Completion Evaluation

The Indonesian economy grew robustly in the 70's as a result of favorable economic policies, but the fall in oil prices in the 80's has caused severe deterioration in the country's external terms of trade. In order to stabilize the economy and achieve growth, the Government of Indonesia (GOI) adopted policy measures that included restraints on public expenditures, tax reforms, and a more active exchange rate policy.

One of the strategies adopted by GOI for spreading economic growth is the opening up of new lands for agricultural production through the Transmigration Program. To overcome the lack of draught power, which has constrained the cultivation of more lands for food and tree crop production, GOI launched a program aimed at supplying draught animal to the transmigration areas.

The basic strategy of IFAD involvement in Indonesia emphasizes multi-component, area specific projects for the densely populated Inner Islands, and the introduction of technically and financially attractive smallholder farming in the Outer Islands. Five projects have so far been supported by IFAD in Indonesia with a total contribution of SDR 95.65 million, including SCDP I and II.

Major Lessons from SCDP I. Draught power provided by cattle raised agricultural output and increased the household incomes of the beneficiaries. The credit in kind system enabled the poor to obtain cattle at favorable terms and the SATGAS teams provided highly effective technical support to the farmers. The project's MIS assisted project management to develop appropriate technical and managerial responses.

Project design and objectives

The primary objective was to increase agricultural production by overcoming the draught constraint of farmers in transmigration sites. The components of the project included the procurement of 84,100 cattle for distribution and redistribution of about 60,500 calves returned to the project as in-kind repayments (65% of project costs), forage improvement, institutional support for project management, construction of handling facilities, and program support including M&E arrangements, consultancy services, special studies, and the investigation of the Jembrana disease.

Total project costs was USD 65.3 million. An IFAD Loan of USD 12.0 million equivalent and a IBRD Loan of USD 32.0 million would finance all the foreign exchange costs of the project and about 60% of the local costs. The GOI would finance the remainder of USD 21.3 million. Funds would be disbursed over a five year period. Two amendments to the Loan Agreement were made, an increase in the disbursements for cattle procurement from 20% to 30%, and reimbursement of project pre-financing.

The major beneficiaries would be sponsored and spontaneous transmigrants, and resettled families living near or in the transmigration sites. An estimated 700 farm households were to be assisted for forage seed production.

At the farm level, expected outputs were an increase in draught power in project areas resulting in increased agricultural production, improvement in incomes, food security and assets of smallholders. At the national level, the project impact was envisaged to be increased agricultural production, incremental beef production and superior technical and managerial services within the livestock industry.

Evaluation

Implementation context

Project coordination and management. The organizational structure and arrangements, as well as the tested operations policies and procedures of SCDP I were to continue. The Inter-ministerial Steering Committee for Foreign Aid Projects (ISC) was responsible for coordinating project implementation at the national level, and a Project-Management Office (PMO) was responsible for planning and implementing project activities at the central Government level.

Liaison between PMO and other agencies of GOI improved as project procedures and reporting were refined. At the provincial level a similar inter-departmental committee coordinated project activities. These meetings tended to be less frequent and would usually only be called when the need arose.

By the end of the project, project coordination had been institutionalized with the incorporation of PMO into the Directorate of Livestock Distribution and Development. There was also greater recognition of the need for better coordination and integration of other livestock distribution programmes and related activities.

The management style of the PD tended to be centralized, but delegation of authority and accountability to divisional managers was gradually undertaken. The management role of the PMU chiefs was also enhanced when, from being mainly coordinators, the PMO increasingly entrusted them with greater responsibility in handling implementation problems at the provincial level. This enhanced their integration into the regular livestock services and strengthened their links with other provincial services.

Project Management Units. The Project Mananagement Unit (PMU) was the main channel of information between PMO and the field level SATGAS units and between PMO and provincial government authorities. Their number was expanded to 12 units to allow for the inclusion of two additional distribution provinces. PMUs became one of the most effective implementing arms the project. It is difficult to assess to what extent the PMUs were "requested" by the provincial livestock services to work on other assignments, although there is reason to believe that at times - e.g. when cattle shipments for other government programmes had to be handled - this may have happened.

By the end of SCDP II, staffing of PMO had reached 70, PMUs had 173 staff, 582 SATGAS were operating in the field, and 22 project staff were working at BCDIU. The PMO staff had been disbanded and distributed to various directorates of DGLS while most of the PMU and SATGAS staff have been integrated into the provincial livestock services. They continue to be highly motivated.

