Tanzania - Tanzania Rural Development Bank Project

Document of The World Bank FOR OMCIAL USE ONLY Repsi No. 7322 PROJECT COMPLETION REPORT TANZANIA RURAL DEVELOPMENT BANK PROJECT (CREDIT 987-TA) June 28, 1988 Africa Regional Office Tis demun ha a reilu irbutm mud may be md by sedlmb nl Sm the pideunu d thdr .ad ItB CuAt nm no" o_wle be dicud w Wedd B.k mthwlmn.  ABBREVIATIONS BPCR - Borrower's Project Completion Report CRDB - Cooperative and Rural Development Bank TRDB - Tanzania Rural Development Bank USAID - United States Agency for International Development  O OIVUCIA U ONLY THE WORLD SANK WasNuton. D.C. 20433 USA om. ci O*etEvGutio June 28, 1988 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report - Tanzania Rural Development Bank Project (Credit 987-TA) Attached, for information, is a copy of a report entitled "Project Completion Report - Tanzania Rural Development Bank Project (Credit 987-TA)" prepared by the Borrower with an Overview by the Africa Regional Office. No further evaluation of this project by the Operations Evaluation Department has been made. Yves Rovani by Ram K. Chopra Attachment T his document hs a rcted ditbution and may be used by ecipinats on In te performae of ther oficial duti. Its contets may not othwibe be diclsd wihout World Bank autlon.  FOR 0MCAL USE ONLY PROJECT %.OMPLETION REPORT Tanzania Rural Develolment Bank Proiect (Cr. 987 - TA) TABLE OF CONTENTS Preface i Basic Data Sheet ii Evaluation Sunmary iv Overview of the Proiect ComDletion Report I. Introduction 1 II. Project Objectives and Accomplishmenta 1 III. Background of Events 4 IV. Commentary 6 Project Completion Report (Prenared by TRDB) 1. Introduction aud Highlights 11 2. Project Identification Preparation and Appraisal 12 3. Project Description 13 4. Project Implementation 14 - Project Start-Up Problems 14 - Project Revisions 15 - Implementation Schedule 16 - Reports 18 - Project Costs 19 - Performance of Technical Assistance 20 - Overall Assessment 21 5. Financial Performance 21 6. Institutional Performance and Development 25 7. Conclusion 29 map IBRD 19829 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.  PROJECT COMPLETION REPORT Tanzania Rjral Develonaent Bank Proiect 1 / (Cr. 987 - TA) PREFACE 1. Included in this package are a Project Completion Report (PCR) on the Tanzania Rural Development Bank Project (TRDB), Cr. 987-TA, prepared by the Borrower and, supplementing it, an Overview of the PCR prepared by the Southern Africa Department. The Overview is based on the Borrower's PCR, the Appraisal Report, the President's Report, the Credit Agreement, the supervision reports, correspondence anca files on the project. It also reflects the covmerts of Bank staff who were associated with the project. 2. The project involved a loan for US$10.0 million, made by IDA (the Association) on October 24, 1980. The Credit was extended for two successive years until December 31, 1985. The category of the Credit relating to technical assistance was extended another year until December 31, 1986, and as of this writing is still ongoing. S. A copy of the draft report was sent to the Borrower on February 25, 1988 for coiwnts. No conmments were received from the Borrower or the Tanzania Rural Development Bank. 4. This project has not been subjected to an audit by OED. ________________ 1 The Tanzanian Rural Development Bank (TRDB) was renamed the Cooperative and Rural Development Bank (CRDB) in 1982.  - ii - TANZANIA Tanzania Rural DeveloPment Bank Proiect Cr. 987 - TA Proiect Completion ReDort Basic Data Sheet Actual or Actual as X Appraisal Estimated of Appraisal Key Proiect Data Expectation Actual Estimates ---------------USS Million)--------------- Total Project Cost 12.8 10.1 78 Credit Amount 10.0 10.0 Amount Disbursed 6.6 66 Amount Cancelled 3.0 1 Date Physical Component Completed 1985 Proportion Completed by Above Date 90 Economic Rate of Return NA NA 'Institutional Performance Unsatisfactory Other Proiect Data Original Actual First Mention in Bank Files 3/77 Negotiations 4179 4/79 Board Approval 4/80 4/4/80 Date of Credit Agreement - 10/24/80 Date of Effectiveness 1/23/81 1/24/81 Closing Date 12/31/83 12/31/85 Borrower: United Republic of Tanzania Executing Agencys Tanzania Rural Development Bank Fiscal Year of Borrowers July 1 - June 30 Follow-on Projects None Staff Inputs (Staffweeks) Er77 Er ES U f ES E SI FI8 EM iUnAL Pr.Appr leal .0 58.0 9.8 - - - - - - - - Ap=rumaI 68 68.8 Ngo t.ti.e 4.8 6.8 -. - Svpervien4s1 - - - 6 .. 8 .2 7.6 1.4 tO.a 8.6 is Oth*r - .1 .8 - - - - - - - - .9 5.0 58.49 ".0 11.9 8.1 14.5 15. 7.6 18.4 10. 0.6 27.7 Cumulative Disbursements 1981 1982 1983 1984 1985 1986 1987 ---------(USS Million)------------------------------ Appraisal Estimates 3.6 7.4 9.7 10.0 Actual 0 0.2 0.3 1.2 1.6 6.3 6.4 Actual as X of Est. 0 3 3 12 16 63 64 Date of Final Disbursement, Dec. 31, 1986 _ D oCetn a 19 I_/ Date of Cancellation, May 31, 1984.  -iii - MISSION DATA Number of Date of Mission Date of Duration Staff and man- Final Mission Origtn Mision (weeks) Specialiuation weeks Regort Supervision I HQ 8/81 3 1 - AE 1/ 3 10/21/81 Supervision 2 HQ 1/82 3 2 - CS,FA 4 4/14/82 Supervision 3 HQ 10/82 If 3 - FA 3 1/07/83 Supervision 4 HQ 4/83 2 2 - CS,FA 4 6/10/83 Supervlsion 5 HQ 9/83 1 2 - e, FA 2 11/16/83 Supervision 6 HQ 6/84 1 2 - E, FA 2 9/20/84 Supervision 7 HQ 10/84 1 1 - PA i 12/03/84 Sapervislon 8 HQ 3/85 1 1 - E 1 4/24/85 Supervision 9 HQ 10/85 1 1 - FA 1 1/27/86 Supervislon 10 HQ 4/86 1 1 - E 1 7/16/86 Name of Currency: Tanzanla Shilling (TS) Exchange Rates: 1978 (Appraisal) US$1 - 8.3 TS Intervening Years US$1 - 12.1 1986 US$1 - 17.0 1/ AE - Agricultural Economist PA - Financlal Analyst E - Economist CS - Credit Specialist  - iv - PROJECT COMPLETION REPORT Tanzania Rural Develogment Bank Prolect (Cr. 987 - TA) EVALUATION SUMMARY Introduction IDA played an important role in creating Tanzania Rural Development Bank (TRDB) in 1971 to provide long and medium-term finance for rural development and finance the purchase of agricultural inputs by either making or guaranteeing loans. IDA was eager to assist the Tanzania economy by strengthening TRDB as an institution and developing its capacity to provide credit for viable rural development activities. Objectives The project provided funds for (i) training oi new and existing TRDB staff and the establishment of six mobile units for the training oi village administrators; (ii) strengthening TRDB's organizational structure; (iii) strengthening TRDB's infrastructure by improving office accommodation and transport facilities; (iv) financing TRDB's lending programs; and Iv) recruiting consultants to assist Government in resolving input distribution problems. Imolementation ExPerience Implementation of the project which was originally scheduled over a three-year period, took six years due to start-up problems. of the project components, the major initiative - training and staff development - was largely carried out by USAID as part of its own separate project, although this was totally unforeseen at appraisal (Para 13). Computerization of accounts and loans was successfully carried out, and minor infrastructure, vehicles.and supplies were provided (Para. 4c). Also, 80 of the $5 million that was provided for rural lending was disbursed. Institutionally, the Association was instrumental in eventually securing Government payment to TRDB of long outstanding loans to Government-backed organizations, filling of several important posts and the correction of some institutional weaknesses. An amount of US$3 million of the Credit was cancelled in 1984 and the Credit was extended for two successive years until Dec. 31, 1985. The category of the Credit relating to technical assistance was extended another year until Dec. 31, 1986 to cover the ongoing and resettlement costs of a few essential experts (Para. 8). Practically nothing from the Credit was disbursed during 1981-83, the original project period. Nearly all disbursements, some $6.6 million, were made during 1984-86 after the original Closing Date. During this extended project period, goods and services costing US$4 million were immt tiately identified, committed and disbursed under large volume contracts. This was accounted for, in part, by improved institutional  procedures, especially with regard to procurement, but was mainly attributed to the fact that the parallel USAID project was being wound down and the credit was the only major source of foreign exchange available to TRDB. The concurrent USAID project to TRDB provided a mult:i-disciplinary team of specialists and the Association, TRDB and USAID agreed that, rather than duplicate technical assistance posts, the Credit's institutional strengthening and training activities would largely be carried out under the USAID project. However, while this objective was incorporated into the USAID consultants' contract, the work done was less broad ir. scope than had been envisaged by the Association. After the USAID consultants temainated their work in August 1985, Credit funds were used to finance the continuation of these consultant services for an additional nine months (Para. 13). IDA's performance during preparation, appraisal and implementation has been mixed. When the project was appraised, IDA was eager to strengthen TRDB through training and paid little attention to other doniors' activities in TRDB resulting in duplicated training program which was difficult to implement. IDA allocated adequate staff resources to the supervision of the project but the implementation of the credit component did not benefit from the regular supervision missions. The effectiveness of supervision was limited in addressing technical and policy problems which undermined project implementation. Results The project was marked by a less than positive development climate. Disincentives to produce, resulting from distortionary macro- economic and sectoral polices, seriously reduced the range of viable sub- projects for which lending was intended. Furthermore, some of these policies (e.g., requiring TRDB to procure and distribute inputs in addition to financing them) weakened the Project's executing agency - TRDB (Para. An unfavorable overall sectoral policy environment, management weaknesses within TRDB, and expanding responsibilities, which often took TEDB well beyond its credit function, contributed to the project's generally low performance. Nevertheless, some tangible benefits were derived from the project's accounting, computing and villege training activities. Sustainability Most of the project objectives were not met but considerable gains were made in upgrading TRDB's accounting