Madagascar - Rural Finance Technical Assistance Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No.: 17485 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF MADAGASCAR RURAL FINANCE TECHNICAL ASSISTANCE PROJECT (Credit 2459-MAG) March 17, 1998 Private Sector and Finance Technical Group Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their offiecial duties. Its contents may not otherwise be disclosed without World B3ank authorization.  CURRENCY EQUIVALENTS Currency Unit Malagasy Franc (FMG) US$1.00 FMG 5,310.09 (December 31, 1997) SDR I US$ 1.35515 (December 31, 1997) AT YEAR END US$_= 1985 FMG 632.92 1986 FMG 742.55 1987 FMG 1,235.08 1988 FMG 1,513.24 1989 FMG 1,530.12 1990 FMG 1,472.25 1991 FMG 1,835.14 1992 FMG 1,918.73 1993 FMG 1,950.29 1994 FMG 4,319.93 1995 FMG 3,693.38 1996 FMG 4,319.93 1997 FMG 5,310.09 SYSTEM OF WEIGHTS AND MEASURES METRIC US EQUIVALENT I METER (M) 3.28 FEET (FT) I HECTARE (HA) 2.47 ACRES (A) FISCAL YEAR OF BORROWER January I - December 31 ABBREVIATIONS AND ACRONYMS ADMMEC Mutual Savings and Loan Development Association Association de Developpement du Mouvement Mutualiste d'Epargne et de Credit BTM National Rural Development Bank Bankin 'Ny Tantsaha Mpamokatra CCFR Rural Finance Coordinating Committee Comite de Coordination des Finances Rurales CSBF Banking Supervisory Commission Commission de Supervision Bancaire et Financiere CTFR Interministerial Working Group for Rural Finance Cellule Technique de Finance Rurale FMG Malagasy Franc ICR Implementation Completion Report NGO Non-Governmental Organization RFTAP Rural Finance Technical Assistance Project SLA Savings and Loan Association Vice President Callisto Madavo Director Michael Sarris Manager Thomas W. Allen Staff Member Herninia Mv[artinez  FOR OFFICIAL USE ONLY TABLE OF CONTENTS PREFACE ..............................................5 EVALUATION SUMMARY ............................................. i-v PART I: PROJECT IMPLEMENTATION ASSESSMENT ....................................I Project Background .................................................1 Project Objectives .................................................1 Achievement of Project Objectives .................................................2 Major Factors Affecting the Project .................................................5 Sustainability .................................................7 Bank Performance .................................................7 Borrower Performance .................................................8 Assessment olf Outcome .................................................8 Key Lessons ..................................................9 Future Operation ................................................ 10 PART II STATISTICAL ANNEXES ............................................. 11 APPENDIX A: Borrower's Contribution - Summary in English .......................... 21 APPENDIX B: Map of SLA Networks Financed by the Project ........................... 24 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  IMPL:EMENTATION COMPLETION REPORT MADAGASCAR RURAL FINANCE TECHNICAL ASSISTANCE PROJECT (Credit 2459-MAG) PREFACE This is the Implementation Completion Report (ICR) for the Rural Finance Technical Assistance Project in Madagascar, for which Credit 2459-MAG in the amount of SDR 2.7 million (US$3.7 million equivalent) was approved on February 16, 1993, and made effective on April 6, 1994. The Credit was closed on December 31, 1997, as planned. Final disbursements are expected to take place at end of March 1998, at which time any unused balance will be canceled. IDA, Societe Internationale Desjardins (SDID), a Canadian NGO, and the Government were the co-financiers of the project. No comments were received from SDID. The Borrower's contribution to the ICR consists of two reports incorporating the views of participarnts in the project and is available upon request. A summary in English is attached for information. The ICR was prepared by Chau Duong of the Africa Private Sector and Finance Technical Group (AFTP1). It was reviewed by Herminia Martinez, Principal Operations Officer (AFTP1), William Steel, Technical Specialist (AFTP1), and Harald Burmeister, Sr. Projects Officer (AFTS2). Preparation of this ICR is based on the final supervision/completion mission carried out in October 1997, and existing material in the project file.  IMPIEMENTATION COMPLETION REPORT MADAGASCAR RURAL FIlNANCE TECHNICAL ASSISTANCE PROJECT (Credit 2459-MAG) EVALUATION SUMMARY Introduction 1. The Rural Finance Technical Assistance Project (RFTAP) was prepared in 1987 in a climate of general disenchantment with ineffective traditional approaches to rural finance in Madagascar. Yet, agriculture was the most important sector of the Malagasy economy, employing over 80 percent of the labor force, accounting for a third of GDP, and generating 60 to 65 percent of export earnings. It needed considerable investments for growth. Until then, virtually all attempts to develop rural finance in the country had been credit-driven, with little attention to savings. Results of the Bank's First and Second Agricultural Credit projects, implemented in the 1980s by BTM, the state-owned National Rural Development Bank, were disappointing. They had ill-adapted features, minimal coverage, high costs, poor recovery rates, and the usual neglect of savings mobilization. Project Objectives 2. The RFTAP (US$3.7 million equivalent), approved by IDA's Board on February 16, 1993, drew on the positive experience of existing pilot projects with group movements in rural Madagascar to test an alternative approach. It aimed at promoting a durable savings and loan movement at the grass-roots level which would provide sound financial services to its members, and over time link up with formal institutions. It was also intended to address the legal and regulatory issues involved in the development of the savings and loan movement. The objectives remained unchanged throughout the implementation period. The pilot project consisted of the following components: (a) support for the creation and development of savings and loan associations (SLAs), assisted by specialized non-governmental organizations (NGOs); (b) support to the Mutual Savings and Loan Development Association (ADMMEC) for project management, monitoring and evaluation; and (c) provision of basic training and entrepreneurship training for microenterprises in rural areas.  -ii- Evaluation of Project Objectives 3. The project's objectives were clear, generally well designed, and reflected realities in the country and the sector. They were appropriate given the pervasive and persistent market failure. The operation was in accord with Government's rural development strategy of liberalizing prices and markets and improving production. Compared to the Bank's two previous agricultural credit operations, the project concept was innovative and had the following characteristics: private ownership, government non-intervention, bottom-up initiatives, deposit facilities, simple procedures, group-based lending for small loans, liberalized lending rates, financial discipline, competition, adaptation to regional differences, and access to technical support. Achievement of Project Objectives 4. The project's achievements exceeded appraisal estimates, even under adverse conditions such as political turmoil and high inflation. A law was promulgated that recognized SLAs as financial institutions and regulated their organization and activities. Over the four-year life of the project, three networks totaling 54 SLAs were created, each SLA grouping on average 150-200 members, with savings averaging US$15-20 per person. Training, on the other hand, could have been better coordinated and made available to wider participation by rural micro-entrepreneurs. By the same token, the project objective of SLAs breaking even after the second year of operations was unrealistic. At project closing, it had been achieved by one network that had started operating since 1993 with financing under Project Preparation Facility 665-MAG and most likely by a second one, the slow growth of which kept transaction costs down. 5. On the institutional side, the program faces three main problems. First, SLAs failed to adopt uniform reporting standards, which made performance evaluation unfeasible in one network. Deficiency in this area became evident at mid-term review when an assessment of the project sustainability was performed. Second, training for SLA salaried staff and elected leaders on the mutualist principle, accounting and auditing procedures, and basic financial management has not reached the required level. Third and more importantly, the project had started with one network favoring credit. It now progresses with all three redirecting their focus towards the more popular practice of using donors' lines of credit as sources of funds. It must be recognized, though, that in two of the three networks, the use of external funds has been limited and carefully supervised. 