Supervision missions repeatedly stressed the importance of institutionalizing the activities of the PMU within the livestock services at the provincial and district levels. At the time the Evaluation Mission was fielded, some action had been taken by DGLS to absorb the project field staff and to decentralize the MIS (see below).

Extension Service by the SATGAS. The project drew from the success of SCDP I with the SATGAS and aimed at establishing additional SATGAS teams to cover the new distribution sites under SCDP II. The number of SATGAS staff actually contracted over the years has been in conformity with the distribution. The establishment of the SATGAS teams has been successful. They acted as a key factor in the efficient implementation of cattle distribution and follow up. Their ability to carry out hands-on management "on the spot" has ensured a continuous progress of the project and provided farmers with the basic support and SATGAS staff have integrated themselves in the community.

SATGAS teams cooperated with extension staff from other departments and especially with the sub-district livestock services largely on an informal basis. There is, however, a need to clarify whether the responsibility for monitoring farmers who have repaid their credit would continue to be undertaken by the SATGAS or passed over to the sub-district livestock services. The increasing number of participants and size of project herd has however implied an disproportional amount of SATGAS time being spent on data collecting, administration and bookkeeping. This has also led to a slow process of loan documentation, particularly in peak periods of cattle procurement. The level of training received by the key farmers is generally good. However, the transmission of knowledge and information from key farmers to group member has been weak. It is important for the SATGAS to closely supervise the transfer of knowledge to group member and to ensure that this process is well functioning.

Consultancy services. The PMO continued to draw on the expertise of consultants for assistance in various technical aspects of the project. At the end of SCDP II, a total of 333 manmonths (mm) of consultancy services were provided to project management (as against 161mm at appraisal), 282 mm to BCDIU (160 mm at appraisal) and 350 mm to M&E and other studies (108 mm at appraisal). This led to an increase in project expenditures for consultants from USD 4.2 million at appraisal to USD 9.4 million when the project closed. It should be noted that studies and surveys not foreseen in the appraisal accounted for a large part of this increase.

Civil Works, Vehicles and Equipment. Less funds had been allocated to civil works under SCDP II as most facilities had been put in place during SCDP I. Upgrading was carried out on eight holding grounds and one quarantine station. Much attention was given to the provision of feed storage facilities and water supplies. These improvements have been instrumental in reducing the losses of cattle due to stress and inadequate feeding an watering. The mission found that constructions were solid and spacious, although specifications may have been excessive for some structures.

A further 550 motor cycles (341 at appraisal) were purchased. This high number was partly in response to the CI insistence that a ratio of 1 to 2 for the number of motor bikes per SATGAS unit was imperative and this was made available through a reallocation of budget in the Loan Agreement. Funds were also allocated for the replacement of motorcycles.

Cattle Procurement. A total of 84 150 heads of cattle were procured (518 of SAR). The quality of cattle has been of high standard, although shortages of good quality heifers and bulls were becoming evident. Trader's profit margin do not appear to have been excessive. The problem of high mortality of cattle in the course of transferring cattle was considerably reduced in SCDP II. Having learned useful lessons from SCDP I, the PMO refined its cattle procurement strategies and procedures in SCDP II. Losses and risks were reduced through rigorous rejection of animals which did not meet specifications and through the establishment and improvement of quarantine stations and holding grounds. Nonetheless, a number of weak animals got through to the distribution areas. Inferior quality of the breeding cattle is one of the reasons for late maturity of heifers, which causes late pregnancy, low calving rates and, eventually, delays in loan repayments.

Cattle Distribution. The project facilitated the distribution of 84 150 cattle to 76 500 farmers. Cattle procured under the project went largely to the Sumatera provinces (78%). SCDP II accounted for 28% of total cattle distributed by donor-assisted credit projects channeled through BRI. The selection of areas for cattle distribution was jointly undertaken by the Provincial Livestock Service, PMU, other Regional Government agencies, the Regional Transmigration Office and the local BRI officials based on selection criteria set by the project, although the PMU had lesser influence than other government agencies in the selection process. Once the area was selected, the Provincial Livestock Service did the selection of the precise project site. Sites actually selected for cattle distribution were predominantly upland farming areas, with the exception of South Sumatra. In Sumatra, 62% of the locations had predominantly red and yellow podsolic soils. Cattle distribution should have only taken place on sites with adequate soil nutrition. The mission concurs with PCR-II (1994) that the credit herd would slowly contract with the inclusion of ecologically unfavourable sites in the project.

