Morocco - Second Agricultural Credit Project

Document of The World Bank FOR OFFICIAL USE £IsLE COPY Report No. 2543 PROJECT PERFORMANCE AUDIT REPORT MOROCCO SECOND AGRICULTURAL CREDIT PROJECT (Loan 861/Credit 338-MOR) June 12, 1979 Operations Evaluation Department 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.  FOR OFFICIAL USE ONLY Project Performance Audit Report MOROCCO SECOND AGRICULTURAL CREDIT PROJECT (Loan 861/Credit 338-MOR) TABLE OF CONTENTS Page Preface i Basic Data Sheet ii Disbursement Table iii Highlights iV PROJECT PERFORMANCE AUDIT MEMORANDUM I. Project Summary 1 II. Main Issues 4 A. Financing of Non-Project Investments 4 B. Bank/Borrower Communication Problems 6 C. Deficiencies in Project Design 7 1. Lack of Extension Services 7 2. Tractor Benefits 8 D. Disbursement Procedures 10 PROJECT COMPLETION REPORT I. Introduction 11 II. Project Description 13 III. Project Implementation 15 IV. Beneficiaries 21 V. Institutional Development 25 VI. Economic Objectives, Performance and Impact 33 VII. Conclusions 37 Appendix 1 - Number of Loans & Average Loan Amounts 40 Appendix 2 - Physical Execution & Incremental Output 41 Tables 1-8 43 Map 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 Performance Audit Report MOROCCO SECOND AGRICULTURAL CREDIT PROJECT (Loan 861/Credit 338-MOR) PREFACE This report presents the results of an audit of the Second Agricultural Credit Project in Morocco for which the World Bank Group granted a loan of US$24 million (Loan 861-MOR) and a credit of US$10 million (Credit 338-MOR), signed in October 1972 and fully disbursed on May 28, 1976, three months before the original closing date. The audit was based on interviews with Bank staff and on a reading of the appraisal report, supervision reports, project files and the Project Completion Report (PCR) prepared by the Europe, Middle East and North Africa Regional Office in January 1977. An OED mission visited Morocco in May 1978. A field trip to visit some participating farmers was undertaken and discussions held with staff of the Ministries of Finance and Agriculture and the Caisse Nationale de Credit Agricole (CNCA). The results of that mission were used to test the validity of some of the conclusions of the PCR and are also reflected in the audit memorandum. The draft PPAR was subsequently sent to the Borrower for any further comments; none were received. The audit finds the PCR comprehensive and accurate with respect to the project's principal achievements and shortcomings. The points discussed by the audit mission have been selected because of their relevance to this as well as other projects. The valuable assistance provided by the Government of Morocco, CNCA, and their staffs met during the preparation of this report is gratefully acknowledged.  - ii - PROJECT PERFORMANCE AUDIT REPORT BASIC DATA SHEET MOROCCO SECOND AGRICULTURAL CREDIT PROJECT (LOAN 861/CREDIT 338-MOR) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 69.4 72.4 Overrun (%) 4.3 Loan/Credit Amount (US$ million) 24.0/10.0 24.0/10.0 Disbursed ) 34.0 34.0 Cancelled ) Repaid to ) October 31, 1978 3.1 Outstanding to ) - 30.9 Date for Completion of Physical Components 03/76 03/76 Economic Rate of Return (M) 18 22.5 OTHER PROJECT DATA Original Actual or Item Plan Revisions Current Estimate Negotiations 03/27/72 - 03/27/72 Board Approval 06/29/72 - 06/29/72 Loan/Credit Agreement Date - 10/12/72 Effectiveness Date 02/07/73 - 02/02/73 Closing Date 08/76 06/76 05/28/76 Borrower Caisse Nationale de Credit Agricole Executing Agency " 1 Fiscal Year of Borrower September 1 - August 31 Follow-on Project Name Third Agricultural Credit Loan Number 1361-MOR Amount (US$ million) 35.0 Loan Agreement Date 02/07/77 MISSION DATA Month, No. of No. of Date of Item Year Weeks Persons Manweeks Report Appraisal 11-12/70 4 4 16 06/72 Post-Appraisal 04/72 2 2 4 06/72 Total 6 20 Supervision I 02/73 1 1 1 04/73 Supervision II 07-08/73 1.6 3 5 08/73 (BTO) 10/73 (FS) Supervision III 02-03/74 2 2 4 05/74 Supervision IV 01-02/75 2.6 1 2.6 02/75 Supervision V 08-09/75 2.3 2 4.6 09/75 (BTO) 10/75 (FS) Supervision VI 03/76 2 5 2 /1 04/76 Project Completion/ Appraisal Agr. III 05-06/76 8 4 2 /1 01/77 Total 19.5 21.2 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Dirham (DH) Year: Appraisal Year Average Exchange Rate: US$1 = DH.4.61 Intervening Years Average US$1 = DH 4.24 Completion Year Average US$1 = DH 4.42 /1 Time spent also on other projects.  - 111 - Project Performance Audit Report MOROCCO SECOND AGRICULTURAL CREDIT PROJECT (Loan 861/Credit 338-MOR) Disbursement Table (US$ million, cumulative) Appraisal Actual Actual as % Period Ending Estimate Disbursements of Estimate 06/30/73 1.8 4.1 229 12/31/73 6.0 4.1 69 06/30/74 10.9 9.0 83 12/31/74 16.1 15.3 95 06/30/75 21.5 20.9 97 12/31/75 27.4 25.5 93 06/30/76 33.6 34.0 101 09/30/76 34.0 34.0 100  - iv - Project Performance Audit Report MOROCCO SECOND AGRICULTURAL CREDIT PROJECT (Loan 861/Credit 338-MOR) HIGHLIGHTS The Second Agricultural Credit Project provided funds through the Caisse Nationale de Credit Agricole (CNCA) for medium- and long-term financing of investments for grain farm mechanization, citrus and winter vegetable production, dairy and cattle/sheep operations, as well as establishment/expansion of marketing facilities. The project succeeded in reaching more farmers than estimated at appraisal, albeit average loan amounts were smaller than anticipated. While financing of citrus, vegetable production and marketing facilities was considerably below expectations, favorable markets for meat and milk led to increased farmers' interest in expanding livestock production. The appraisal had estimated an 18% rate of return. Due to the project's shift in emphasis to higher value livestock produce, the ERR has been recalcu- lated at 22.5%. The following points may be of special interest: - Bank financing of investments which were not part of the project (PPAM paras. 17 to 22); - Bank/Borrower communication problems due to inadequate translation work (PPAM paras. 23-27; PCR paras. 4.05, 4.07 and 5.12); - Due to not pressing for improved extension services the Bank was foregoing chances of wider project impact (PPAM paras. 28 to 31; PCR para. 5.18); and - Remarkable institutional development of CNCA (PCR paras. 5.01 to 5.05, and 5.21 to 5.27).  Project Performance Audit Memorandum MOROCCO SECOND AGRICULTURAL CREDIT PROJECT (Loan 861/Credit 338-MOR) I. PROJECT SUMMARY 1. In 1962 the Moroccan Government established a new agricultural credit system under which the Caisse Nationale de Credit Agricole (CNCA) provided short- and medium-term loans to farmers. The World Bank decided in 1965 to finance CNCA's three-year lending program by contributing US$10 million (Loan 433-MOR). The Loan was fully disbursed by September 1969, after an extension of the Closing Date by one year. The delay in project implementation was mainly due to CNCA lending to local credit societies at subsidized cost, an operation not covered by the Loan Agreement, leading to a temporary suspension of loan disbursements. Project performance was poor because of CNCA's weakness in terms of staffing and financing, as well as Government's interference in CNCA operations. 2. Due to the difficulties and controversies faced during imple- mentation of the first credit project, the follow-on project was not appraised until December 1970, more than one year after the completion of the first. The Second Agricultural Credit Project was essentially prepared by CNCA staff with some limited assistance by FAO and the Bank. A further delay in Board presentation was encountered since pre- negotiations were particularly lengthy due to different views of the Borrower and the Bank on interest rates of subloans. 3. Following a six months' deadlock on the interest issue a com- promise was reached in March 1972 whereby on-lending rates would be increased from 6-1/2% to 8% except for the "lower income" farmers who would continue to benefit from CNCA's prevailing 6-1/2% loans. The Bank imposed a 20% ceiling on disbursement of its funds for such loans. 