‘gestation period' should be used, where tested results can then be replicated in other project areas.

Women were not adequately considered in the project design and specific efforts were not made to identify their needs. Women's development constraints should be considered at the design phase, to incorporate if necessary, specific measures to address their specific constraints. Future projects should provide training in agro-processing, and other more profitable activities than in the traditional low market potential areas that the project focused on, such as handicraft production.

A future project in the area should provide explicit support for the development of microenterprises. This could be done through support of sustainable intermediary institutions such as ARIPO (the Oaxaca Agency for Artisan Promotion), which has become an important market link between artisans and exporters of their products. The creation of rural non-farm activities (RUNFAs) is of particular importance to Oaxaca given the limited agricultural base, with the total cultivable area representing less than 10% of the total area. A partial solution to stem the rural-urban flow would be to expand the base of economic activity in the area, in light of the limited agricultural potential.

The appropriate plantation of maguey and nopal is a valid protection against soil erosion in arid areas. This method was employed by the project. These plants also provide raw materials for a host of other products. Maguey can be used for producing fibers, honey, syrups, and pharmaceutical steroids, thus stimulating the development of backward and forward linkages.

Reforestation efforts linked with productive wood-based activities have a greater probability of success than as an effort in of itself.

Given the multiplicity and duplicity of activities by various government agencies in the project area, beneficiaries were unable to distinguish the IFAD project from others. The low profile of IFAD in the project has implications for the evaluation of such projects, in that it impedes being able to distinguish project activities and beneficiaries from others, and constrains knowing what to attribute benefits or changes to. IFAD projects should be identifiable through plaques and signs, to increase visibility, for both the project and IFAD. The requirement to ‘publicize' the projects could be stipulated by IFAD in the loan agreement.

IFAD should promote an exchange of experiences in its efforts both regionally and worldwide, since many of the constraints faced, solutions proposed and lessons learned share common features, and have wider applicability than to a specific project or country.

In conclusion, while the Oaxaca project has been criticized as being largely ineffective, the ex-post evaluation mission was able to identify several project activities which had positive sustained impact three years after project funding ended. The project has provided lessons on how to generate sustained benefits in other similar rural development efforts, as well as shed light on what pitfalls to avoid under similar circumstances.


LANGUAGES: English, Spanish