6. The project was initially defined as a "rural" finance technical assistance project. However, the rural/urban divide is blurred upon completion, since the need for financial services provided by SLAs is significant in both areas. In addition, by expanding in both rural and urban areas, SLAs will be able to diversify their portfolios, reduce their risks, and increase their potential for profitability. To reflect this broadened focus, oversight of the follow-up project will be tumed to the Ministry of Economy and Finance.  Major Factors Affecting the Project 7. Some events had major influence on the course of the RFTAP but were partly beyond Government's control: project effectiveness was delayed for close to a year owing to the political transition; one renegotiated management contract delayed program start-up; an NGO could not fulfill its commitment due to a reason unrelated to its competence or the project; a Bank-supported social development project offered credit to farmers at competitive subsidized rates; donors were willing to provide credit funds for quick results; and a rural finance specialist was dismissed but never replaced. On the other hand, in the first two years of RFTAP implementation, Government could have exercised more macro discipline to reduce high inflation and budget deficit and encourage savings. ADMMEC, the project implementing unit, was also responsible for a number of difficulties: its staff had limited skills in rural finance/banking and marketing; yet, it did not seek to maintain the technical assistance envisaged under the project; training programs were executed with much delay; management and financial control capacity were overall weak. 8. Cost Changes. Total project cost stayed within limit despite local inflation rates that exceeded the annual 10 percent predicted. As compared with appraisal estimates, there was an overrun in the SLA promotion component and the project management component, while funds were underused for services to microenterprises. Both contracts with NGOs and ADMMEC's operating costs were underestimated. The four-year implementation period was respected even as the project reached its outreach targets long before credit closing. The outreach targets were not ambitious, but this is understandable in a pilot project. Project Sustainability 9. On the legal and regulatory issue, project sustainability is good. On the institutional side, however, because the SLA networks had just completed their start-up phase, they would continue to require capacity building at all levels in order to achieve efficiency. Last but not least, SLAs need a stable political situation, a macro-economic and sector policy environment conducive to effective financial intermediation, and increasing members' confidence in their SLAs to develop. Project sustainability will depend on those iactors. Bank Performance 10. Overall, the Bank performed satisfactorily throughout the project cycle. The project was consistent with the Bank's rural services strategy and in line with its financial sector strategy for Madagascar. Project's risks were correctly assessed. On the other hand, throughout the four-year implementation period, task management was changed three times, causing discontinuity in project supervision and a delay in conducting the mid-term review. The mid-term review was instrumental in focusing ADMMEC and the networks on improving the financial performance of SLAs. Skills in agricultural and  -iv- financial sector development of Bank staff involved in the project were satisfactory. However, staff should have used more care in ensuring that ADMMEC put in place a sound accounting system at project start. Also, they should have ensured that a second rural finance advisor be recruited for the project after the first one was dismissed. Borrower Performance 11. The performance of the Government and particularly of the Ministry of Agriculture was satisfactory. The Government was committed, subscribed to all the principles of the new approach in its Rural Finance Development Letter, and gave its support from preparation throughout implementation of the project without interference. ADMMEC's performance was less satisfactory, though overall it did fulfill its mandate. Deficiencies were found in financial management, training, and in the carrying out of its monitoring and evaluation function. ADMMEC's difficulties came also from conflict between its responsibilities as a project implementing agency and its professional association functions. Assessment of Outcome 12. Considering the uncertainties and risks normally conceived in a pilot project of this nature, and the unexpected difficult political and economic circumstances under which the project was implemented, the outcome is particularly positive despite the shortcomings indicated. Most of the agenda is completed. The project has succeeded in setting an entirely new pattern for microfinance in Madagascar, including the legal and regulatory framework. It has forced other systems to become more professional. The planned activities have been largely carried out (establishment of 54 SLAs, training for microenterprises, studies). In sum, the project has tested and proved that member-based SLAs, using commercial principles, are able to cater to the demand for financial services in rural communities and increase the income and prospects of the poor. For the above reason, the project's outcome is rated satisfactory. Key Lessons 13. Implementing the pilot RFTAP was akin to undertaking a voyage of discovery in various domains, from methodology to politics. While the lessons learned from this project share similarities with those from many other microfinance projects, some important ones relate to institutional problems specific to the Malagasy context: (a) Significant human and material resources are required to build solid and healthy institutions. The networks should pay more attention to training; (b) Until the savings culture is completely internalized, deposit mobilization rather than external lines of credit should be persistently and consistently maintained as basis for sustainable capability to lend;  (c) To balance cost and progress toward self-sustainability, it is evident that the SLA networks must also move into urban areas where population density is higher and savings are more important; (d) Where the need is identified and warranted, financing should be provided to assist SLA networks set up appropriate MIS and accounting systems; (e) Funds should be earmarked for mandatory external operational and financial audit of the SLA networks once they reach a given level of assets. For effective monitoring and evaluation, minimum uniform reporting standards on outreach and financial information should be introduced from the start; (f) Setting real positive interest rates on loans provides SLAs with sufficient margins for cost recovery and put them on the path to self-sustainability; and (g) Government should establish a mechanism to coordinate activities of competing rural finance schemes. Future Operation 14. The above and other findings are being taken into account in the design of the second phase of the project which is being prepared. The second phase project will likely continue to strengthen and expand existing SLA networks and encourage new eligible schemes offering innovative approaches, while focusing on trend toward sustainability. It might also include development of linkages between SLAs and the banking sector, improvement to the legal and regulatory framework, supervision of SLAs by the banking supervisory conmnission (CSBF), and training of microfinance professionals and trainers.  