4. The Board approved a loan of US$24 million and a Credit of US$10 million on June 29, 1972 but signing was postponed until October of the same year, due to delays in the replenishment of IDA funds. Effectiveness of the Loan/Credit had to be postponed until February 1973, due to a delay by CNCA in submitting all necessary documents. However, retroactive financing of subloans made by CNCA as of September 1, 1972 was approved by the Bank. 5. The objectives of the project were to assist in the moderni- zation of the agricultural sector by financing medium- and long-term investments for mechanization of grain farms, development of citrus and winter vegetables, dairy and cattle/sheep operations, and provision of marketing facilities. Total costs of the project have been estimated at US$69 million, with a foreign exchange component of US$34 million (49%) equal to the Bank/IDA contribution. - 2 - 6. The project was completed on time. The final disbursement took place one month prior to the Closing Date of June 30, 1976. In May 1975 a major reallocation of funds took place. It was found that credit demand for investments in citrus, winter vegetables and marketing facilities was lower than anticipated at appraisal, while interest in livestock development had greatly increased. The total reallocated to livestock development amounted to US$5 million. Due to difficulties in obtaining documentation to permit withdrawal and problems with the CNCA computer, disbursements were slightly below appraisal forecasts until the last year when they were faster than anticipated. 7. Investments in grain farm equipment reached only 85% of estimates due to optimistic appraisal assumptions. About 44% of the funds allocated under this category were used to finance tractors, 14% for draft animals, 12% for harvesters, the remainder for other equipment and destoning of fields. Citrus development fell far behind appraisal estimates. Due to a difficult export market and a change in government policy, citrus plantings reached only 1,000 ha compared to 7,000 ha assumed at appraisal. Due to depressed markets investments for winter vegetable production reached only DH 19 million as compared with DH 28 million estimated by the appraisal mission. Due to attractive prices for milk and meat, demand for heifers increased dramatically. Project funds financed the purchase of approximately 15,500 heifers compared with only 1,800 assumed at appraisal. Equally impressive were the investments for beef cattle and sheep. Approximately 6,400 loans were extended to this category - with an average loan amount of DH 5,000 as opposed to 2,900 loans of DH 5,600 on average at appraisal. Disbursements under this category reached US$11 million, more than three times the original allocation. By far the least successful project component was lending for marketing facilities. Only US$0.68 million as compared to US$1 million allocated under this category were disbursed. 8. Since CNCA keeps records only on loans and not beneficiaries, it is difficult to ascertain the number of farmers actually reached under the project. Many farmers apply for and obtain more than one loan. Approximately 25,500 loans were made to an estimated 17,000 farmers (8,000 estimated at appraisal). The average loan of DH 8,000 was con- siderably smaller than the DH 28,000 of the appraisal. Due to some farmers obtaining several loans it is reasonable to set the total loan amount to a particular farmer at about DH 12,000. 9. Medium-sized farmers with fiscal incomes between DH 3,000 and DH 6,000 qualified for loans carrying only 6.5% interest. The Bank limited its assistance to this group by stipulating in the Loan Agreement that only 20% of the project funds could be used for loans at 6.5% interest. During project implementation it turned out that CNCA had accurately pre- dicted the smallholder demand for loans (34%), a demand which was satisfied through drawing on CNCA's own funds. The Bank therefore helped finance to a large extent large-sized farmers with annual incomes in excess of -3- DH 6,000. This was in line with the Bank's greater concern at that time with adequately providing for CNCA's financial viability. Loans to cooperatives were curtailed due to a misunderstanding on information required for Bank approval. One loan was made by CNCA to a state com- pany (DH 1.2 million) for the purchase of dairy cows. 10. Based on the experience gained during implementation of the first project, the Bank's concern focused on institutional problems CNCA had previously encountered. These problems included: (i) the need to introduce separate accounts to permit differentiation between CNCA's general lending activities and operations administered by it on behalf of the Government; (ii) the strengthening of CNCA's capital structure made necessary by the three-fold expansion of its lending pro- gram; (iii) the need to increase profitability which led to emphasizing higher interest rates; and (iv) the reliability of all financial data, which the Bank thought could be obtained through audits of financial statements through an internationally recognized accounting firm. 11. The high caliber of CNCA management and good working relations with the Bank led to an overall good performance of this institution under the project. Separation of accounts was introduced in late 1972 and the increase in capital was made effective in fiscal year 1972/73 when DH 44 million were transferred to equity capital. Following Bank insistence, interest rates were increased to 7% for cooperatives and farmers' associations and to 8.5% for medium-term loans to individual farmers. By restricting its funds to be on-lent at 6.5% the Bank could not prevent CNCA from satisfying all demands for this specific lending operation through using its own funds. The restriction, how- ever, caused a delay in disbursements, because without it, project funds would have been completely disbursed one year ahead of schedule. A further misunderstanding occurred between CNCA and the Bank on the eligibility of tractor financing under the 6.5% loan category. The Bank's interpretation of the Credit Agreement prevailed and no tractor loans at 6.5% were authorized. Auditing of project accounts by an expatriate firm has been slow but was adequate in its coverage. 12. Beneficiaries contributed 30% to the cost of any subproject except in two cases. Two state companies could not provide the required self financing and their applications were therefore rejected by the Bank. Loans to agrarian reform cooperatives did not provide for any self financing due to a 40% Government subsidy covering the farmers' share but this occurred without prior knowledge by the Bank. 13. CNCA's appraisal of loan applications, while satisfactory as a whole, leaves room for some improvement. Incremental returns could often have been computed in a more careful fashion. It must, however, be recog- nized that data on farm operations are limited and information provided by the farmers is seldom reliable. Supervision by CNCA was restricted to verifying the physical existence of financed assets rather than by the farmers is seldom reliable. Supervision by CNCA was restricted to verifying the physical existence of financed assets rather than analyzing the loan's impact on production and income. Ample scope exists for improving the information flow within CNCA as well as between the Bank and CNCA. Effective loan collection procedures contributed to a relatively good level of repayments. 14. CNCA has become an effective credit institution. Its finan- cial strength has improved although profit margins have declined due to fixed interest rates. The debt/equity ratio decreased to 0.61 in 1972/ 73 and 1974/75 after a high of 0.67 in 1972/73.- The organization improved through network expansion, better personnel management and more effficient lending procedures. Over the past years CNCA has grown to become a relatively sophisticated institution, which is now one of the central forces in the agricultural development of Morocco. 