Liberia - Small- and Medium-Scale Enterprise Project

Documnt of The World Bank FOR OFFIcAL USE ONLY Rpopt N.. 8471 PROJECT COMPLETION REPORT LIBERIA SMALL AND MEDImM-SCIALJF, ENTERPRISE PROJECT (CREDIT 1076-LBR) MARCH 28, 1990 Industry and Energy Operations Division Western Africa Department This docum bas a esticted disribution and may be aued by recipiets only In tde performac of their officil dues Its conteots may not otherwe be dislosed without World BDak authorzaton.  CURRENCY EQUIVALENTS Name of Currency: Liberian Dollar Appraisal Year Average Exchange Rate: US$1.00 - LS1.00 Completion Year Average Exchange Rate: US$1.00 = L$l.00 ABBREVIATIONS ACDB - Agricultural and Cooperative Development Bank FMO - Netherlands Finance Company for Developing Countries LBDI - Liberian Bank for Development and Investment LDC - Liberian Development Corporation MSEs - Medium-Scale Enterprises NBL - National Bank of Liberia NIC - National Investment Commission PCR - Project Completion Report PFIs - Participating Financial Institutions SAR - Staff Appraisal Report SEFO - Small Enterprises Financing Org&nization SME - Small and Medium-Scale Enterprise SSEs - Small-Scale Enterprises USAID - United States Agency for International Development  WOR OFFICIAL USE ONLY TWE WORDO SANK Wasington. OC. 2033 U.S.. OMi. Ow.ct.Gwf Opw&Mtae Evioutw March 28, 1990 ME-ORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Liberia Small- and Medium- Scale Enterprise Project (Credit 1076-LBR) Attached, for information, is a copy of a report entitled "Project Completion Report on Liberia Small- and Medium-Scale Enterprise Project (Credit 1076-LBR)," prepared by the Africa Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment Thts dument has a osriked distibution and may be uad by rneibts only in the pufonnuae of their offical dutbe Its contests may not othowe be diasebd without World Bank authoniution.  FOR OFFICIAL USE ONLY LIBERIA PROJECT COMPLETION REPORT SMALL AND MEDIUM-SCALE ENTERPRISE PROJECT CREDIT 1076 - LBR TABLE OF CONTENTS Paae No. PREFACE ......................... ............................... BASIC DATA SHEET .............................................. i HIGHLIGHTS ............................ ............ - v I. INTRODUCTION ................... .......................... 1 II. THE ENVIRONMENT .......................................... 1 A. Economic Background ......................... ........ 1 B. The Industrial Sector .. . . ....... 2 C. The Financial Sector .. . ....... 3 LII. NATIONAL BANE OF LIBERIA AND PARTICIPATING FINANCIAL INSTITUTIONS .. ............................ 5 A. National Bank of Liberia . ....................... S i. Ownership ...................................... 5 ii. Nature of Operations ..... ...................... S iii. Financial Performance and Condition ............ 5 iv. NBL as the Apex Institution ................. ... 6 V. Credit Guarantee Scheme ................. ....... 6 B. Participating Financial Institutions ............. ... 6 i. Agricultural and Cooperative Development Bank ..... ..................... 6 ii. Liberian Bank for Development and Investment ..... ....................... 7 iii. Small Enterprises Financing Organization 8....... IV. THE PROJECT .............................................. 9 A. Objectives ..................... ......................... 9 B. Project Implementation ...... ........................ 11 C. Compliance with Credit Covenants ................. ... 14 D. Utilization of the Credit ........................... 14 V. CONCLUSIONS AND LESSONS LEARNED ............. .............. 17 This document has a rstricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherie be disclosed without World Bank authoriation.  TABLI OF CONTENTS (cont'd) Pate No. ANNEXES ANNEX I Income Statements of the National Bank of Liberia, 1981 - 1985 ........... ..* .. 20 ANNEX It Balance Sheets of the National Bank of Liberia 1981 - 198S ...........*. .*.. 21 ANNEX III Suimarized Balance Sheets, Income Statements and Selected Financial Ratios of the Agricultural and Cooperative Development Bank, 1984 - 86 ..... 