Morocco - National Agricultural Credit Project

 ICRR 10241 Report Number : ICRR10241 ICR Review Operations Evaluation Department 1. Project Data : OEDID: OEDID : L3088 Project ID : P005469 Project Name : National Agricultural Credit Project Country : Morocco Sector : Agricultural Credit L/C Number : L3088 Partners involved : Japan (OECF); African Development Bank (ADB); European Investment Bank (EIB); Germany (KfW); Arab Fund for Economic and Social Development (FADES) 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) To increase the efficiency of agricultural activities through investments financed by the Caisse Nationale de Credit Agricole (CNCA); and (b) to strengthen the institutional and financial performance of CNCA . Components : (a) to support diversified and high return activities related to agro -industrial exports, fisheries, and artisans; (b) convert CNCA into a full-service bank with increased managerial and financial autonomy; (c) strengthen CNCA's management structure and MIS; (d) improve CNCA's appraisal procedures; and (e) develop skills to manage the changed organization and assist CNCA's clientele . Costs & Financing : (all figures in US$ millions) appraisal estimate 1532.0, of which IBRD loan was 190.0 and cofinancing was provided by the ADB, FADES, OECF, EIB, and KfW for a total of 298.0. Final cost was 1155.5, with IBRD loan fully disbursed and 123.9 provided by cofinanciers. 3. Achievement of Relevant Objectives : At the time of closing, the project was deemed to have successfully met its major objectives, and on this basis a follow on project, the National Rural Finance Project (NAFP), was designed and approved . The project financed a number of diversified sub-projects and actions taken towards improving the institutional development of CNCA were judged to be satisfactory. However, no PCR was done at the time. The completion report was done 5 years later and produced as a combined ICR for NACP and NAFP, at which time it was apparent that NACP failed to meets its stated objectives. There is no evidence to suggest that the outcome of the financed investments was positive; on the contrary, subsequent assessments have revealed the poor quality of CNCA's portfolio, particularly the agro-industrial sub-portfolio. As for the institutional development objectives, contrary to what was believed to be the case at the time of approval of the follow -on project (NAFP), the progress made under NACP was limited . 4. Significant Achievements : None apparent. 5. Significant Shortcomings : Failure to make significant progress in the institutional development of CNCA . While the credit line disbursed rapidly, subsequent analysis suggests that poor financial management and inadequate policies have led to a deterioration of CNCA's portfolio. Further, there is no evidence that the investments supported by the project had any significant impact. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Unsatisfactory Highly Unsatisfactory Institutional Dev .: Negligible Negligible Sustainability : Uncertain Unlikely Sub-portfolio quality is poor and CNCA continues to be financially and organizationally weak.  Bank Performance : 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 is, however, consistent with the overall assessment in the ICR . Borrower Perf .: Deficient Highly Unsatisfactory Same as for Bank Performance. Quality of ICR : Unsatisfactory 7. Lessons of Broad Applicability : The lessons are the same as for the follow on project, National Rural Finance Project (Loan3662-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 for two projects, the NACP and its follow -on project, the NAFP. It is well written and provides an in -depth, candid and objective assessment of the overall implementation progress, the problems affecting the two projects and their outcomes. However, the ICR is rated unsatisfactory in the context of the project under review as it is five years late (despite long-standing guidelines that the ICRs, and previously the PCRs, be completed within 6 months of project closing). As a consequence, the ICR's value is greatly diminished since the lessons it draws are five years late. This is particularly significant considering that the outcome of the follow -on project was no better than that of the current project. The ICR gives no rationale for the delay . It should be noted, however, that the decision to not do the ICR at the time of project closing was taken by the then responsible department . The responsibility for the joint NACP-NAFP ICR was subsequently inherited by the current sector unit .