system, computerization and establishing mobile units for village training. The gains in these areas are expected to be sustained. FindinRs and Lessons (i) Project design should have assessed USAID training program in order to eliminate duplications and minimize implementation problem (Para 13);  - vi - (i) In view of the credit lssues, detailed design of the credit component should have awaited the generation of conclusive and verifiehle financial data to be included in the project (para.l9); (ii) IDA supervision, t'tough intensive, was not consistent in policy recommendations (para. 19); and (iII) In situations where the policy actions of the Borrower adversely impaired project implementation, the project should have been better served by IDA suspending all credit disbursements by invoking the General Condition Clause (para. 17).  - 1 - TANZANIA Tanzania Rural Development Bank Proiect (Cr. 987 - TA) Overview of the Proiect Comwletion Revort I. INTRODUCTION 1. The Borrower has provided a comprehensive Project Completion Report (BPCR) prepared by the Cooperative and Rural Development Bank (CRDB). 1 I 'While the report is generally straightforward, care is advisable in reading it as the boundaries between the activities financed by the Association and those of a concurrent USAID-financed project are not clarified; as it turned out, USAID did a very substantial amount of the work originally included under Cr. 987-TA. Additionally, the project history suggests a certain frustration with the project on the part of both the Tanzanians and the Association. 2. This Project Performance Overview Memorandum is intended to supplement the BPCR by: - summarizing the project objectives and results; * - discussing the reasons the project developed as it did, including the role of USAID; - assessing the project's weaknesses and strengths; and * - providing a general commentary on the course of the project. II. PROJECT OBJECTIVES AND ACCOMPLISHMENTS 3. Since its creation in 1971, the Tanzania Rural Development Bank hbe been involved in ten IDA-funded agricultural projects, usually in the role of credit channel. With the demonstrated weaknesses in the economy and the growing difficulties with agricultural credit, in 1978 the Association, which had given the Government advice when TRDB was first organized, raised with Government the possibility of a rural development credit operation to improve TRDB's institutional capability and providing credit to rural sector projects, over the period 1981-83. It was considered a pilot project, and consequently, the amount of the Credit ($10 million), of which $5 million was earmarked for rural credit, was kept relatively small. 4. The individual project components and their disposition were as follows: (a) Staff Training Improving sub-project appraisal capacity was deemed essential. To establlish an in-housa training unit for this purpose, the Credit provided financing for three internally recruited posts: Chief Training Officer; ________________ 1 1 Formerly the Tanzanian Rural Development Bank (TRDB). the Beneficiary and executing agent of the Project. For simplicity, the acronym TRDB is used throughout the following pages.  Agricultural and Farm Management Speciqlist; and Agricultural Economist. As it turned out, none of these positions were financed by the IDA Credit. Instead, they were sibsumed under and financed by the USAID project as discussed in para 13. The Borrower felt that the USAID Consultants moved away from the agreed training focus on project appraisal and concentrated efforts on credit managemetzt. Although this criticism has some substance, the Association felt USAID had done an adequate job and had been responsive to the changing needs of TRDB. (b) Village Training Six 2-man mobile units were to be established for travel to centrally located villages, on a nationwide basis, to give advice on the use of credit, including training in record and bookkeeping. This component proved successful, allowing officials to visit the locaJes of prospective sub-projects either for training purposes or for sub-project appraisal. (c) Strengthening of Organizational Structure This component provided for the installation of a computer to computerize accounts, the establishment of an information system, the creation of an organization and methods system, and the establishment of a monitoring, evaluation and research division, including the financing of a computer specialist, and an organization and methods consultant. The computer was installed, training of TRDB staff was provided, and the accounting systems were coaputerized successfully. TRDB considered this component the outstanding accomplishment of the project. Although the planned Organization and Methods Division Study was not made, a division for this purpose was established by TRDB. (d) Input Distribution Study TRDB had inherited responsibility for the distribution of farm inputs financed by its rural credits. This task, which had been handled primarily by farm cooperatives before they were disbaned, was both unwelcome and inadvisable for a rural development bank. This was recognized by all parties involved and accordingly the project provided funds for an Input Distribution Study of the alternatives. The study, bowever, was never made. Government itself investigated the possibilities for input distribution in the light of its decision in 1981 to reconstitute the cooperatives. By the end of the project, input distribution was in the hands of farm district level or other farm-related organizations (e.g., the Tanzania Farmers Association), and TRDB was no longer responsible for this function.  - 3 - (e) Infrastructure and Vehicles The Credit provided assistance for needed office facilities for TRnR and vehicles for reglonal officers, field credit supervisors, and for the mohile units. These were generallv provided. (f) Rural Credit The rural credit component of TMS5 million failed to get off the ground during the original prolect period. TTSS3 million of Cr.987-TA was cancelled on May 31, 1084, thereby reducing the allocation for rural credit to 92 million. However, during the late stages of the extended prolect veriod, large purchases (e.g., spare parts under a tractor rehabilitation program, thousands of ox-ploughs, and large auantities of agricultural chemicals) were financed by TRDR and necessitated moving TS91.6 million hack into this categorv from unallocated and utilized categories within the Credit. At the very end of the protect period, the credit financed the contlnuation of ITSAIDs consulting services for a soecified period of time (oara 13). 5. The Association viewed the strengthening of TRPR through policy changes as equallv imnortant to the institu;ional support. In supoort of this objective, an interest rate covenant was Included In the Project Agreement. It recuired TRnR to charge Interest rates of (a) 7.5% ner annut on medium-term loans made to villages and cooperatives; (b) 8.5% on short-term loans made to villages and corporations; (c) 9% on loans made to Parastatals and district development corporations; and (d) 10% on loans made to Individuals, partnerships, companies and associations engaged In rural development. Although the interest rate covenant was undated, TRDA made continual adjustments during the project period and all the interest rate targets set in the covenant were met and/or exceeded. 6. During vrolect implementation, at the Association's suggestion, the Borrower agreed to the appointment of a Regional Directorate Read. The Directora.e Bead position, which was filled, was essential for coordination of regional operational activities and assumed an added importance as the position of General Manager had been vacant for a long time. A General Manager was eventually appointed In 1983, following continued Association representations. 7. TRDB also agreed to take action to recover the unpaid principal and interest owed by the cooperatives unions which had been dissolved. In 1983, the Government paid TRnR the amount of the cooperatives debt (the equlvalent of USS7 million); and in 1985 substantially repaid TRDB for the amounts it had lent to the tea and tobacco parastatals. Disbursements 8. After two extensions of the original Closing Date of December 31, 1983, the Credit was to have finally closed December 31, 1Q85. Uowever, very late in the day, it was agreed to keep onlv one category of the Credit open until necember 31, 1986 in order to disburse against the cost of the  - 4 - expatriate TRDB Chief Accountant, who was the only full time consultant to have been financed by the Association. As of August 31, 1986, $6.25 million of the revised Credlt amount of $7.0 million had been disbursed. It ls expected thut eventually $6.6 million will have been disbursed and another US$400,000 cancelled. These are the estimates used In the Basic Data Sheet (page ii). 9. Toward the end of 1985, $1.6 million of the Credit was reallocated to Category 5 of the Development Credit Agreement, from which S3 million had been removed when that amount of the Credit was cancelled. As of August 31, 1986, approximately $4.0 million had been disbursed from this category, the Association agreelng that commitments made with suppliers prior to December 31, 1985 would be eligible for disbursement until mid-1986. 10. The disbursement situation as of August 31, 1986 is shown below: Amount of Original Amount Disbursed Credit Allocation as of Aug. 31,1986 US$ Thousands Computers/Vehicles 1400 1140.3 Office Equipment and supplies 400 62.7 Consultants 1500 768.0 Training 200 285.1 Local Staff Costs 200 - Housing 150 Mobile Unit Operation 200 - Rural Development Loans 5000 3991.9 Unallocated 950 _ 10000 6248.0 Cancelled 3000 Undisbursed (as of August 31, '86) 752.0 7000 7000.0 Examination of the tabulation of disbursements by year in the Basic Data Sheet (page 11) shows the extent to which disbursements were concentrated in the later stages of the project, almost entirely after the original closing date. Disbursements were suspended by the Assoclation on country grounds in 1982 and 1985, for substantial periods. In the 1982 instance, TRDB complained to the Association that suspension had forced termination of the staff training program because specialist consultants to be financed under the Credit could not be recruited for the task. Although this suspension only lasted three months, future uncertainties over disbursements led to the training program being totally carried out by the USAID consultant team. III. BACKGROUND OF EVENTS 11. The Bank-Group had previously involved TRDB in the execution of its agriculture projects but this project marked the first time the Association had sought to directly improve the institutional structure and policies of TRDB.  - 5 - 12. The World Bank appraisai of the project focused on the future training of TRDB staff in rural sub-project appraisal work through the setting up of a TRDB training unit. At the start of implementation, TRDB was beset with the nearly impossible task of input distribution, including the problem of dealing with village level authorities. Appointments and actions which were necesssry for the Project to go ahead were delayed and, although this may be viewed as a lackt of conviction or disinterest in the project, it probably reflects an overriding focus on problems relating to the input distribution system and restoration of village cooperatives. Some progress was made, especially with regard to computerization, but training and credit languished. 13. During 1980-82, a USAID-financed project, Resources for Village Production and Income (RVPI), was prepared. It was considerably larger than Cr.987 and had similar objectives, including provision of technical assistance. The Association first heard of a possible USAID operation at the late'stages of processing. To avoid duplication of effort, in August 1983, the Government, the Association and USAID agreed to a proposal which had been under discussion since February 1983, whereby USAID would amend its technical assistance contract with an American Consulting firm (ACDI). This consultant team, consisting of an Operations and Banking Specialist, an Organization and Methods Specialist, a Training and Management Specialist, a Systems Analyst/Programmer and a short term planning consultant (8 months) would carr; out those activities envisaged by the Association for its training and O&M consulting components. At the conclusion of the USAID project in August 1985, TRDB and the Association agreed to extend the ACDI technical assistance team for an additional nine months, and this cost was paid for by the Credit. 14. When the dimensions of the USAID project became apparent to Bank staff, it was believed by some that this project would have a preemptive effect, fulfilling the purpose of the Credit and thereby obviating its need. Thus there was some feeling that the Credit should be cancelled. In any case, the Association had become dubious about the project's rate of progress and realized that it would be necessary to reevaluate and redesign the project. Early in 1982, it made extension of the Credit beyond December 31, 1983 conditional on the Borrower fulfiiling certain obligations and taking certain actions. It was largely within this context that in April of 1984, the Association cancelled US$3 million of the Credit and extended the Closing Date to December 31, 1984. The Association continued to involve itself actively in the project and supervision continued at the same rate. 15. Early in the project, TRDB had appeared distressed by the Association's refusal to finance village godowns for grain storage on the grounds that these should be financed on purely commercial terms. For the same reasons, the financing of tractors was refused as well, and the impression is that TRDB did not know what to propose for sub-project lending. Eventually, in 1984-1985, rural credit assumed a major place in project implementation. The termination of TRDB's responsibility for input distribution and the long delayed appointment in 1983 of a General Manager helped initiate, and then maintain, rural suh-project lending. However, it was the sudden demand of the cooperatives for goods that provided the main impetus. Although officially reinstated in 1981 (pars 4 (d)), the  cooperatives did not progress to the point where they could actually function until 14R5 (the coffee and cotton cooperatives In 1985, and other cooperatives in 1986). In the space of months, TR)R orocessed the hulk of the S4 milllon lent and disbursed (nara 4(f)). 16. During the original project implementation period, 1981-83, TRJ)R's total volume of lending trailed off, attributable, inter alia, to the very weak economy in Tanzania during this period. The recovery of loans was bielow expectations as well (RPCR, para 5.0-5.2). Overall, its financial Performance was rather static; the improvement anticipated at appraisal did not materialize (although In 1985 and 1986, loan recovery statistics showed some lmprovement as the result of Government payment of quasi-Government debt). TRRD doubled its staff, from 366 in 19RO to 700 in 1985, and computerized Its accounts (RPCR, para 4 (c)). After the cooperatives were reinstituted in 19R2, TRnR was restructured into the Cooperative and Rural flevelovment Bank (CRDR), with an additional mandate to Provide credit to cooperatives and undertake commercial banking. TRDB organized itself to provide the new services but it took several vears for lthe cooerntlyves to iecome functional d.ara 15), ad commercial banking has thonly recently teen initiated. IV. COM*1NTARY 17. According to Rank agricultural staff, the policy environment In Tanzania in recent years has not been conducive to the implementation of rural development Proiects. Projects have had to depend on an undulv heavy emphasis on Government planning and control as a substitute for adequate farmer incentives. It is evident that Policy actions of the Government have impeded TRDB's development and have had a negative effect on its viabilitv. The dissolution of the cooperatives is a case in point. 