IMPLEMENTATION COMPLETION REPORT MADAGASCAR RURAL FINANCE TECHNICAL ASSISTANCE PROJECT (Credit 2459-MAG) PART I: PROJECT IMPLEMENTATION ASSESSMENT Project Background I. When the Rural Finance Technical Assistance Project (RFTAP) was appraised in 1992, the agricultural sector which constituted an important economic activity of Madagascar, had already undergone major policy changes and substantial reform. Prices for most agricultural products had been liberalized, with a strong production response. Considerable investment was needed to support this supply response and efficient financial services should have been available to help deliver it. By that time, however, it was evident that past attempts to develop rural financial operations, mostly through credit schemes with the state agricultural development bank, BTM, had fallen short of expectations. 2. Results of the Bank's two rural finance operations were disappointing. They had ill-adapted products, minimal coverage, high costs, poor recovery rates, absence of competition, and indifference to savings mobilization. IDA's First Agricultural Credit Project (Cr. 1064-MAG), the main objective of which was to support Government's policy to exten(d credit to smallholders, failed for lack of demand and most of the Credit was reallocated to finance the importation of inputs and equipment for resale. The Second Agricultural Credit Project (Cr. 1804-MAG) moved away from the smallholder credit and focused on lending to medium-sized private enterprises. The medium-term credit component had only a small number of large enterprises, some of which could have obtained the credit from other sources. Project Objectives 3. Statement of Project Objectives. The objectives of the project were to stimulate the creation of a savings and loan movement at the grass-roots level which would provide financial services on a sustainable basis to its members and over time develop banking relations with the formal financial system, and to address the legal and regulatory issues involved in the development of such movement. The stated objectives remained unchanged throughout the project life. Specifically, the project aimed to help: (a) develop farmers' savings and loan associations; (b) support training and technical assistance to such associations without subsidizing credit or providing credit lines; (c)  -2- promote development of market-based, competitive institutions; (d) work through schemes in high priority areas; and (e) address the legal and regulatory issues. This was to be achieved through: (a) support for the establishment of savings and loan associations (SLAs), with technical assistance from specialized non-governmental organizations (NGOs); (b) support to Association de Developpement du Mouvement Mutualiste d'Epargne et de Cr6dit (ADMMEC), a non-government association and the project's implementing agency, for project management, monitoring and evaluation; and (c) provision of basic training and entrepreneurship training for microenterprises in rural areas. 4. Evaluation of Project Objectives. The project correctly reflected the needs and constraints of the Malagasy rural financial sector: inadequate supply of financial services to the low-income rural population, including savings facilities, quasi-monopoly of the state agricultural bank in the sector, its high transaction cost, and its distressed financial condition. It thus proposed a novel approach to provide efficient rural finance services and tap into a huge potential demand for these services. The operation was also in accord with Government's rural development strategy of liberalizing prices and markets and improving production. It incorporated innovative elements drawn from current best practices in rural financial intermediation: private ownership, government non- intervention, bottom-up initiatives, deposit facilities, simple procedures, group-based lending for small loans, liberalized lending rates, financial discipline, competition, adaptation to regional differences, and access to technical support. 5. The project scope was manageable, but supervision of young SLAs was labor- intensive and costly. In addition, ADMMEC did not inspire confidence among operators or the local networks to take a leadership role, partly because its board of directors and staff had limited experience in rural finance issues, and partly because ADMMEC was viewed more as a World Bank project unit. The project had planned for technical assistance to help establish a Malagasy SLA system. Unfortunately, there was strong resistance to maintain this technical support. Eventually, it was removed, thus handicapping ADMMEC in the early stage of the project and of the mutualist movement. Until the mid-term review in October 1996, ADMMEC's monitoring and evaluation staff had focused solely on outreach. Only afterward, did they start to develop the skills to assess the financial performance of the SLA networks. Achievement of Project Objectives The project's major objectives were substantially achieved.  -3- 6. Development of SL4s. Regarding the legal and regulatory framework, Law no. 96-020 regulating the mutualist financial institutions and complementing the banking law no. 95-030, was promulgated on September 4, 1996. However, directives for its implementation that had been prepared in consultation with ADMMEC and the SLAs have not been approved and issued yet. CSBF will assume oversight of SLAs which are required to group into unions and federations. The grouping will facilitate CSBF's supervisory functions. SLAs still need to choose their legal status and prepare long-term plans for their development. 7. As for the creation of SLAs, most targets had been reached and had even exceeded appraisal estimates. Over the four-year life of the project, 54 SLAs were created, each grouping 150-200 members, with savings averaging US$15-20 per person (against US$10 estimated). Expansion of one existing pilot project could not be achieved owing to the operator's early withdrawal for a reason not related to its competence or the project. Preliminary feasibility studies were completed and could be available for later use. Some other serious hurdles along implementation did not prevent RFTAP from moving ahead: the 1991-93 political turmoil, the major devaluation of the FMG (about 50 percent) in 1994, and high inflation in the first two years of project implementation (averaging 43 percent over the period). Even after adjustment for inflation, the savings mobilized and credit distributed under the project remained positive in real terms. Growth results could have been much more spectacular if inflation had been controlled, as demonstrated in the first six months of 1997 when savings collected under the project doubled. SLAs will continue to require support, including technical assistance, and training, but viability prospects are promising. 8. On the institutional side, achievements are encouraging. Nevertheless, the program faces three main problems. First, SLAs failed to adopt uniform reporting standards, which made performance evaluation unfeasible in one network. Deficiency in this area becamLe evident at mid-term review when an assessment of the project sustainability was performed. Data collection had not been mastered and yielded numerous inconsistencies. To correct this problem, forms utilized should be kept as simple as possible and training should be extensive to the concerned people in SLAs on how to fill them. Second, training for SLA salaried staff and elected leaders on the mutualist principles, accounting and auditing procedures, and simple financial management had not been given due attention by ADMMEC and the NGOs providing technical assistance to the networks. Third, the pressure from programs that focused on credit has already resulted in some reorientation of the SLAs. The project started out with one network focusing on credit. All now are considering the more popular practice of using donors' lines of credit as sources of funds although two of the three networks have used credit lines sparingly and intend to continue to do so. Past experience in the country and elsewhere demonstrates that there is the ever present danger that immoderate use of external credit would decrease the incentive to save and depress savings. 