Credit-in-kind enabled the poor to acquire breeding cattle-cum-draught animal on very favorable terms, and this accounted for the widespread interest and participation in the project. Attempts were made to simplify the lending procedures but delays in processing credit documents became even more widespread in the redistribution of offspring. Redistribution of offspring began in 1986. As of 30 June 1994, some 25 308 offspring from SCDP II cattle had been returned as in-kind repayments. This represents 23% of the maximum number of offspring (110 000) SCDP II farmers were expected to return to the project within the maturity period of five or six years. If the monetized value of the cattle credit is used as a basis for determining repayment performance, the repayment rate would be recorded at 40.7% as at 30 June 1994. This is the percentage of total matured loans that have been repaid. The Mission also evaluated the quality of the project's "cattle loan herd" by looking at the past due ratio. This ratio indicates the proportion of outstanding loans which are in arrears. In SCDP II, 27.4% of outstanding loans were in arrears as at 30 June 1994. Loans in arrears have increased from IDR 1.39 billion in 1990 to SDR 7.20 billion in 1994.

Factors explaining the low repayment performance include the distribution of poor quality heifers to beneficiaries, the selection of project sites with unfavorable agro-ecological conditions, and poor animal husbandry practices of the beneficiaries. Loan processing and documentation continued to be a problem area. The attempt to monetize credit in kind also created unnecessary complexities.

Forage Seed Development. In the procurement areas, the forage seed development scheme worked quite well in the initial years, but the demand for forage legume seeds declined in latter years, owing to which the prospects of the program dimmed. A salient feature of the scheme was savings mobilization among the participants. This was a practical way of educating village people on the use of bank services. In the distribution areas, mixed farming systems were designed and promoted aimed at improving the sustainability of the dominant cropping component while securing forage for the livestock.

Jembrana Diseases Investigation. Fully equipped and operational, the BCDIU in Denpasar has determined that the disease is caused by a virus, but it still needs further funding support for developing a cheaper vaccine. It is the opinion of the evaluation mission however, is that financing of BCDIU's activities should not be included in a project with a limited time horizon. GOI should look for a partner among the international scientific organizations for longer-term collaboration.

Financial performance. GOI contribution had only reached USD 7.7 million at loan closing, 16% of total costs as against 34% envisaged at appraisal, owing to constraints on GOI budget and rigidities in its investment policy. This led IFAD and World Bank to increase their share of financing cattle purchases.

Project achievements

Institutional development

Strengthening of livestock services. A high level of performance was maintained all throughout SCDP II. The project has contributed to the reduction of weaknesses in the livestock extension services and in strengthening its extension force. A total of 175 staff members were trained with financial support from IFAD. Farmer groups (kelompoks) were strengthened, but they need to be revitalized and given a permanent function if they are to be sustainable.

Institutionalization of SCDP. At the time of project closing, the Livestock Services were undergoing a process of restructuring that aims to integrate the erstwhile project organization into the management structure of DGLS. Several threats to the process of institutionalization need to be dealt with: (i) transfer of responsibilities from experienced full-time managers at PMO and PMU to less experienced livestock staff at provincial and district levels; (ii) recruitment of experienced SATGAS staff to district or province levels without replacing them with adequately trained new recruits in the field; and (iii) the limited involvement of district level livestock services during project implementation. The integration of project personnel into DGLS could be sustained by using part of the revenue from credit herd cull sales to cover the salaries.

Monitoring and evaluation system

Management Information System (MIS). The MIS has been a key factor to the project's capability of meeting physical and financial targets. A comprehensive computer based system provided management with necessary information for decision-making. Measuring physical achievements and credit repayment was overemphasized. The system still lacks socio-economic indicators. The practice to erase a farmer from the system once he had repaid his credit defeats the purposes of follow-up and post-project evaluations.

The present MIS has centralized the livestock and credit database at PMO, leaving only aggregated cattle data at PMU level. This design was very efficient in the implementing stage of the project cycle, but in the post-project stage the MIS has to be adapted to a decentralized structure with local databases. This will give district and province level management the possibilities to analyze field data and take immediate action where so required.