15. Although the area under the grain sub-component was considerably smaller than estimated at appraisal, destoning and draft animal mechani- zation contributed to an estimated incremental output of 142,000 tons of grain, representing 84% of the appraisal projection. Due to the large reduction in project supported citrus plantings only 27,000 tons will be produced at full development (180,000 tons estimated at appraisal). About 25,000 tons of winter vegetables are produced for export compared with 50,000 tons expected at appraisal. Milk production, however, will reach 158,000 tons at full production in 1985, about 300% above appraisal forecasts. Also beef output of about 6,500 tons is about two and a half times greater than appraisal estimates. 16. The project contributes to exports of about DH 29 million worth of citrus and winter vegetables. Savings of foreign currency due to substitution of cereal and milk imports amounts to about DH 31 million per year. Based on the shift from lower priced citrus/vegetables to higher value milk/meat production the project's economic rate of return has been recalculated to be about 23%, slightly higher than the 18% estimated at appraisal. II. MAIN ISSUES A. Financing of Non-Project Investments 17. Two operations, not covered by the Loan/Credit Agreements have been financed under the project, i.e. destoning of fields and purchase of - 5 - draft animals.1/ Total Loan/Credit funds disbursed for these invest- ments amounted to DH 18.05 million (US$4.1 million), most of it under Category I - "Sub-loans for grain farm equipment under Part A of the Project." The Credit Agreement under Part A, Schedule 2, Description of the Project, stipulates: "The provision of sub-loans to grain farmers and farmer groups to finance investments in tractors and attachments, grain harvesters, balers and other farm machinery, and related farm investments, primarily in rainfed areas." 18. Both types of investments had been eligible for Bank finance under the First Agricultural Credit Project (Loan 433-MOR) and this explains in part why on the one hand CNCA was under the impression that it could count on continued Bank support for this important part of its lending operations and on continued approval by Bank officials for whom applications for land improvement and draft animal financing were routine from the preceding project. 19. It has to be pointed out that the Credit Agreement was of no great assistance in preventing misallocation of Loan/Credit funds either. The term "related farm investments" as mentioned above was too ambiguous. Are farm investments related to tractors and other machinery, i.e. spare parts or buildings to house the costly equipment; or are the investments related to grain farming? The Credit Agreement's Schedule 1, Withdrawal of the Proceeds of the Credit and of the Loan throws a different light on the subject. The definition in Category I speaks of "grain farm equipment" which would rule out destoning/land clearing operations and draft animal financing. A further breakdown of this Category points to (a) tractors and attachments; and (b) grain harvesters and balers. These definitions adequately preclude financing of the two investment categories discussed. 20. The appraisal report does not explicitly preclude destoning/ land clearing operations and/or draft animal purchases as project com- ponents, but rules them out by implication. The Loan/Credit was 1/ The Region notes that implementation was guided by the French version of the loan documents (see para. 23-24). The Bank reimbursed CNCA for a percentage of its sub-loan disbursements and the staff approved inclusion of destoning, land levelling and draft animals on grounds: (a) the amount of the Loan was determined by the foreign exchange cost but disbursement percentages were derived as convenient averages. (b) these items had been included in the First (and were later specified in the Third and Fourth) Credit Project. (c) and the staff considered that destoning was necessary for effective utilization of machinery while draft animals and implements were appropriate for smaller farmers. - 6 - intended to cover the project's foreign exchange requirements (appraisal report, para. 3.11) estimated at US$34 million, an amount identical with the approved Loan/Credit funds. The draft animal costs, however, are 100% local costs and land improvements have little (PCR estimate 30%), if any foreign exchange content. Most work on the land, i.e. removing stones and cutting down light bush, is done by hand, mainly with hired seasonal labor. 21. Further indication of the project's relatively narrow objectives can be found in the appraisal report. The project definition (appraisal report para. 3.01) points at grain farm development in rainfed areas through provision of tractors and harvesting machinery; and the table in para. 3.02 shows only grain farm equipment. In dealing with the project's Benefits and Justification (Section VI, para. 6.05) only tractor mechani- zation is analyzed. Benefits from draft animals or destoning/land clearing are neither mentioned nor claimed. On the contrary, the effects of substituting tractors for animal power on the employment situation receive wide coverage in this paragraph. Annex 4, para. 10 goes even further and shows the negative sides of draft animal use, i.e. they can be used only for a short period of time, must be maintained throughout the year, fodder needed for them could otherwise be used for livestock production, they lead to inadequate seedbed preparation, particularly if rains are late and plowing and cultivation must be undertaken when soils are dry and hard - with animal power alone, large areas cannot be planted at all in years of drought. 22. Despite these facts the Bank disbursed about 12% of its Loan/ Credit funds for expenditures which were neither covered by the Loan/Credit Agreements nor anticipated by the appraisal. There is no evidence on files that this issue was ever discussed in the context of procurement or during supervision. B. Bank/Borrower Communication Problems 23. The misinterpretation or misunderstanding of expenditures eligible for reimbursement by the Bank as described above was further aggravated by poor translation work. Although the Bank is always stating that the English version of any document is the sole binding version, it has, as a service to customers also provided translations of pertinent papers and documents. These translations are continuously used in day-to-day work, not only by the borrowers, but also to a great extent by Bank staff. It seems rational to assign staff whose mother tongue is French to work with francophone countries, or when their first language is Spanish to deal with countries in Latin America, etc. And it is equally understandable that it is less tiring for these staff to use the translations in their work instead of the original English version whenever possible. 24. When discussing the issue of Bank financing not covered in the Loan/Credit Agreements, CNCA staff immediately referred to the French text of the Credit Agreement. The audit mission found that in the French text the phrase "and related farm investments" of Schedule 2, Description of the Project, Part A read "and all other agricultural 7 - investments necessary" (ainsi que tout autre investissement agricole necessaire), a completely different meaning from the English version. CNCA management, considering land improvements and provision of draft animals "necessary" for many grain farmers felt free - and is not to blame - to request disbursements for these investments under Category I. 25. Another misunderstanding, due to unclear wording of correspon- dence in French between the Bank and the Borrower occurred in 1974, which led CNCA to believe that the Bank was not interested in financing agricultural cooperatives (PCR, para. 4.07). Due to the misinterpreta- tion no more disbursements for cooperatives were requested during project implementation. This development is most regrettable because it pre- vented use of Bank/IDA funds from reaching the smaller and poorer segment of the rural population organized in the coopertives. 26. Considerable time and effort had to be spent on discussing the eligibility of 6.5% tractor loans to cooperatives (PCR, paras. 