9. Results of the training component were mixed. On one hand, 27 national field staff in SLAs hadl been trained under the project against 20 estimated at appraisal. A shift  -4- in arrangement in 1994 gave the SLA operators the responsibility for providing training to staff and members in their respective networks. It was perceived that such arrange- ment would result in more effective training. Training provided by the three SLA networks was adapted to their respective structures and their recruitment philosophy. On the other hand, the planned position of an expatriate trainer was canceled as a result of the above decision and deprived ADMMEC of much needed mentoring. ADMMEC was given the responsibility of organizing the basic training program for SLA members and the entrepreneurial training program for off-farm microentrepreneurs in rural areas. Its performance on that account was lacking. Poor coordination and lack of rural finance skills led to schedule slippage and much less participation by the targeted beneficiaries than estimated at appraisal. 10. TechnicalAssistance under the project had also given mixed results. Throughout project implementation, there was competition among some of the NGOs designated to set up or expand the SLA networks. In the beginning, the Ministry of Agriculture had determined that in the initial stage and in order to nurture SLAs' growth, one network would operate in one zone. In practice, the authorities had difficulty applying this understanding as NGOs competed for the "best" zones. On the other hand, one SLA network could benefit from technical assistance in financial management only near the end of the project. The above network lacked an appropriate accounting system that was a handicap for financial management purposes. Other,technical assistance planned for the project included a training specialist (para. 9) and a rural finance advisor (paras. 17 and 22). The first position was canceled in 1994 while the second was only briefly filled and never replaced, thus depriving the project all through its implementation, of the requisite skills in rural finance. 11. Besides the required annual audits and the preliminary area surveys included in SLA technical assistance contracts, four studies were completed under the project, three of which were undertaken by national consulting firms. The two studies on beneficiary evaluation analyzed how SLA members rated the program and their organizations and were helpful to the networks in finetuning their methodologies. The study of project impact on poverty alleviation reviewed the consequences SLA members' access to SLA financial services has on their living standards and will be useful in better targeting beneficiaries for future projects. Overall, the three studies shed light on the positive aspects of the program. A fourth study did a comparative analysis of the approaches used by the different NGO operators and underlined the strengths and weaknesses of each. 12. Support to ADMMEC. The project was managed by ADMMEC that had the statute of a national association responsible for promoting the mutualist movement. Its membership initially consisted of 11 NGOs and BTM. ADMMEC had not inspired confidence amnong the NGOs or the SLA networks to take a leadership role, partly because its board of directors and staff had limited experience in rural finance issues, and partly because it was considered as a Bank's instrument. However, overall, it had fulfilled its mandate for project implementation and there was growing recognition that ADMMEC was serving as a forum for discussion of issues. The general consensus after  -5- the mid-term review was that ADMMEC should evolve into a professional association to represent the interests of the SLAs and become the interface of the Government and the donors in promoting the mutualistic movement. To position for this move, ADMMEC had expanded the membership of its Board of Directors. It would also have to change its legal status. ILO had expressed its intention to support ADMMEC after RFTAP closing in December 1997. 13. Services to Microenterprises. ADMMEC could have been more proactive in coordinating and organizing the training program for microentrepreneurs. Targets were not met and training was provided by only two NGOs out of the four originally planned. A position of training specialist, which was programmed at appraisal, was canceled in 1994 (para. 10). The project would have benefited from such expertise. 14. The project was initially defined as a "rural" finance technical assistance project. However, the rural/urban divide is blurred upon completion, since the need for financial services provided by SLAs is as significant in both areas. In addition, by expanding in both rural and urban areas, SLAs will be able to diversify their portfolios, reduce their risks, and increase their potential for profitability. To reflect this broadened focus, oversight of the follow-up project will be passed from the Ministry of Agriculture to the Ministry of Econiomy and Finance. Major Factors Affecting the Project 15. Some events had major influence on the course of the project, but were largely independent of Government's control: (a) Project effectiveness was delayed for close to a year after credit signing owing to a political crisis and the ensuing transition period when the decision-making process made it difficult for conditionalities to be met. (b) Because of its high cost, a contract with an NGO to start a SLA network in a new area had to be renegotiated, which delayed program start-up from April 1994 to February 1995. A contract with another NGO to expand its existing SLA network could not be pursued as the NGO, for reasons non- related to the RFTAP, stopped its operations in Madagascar. (c) The Bank-financed Social Fund program, as it expanded into credit, caused difficulties to SLA development. First, notwithstanding instructions, the Social Fund, which did not need to recover costs of operations, had tended to set interest rates that were well below those of SILAs. Second, Social Fund representatives had urged individuals to set up SLAs in competition with those being financed under the project and by other donors. The Social Fund staff had no particular expertise in setting up financial intermediaries. Discussions within the Bank and with the Social Fund Director led to satisfactory arrangements as follows: (i)  -6- the Social Fund would use SLAs as financial intermediaries in areas where these exist; (ii) the Social Fund would consider activities in very poor regions which are less likely to have viable financial intermediaries; (iii) conflict problems would be solved on a case-by-case basis; (iv) in areas where SLAs do not exist, the Social Fund would apply the lending rate of the closest commercial bank; and (v) in irrigated zones, required beneficiaries' personal contribution would be increased by 20 percent starting January 1998 in line with Government irrigation sector policy. It would be difficult for the nascent SLAs to develop in face of too strong a competition. (d) Donors who favor quick results have provided credit funds. Although the two NGOs that managed the networks had carefully designed the operations to ensure that the savings aspects of the cooperatives are retained, the surge in external credit put pressure on SLA networks to look for external sources of financing to expand credit and thus compete for membership with networks which are predominantly channeling external lines of credit. 