At PMO level the Planning Division was responsible for MIS. All reports were compiled into monthly, quarterly and annual reports and analysis were made to provide feedback to the PMUs. The decentralized MIS was introduced in 1992 and included a programme package name SIM P3T with one version for district level: SIMKAB, and one for province level: SIMPRO. To date, the system is still not operational.

Socio-economic Impact Evaluation. It was recommended not to renew the contract of the consultants, BMB Ltd, after the mid-term review found the socio-economic surveys they did for the project were lacking in analaysis and considered below acceptable standard. Surprisingly, their contract was renewed in 1984, 1986, 1988 and 1990. Annual surveys were conducted during the period 1987 - 1990, but the integration of their findings and information into management's decision making was never achieved.

Effects assessment and sustainability

Animal Performance. The calving rates in the distribution areas are not different from those in the procurement areas. However, the mortality rates in the distribution areas are lower than those in the procurement areas. Of 107 project sites surveyed in SCDP I, 55 sites or 51.4 percent had lower than 50 percent calving rates, and 25 sites or 23.4 percent have calving rates of 60 percent and higher.

Impact in Distribution Areas. The principal project benefits to the farmer are derived from incremental food crop production generated by ploughing. The use of cattle allowed an average increase of cultivated area of 0.5 to 0.7 ha per farm. Studies indicate that the extra income from crop and livestock sales is smaller than the extra income which non-ploughing farmers obtain from off-farm work. Nonetheless, ploughing farmers are able to achieve better food security and food intake levels.

Impact in Procurement Areas. The project's socio-economic study estimates that farmers receive 30 to 40 percent of the contract price of the animal, and the remainder is distributed between collectors and traders. Collectors and traders do not appear to be making excessive profits, given the costs and risks of supplying cattle to the distribution areas.

Impact on Women. Field discussions by the mission revealed that many women were clearly involved in the regular care of the cow but saw their role as assisting, rather than management. When extra labour was required for collecting fodder, where the children were old enough they were more likely than the wife to be called upon to help.

Environmental Impact. Following the movement of the cattle, there are six stages of interaction with the environment that need more in-depth study and analysis: (i) the impact of grazing patterns on soil erosion; (ii) environmental degradation by cattle faeces and urine; (iii) risks of transporting weeds associated with the forage programme; (iv) effect of cattle manure on soil fertility; and (v) risk of exhausting soil fertility through ploughing;

Impact of Jembrana Disease research. Evidence has now been obtained that Jembrana Disease is caused by a virus belonging to the family Retroviridae. Production of a low-cost vaccine is highly possible but more funding is required.

General assessment

The Project enabled the poor to acquire breeding cattle-cum-draught animal without imposing on them the burden of generating substantial cash income for the repayment of loans. The project has had a positive impact on the lives of the beneficiaries in the areas of income, labour saving and nutrition. The project's approach is highly recommended for future IFAD smallholder cattle development projects.

Availability of cattle has led to reduction in the heavy work of hoeing in preparation for planting and the opening of more land for agricultural production. The area of land cultivated by the farmers generally increased from 0.25 ha when they used the hoe for clearing the land, to 1.0 ha when they used cattle for ploughing. As a result, household earnings from agricultural production increased for most of the beneficiaries.

Some factors that were influencing project performance are:

• One of the factors contributing to the project's success was the high level GOI support for the project. This was possible because the project objectives dovetailed with GOI objectives for the development of transmigration areas.
• Most of the project sites selected for cattle distribution were transmigration areas whose food crop production was constrained by the lack of draught animal. There were project sites, however, with harsh agro-ecological conditions and the cattle in these areas generally had poor health and low calving performance.
• During the project period, local prices of cattle steadily increased, thus giving beneficiaries brighter hopes for future cattle sales and continuing inspiration to care for their cattle.
• Project management succeeded in strengthening DGLS services and in establishing a well-knit organization to support a credit-in-kind system rooted in a tradition that continues to be socially acceptable and widely practiced. The MIS turned out to be the right tool for management to control the vast operations throughout the country. Adaptation of the MIS at the district level (SIMKAB) and province level (SIMPRO) is yet at an infant stage and needs considerable attention before these would be institutionalized. Most of the project directors have proven to be capable managers.
• Project support for civil works has contributed to a great extent in minimizing the risks identified at Appraisal. GOI funding was less than anticipated, prompting IFAD and World Bank to increase their contributions particularly for cattle procurement. The PMO developed a computer based financial accounting system which has greatly assisted in establishing a high standard of financial recording and reporting.
• The project underscored the importance of improving the quality of project staff by organizing training courses for them.
• Discipline in the organization was reinforced by an above normal honoraria paid by the project and by adequate provision for housing, travel, vehicles, equipment and training - all of which contributed to the high morale among the project staff and their willingness to handle difficult situations and to produce good results.