22 ANNEX rV Sumarized Balance Sheets, Income Statements and Selected Financial Ratios of the Liberian Bank for Development and Investment, 1984 - 86 ............ 24 ANNEX V Sunmarized Balsnce Sheets, Income Statements and Selected FinancLal Ratios of the Small Enterprises Financing Organimation, 1984 - 86 .............. 26 ANNEX VI Participating Fitnancial Institutionss Arrears Situation as of September 30, 1986 .......... 28 ANNEX VII Schedule of Estimated vs. Actual Cumulative Disbursements ........................... 29 ANNEX VIII Subprojects Financed under the Credit ............ 30 ANNEX IX Characteristics of Subprojects Financed under the Xrerit Co..nt.on.te....................... 32 ANNEX X Borrowerl's Comments an the PCR ....... 33  L iX PROJECT COMPLETION REPORT SMALL- AND MEDIUM-SCALEU ERpR;SR PROJRCT CREDIT 1076-LER PtIEFACE This Project Completion Report (PCR) relates to IDA Credit 1076-LBR of SDR3.2 million to the Government of Liberia to support small- and medium- scale enterprises. .he project was approved by the Board on November 18, 1980 and was declared effective on September 14, 1981. The closing date was extended three times from June 30, 1984 to June 30, 1987. The Credit has not been closed yet as there is still an outstanding Special Account being recovered. The Loan Department is actively pursuing the recovery of the initial deposit. The current suspension of Bank Group disbursements to Liberia was in force at the present closing date of June 30, 1987. 71X of the credit had been disbursed. The balance is in the process of being cancelled. The PCR was prepared by staff of the Western Africa Department, based on information obtained from the Staff Appraisal Report, President's Report, legal documents, supervision reports, progress reports, project correspondence files and subloan application documents. No Bank mission was sent out for the purpose of preparing the PCR. This PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower and the implementing agencies for comments, which have been reflected in this report and reproduced as Annex X.  - ii - LIBERIA LbMLL AND MEDIU-SCALE ENTERPRISE PROJECT CREDIT 1076-LBR KEY PROJECT DATA Item Apnraisal Estimate Actual Credit Amount SDR 3.2 million SDR 3.2 million Disbursed SDR 3.2 million SDR 2.3 million Special Accounts a/ 0 SDR 0.3 million Cancelled b/ 0 SDR 0.6 million Repaid to IDA 0 0 Outstanding to IDA SDR 3.2 million SDR 3.2 million a/ Not yet accounted for. bi In the process of being cancelled. OTHER PROJECT DATA Item Original Plan Actual Appraisal 05/14179 5!1&/179 Negotiations 04/22/80 04122180 Board Approval 11/18/80 11/18/80 Loan Agreement 01/09/81 01,09181 Effectiveness /02/81 09/14/81 Final Subproject Submission 06/30/83 - Closing Date 06130/84 06/30/87 Borrower Government of Liberia Fiscal Year of Borrower 07/1-06/30 07/1-06/30 Executing Agencies: Line of Credit National Bank of Liberia Technical Assistance National Investment Commission  - iii - MISSION DATA Month/ No. of No. of Date of Year Weeks Persons MaDweeks Report Identification 06178 3 2 6 09/78 Preparation I 12178 2 4 8 01/79 II 02179 0.4 1 0.4 04/79 Appraisal 05/79 2 3 6 07/79 Post-appraisal 12179 0.4 1 0.4 01/80 Review of Status I 06/80 0.4 1 0.4 06/80 w a II 06/81 0.2 1 0.2 06/81 Total 8.4 21.4 Supervision I 06/82 1.1 1 1.1 07/82 II 02/83 1 2 2 n.a. III 03/83 0.4 1 0.4 07/83 IV 02184 0.7 2 1.4 03/84 V 07/84 1 1 1 07/84 VI 02/86 1.4 2 2.8 03/86 VII 11/86 0.4 1 0.4 11/86 Total 6.0 9.1 n.a. - not available. CUMULATIVE CREDIT DISBURSEMENTS (US$ million) FY 82 83 84 85 86 87 Appraisal 0.80 1.96 3.21 4.00 - - Actual 0.17 0.24 0.59 1.25 2.11 2.84 Actual as Z Appraisal 21.25 12.24 18.38 31.25 - -  - iv - STAFF TS FY 7 73 01 ft " 66 e ft Prefe1r ton 0.4 12.0 - - - - - - - - - - 12.4 Approaisl - 7.7 20.2 - - - - - - - 27.9 Noptlatlon - - 0.2 8.8 - - - - - - - - 9.5 Sup.r'lelon - - - S.? 7.9 9.2 7.0 0.6 22.4 9.8 - - 79.0 PCR - - L _ - _ - - . 