16. Other events could have been controlled by Government. Such was the high inflation that persisted in the first two years of project implementation. Inflation hurt the project and stunted its growth because it discouraged savings and reduced the real value of deposit accounts. 17. Other difficulties were related to the project implementing agency. An expatriate rural finance specialist who served as ADMMEC's advisor was dismissed early in January 1995. He was never replaced, thus leaving a void in rural finance skills that were much needed given ADMMEC's limited knowledge in this area and the pioneering quality of its mission. Its weak management, financial control, and monitoring/evaluation capacity are another impediment. Staff were not appropriately supervised in their duties; financial statements for 1994, 1995 and 1996 were not produced and were prepared instead by auditors; the internal control system was inadequate, and the monitoring and evaluation skills of ADMMEC staff started to develop only late into project implementation. 18. Cost Changes. Project costs stayed within the appraisal total despite local inflation rates that exceeded the predicted 10 percent per year. As compared with appraisal estimates, there was an overrun in the SLA promotion component and the project management component, while funds were underused for services to microenterprises. Cost for technical assistance surpassed planned budget, even when fewer (3 out of 4) contracts were implemented and were for shorter duration. Management contracts with NGOs were indeed more costly than envisaged. At project end, the start-up costs for each SLA amounted to about US$46,000. Similarly, ADMMEC's operating costs were underestimated. As they constituted nearly the entire local portion of the financing plan, these operating costs were mitigated by the important  -7- FMG devaluation (about 50 percent) in 1994. The four-year implementation period was respected even as the project reached its outreach targets long before credit closing. The outreach targets were not ambitious and this is understandable in a pilot project. Sustainability 19. Achievements under the pilot project are on target. On the legal and regulatory issue, project sustainability is good. Physical investments (offices, safes, manuals) for the start-up of 54 SLAs created under the project will be maintained. On the methodologies adopted, group lending, familiarity between the borrowers and the elected leaders in SLAs, and social sanction will generally ensure repayment while positive real interest rates and adequate spreads will strengthen financial sustainability. 20. Sustainability prospects are encouraging, but much remains to be worked out. There are difficulties in ensuring adequate savings and equity contribution, especially in rural areas where population density is low. This explains SLAs' tendency to converge toward semi-urban and urban areas where savings are highly concentrated. Another threat to sustainability is the trend to depend on donors' funds for credit, which might also be tied to a wrong assumption (from past experience) among beneficiaries that Government or donors' funds are grants that will continue to be provided and do not have to be repaid. Although the current repayment record is good, it is not certain that this would be sustained in the future. Also, it would be difficult for training and institution building, key elements for building sustainability, to be satisfactorily carried out in a short time. Ownership and commitment by SLA members remain fragile because the networks are new and have not achieved significant coverage. Lastly, SLAs need a stable political situation, a macro-economic and sector policy environment conducive to effective and sound financial intermediation, and increasing members' confidence in their SLAs to develop. Project sustainability will depend on these factors. The overall assessment is that financial services can be maintained and developed although support for capacity building would need to be provided for some time. Bank Perforimance 21. Overall, the Bank has performed satisfactorily throughout the project cycle. During identification, through a series of workshops organized with BTM, it had taken the lead in defining issues, analyzing options, and introduced the concept of SLA in a context where nothing existed. During preparation, the Bank's report "Rural Finance Review" served as basis for discussions with Government. The project was consistent with the Bank's rural services strategy to reduce farmers' dependence and insecurity, and improve agricultural productivity. The operation was also in line with the Bank's overall financial sector strategy for Madagascar, which aimed at increasing the system's financial depth and promoting monetization in rural areas. The project's risks, mainly donor funding of rural credit involving subsidization and managerial inexperience in SLAs, were correctly assessed but cost for technical assistance and project management was  -8- underestimated. Performance indicators were found to be rather modest while clearer criteria for evaluating the networks' performance should have been established. 22. The project was regularly supervised in conformity with Bank norms except for a slack in the first half of 1996 when task management changed for a third time. Seven supervision missions reviewed progress under the project between April 1994 and December 1997, on average one every six months. Supervision of the RFTAP was particularly labor-intensive. Overall, implementation progress was well reported and problems and opportunities addressed in a timely manner. However, Bank staff should have given more care to ensuring that a sound accounting system was in place at project start. They could have also helped maintain the presence of a rural finance advisor to help build up ADMMEC's competency and stature. This was the weakest point in RFTAP supervision. Three staff changes over the life of the project also affected project progress. The mid-term review suffered a six-month delay, but did lead to the institutional strengthening of SLA networks and the reinforcement of ADMMEC's monitoring and evaluation responsibilities. There was a satisfactory skills mix in agricultural sector development and financial sector development by Bank staff involved in the project. Coordination of Bank projects in different sectors on the terms for providing micro-credit could have been improved (para. 15(d)) and would have ensured consistency in Bank's program with the country. Borrower Performance 23. Overall, the performance of the Government and the Ministry of Agriculture that oversees the RFTAP, was satisfactory. Crucial to project design and success was its commitment to reform the rural finance sector and introduce a culture of savings. The Government was committed and did not interfere. During preparation, it organized workshops and presented working papers that permitted the Bank to have a satisfactory dialogue on all aspects of the project. It subscribed to all the principles of the new approach in its Rural Finance Development Letter. The law for SLAs was passed and the statutes for ADMMEC and SLAs prepared. Throughout supervision, ADMMEC staff and members of the rural finance coordinating committee (CCFR) that consisted of representatives from the Ministry of Finance and Agriculture were regularly involved in Bank missions to jointly evaluate SLAs' progress and forrnulate recommendations. 