Morocco - National Rural Finance Project

 ICRR 10295 Report Number : ICRR10295 ICR Review Operations Evaluation Department 1. Project Data : OEDID: OEDID : L3662 Project ID : P005486 Project Name : National Rural Finance Project Country : Morocco Sector : Agricultural Credit L/C Number : L3662 Partners involved : Japan (OECF); Arab Fund for Economic and Social Development (FADES); Germany (KfW); European Investment Bank (EIB); Caisse Francaise de Developpement (CFD) Prepared by : Madhur Gautam, OEDST Reviewed by : John Johnson Group Manager : Gregory Ingram Date Posted : 04/08/1999 2. Project Objectives, Financing, Costs and Components : Objectives : (a) Promote private investments in rural areas and (b) consolidate the institutional transformation of Caisse Nationale de Credit Agricole (CNCA). Components : (a) finance demand-driven private investments in rural areas and agro -industries; (b) provide a full range of services to rural farm and non -farm clients (notably women), enterprises and young entrepreneurs; (c) improve CNCA's organizational structure, financial performance, planning process and MIS; (d) technical assistance to establish a Climatic Risk Insurance Fund and a crop insurance scheme; and (e) develop viable credit and savings schemes to reach the poor. Costs & Financing : (in US$ millions) Appraisal estimate 1150.0 of which IBRD loan was 100, and cofinancing was provided by OECF, FADES, EIB, CFD, and KfW for a total of 279.0. Final cost was 457.6, of which IBRD provided 21.0 and cofinanciers 94.8. The remainder of the loan and cofinancing was canceled . 3. Achievement of Relevant Objectives : The project failed to achieve its physical or institutional development objectives . No disbursements took place in the first two years of the project as a direct result of droughts in successive years; some limited funds were disbursed in the third year. Subsequently, as a result of disagreements between the Bank and CNCA on the future course of action prompted by an external financial and operational audit, the project stalled and was eventually closed without further disbursements. 4. Significant Achievements : None. 5. Significant Shortcomings : The credit line was not implemented as planned and a substantial proportion of the Bank loan and cofinancing was canceled. CNCA's institutional strength has deteriorated instead of improving . The project failed to develop suitable information and management control systems; the training component was unsuccessful; governance issues remained unresolved; the climatic risk insurance fund never materialized; and the financial position of the CNCA is weaker than anticipated at appraisal . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Unsatisfactory Highly Unsatisfactory Institutional Dev .: Negligible Negligible Sustainability : Uncertain Unlikely CNCA is financially weak and it's performance is unlikely to improve under the current organizational structure . Bank Performance : Deficient Unsatisfactory  Borrower Perf .: Deficient Highly Unsatisfactory The ratings scale as per ICR instructions allows only one rating for unsatsifactory performance, namely 'deficient'. OED distinguishes between unsatisfactory and highly unsatisfactory performance . The OED rating for this project is, however, consistent with the text of the ICR . Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : Same as for the preceding project, the National Agriculture Credit Project (Loan 3088-MOR). 1. Long term relationships with borrowers should not be used as a substitute for prudent appraisal practices . The financial health and performance of financial institutions should be rigorously reviewed and appropriate indicators established for monitoring and evaluation of progress towards project objectives . 2. Follow-on projects must be justified on clear evidence of progress on institutional development . Repeat loans run the risk of being regarded as quasi -permanent sources of funds, fostering complacency and undermining institutional sustainability. 3. Project task teams should reflect appropriate skills -mix to design, prepare and supervise complex projects, especially those involving substantial institutional development for specialized institutions such as financial intermediaries. 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR is well written and it provides an in -depth, candid and objective assessment of the implementation progress, the problems affecting the project and its outcome .