10.0 11.5 To" l 0.4 19.7 20.4 9.0 7.9 9.2 T.0 0.0 22.4 9.J 1.5 - 182.1  - V - RIGHLIGHTS The Govternment of Liberia was the recipient of the SDR3.2 million credit, the main objectives of which were tot (a) develop an appropriate institution that would provide the necessary assistance to entrepreneurs in planning and managing their investments; and (b) encourage local financial institutions to increase their support of local businesses (para. 4.01-4.02). The credit was approved by the Board in November 1980, became effective in September 1981 and, in effect, closed as of June 1987. The business environment in Liberia deteriorated substantially during the project's implementation period as the country witnessed serious economic, financial and political turmoil (para. 2.01-2.02). Changes in personnel brought about uncertainty in the civil service and public agencies and critical delays in project implementation. The Project Analysis Department in the National Bank of Liberia (NBL), responsible for managing the credit component, was not established until January 1984. The technical assistance component was to be implemented by the Liberian Development Corporation (LDC). The Government disbanded LDC in September 1979 and created National Investment Commission (NIC) with a broad mandate of coordinating investment policies in the country. Although NIC immediately set up a Small and Hedium Enterprise (SME) Department, it had not reached the operational level required to implement the technical assistance component of the project by the time the Credit became effective. As a result, implementation of the project was off to a very slow start. The slow implementation was compounded by frequent and long suspension of disbursements to Liberia by the Bank Group. The closing date was extended three times. By the original closing date (June 30, 1984), only 15? of the credit had been disbursed (Annex VII ). 71? of the credit was disbursed by the final revised closing date (June 30, 1987). The balance ic now in the process of being cancelled. The project's achievements were mixed. The line of credit and technical assistance helped develop indigenous private sector enterprises in a country that had done very little, until the time of the project, to support local enterprises. The project contributed to institution building of the NBL, NIC and participating financial institutions, especially the Small Enterprises Financing Organization (SEPO). The institutional support system provided rhrough NIC forged complimentarity between industrial extension services and project finance. Technical assistance, after -t was redesigned, appeared to have been a useful and appreciated service. The most important elements of NIC's technical assistance were in connection with the selection of machinery and training of entrepreneurs in accounting procedures. An apex lending arrangement and an institutional support system have been established and need to be consolidated further and supported by the Bank when Bank Group operations in Liberia are resumed. The objective of encouraging local financial institutions to increase their support of local businesses was achieved only partially. Eleven financial institutions were expected to participate in the project;  - vi - only three actually took part (one of them reluctantly). None of the ci-wnercial or foreign banks operating in Liberia participated in the project. SEP0, which did not exist at the time of appraisal, was the most active participant in the project and is likely to continue to give strong support to the small and medium-scale enterprises (SMEs). Eighty-six SMEs (compared to 74 projected at appraisal). 922 of them being small scale enterprises (SSEs), benefited from the line of credit. Difbursements for SSE subloans exceeded appraisal estimates by 682 while disbursements for m3dium-scale enterprise subloans fell below appraisal estimates by almost 902. About 292 of the SMEs were in agriculture related industries; 28S in service industries; 21Z in wood industries; and 62 in other industries. The enterprises were expected to generate 662 jobs at an average cost of about $5,000 per job. IDA supervision missions were fairly regular except in 1985 when there was none. They contributed to developing short range revised work programs and implementation schedules de