24. As a project implementing agency, ADMMEC had some shortcomings. General and financial management was weak, whereas staff did not have much experience in rural finance issues (para. 17). For the latter reason, the SLA networks and especially the NGOs providing technical assistance had difficulty recognizing it as leader of the mutualist movement. Assessment of Outcome 25. For a pilot project implemented under adverse political and economic conditions, the above shortcomings are relatively slight considering its achievements. Most of the  -9- agenda is completed and in some instances the objectives have exceeded estimates. The project has played a critical role in developing an understanding of savings and loan systems and put in place the beginnings of such systems, including the legal and regulatory framework, which has not been attempted by other donors. Furthermore, the project has forced other systems to become more professional. The planned activities have been largely carried out (establishment of SLAs, training for microentrepreneurs, studies). The project has tested and proved that member-based SLAs, using commercial principles, are able to cater to the demand for financial services particularly in rural communities, even in face of adverse macroeconomic conditions and stiff competition. Some preliminary information of studies undertaken to assess the response of beneficiaries and to measure project impact indicated that the project had resulted in increased investment in equipment, improved agriculture production for farmers (especially in the network that received external lines of credit), increased savings, better education for children, better health owing to more access to services, enhanced food security, improved housing, reduced use of moneylenders, better household budget management, and improved living standards. These positive results will allow SLA clients to reduce their own poverty. The operation is a pilot technical assistance and capacity building project; quantified results are thus small compared to cost. Future benefits would require patience and continued adaptation. Key Lessons 26. Implementing the pilot RFTAP was akin to undertaking a voyage of discovery in various domains, from methodology to politics. While the RFTAP shares common lessons with other similar projects in the sector, it nevertheless provides valuable insight into difficulties specific to the Malagasy context and would help improve the quality of future microfinance projects in the country: (a) Allowance must be made for the indispensable learning process that facilitates the development of strong and sustainable SLAs. More consistent attention should be paid to training and institution building; (b) UJntil the savings culture is completely internalized, deposit mobilization should be persistently and consistently maintained as basis for future sustainability; external lines of credit should be used moderately, and only as a complement to savings. In the future, donors should pay more attention to sustainability; (c) To balance cost and progress toward self-sustainability, it is evident that the SLA networks must also move into urban areas where population clensity is higher and savings are more important; (d) Where the need is identified and warranted, financing should be provided to assist SLA networks set up appropriate MIS and accounting systems;  -10- (e) Funds should be earmarked for mandatory external operational and financial audit of the SLA networks once they reach a given level of assets. For effective monitoring and evaluation, minimum uniform reporting standards on outreach and financial information should be introduced from the start; (f) Setting real positive interest rates on loans provides SLAs with sufficient margins for cost recovery helps set them on the way to self-sustainability; and (g) Government should establish a mechanism to coordinate activities of competing rural finance schemes. Future Operation 27. The lessons of the project are being reviewed and incorporated in the second phase which is under preparation. The central objective of the second phase project is likely to strengthen and expand existing SLA networks as well as support any new eligible schemes offering innovative approaches. The focus will be on continuing and strengthening the trend toward sustainability. New extension zones with adapted approaches will be explored. Development of linkages between SLAs and the banking sector will be included. The future project will also support improvement of the legal and regulatory framework, CSBF's supervision of SLAs, assistance to SLAs to conform to prudential requirements, and training of microfinance professionals and trainers.  PART II STATISTICAL ANNEXES TABLES Table 1: Summary of Assessments ................................................ 12 Table 2: Related Bank Credits ...................... 13 Table 3: Project Timetable .14 Table 4: Credit Disbursements: Cumulative Estimated and Actual .....14 Table 5: Key Indicators for Project Implementation .... . 14 Table 6: Studies Included in Project .15 Table 7A: Project Costs.........................................................................................16 Table 8B:: Projject Financing .16 Table 9: Status of Legal Covenants ..17 Table 10: Compliance with Operational Manual Statements .19 Table 11: Bank Resources - Staff Inputs ............................... 19 Table 12: Bank Resources - Staff Missions .................................'...'.. 20 APPENDICES: Appendix A: UJnofficial Summary of Borrower's Contribution .21 Appendix B: Map of SLA Networks Financed by the Project .24  -12- Table 1: Summary of Assessments A. Achievement of obiectives Substantial Partial Negligible Not applicable Macro policies V Sector policies , Financial objectives / Institutional development V/ Physical objectives V Poverty reduction V Gender issues V Other social objectives / Environment objectives / Public sector management I/ Private sector development V Other / B. Proiect sustainability Likely Unlikely Uncertain C. Bank perfornance Highlv Satisfactory Satisfactory Deficient Identification V Preparation assistance V Appraisal V Supervision V D. Borrower performance Highly Satisfactory Satisfactory Deficient Preparation V Implementation , Covenant compliance V E. Assessment of outcome Highly HiWhlv Satisfactory Satisfactory Unsatisfactorv Unsatisfactory Iv/  -13- Table 2: Related Bank Credits Credit Title Purpose Year of Status Approval Preceding Operations DFC/SSI Project Provide, through the National Industrial Bank, 1980 Completed (Cr. 977-MAG) credit for small, medium and large-scale projects in industry, agro-industry and tourism; and contribute to the institutional development of BNI through technical assistance. First Agricultural Credit Provide, through the National Rural 1981 Completed Project Development Bank (BTM), credit for (Cr. 1064-MAG) agricultural inputs and equipment, and training to smallholders. Second Agricultural Credit Provide foreign exchange through the 1987 Completed Project National Rural Development Bank (BTM) to (Cr. 1804-MAG) (i) finance sub-projects in agricultural production and primary processing and marketing and (ii) contribute to the institutional development of BTM through technical assistance and the acquisition of computer equipment. Following Operations Financial Sector and Provide funding for the investments in 1990 Active Private Enterprise rehabilitation and new projects; and support a Development Project comprehensive package of policy reforms in (Cr. 2104-MAG) the financial and private enterprise sector. Financial Institutions Enhance the Central Bank's ability to Development Technical formulate and conduct monetary policy based Assistance Project on indirect instruments; improve the 1993 Active (Cr. 2497-MAG) prudential supervision environment through the strengthening of the CCBEF; formulate and enforce audit and financial disclosure standards based on international norms; and support the privatization of state banks. Social Fund II Alleviate poverty and support community 1995 Active (Cr. 2778-MAG) development through partnership with NGOs and beneficiary communities; and rovide supplemental financing to the Fonds d'Intervention pour le Developpement (FID).  -14- Table 3: Project Timetable Steps in Project Cycle Date Planned Date Actual Identification December 1989 Preparation September 28 - October 12, 1990 Appraisal November 1991 February 24 - March 16, 1992 Negotiations July 1992 December 14 - 18, 1992 Board approval August 1992 February 16, 1993 Signing May 14, 1993 Effectiveness July 6, 1993 April 6, 1994 Project completion report March 30, 1998 March 17, 1998 Credit closing December 31, 1997 December 31, 1997 Table 4: Credit Disbursements: Cumulative Estimated and Actual (US$ million) FY94 FY95 FY96 FY97 FY98 Appraisal Estimate 0.5 1.3 2.3 3.4 3.7 Actual 0.6 1.5 2.4 3.2 Actual as % of Estimate 120% 115% 104% 94% Date of Final Disbursement 03/31/1998 Table 5: Key Indicators for Project Implementation I. Key implementation indicators in SAR Estimated Actual 1. 