Sustainability

DGLS can operate the credit herd as a self-perpetuating, revolving commodity credit facility. In the long haul, DGLS should devote more efforts and resources in creating and maintaining a herd of high quality breeders, and to entrust the offspring redistribution to institutions operating as "credit intermediaries" at the village level (e.g village cooperatives, NGOs, rural banks, or even farmer groups). This course of action is best implemented by a decentralized organizational set up. Sharing of the proceeds from the sale of culled bulls should be restructured in favour of the provincial livestock services.

Main issues and recommendations

Site and Beneficiary Selection. More attention should be devoted to the selection of distribution sites with favourable agro-ecological conditions and the selection of beneficiaries who are poor and who have an effective need for draught animal.

Purely in-kind credit model. The concepts and operating procedures of the credit in kind system should be kept along the purely-in-kind model in order to avoid unnecessary complications in operating the "revolving cattle credit" scheme.

Cattle Procurement. For future inter-provincial or inter-island shipment of cattle, a 500-head shipment is deemed practicable. There should be a lesser need for costly infrastructure of holding grounds when shipment is done during the dry season.

Cattle Development. A practical system of individual recording of cows is imperative. Such a simple record could be a valuable tool for the farmer and the SATGAS to keep track of the cow's fertility and later, selection of offspring.

Forage Development. SCDP created an artificial demand for seeds which was unsustainable. This should be avoided in future projects.

Jembrana Disease Investigation. It is more appropriate for GOI to seek funding support for this as a separate technical assistance project rather than as part of a loan package.

Livestock Project for Women. Project impact on women will be more conspicous if they were given credit for raising goats, chicken, or pigs. The credit program for women is best organized along the established group lending procedures of Grameen Bank.

Decentralized MIS. In post-project period, the MIS should adapt to a decentralized structure with local databases. The decentralized MIS will give district and province management the possibilities to analyze field data and take immediate action where so required. The design of socio-economic surveys needs to be simple, low cost and sustainable.

Savings mobilization. Savings mobilization should be introduced in the distribution areas and regarded as an indicator of people's participation in the project. In view of government difficulties in raising its equity for such projects as SCDP, future IFAD projects could increasingly recognize the supporting role that people's savings can play in development projects.

Training. Further training on how to operate the MIS is needed. This should involve not only the MIS-operators but also management at all levels who will use the system for better management.

Lessons learned

In transmigrant areas dedicated to tree crops there is less opportunity to use cattle for ploughing. A farmer who is able to benefit twice from the project is at risk of becoming dependent on the project. They should be able to purchase calves from the sale of their previous cattle or to accept extra cows from traders or neighbours through the traditional gaduhan. Often they financial position of key farmers was so much better than their peers that any demonstration effect of the project on poverty alleviation could not be manifested.

The SATGAS may not have the time nor the experience in how to support farmers utilizing the combination of cattle and land in a most profitable way. This could be achieved better if farmers are linked with other extension services.

Due to simultaneous cattle procurement activities of many projects, the procurement areas were running dry of breeding stock. Coordination in cattle procurement among various projects is imperative.

Farmers will produce fodder if they also have other benefits from the activity such as soil fertility and soil conservation. Closer links should have been established between project staff and research institutions particularly to obtain better knowledge on native legumes and grasses.

A decentralized organization would facilitate a "micro-management" approach to post-project activities. The continuation of the SATGAS numeric strength, multi-skilled technical capability and budget and resource support is crucial for project sustainability.

There is a need for adequate specification of the M&E system from the very beginning of the project. Necessary information for management should be identified, indicators and ways of measuring them clearly stated and responsible staff appointed before field activities commence.

Protein consumption will not improve significantly among project beneficiaries until there is greater awareness of the importance of protein in the diet, and there is greater availability of meat at the village level. For the project to have direct relevance to women, animals normally managed by women such as goats, pigs and chicken should be included.