4.04, 5.12). While Section 5.07 of the Loan Agreement permitted CNCA to charge only 6.5% on sub-loans to cooperatives with incomes of less than DH 4,000, Schedule 1, para. 4 of the Credit Agreement precluded any tractor financing for less than 8%. The Bank stuck to the letter of the Credit Agreement, despite CNCA claims that this position was against the understanding reached during negotiations. The Bank won the case at the cost of depriving small farmers from the benefit of better and timelier land preparation through mechanization. 27. Lessons to be learned from these unfortunate misunderstandings are that, compared to the efforts the Bank is making to clear and check English texts and correspondence very little is done in comparison for scrutinizing communications in French. Most outgoing letters and cables of this project were in French and the file copies show little evidence that the correspondence was based on English texts which had been sub- ject to clearing procedures. While adequate knowledge of French can be assumed for staff working with the Programs' Departments, the same may not be true for many staff in the Projects' Departments, especially at the managerial level which would be expected to clear correspondence. C. Deficiencies in Project Design 1. Lack of Extension Services 1/ 28. The appraisal assumed considerable productivity improvements to take place under the project: use of high-yielding wheat seed, 1/ On this point the Region notes that the Bank sector and project work have emphasized deficiencies in agricultural extension in Morocco. Efforts to attack the problem have been made in the Doukkala Irri- gation Project, the Meknes Agricultural Development Project and the Fes-Karia-Tissa Agricultural Project. The Bank has also been encouraging the Government to undertake, with Bank assistance, a research and extension project. To the present this last initiative has not gotten much response from Government. - 8 - increasing use of fertilizers and chemical weed control on grain farms and citrus plantations; land levelling for irrigation and pest control on truck farms; and improved feeding techniques for imported dairy cattle. All these improvements would have required adequate arrangements for conveying the appropriate technology to farmers, especially the assignment of qualified extension agents. 29. The appraisal report mentions that the Moroccan Government has concentrated technical services in newly irrigated areas (appraisal report para. 2.05, Annex 1, para. 11), but the project was meant to reach farmers outside these irrigated areas. The formidable task of the extension service in rainfed areas, as was pointed out in the appraisal, was not made easier by the inadequate ratio of 1 extension worker to 1,250 farmers (appraisal report Annex 1, para. 13). 30. Due to the absence of project induced efforts to improve exten- sion activities, productivity has remained at relatively low levels. At full development average milk production per cow will be only 1,400 1, a very low yield considering the large number of imported dairy cattle. Vegetable yields of 15 tons/ha are also on the low side.l/ 31. The appraisal of constraints hampering agricultural develop- ment under rainfed conditions in Morocco was incomplete. While the demand for medium- and long-term credit facilities to carry out the required modernization of the sector had been clearly recognized, only minor attention was paid to the provision of seasonal input packages which are necessary to maximize the benefits from medium- and long-term investments. Identification of the appropriate "input packages", selling farmers on the idea of using them, and better farmer training in the use of the project financed medium- and long-term investments would have been the task of an improved extension service. By leaving organiza- tional as well as financial arrangements for better services to the Moroccan Government, the Bank was foregoing chances of a much wider project impact.2/ 2. Tractor Benefits 32. Financing of tractors for grain farmers has been the most impor- tant part of the credit operations assisted under the project. About 42% of Loan/Credit funds were to be used for this purpose according to apprai- sal estimates. To demonstrate the financial and economic viability of tractor mechanization a farm model (100 ha grain farm) is presented in the appraisal report. While the text of the appraisal report correctly states that yield increases would be a combination of improved land preparation by tractors and the use of seasonal input packages, the farm 1/ An average yield of 30 tons/ha of tomatoes, 20 tons/ha potatoes, 15 tons/ha green beans should be feasible. 2/ Similar observations have been made by the audits on Jamaica First Agricultural Credit Project (Loan 719-JM), OED Report No. 1898 of February 10, 1978 and Tunisia First Agricultural Credit Project (Loan 779/Credit 263-TUN), OED Report No. 2497 of May 24, 1979. - 9 - model, the basis for the cost/benefit calculation, gives the impression that the yield increases are due only to tractorization.l/ 33. In its effort to justify tractor financing the appraisal over- estimated the number of hours a tractor could usefully work during a year. A total working time of 1,450 hours/year had been assumed and a minimum of 1,100 working hours/year was considered necessary to assure economic utilization of a tractor (appraisal report, Annex 4, para. 12). Calculation of the economic and financial viability was based entirely on assumptions of increased yields as mentioned above. 34. The Bank lacks a guideline for determining likely benefits and the justification of tractorization. As early as July 1970 DPS initiated an investigation of on-farm changes following introduction of tractor mechanization 2/ and the debate over the tractor program increased by 1973. However, there is no indication that this discussion had an impact on operational work.3/ Due to the absence of basic criteria for determining realistic working hours, possibilities of expanding acreage, timeliness of land preparation, feasible yield increases, etc., no uni- formity in assessing benefits of tractorization exists. Although appraised in the same year, by the same division, tractor hours for a Moroccan and a Tunisian 4/ 100 ha grain farms differ by more than 30%, despite the fact that soil and climatic conditions are very similar in both countries. 35. By paying too little attention to seasonal constraints - the appraisal report points to the relatively short six to eight week period at the onset of the rains in October-November, when most of the plowing, harrowing and seeding takes place - an exaggeration of possible working hours for tractors is the likely consequence. The appraisal stated that a tractor can be run for 24 hours a day (Annex 4, para. 12 (c)), but are there additional drivers available during peak requirements? Another factor influencing useful hours to be worked is the time lost in trav- elling to and from the field, refueling stops, meal breaks, adjusting the attachments, etc. 36. With increasing interest of Borrowers in mechanized farming (on individual farms and/or through farmers' associations), the Bank should 1/ Operating cost per ha amounted to DH 257/ha without and DH 304/ha with the project. The difference of DH 47/ha (US$10) would not cover the cost of input packages, including improved seeds, ferti- lizer and pesticides. 2/ The final report was issued in February 1975 as Staff Working Paper No. 210, op. cit. 3/ See also PPAR on Pakistan Third Credit for the Agricultural Develop- ment Bank (Credit 157-PAK), OED Report No. 2126 of June 30, 1978. 4/ A PPAR of Tunisia First Agricultural Credit Project (Loan 779/Credit 263-TUN), OED Report No. 2497, was issued on May 24, 1979. - 10 - review whether it is adequately prepared to advise on the feasibility and economics of tractorization.l/ Other benefits accruing from tractor investments such as using fodder for milk/meat production instead of feeding it to draft animals, or transport cost savings to and from markets should also be studied. D. Disbursement Procedures 37. Considerable delays in disbursements occurred because of the Bank's insistence on being informed on tractor brands financed under the project. Due to CNCA's computerized operations, papers of approved tractor loans had to be returned to the branch offices where the brand names had to be inserted by hand, and returned to headquarters at Rabat before being submitted to the Bank for reimbursement. 