18. Turing this period of severe economic difficulties, the strained nature of the Association's relations with Government and its institutions pervaded implementation activity and may provide a partial explanation for the continual oroject uncertainties. The Government and TRDR appeared sometimes to be on the defensive, a situation that occasionally hecame acrimonious. TRDB on occasion complained about the Association's tendency to make credlt extension contingent upon certain TPRnB actions and then at a later point to change the conditions. A couple of times the Association did appear to have lost track of what the original conditions were, and there is some Justification for the Borrower's criticism. But these instances reflected as much the prevailing relations as they did the incidents themselves. 19. The financial data available to the appraisal mission was inconclusive and unverifiable. As a result, TRDB proved to he less viable than indicated by aporaisal estimates.' The ratio of bad debts to loans disbursed was a good deal worse than had heen estimated and the assumed RX ratio turned out to be inaccurate. As the project progressed, TRDR's accounts were found to he unreliable, and the Association suggested to TRDR that consultants be recruited to re-examine the accounts, especially in view of the auditors' strong and extensive qualification of annual statements. Consultants were subseouently financed by the Credit; their examination disclosed major errors and inconsistencies in the loan  -7 - information and lndlcated that the TRDB accounts and financial statement reported in 1983 could not have reflected either its financial or loan positions. This evaluation exercise was useful not only in detecting errors but also In serving as a catalyst for TRDB st ff to properly Identify, label and transfer field data to the accounts. The accounts were cleared up and since then the audits have not been qualified. 20. However, despite Improvements in lnputting and transferring loan data, ACDI's quarterly report of January 1986 (para 13) reported that the credit functions of TRDB still need improvement. The consultants recommended that TRDB's credit operations should be consolidated into one department Instead of the three departments currently in place, and proposed an organizational plan and job functions suited to the purpose.  - 9 - THE COOPERATIVE AND RURAL DEVELOPMENT BANK PROJECT COMPLETION REPORT ON CREDIT 987-TA CONTENTS: 1. Introduction and Highlights 2. Project Identification Preparation and Appraisal 3. Project Description 4. Project Implementation- - Project Start up Problems - Project Revisions - Implementation Schedule - Reports - Procurement - Project Costs - Performance of Technical Assistance Overall Assessment 5. Financial Performance 6. Institutional Performance and Development 7. Conclusion  - 11 - ' INTRODUCTION AND HIGHLIGHTS 1.1 hr~e development of the 'ural Sector has rece,ited priority attention from the Tanzanian Government wAhich has undertaken a comprehensive program to support the development of the agricultural Sector, in conjuction with efforts to achieve balanced regional growth and more equitable income distribution. As part of the government efforts Credit 987 TA was acquired from the World Bank {or the porpose of strengthening the operational capability of TRDB in delivering Credit and technical assistance to promote the development of the rural Sector: The specific objectives of Credit 987 TA were to:- (a) Improve the tratning of new and existing Staff and to establish Six Mobile Units for the training of Vit;age administrators (b) Strenthen TROB's organisational structure by: i) Establishing a management information Centre with a small Computer suitable for TRDB'S operations and the employment of consultants to implement the Computer System. ii) Establish an Organisation and Methods Division and the employment of Consultants to develop worK routines, controls and procedures manual. iii) Enlarge the Research Division to include monitoring and evaluation of TRDB's activities. iv) Establish a Regional Directorate" at head office to coordinate and supervtse the activities of the regional offices." (c) Strenthen TRDBS's infrastructure by improving office accomodation and transport facilities. (d) Employ Consultants to assist government in resolving the input distribution problem (e) Include a Credit Component to beef up TRDB's lending program. 1.2 Credit 987-TA became effective in April 1981. In 1982 the Cooperatives were re-established. In order to meet tho banking and Credit needs of the Cooperatives TRDB was restructured into Cooperative and Rural Development Bank (CRDB with mandate to undertake all commercial banking activities as well as development finance for rural and cooperative development.) The authorised capital stock of the bank was increased from Shs.300 million to Shs.1,200 million. The shareholders are  - 12 - government 51% and the Cooperatives 49/. In the meantime, because Cooperatives are still financially weak the Cooperative shares are split between Cooperatives (3Q0 and the Bank o* Tanzania (19/.). As at 31st March 1986, Tshs.280 million were paid up while Tshs.311 million were collable. The BanK was also relieved from the task of distributing inputs. 