Colombia - Caja Agraria Institutional Strengthening Project

 Caja Agraria institutional strengthening project Report No: ; Type: Report/Evaluation Memorandum ; Country: Colombia; Region: Latin America And Caribbean; Sector: Other Agriculture; Major Sector: Agriculture; ProjectID: P006834 December 29, 1995 Colombia: Caja Agraria Institutional Strengthening Project (Loan 2909-CO) The Colombia Caja Agraria Institutional Development project (Loan 2909 for US$15 million equivalent) was approved in FY88. The loan's closing date was extended by two years to June 30, 1994, and a balance of US$7.4 million equivalent was canceled. The Government of Japan provided cofinancing through a grant of US$0.5 million equivalent, and the implementing agency covered all local costs. The Implementation Completion Report (ICR) was prepared by the Latin America and the Caribbean Regional Office. The borrower provided a 1993 review of project progress, as well as comments on the draft ICR. The project's objective was to provide more efficient financial services to the rural sector by transforming the country's main financial intermediary for agricultural credit, the Caja, into a well-run, selfsustaining agency. Project components included: (i) the physical renovation of the Caja branches, (ii) a large program to modernize data processing and other office equipment; (iii) training for staff and managers; and (iv) technical assistance for all components. Caja was expected to close some branches and to reduce its staff substantially. The project did not succeed in turning Caja into an efficient profitable concern. Implementation encountered numerous problems, from delays in the development of automated management systems beyond the closing of this project, to frequent turnover of managers. Delays in cost-cutting measures and a downturn in the economy caused Caja's financial situation to deteriorate until 1991, when the Government started a series of recapitalization and cost- cutting measures. The Bankfunded Agricultural Sector credit (Loan 3575, approved FY93) included support and revised indicators for the streamlining of Caja's operations, but this project was canceled in FY96. Progress has been made in recent years in cutting costs and automating some management systems, but the ICR does not expect Caja to be self-sustaining in the foreseeable future. Accordingly, the Operations Evaluation Department rates the outcome of the project as unsatisfactory, as does the ICR. Institutional development is rated as modest and sustainability as uncertain, because the positive steps taken by the borrower in recent years have not yet succeeded in turning Caja's losses around. The performance of the Bank is rated as unsatisfactory. These ratings are the same as those in the ICR. The problems encountered by this project were visible early on, and a mid-term evaluation in 1992 should have been more effectively used to correct these or—barring Caja and Government commitment to deal with these—to have closed the project. Another important lesson is that the Bank must be more realistic in assessing risks during preparation. Such assessment must cover both risks related to the institutional weakness of the accounting agency and to those related to the economic and political environment. Finally, this experience underscores the importance of borrower commitment for project implementation to be successful and points to the need for up-front action by the borrower as a key test of borrower ownership. The ICR provides a good account of why the project's objective was only partially met, and of the steps recently initiated by the borrower to complete what the project started. No audit is planned.