38. Since the Bank had adequate assurances that tractor horsepower would be in line with farm size and cropping patterns - CNCA has very strict guidelines on this subject - the requirement for submitting brand names as explained by Bank staff was to permit elimination of tractors manufactured in non-member countries. The procedure insisted on by the Bank seems to have been unnecessarily burdensome. CNCA was very aware of the Bank's financing restrictions and has, for instance, never submitted disbursement requests for cattle imported from East European countries. A spot check of records by supervision missions would have been an adequate precaution and would have prevented costly disbursement delays and additional administrative work. 1/ CPS notes that, while the statements concerning lack of policy gui- dance on tractorization are essentially true in so far as Morocco is concerned, experience gained from the studies referred to in foot- notes to para. 34 and others carried out elsewhere, emphasize the difficulty of generalizing from specific experience. The overriding problem in preparing policy guidance in this area is the country, and sometimes within country, specificity of relevant conditions. Thus, although tractorization has resulted in rapid transformation of the agricultural sector, in many cases with severe adverse side effects such as concentration of control of land and displacement of tenants, these costs have been balanced in cases where, for instance, mechani- zation has been used to extend acreage in energy short situations. The evidence indicates that unless the technical package is carefully attuned to the institutional structure of agriculture in a particular setting, the inter-action of the technical package with the institu- tions may well have unexpected and sometimes adverse consequences. Notwithstanding the problems noted above, policy guidance on the feasibility, economic and social impact of tractorization is in course of preparation. - 11 - PROJECT COMPLETION REPORT MOROCCO SECOND AGRICULTURAL CREDIT PROJECT (Loan 861/Credit 338-MOR) 1. INTRODUCTION Background: The First Agricultural Credit Project 1.01 Although the administrative structure in place in Morocco in the early years after Independence was both well-organized and efficiently run, the most pressing need at the time was the availability of funds. In 1962, the Government established a new agricultural credit system under which the Caisse Nationale de Credit Agricole (CNCA) provided short-term advances and medium and long-term credit to farmers. It thereby set up the framework that would allow CNCA to play an increasing role in the development of the agricul- tural sector. One of the most effective contributions the Bank could make to this development was to provide the funds that would be made available to farmers through this existing structure. 1.02 As a result, the Bank decided in 1965 to finance CNCA's 3-year development program. Its goals were two-fold: (1) to encourage on-farm development in the private sector where productivity had been stagnating (Part A) and in the process strengthen CNCA's ability to meet agricultural credit needs and (2) to enable the State Company CGEA (Centrale de Gestion des Exploitations Agricoles) to replace the obsolete farm equipment and machinery seized from European settlers, whose confiscated lands it was then in charge of managing (Part B). 1.03 The overall performance of the Loan was not without problems. First, subloans to private farms under Part A lagged behind schedule, due to a short- age of qualified CNCA personnel. Secondly, Government intervened to direct CNCA resources to CLCA lending 1/. Both these developments seriously affected CNCA's operational effectiveness and financial soundness. Thirdly, and most important, CGEA was dissolved a year and a half after the loan became effec- tive without prior notification to IBRD. In February 1968, the Bank reached the much debated decision to suspend all withdrawals to the private sector under Part A and to cancel the unused balance ($234,000) committed to CGEA under Part B. The deadline for withdrawals under Part B had already been postponed one year and could not be further postponed. Part A of the Loan was reinstated after IBRD was assured that all CLCA operations (both in staffing and financing) would be separated from CNCA and that CNCA would carry out a thorough revision of its lending program, update its accounts and strengthen its staff. The Loan was fully disbursed by September 1969. All in all, the combination of CNCA's relative weakness in terms of staffing and financing and of Government's heavy interference in CNCA operations caused the First Proj- ect's performance to be not only quite disappointing but also a source of con- siderable controversy within the Bank. 1/ Lending to small farmers at subsidized cost. - 12 - 1.04 This Project was chosen by the Operations Evaluation Department to be subjected to a thorough analysis in order to assess its impact 1/. Exten- sive field research was completed in 1973-74, by comparing a sample group of CNCA customers to a test group of farmers who had not been exposed to agri- cultural credit. The report acknowledges that the analysis was biased by the severe droughts experienced by Morocco during this period and that its results could be misleading and need to be very carefully interpreted. It points out to a low return on mechanization investments because of the droughts; it recognizes however that tractors are the only means to break the ground in years of drought and that the alternative for the farmer is therefore between getting some crop, or getting no crop at all. The OED assumption of a drought every five years seems unjustified by historical data, which points out to a drought every ten years rather. Recent analysis shows adequate returns on mechanization investments, using conservative average yields, based on a conservative pattern of good and bad crop years. The OED report also points out to the complementarity between tractor use and new cultural practices (new varieties, fertilizers, pesticides, etc.): modern cultural practices, without proper land preparation through use of a tractor, would not reap adequate benefits, and thus benefits have to be entirely attributed to the tractor, whose use will almost always imply new cultural practices. Overall economic results appear to be inconclusive (the OED "guess" of an economic rate of return of 5% appears pessimistic) but the main impact of the Project was clearly the improvement in CNCA's management and operations. Project Preparation and Appraisal 1.05 Developments under the First Project had caused some estrangement between the Bank on one side and CNCA and the Moroccan Government on the other. Although the First Project was completed in September 1969, it was not until December 1970 that a mission was sent to appraise a Second Agricultural Credit Project. This was a three-year development program to help finance medium-term investments for mechanization of grain farms, development of citrus and winter vegetables, dairy, cattle and sheep operations and the development of marketing facilities. The preparation work was essentially done by the CNCA staff with some limited assistance by FAO and the Bank. 1/ OED Report: Agricultural Credit Programs, Report No. 1357, Background Paper No. 4. - 13 - II. PROJECT DESCRIPTION 2.01 The objectives of the Project were to encourage investment in and modernization of the agricultural sector which had been growing relatively slowly over the preceding decade. Close to 8,000 farms were expected to be reached under the Project, involving farms ranging from 5 to 50 ha of irri- gated land or from 15 to 200 ha of dry land. The Project would create employ- ment for 18,000 persons. Furthermore, it would have a positive impact on the balance of payments by reducing imports of grain, milk and meat and by generating additional exports of citrus and vegetables. The Project's overall economic rate of return was expected to be 18% and the financial rates of return on the investments were to range from 20% to 43%. 