1.3 The CRD8 Project Credit 987 TA was implemented concurrently with the Resource for Village Production and Income Project financed by USAID. The Resources for Village Production and Income was put together with the full knowledge and details of Credit 987 TA. A lot of efforts were given to making the resource for Village Production and Income Complimentary to Credit 9a7-TA. 1.4 It was expected that the Bank would start operating from its spacious offices along Azikiwe Street at the beginning of Project Implementation. However, the burning of BOT offices in May 1984 forced the government to allow BOT use CRD0 offices for some time as their temporary headquarters. The majority of CRD8 staff could not therefore move into the new offices until early 1986. 1.5 For the first time in 4 years, the Bank 1984/85 Accounts obtained a clean certificate from the Auditors. 2. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL 2.1 In 1978 the TRDB Management met with a World BanK Supervision Mission and discussed among other things the possibility of TROB being considered for a general line of credit to compliment the specific lines of Credit from the World Bank for such areas as tobacco, tea and livestock production. The World Bank Mission was enthusiastic about the idea and provided brief guidelines on how the request for such general line of credit should be prepared. The guidelines included the maximum ceiling of USS 10 million as the amount that could be given by IDA to TRDB for the first time. 2.2 The TRDB management mobilised its staff to plan, develop and prepare the project as a basis for requesting the general line of Credit. The work of preparing the project was completed by CRD8 staff in 1978. The request for a general line of Credit amounting to USS 10 million was submitted to the IDA through the governmen\ in 1978. 2.3 Several IDA supervisiorn mission on their visits to Tanzania for  - 13 - supervising other projects held discussions with the TROB Management on the proposed general line of credit. It was not until 1980 when the Sta+f Appraisal Report on the project was produced. Development Credit Agreement was completed in October, 1980. 2.4 Originally the effective date on which the mplementation of the project could start was set for January 1781. However, several conditions had to be fulfilled by the government before IOA could allow implementation to begin. The first condition was the appointment of a General Manager. The government, while agreeing on the need to have tne vacancy filled, wanted to do it cautiously in order to have the right candidate. The second issue was on the interest rates. IDA HAD WANTED INTEREST RATES CHARGED BY TROB to be raised to 12 1/t2 to take into account TRDB huge losses resulting from default and high admintstrative Costs. The government's position was that interest rates could not be considered in isolation except as a part of the nattonal public finance and monetary-policy. the third issue concerned Cooperative loans which worsened the financial position of TROB. IDA urged the government to pay for these loans since there was no other insitution TRDB could hold responsible. Although the government had agreed in principle to pay for the Cooperative loans, they wanted authentication of the indebtness by the liquidators of the various Unions. This process took time. As a result of delays in implementing agreed conditions by the borrower the credit became effective in April, 981. 3. PROJECT DESCRIPTION 3.1 STAFF TRAINING The project would enhance the capability of the bank in undertaking inhouse training programmes in project appraisal. Participants would be exposed to the use of case studies from actual projects financed by TRDB in order to illustrte the correct methodology as well as to provide maximum scope for problem solving. A number of employees would be sent to study overseas in specialised fields. The training unit of the bank would be strengthened by recruiting internationally three sta+f to fill the posts of (a) Chief Training Officer who would advise the training Manager (b) the agricultural and farm management specialist and (c) the agricultural economist. 3.2 VILLAGE TRAINING Six two-man mobile training teams would be established under the project and they would travel to rural areas to provide crydit education including the meaning of Credit, and the borrowers responsibility in the proper use of caredit and repayment.  - 14 - ..3. STRENGTHENEING TROB'S ORGAN!SATIONL STRUCTURE The oroJect Ll'ould pro*'ide +unroig Zor emolo:in% on-ut- tr to study the need for Computer in the EBank as wel' as +unding tne procurements installaktion. employment of Computer Speci.1 i st and traininng of local Computer staff. Funrds would also be provided to employ Consultants to help TROB set up an Organisation and Methods division. Proision was al1so made .or funding the recruitment of staff for a Monitoring, Evaluatton and Research Division as we'l as the procurement of office furniture and equipment. 3.4 STRENGTHENING TRDS'S INFRASTRUCTURE Funds would be provide sor procuring additional office furniture and equipment3 landrovers and motor-cycles. 