10 associations established under the DID scheme. 30 24 2. 10 associations established under the WOCCU scheme. 15 20 3. 5 associations established under the FERT's scheme. 8-12 10 4. 4 associations established under the CIDR's Not applicable: CIDR withdrew scheme. 7 from Madagascar and could not complete the terms of its contract. 5. 125-150 members per association; and at least 125-150 150-200 4,000 members for the SLA network. 4,000 +10,000 6. Associations established in at least 3 new regions for new promotion schemes, and in 2 new 3 3 regions under existing schemes. 2 1 7. At least FMG 50 million savings collected in project year 1, and FMG 100 million in project FMG 205 +FMG 1.4 billion year 2. million S. Minimum loan/savings ratio of 20% and maximum of 40%. 20-40% 28%  -15- Table 6: Studies Included in Project Study Purpose Status Impact of Study Beneficiary To analyze how SLA Completed Provided feedback on the quality of SLA Evaluation members in the regions financial services. Was instrumental in of Marovoay, helping the networks adjust and improve Ambatondrazaka, and the quality of their services in specific Tamatave evaluated areas. Some preliminary information on SLAs and the mutualist the impact of the project on beneficiaries movement. was also available: increased investment in production, reduced use of moneylenders, better household budget .______________ management, improved living standards. Beneficiary To analyze how SLA Completed Same as above. Evaluation members in the regions of Vakinankaratra, Haute-Mania, Miarinarivo, and Bongolava evaluated SLAs and the mItualist movement. Study of project To review impact on . .. Completed Provided information on the poverty impact on poverty access of members to.. level of SLA members. Would help alleviation SLA financial services. future microfinance projects improve the coverage of target populations and meet their needs. Impact of the project on beneficiaires was significant: better liquidity management, improved agriculture production for farmers (especially in the network that received extemal lines of credit), more investment in equipment, increased savings, better education for children, better health owing to more access to services, enhanced food security, improved housing. The pace of improvement is, however, slow. Study on the To do a comparative Completed Gave insights into differences in different analysis of the microfmance technologies used under the approaches to approaches used by the project. Marginal impact. promote SALs different microfinance development organizations supporting the SLA networks, underlining the strengths and weaknesses of each. 1994, 1995, 1996 To perform annual audit Completed 1996 audit alerted ADMMEC Project Audits of the project accounts. management and IDA to the inadequacy of ADMMEC's accounting system.  -16- Table 7A: Project Costs Appraisal estimate Latest estimate (US$ million) (US$ million) Local Foreign Total costs costs Savings and Loan Promotion 0.7 2.2 2.9 3.94 Services to Microenterprises 0.0 0.1 0.1 0.05 Monitoring and Evaluation 0.2 0.4 0.6 0.03 Project Management 0.3 0.2 0.5 0.48 Total Baseline Costs 1.2 2.9 4.1 4.50 Physical Contingencies 0.1 0.0 0.1 0.05 Price Contingencies 0.2 0.2 0.4 0.27 Total Project Cost 1.5 3.1 1 4.6 4.82 Table 7B: Project Financing Appraisal estimate (US$ million) Latest estimate _________ _________ _________ (US$ m illion) Source Local costs Foreign Total costs IDA 1.0 2.7 3.7 3.80 Government 0.4 0.0 0.4 0.33 Implementing Organizations 0.1 0.4 0.5 0.69 Total 1.5 3.1 4.6 4.82  -17- Table 8: Status of Legal Covenants Agree- Section Cove- Present Original Description of covenant Comments ment nant type status fulfillment date Credit 3.04 Manage- Complian 06/30/95 Borrower to carry out The mid-term review, ment ce after jointly with IDA and with originally planned for June aspects delay the participation of 30, 1995, was first delayed to ADMMEC, a mid-term spring 1996, then to October review of the Project and 1996, awaiting the soon thereafter, to completion of the beneficiary implement the survey and some other recommendations of such a studies. review. Credit 4.01(b)(i) Accounts Complied 06/30/96 Borrower to have the Fulfilled. /Audits with 06/30/97 records and accounts related to expenditures made on the basis of statements of expenditure and those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association. Credit 4.01(b)(ii) Accounts Complied 06/30/96 The Borrower to furnish to Fulfilled. /Audits with 06/30/97 the Association as soon as available, but in any case not later than six months after the end of such year, the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Credit 4.01(b)(iii) Accounts Partially The Borrower to furnish to A random SOE review of the /Audits complied the Association such other April 1997 mission found that with information concerning some supporting documents records and accounts and the related to the project's audit thereof indicated in accounts were not readily _________ __________ Sections 4.0 1(b)(i) and (ii) available. This covenant also appears in the Project Agreement between IDA and ADMMEC.  -18- Agree- Section Cove- Present Original Description of covenant Comments ment nant type status fulfillment date as the Association shall from time to time reasonably request. Project Section Manage- Complied 06/30/94 Between June 30 and Complied with. 2.02(a) ment Complied 06/30/95 September 30 of each year, Complied with. Aspects Complied 06/30/96 ADMMEC to furnish to the ADMMEC's work program with Association, for its review and budget for FY1997 was delay and approval, in respect of submitted with delay and was the forthcoming year, approved in early 1997. detailed work programs and budgets. Project Section Accounts Complied 06/30/96 ADMMEC to maintain Audit report for FY 1995 4.01(a) /Audit with 60/30/97 records and accounts raised a number of points to partially adequate to reflect, in be clarified and remedied by accordance with sound ADMMEC. Resident Mission accounting practices, its sent a follow-up letter dated operations and financial July 3rd, 1996. Headquarters conditions. sent another dated August 13, 1996 on the same points. ADMMEC replied on August 19, 1996.that it has taken remedial measures. Project Section Accounts Complied 06/30/96 ADMMEC to have its The 1995 audit was 4.01(b)(i) /Audit with 06/30/97 records, accounts and completed but the report cited financial statements ADMMEC's inability to (balance sheets, statements produce financial statements. of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association.  -19- Table 9: Compliance with Operational Manual Statements Statement Number and Title Describe and comment on lack of compliance OP 10.02 During the 1996 audit of the project accounts, the auditor Financial Management indicated deficiencies in ADMMEC's accounting and internal controls and in the reliability of its* financial statements. At the Bank's request, ADMMEC subsequently worked out a remedial action plan, hired a qualified accountant and put the accounting system back in order. Table 10: Bank Resources - Staff Inputs Stage of Project Cycle Actual -_____.._______..______ W eeks US$ Preparation to appraisal 81.14 166,027 Appraisal to Board 54.35 130,297 . Supervision 80.70 204,665 Completion 6.84 10,166 Total 223.03 511,155  -20- Table 11: Bank Resources - Staff Missions Performance Rating Stage of Month/ No. of Days Specialized Imple- Develop Types of Problems Project Cycle Year Persons in Staff Skills ment- ment Field Represented ation Appraisal e 02/92 4 80 SOO Board PSDS L C Board - 02/93-+ 2 62 RDS Delays due to Effectiveness 04/94 AE conditionalities that took time to be fulfilled because of the political crisis. Supervision 07/94 1 10 RDS S S Implementation was delayed in the second pilot area. 03/95 2 32 RDS S S Implementation AE rem4ined slow at ADMMEC management .