2.02 The Project was divided into six components: A. Grain Farm Equipment: Purchase of tractors and attachments (Category LA), and of grain harvesters and balers and other farm machinery, primarily in rainfed areas (Category IB). B. Citrus Plantation Development: subloans to finance the expansion of existing orchards or the creation of new citrus and other fruit tree plantations, including land and groundwater development, tractors, planting equipment, fertilizers and pesticides and labor during the establish- ment period (Category IIA). C. Winter Vegetable Production: subloans to finance land and groundwater development and machinery for intensive export- oriented vegetable production (Category IIB). D. Dairy Farm Develooment: investments in land and groundwater development, barn construction, forage-harvesting equipment, watering and milk-handling facilities and the purchase of heifers (Category IIIA). E. Beef, Cattle & Sheep: subloans to finance construction or improvement of fattening stables, including watering facil- ities but excluding the purchase of feeder cattle or sheep (Category IIIB). F. Marketing Facilities: subloans to individuals, cooperatives and commercial packers to finance investments in pre- packaging, packaging, handling and storage facilities pri- marily to expand capacity for sorting, grading and packaging of citrus and other tree fruits, tomatoes and other vegetables (Category IV). A breakdown of allocations by category is shown in Table 1. - 14 - 2.03 The total cost of the Project was forecast to be $69.4 million; the foreign exchange cost (48.8% of total cost) was met by the Loan/Credit ($34 million); the farmers contributed 29.4% of the cost (or $20.5 million), the State contributed 0.6% (or $0.3 million) as subsidies for 5--ll equipment and to Agrarian Reform Cooperatives, and CNCA contributed the remaining 20.9% ($14.6 million). The Project was in support of CNCA's medium-term lending program through its regional offices, the CRCAs (Caisses Regionales de Credit Agricole). The medium/large sized farmers (fiscal income 1/ above DH 3,000) were thus eligible, along with Agrarian Reform Cooperativ"es and farmers' associations for mechanization. 2.04 Although the positive effects of CNCA's new management team were already visible when this Second Project was appraised and the separation of CLCA accounts was underway at the time, the Bank preferred to use caution and not include the CLCAs in its financing. They were then regarded by the Bank not as CNCA branches but as Government agencies only administered by CNCA and considered not financially viable. The small/medium sized farmers clients of the CLCAs (fiscal income below DH 3,000) were thus not eligible. The only concession to the so-called "lower-income" farmers was to accept the Moroccan proposition of a two-tiered interest rate with a lower relending rate for farmers with a fiscal income between DH 3,000 and DH 6,000, and for farmers' associations and cooperatives whose members had an average income below DH 4,000 (i.e., all cooperatives but a few). 2/ After lengthy negotiations (see para 3.01 below), it was agreed that the lower relending rate would be set at 6.5% and the higher rate at 8%--with a maximum of 20% of the Loan/Credit being relent at 6.5%. At the time, such a differentiation of interest rates along income levels was considered quite innovative and this was the first agricul- tural credit project to adopt such a rate structure. 1/ Notional income, devised by the Moroccan tax authorities, based on constant parameters measuring the productive capacity of the farm; it is equivalent to about 40% of the real farm income for smaller farmers and much less for larger farmers. 2/ Purchases of tractors and harvesters would not be covered by this low rate, regardless of the income of the recipient. - 15 - III. PROJECT IMPLEMENTATION Negotiations and Effectiveness 3.01 Although the appraisal work was ready by early 1971, the Project was not submitted to the Board until June 1972. Pre-negotiations were par- ticularly lengthy due to differences of opinion between the Government and the Bank on interest rates applicable to subloans. The Bank urged CNCA to raise on-lending rates from the then effective 6-1/2% to at least 8% on the following grounds: (a) The interest rate on the Loan would be 7.25% so on-lending rates should be at least somewhat higher to ensure CNCA's financial viability (not taking into account other resources available to CNCA at a lower cost, including the IDA Credit passed on as equity); (b) The general structure of interest rates in Morocco was unsstisfactory and should reflect more closely the cost of capital. Although CNCA originally favored the Bank's proposal, the Moroccan government considered the issue to be a matter of overall economic policy and opposed a raise in interest rates. It pointed out that the interest rates for agricultural credit had to remain in line with the rates applicable in other sectors of the economy such as industrial development and that the negative psychological impact of a rate increase would be a considerable disincentive to investments in agricul- ture. After a six-month deadlock on the issue, a compro- mise was reached (which was in fact a rallying to the Lank's position) whereby on-lending rates would be in- creased to 8% except for the "lower-income" farmers who would still enjoy a 6.5% rate. The Bank imposed a 20% ceiling on disbursement of its funds for such loans. These rates became effective on September 1, 1972, at the beginning of CNCA fiscal year. 3.02 Agreement on the above issue was reached in March and negotiations took place in April 1972, but the signature of the Loan and Credit Agreements had to be postponed until October of that same year, due to delays in the replenishment of IDA funds. The Bank suggested that the Agreements be amended to allow for immediate disbursement of the Loan, which would have prevented CNCA from impairing its cash flow position but would have increased its long- term indebtedness. The Government of Morocco and CUCA chose to wait for IDA funds. The effectiveness of the Loan/Credit was further postponed until February 1973, due to a delay by CNCA in submitting all necessary documents. The Loan/Credit nevertheless covered retroactively all subloans financed after September 1, 1972. - 16 - Disbursements and Reallocation of Funds 3.03 The Project was completed on time and the last disbursement took place one month before the new official closing date of June 30, 1976 (the original closing date was August 31, 1976). Because the date of effective- ness had been delayed by three months, a revised disbursement schedule had been issued in early 1973. The first withdrawal application (April 73) was rejected by the Bank due to lack of supporting documents and the first dis- bursement was only made in July 1973, for an amount slightly above what had been scheduled. This delay, in addition to the previous delay caused by the lack of IDA funds, did create slight liquidity problems for CNCA (see Table 2). Although this first large disbursement placed CNCA ahead of its schedule, from then on disbursements fell persistently behind schedule. Several reasons were given for this lag: (a) CNCA had considerable difficulties in obtaining and submitting all the necessary documentation that was to accompany each withdrawal application: (b) in late 1973, hardware problems with its computer equipment interferred with CNCA's ability to process all necessary data for each withdrawal application; and (c) the 20% quota on Bank funds for subloans at 6.5% interest rate was reached in mid-1975, so only subloans at 8% could thereafter be submitted for refinancing, thereby reducing the flow of disburse- ments. This situation was compounded by the fact that a large pprcentage of subloans extended by CNCA during the early years of the Project carried a 6.5% interest rate (such loans represented 60% of all loan amounts during the first two months, 45% during the first year, 36% during the second year and 29% during the third year). Higher interest rates on all CNCA loans were made effective on September 1, 1975 and disbursements sped up to exhaust the Loan by May 28, 1976. 