3.5 INPUT DISTRIBUTION The project provided funds for employing consultants to undertake a study on how to improve the input Distribution System and to re!ieve TRDB of this task. 3.6 CREDIT The project provided a Credit Component of US $ 5 to be million used by TRDB to extend loans to borrowers in five regions which had already a well established demand for credit and where TRDB expected to expand its activities at a faster rate. The facilty was expected to support import requirements of TRDB for loan -tems. 4. PROJECT IMPLEMENTATION 4.1 START UP PROBLEMS In order to have a smooth take off of the project it was decided to have a +irm employed by CRD0 to perform activities involved in Para 3.1 to 3.5. However, by the time of the take off the bank was already implementing a USAID financed, OResources for Village Production and Income" Project, using ACDI with three long term expatriates. Employing yet another firm with three expatriates would have brought to 6 the number of expatriates working with TRDB. This realisation necessitated a review of the two projects to establish how they could be dovetailed for maximum efficiency. This definitely involved time and was one of the major causes for the delay in start up. Another reason for the delay was late or non-fulfilment of some conditions precedent to disbursement like the issue of  - 15 - interest rate and payment of Cooperative loans. . 2 PROJECT REVISION rhe review of the rIlat,onship of tne tw.o pro.jects: 'Te LCIA General 1 Irne of Credit anrd the Resources *or UYI'.'"ge Produc lon and Income Project durtng implementati'on led to some changes. (a) trhe Scrapping of the idea of employing a new +frm to supply contract services for the Credit 987-TA Project. Instead the functions of the Chief Training Expert who was to be employed under Credit 987-TA Project were invested, first in the Decentralisatton and Training Specialist under the Resosurces for Village Production and Income and later in the Training Specialist. The original objective of the three IDA 4unded specialists were to improve training sKills of tra,ning personnel, produce improved training materials anc project appraisal modules to 4acilitate faster decision maKKing. The activities of the three specialists would also have been geared to bringing closer coordination between trainings monitoring, evaluation and research. The result of phasing out the Farm Management Specialist and the Agricultural Economist as well as transferir.g only a part of the functions of the chief Training Expert to the Decentralisation and Training Advisor constrained the attainment of the followings a) Steps to strengthen the training department were delayed; b) Emphasis in training was placed on-the job training and on Credit management and administration; c) Teaching materials and project appraisal modules were not prepared; d) Steps to bring closer coordination between training on the one hand and monitoring, evaluation and research on the other were not taken. The delay in begining the implementation of the project led IDA to cut down the Credit Component from US$ 5 million to US$ 2 million in the belief that the delays reflected poor absorptive and utilisation capacity of the TRD8's clients and TRDB respectively. With a smaller credit amount, TRbB (with IDA concurence) decided to use it to import loan items that were in critical shortage in Tanzania.  - 16 - 4.3 IMPLEMENTATION SCHEDULE The Schedules of Activities according to the appraisal report is .;uxtaposed against the actual Schedule in table 1 below: Table 1s Planned Schedule of Activities Compared with Actual Schedule of Project Activities Actual Activities Planned Start Reasons , Staff Training 1980/81-1983/84 1981/82-1985/86 Start up problem. 2. Mobile Clients 1980/81-1983/84 :982/83-1985/86 Delay in procu Training Unit ring vehicles due toproblem of getting right type of specifications 3. Study Computer Needs and Recofiwnend appropriate 1980/81 1980/81 type of Computer. 4. Procure Computer 1980/81 1981/82 5. Instal Computer 1980/81 1982/83 Delay in completi construct4on of Building. 6. Establish an O&M Division 1981/82 982/83 7. Incorporate Monitoring and Evaluation Function. 1981/82 - Shelved when amalgamating activities of Credit 987-TA with those of RVP & I Project. 8. Procure additional De'ay in office 1981/82 1984/85 construction furniture of the new and Equipment. building  - 17 - Ac tual Activities Planned Start Reasons _________- ------- ----- ------- 9. Procure additional venicles ard motorcycles. 1980-1983 1982/83-1985/86 1O.Provide credit to the rural area. 1980/81-1983/84 1985/86-1986/87 The reduction in the amount of of credit led TRDB to change the Scope of financing and it took a long time to define new areas of concentration. About 90% of th. project activities were supposed to be completed by 1982/83 ace-or;ng to the planned Schedule. However the actual implementation schedule shows that less than about 20% of the project activities were under way by that time. Table 2 shows that in monetary terms disbursements would have amounted to US $9.4 million by June 1983. However actual disbursements amounted to only US $1.63 millon in respect of Computer equipment and training. Table 2. Project Planned Disbursement Schedule Compared to ProJect Actual Disbursement Schedule Exchange Rate Planned Cumulative Actual Cumulative Date TShs./US $ Disbursement Disbursement (T.Shs. million) (T.Shs. million)