________ _______________ _________ level. 10/95 2 37 AE HS HS 07/96 1 10 AE S S 11/96 5 59 ACO S S Management and POO staffing problems at E ADMMEC level. SE OA 04/97 2 10 POO S S Weak project OA management; poor accounting of project funds; weak promotion capacity; nascent monitoring-evaluating capacity; absence of accounting system in one SAL network. Completion 10/97 1 10 OA s S I _ _ _ * Data not available ACO: Agriculture Country Officer Ratings: AE: Agricultural Economist I - Insignificant problems. C: Consultant 2 - Moderate problems. E: Economist 3 - Major problems; appropriate actions being L: Lawyer taken. OA: Operations Analyst 4 - Major problems; not being addressed POO: Principal Operations Officer adequately. PSDS: Private Sector Development Specialist S - Satisfactory. RDS: Rural Development Specialist U - Unsatisfactory SE: Senior Economist SOO: Senior Operations Officer  -21- APPENDIX A Republic of Madagascar Antananarivo, July 1997 Ministry of Agriculture Appendix A: Unofficial Summary of Borrower's Contribution Background 1 In view of continuing financing difficulties in rural communities, the Government of Madagascar entered into a credit agreement with IDA in 1994 with the objective of strengthening its rural financial system through the pilot application of the cooperative principle. The main idea was to create self-sufficient savings and loan associations that would extend credit to members with savings collected among the latter. Technical assistance was provided by specialized international organizations (Developpement International Desjardins-Canada, World council of Credit Union-Africa, Formation pour l'Epanouissement et le Renouveau de la Terre-France and Centre International de Developpement et de Recherche-France) while project coordination was managed by ADMMEC, the association that was responsible for promoting the mutualist movement in the country. Project Implementation 2. In order to foster a favorable environment for the development of the mutualist movement, the Government facilitated the passing on September 4, 1996 of Law No. 93.026 regulating the creation and financial activities of savings and loan associations. ADMMEC, which was also mandated to carry out the project, succeeded with the support and supervision o:f the Ministries of Agriculture and Finance in bringing it to a satisfactory completion. ADMMEC had started to establish itself as a professional association of savings and loan networks to champion the latter's interests and promote the mutualist movement. The technical assistance recruited to help develop the networks of savings and loan associations met their objectives. As of April 30, 1997, 53 associations were created grouping 9,683 members, collecting FMG 900 million in deposits and extending outstanding loans in the amount of FMG 309 million. Each network tailors its approach to the needs and specificities of the region in which it is implanted. Linkages, though still few and cautious, have been established with the commercial banks through the careful use of lines of credit. Results are encouraging but much remains to be done, especially concerning the training of elected leaders and salaried staff of the associations. The networks have now passed to the second phase of development with the creation of pre-unions and unions. 3. Many difficulties stood in the way of project implementation. On the institutional level, the political situation in 1992-93 delayed by a year the ratification of the IDA credit agreement. Decree no. 93-026 which was a prerequisite for starting the project became  -22- obsolete over time and needed to be replaced. The lack of professional skills of ADMMEC's founding members made it difficult for ADMMEC to establish itself as the leader of the mutualist movement. The Government started to have a clear strategy for coordinating the different competing networks only in 1997, near the end of the project. On project implementation, enforcing respect of the mutualist principle where social programs tended to offer better rates created tension in some regions. There remained a lingering resentment among ADMMEC's founding members who did not have the required qualifications to manage the various savings and loan networks but expected to assume such functions. Because they were not required to give results, the networks tended to neglect training, especially when they did not want to grant large volumes of credit at an early stage. The frequent change in task management at the World Bank was another disruptive factor. Assessment of IDA's and the Government of Madagascar's Performance 4. IDA's performance was satisfactory. Support was provided by the Resident Mission and regular missions from headquarters staff, which in some instances sped up decisions. The skills of staff involved in the project were diverse (rural development, management, finance). 5. In general, the Government had been very supportive. It had helped the project meet all conditions for effectiveness. In particular, the Ministry of Agriculture had been instrumental in creating various committees to supervise the project, give technical advice to ADMMEC, coordinate initiatives from competing rural finance schemes, pass the law regulating the savings and loan associations, and mobilize the counterpart contribution to the project. 6. ADMMEC had fulfilled its mandate. Regular quarterly and annual reports based on field missions and desk review of reports, accounted for progress made under the project. Funds were requested in a timely manner and audits performed annually. The 1996 audit did find some deficiencies in its accounting system and project management. However, remedial actions had been taken. In March 1997, ADMMEC became truly representative of the savings and loan networks when 8 of the 9 members elected to its board of directors were members of the networks. ADMMEC also initiated the creation of a union grouping all salaried staff of the networks in an effort to improve their professional skills. ADMMEC coordinated discussions among networks on CSBF's (the supervisory banking commission) draft decrees affecting mutual savings and loan associations. 7. At project end, the international organizations providing technical assistance to the savings and loan networks had reached their quantitative objectives, continued to adapt their approaches to the needs of their beneficiaries, to initiate relationships with social groups, and to stimulate participation of the population and expansion of the mutualist movement. Still, much remains to be done.  -23- Lessons Learnecl and Recommendations 8. The project has set the stage for the mutualist movement to develop in Madagascar and offers various lessons for stakeholders in their ongoing work. It is thus recommended that: * Government give stability (by creating a coordinating Government agency on microfinance programs to help alleviate frequent institutional changes), direction (by issuing a clear national strategy), and information (by setting up and mnaintaining a national data base and conducting regular information campaigns); * microfinance terms be used uniformly across the country in order to avoid confusion among beneficiaries; * work standards for microfinance institutions be set up (accounting systems, financial reporting requirements, audits, etc.); * a national microfinance training center be created and relevant training initiatives be supported; - transfter of skills in microfinance be carefully planned; r regional social diversities be seriously taken into account; 3 the World Bank maintain the same task manager over the life of the project.  APPENDIX B Appendix B: Map of SLA Networks Financed by the Project ANThYRANAAC MA 7M._ S$ANLANA LVONrO Y/=.VAThNJNA fENOAJIVO ATSINAN'A.A &AMBATONORAZAKA TSIROANOMN D 1DY \p. M OAL4S'[MA AAI74,A4N'4Rz;o L FLNAANSA 1AJ A}RA41 ATSIMO FAJAPAXG.-LNCA TOAQ4/&i ~~~~~~~LEGENDE2 IVAN(jAjNDR) O CECAM BTiAVO &ECA 3