3.04 Subloans to individual farmers and associations submitted for refinancing amounted to DH 219.1 million; this represented about 77% of the total amount of loans extended by CNCA to individual farmers and associations through Headquarters and CRCAs between September 1, 1972 and April 30, 1976. (This total amount includes some loans that would not have been re-eligible for refinancing such as land purchase or beekeeping). Loans to cooperatives submitted for refinancing amounted to a negligible proportion (about 3.5%) of loans extended by CNCA to cooperatives. Most loans to companies were excluded from the Project 1/ and only 15% of those extended during the period were submitted for refinancing (including the withdrawn application no. 11). 50.8% of all loans extended by CNCA (excluding the CLCAs) during the period were submitted for refinancing and 42.9% were actually refinanced under the Project (see Table 3). 1/ State copanies probably because of the likelihood of distribution of their land holdings and because of CNCA's lack of autonomy in its decision to finance their investments; private companies probably because their legal status was uncertain (agricultural production companies) or because they had other sources of finance (processing companies). - 17 - 3.05 A major reallocation of funds among investment categories took place in May 1975. The amount allocated to citrus and winter vegetables were de- creased by $4.5 million and investments in marketing facilities were cut in half to $0.5 million (Table 1). The livestock development component was increased by $5 million. This revision was made at the request of CNCA and was merely in recognition of a trend that had been developing over the previous eighteen months. On the one hand, the chronic shortage of milk and meat had become more acute in 1973-74, thereby considerably increasing the applications for dairy and cattle farm development loans. Indeed, by March 1974, 26% of all subloans under the Project had already been made for livestock development, versus 10% in the appraisal estimate. On the other hand, develop- ment of citrus plantations had been somewhat curtailed in the face of falling export prospects and the new official encouragement to sugar production (beet and cane) in some regions--thereby reducing the demand for citrus loans. Furthermore, the $1 million that had been earmarked for marketing facilities could easily be cut in half without any negative consequences as CINCA concen- trated its efforts not on marketing facilities but on agro-industrial projects not covered under the Project (see para 3.12 below). Physical Execution 3.06 The major deviations between the appraised and actual have been the following for each project component. 1/ Grain Farm Equipment. Only 85% of the funds allocated to this component were actually disbursed (Table 1). The demand for equipment turned out to be lower than expected; this cannot be asttributed to any Government policy change, but is probably a case of optimistic appraisal assumptions, and of decrease of demand in response to price increases. While the number of tractors to be financed had originally been estimated at 3,500, less than half as many (1,400) were actually financed (the appraisal estimate of DH 27,000 for average tractor loans was nevertheless correct). A little over 700 loans were made for small equipment and tractor implements. Harvester loans averaged some DH 4,000 more than expected and less than 200 harvesters and balers were financed (as opposed to 370 harvesters and 90 balers in the appraisal estimate). Close to 16,000 draft animals were also financed under the Project for grain farms. Approxi- mately 17,000 ha of land were cleared and destoned for grain farming over the lifetime of the loan. In addition, 340 trucks and pick-ups and 300 pumps with attachments were financed. Within the grain farm component, the largest item financed was tractors (43.8%) followed by draft animals (13.5%), harvesters (11.6%), trucks (7%), small equipment and attachments (6%), destoning and clearing (5.8%), drainage and irrigation (3.8%) and pumps (3.4%). All loans to Agrarian Reform Cooperatives (DH 3 million) were extended under the Grain Farm Develooment conocnent. 3.07 Citrus Develo;=ent. While it was estimated at appraisal that 7,OOC ha of citrus would be planted under the Project, a mere 1,000 ha were financed 1/ See Appendix 1 for a detailed breakdown of items financed. - 18 - by the Bank. Close to 380 loans were indeed made for new plantations or ex- tensions of existing plantations (360 at appraisal) but the average area was below 3 ha per farmer (vs. 20 ha at appraisal). Approximately 900 wells were built with Bank financing, which allowed for the irrigation of about 4,000 ha. The maintenance costs on approximately 1,550 ha of existing planta- tions were financed under the Project (20 ha per loan). Average loan amounts were below DH 9,500 (slightly above DH 12,000 for the establishment of new plantations and above DH 26,000 for maintenance). Even though it can be assumed that a farmer could benefit from an average of six to seven loans over the three-year period to cover the financing of his various needs (plantations, machinery, groundwater development, etc.), he would still fall short of the average loan amount of DH 138,000 estimated at appraisal. This discrepancy is partly due to the curtailment of new citrus plantations, which came as a consequence of poor export prospects and a shift in Government priorities from citrus to sugar crops. Approximately 80 tractors, 125 trucks and pick-ups and 650 pumps were financed for citrus plantations. The largest investment categories for citrus development were pumps (28.5%) followed by plantation increases (18%), drainage and irrigation (14.6%), trucks and pick-ups (9.8%), tractors (9.7%) and plantation maintenance (8.5%). 3.08 Winter Vegetable Production. It is not possible to find from existing figures how many farmers actually did benefit from the Project and what area was involved. However, approximately 2,000 loans were extended under this component for all investment items, 460 of which were to finance the digging of wells. Approximately 100 tractors, 200 trucks and pick-ups and 1,000 pumps were financed for winter vegetable production. Average loan aEount for all items was DH 9,500. Appraisal estimates assumed that 750 farmers would each develop 12 ha with a total loan of DH 38,000 (covering a complete package including ground-water development and machinery). These figures may be considered fairly realistic. 3.09 Dairy Development. Although Part D (Category IIIA) of the Project includes groundwater development, barn construction, harvesting, milking and watering equipment in addition to the purchase of heifers, withdrawal applications under Part D were only entered for "livestock", i.e., the sole purchase of heifers. It shall be assumed that all other items were entered under Part E (Category IIIB), which was earmarked for the construction of fattening stables and watering facilities. Approximately 15,500 heifers were financed under the Project with a total ccst of DH 55 million (including 400 heifers imported by SODEA) 1/. Foreign-bred heifers constituted the majority (11,000 units) and the remaining 4,500 were cross-bred and locally born pure- breds. These figures are greatly in excess of the appraisal estimates for reasons mentioned below (1,800 heifers of which 900 would be imported). Loan amounts were expected to average DH 48,000 and to include, beside the purchase of 12 heifers on average, barn construction, ecuipment purchase, etc. In fact, they averaged DH 16,000 and covered only the purchase of 6 cows on 1/ Societe de Developpement Agricole: a State company in charge of planted lands confiscated from foreign settlers. - 19 - the average; 1/ they did not include investments other than the purchase of the heifers. A considerably larger number of farmers was reached (2,400 assuming one loan per farmer) than what had originally been expected (150 farmers only). 3.10 Beef Cattle & Sheep. Over 5,600 shelters and close to 100 barns and 50 stables were built or improved upon under the Project. Approximately 600 draft animals, 40 tractors, 70 trucks and pick-ups, 25 pumps and 160 wells were financed by the Bank. Merely 75 ha of alfalfa were created under this component (an average of 2 ha per farmer). Approximately 6,400 loans were extended in this category--with an average loan amount of DH 5,000 (as opposed to 2,900 loans of DH 5,600 at appraisal). 3.11 The number of loans under these two parts of the Project (Dairy Development and Beef Cattle & Sheep) greatly exceeded the figures that were originally forecast. As explained earlier, livestock development was strongly emphasized by the Government in 1973 in the face of the increasing shortage of meat and milk. Rising prices attracted many farmers to purchase livestock and close to 11,000 heifers were imported from East and West Germany over the two following years. 2/ Even though an extra $5 million was reallocated to live- stock development under the Project, disbursements actually exceeded this new allocation by $2.5 million to reach $11 million (more than 3 times the original allocation). 3.12 Marketing Facilities. This component was by far the least success- ful. Fewer loans were extended under this part of the Project than had been expected. CNCA felt it could achieve little with the amounts allocated to this component and preferred to concentrate its activities in other areas, such as dairy and beef agroindustrial projects which were not eligible for refinancing. Most subloans in this category were extended for collective equipment (growers' cooperatives) and sorting and packaging equipment for citrus (mainly in Agadir) and tomatoes (El Jadida and Berrechid). One of the tasks of the Office de Commercialisation et d'Exportations (OCE), the Govern- ment agency responsible for export marketing, is to control the quality of the produce being handled at the packaging plant. OCE did not welcome the creation of new plants as it meant an additional burden on its services and was in contradiction with its policy of trying to achieve greater uniformity in quality by encouraging the concentration of packaging capacity into a few larger units. 3.13 Summary. The table below presents, in a summarized form, the major differences between appraisal estimates and actual estimates. Most figures labelled "actual" are indeed estimates as no precise information was available regarding the number of items financed or the number of beneficiaries (only the number of loans is available). Appendix 1 gives a more detailed breakdown of items financed by investment category. 1/ Excluding the loan to SODEA for DH 1.2 million covering 400 cows. 2/ Only heifers from West Germany were financed under the Project. - 20 - Average Loan Amount (DH) Actual Actual as a % as a % Aooraisal Actual Appraisal Appraisal Actual Appraisal Grain Farm Equipment Tractors 3,500 1,437 41 27,000 26,981 100 Harvesters & Balers 370 & 90 194 42 49,000 53,815 110 Citrus Develooment Number of farmers 360 380 105 138,000 9,500 /1 Average surface (ha) 20 3 15 New plantations (ha) 7,000 1,107 16 Winter Vegetable Production Number of farmers 750 750 100 38,000 9.500 /1 Dairy Develooment Number of loans (farmers) 150 2,410 1,600 48,000 15,921 /1 Total number of heifers 1,800 15,542 863 Average number of heifers per loan 12 6 50 Beef Cattle & Sheep Fattening Number of loans 2,900 6,400 220 5,600 5,000 89 Total Surface to Be Irrigated (Hectares) 15-20,000 8,750 58-44 Total Number of Farmers Reached /2 8,000 17,000 212 28,000 12,000 43 /1 These figures cannot be directly compared as loan amount at appraisal covers several investment items, and in some cases farmers received more than one loan to comolete their investment. /2 The number of farmers tines the average loan amount in appraisal (8,000 x DH 28,000 = DH 224 million) does not coincide with the actual figures (17,000 x DH 12,000 = DH 204 million) due to exchange rate fluctuations and one large loan to SODEA (DH 9 million) not included here. - 21 - IV. BENEFICIARIES Individual Farmers 4.01 No precise figures are available to indicate how many farmers have actually been reached under the Project, as all statistics are given in number of loans (and only for commitments) and not in terms of the number of cus- tomers. All in all, a crude estimate would set at about 17,000 the number of farmers reached under the Project. Approximatley 25,500 loans were made under the Project for an average amount of DH 8,000 and 98% of the Loan-Credit was disbursed for individual farmer subloans (including farmers' associations for mechanization). It can safely be assumcd that the number of beneficiaries greatly exceeded the figure originally forecast (8,000). By the same taken, the average size of the subloan (DH 8,000) was considerably smaller than the appraisal estimate of DH 28,000--although both figures cannot be directly compared since the appraisal figure includes all the needs of a particular farmer and covers a variety of investment items (groundwater development, machinery, etc.). A reasonable assumption would set total loan amount to a particular farmer at approximately DH 12,000. A breakdown of the number and size of the loans (actual and appraisal estimate) can be seen in Appendix 1. 4.02 It is equally difficult to estimate the size of the various sub- borrowers as no records are kept to break down the loans or the beneficiaries by income bracket or farm size. The fact that the loan amounts were, on average, smaller than expected, does not necessarily imply that smaller farmers were reached, but most probably that loans were not made for a total package, but instead for single investment items. The only gross indication available would be the distinction between subloans at 6.5% and at 8% interest rate as it was based on a cut-off point of DH 6,000 fiscal income for individual farmers. The following amounts were submitted for refinancing at 6.5% and at 8% by CNCA: - 22 - Category 6.5% 8% Total (DH'000) % (DH'000) % (DH'000) % I. Grain.Farm Equipment A. Tractors 1,229 3.2 37,550 96.8 38,780 100 B. Harvesting Individuals 13,547 29.0 33,104 71.0 46,651 100 Cooperatives 2,573 85.7 429 14.3 3,002 100 II. Citrus & Vegetable A. Citrus 3,149 13.8 19,722 86.2 22,872 100 B. Vegetable 652 3.4 18,440 96.6 19,092 100 III. Livestock A. Dairy Farm 6,324 16.2 32,788 83.8 39,113 100 B. Beef Cattle & Sheep 14,003 43.9 17,904 56.1 31,906 100 IV. 'Marketing Facilities 538 13.2 3,539 86.8 4,076 100 TOTAL 42,015 20.4/1 163,477 79.6 205,493 100 /1 Only 20% was actually disbursed for subloans at 6.5% interest rate. 4.03 Medium-sized farmers qualifying for a 6.5% subloan borrowed mostly for the purchase of dairy cows and draft animals, the construction of animal shelters, destoning of grain farms and irrigation and expansion of citrus plantations. These are all investments requiring a relatively small capital outlay. Not surprisingly, very few loans were made to nedium-sized farmers for winter vegetable development as most farmers on irrigated lands receive an income that is above the DH 6,000 limit (actual farm income equivalent $3,500). 4.04 The figure of DH 1.2 million entered under Tractors at 6.5% was in fact for farmers' associations for mechanization and not for small individual farmers. Indeed, CNCA financed some 50 tractors to such groups at 6.5% until mid-1974 due to a misinterpretation of the text of the Agreements (see para 5.12 below for a more detailed description of the incident). No further data is available as to the number of tractors financed for these associations as they are in no way differentiated from individual farmers for the purposes of data processing. 4.05 One of the requirements of the Credit Agreement (Schedule 1, para 4D) was that Bank disbursements for subloans at a 6.5% interest rate should make up no more than 20% of all amounts disbursed. C'CA had already made it - 23 - known during pre-negotiations that an estimated 66% of its lending operations was in the category eligible for 8% interest rates and that as much as 34% was in the category eligible for 6.5% interest rate. The Moroccan Government suggested that these same proportions (66-34%) be applied to the proceeds of the Bank Loan/Credit. This proposal was rejected by the Bank, who firmly insisted on an 80-20 breakdown for subloans at 8% and 6.5% respectively. It considered this a concession, since it retained the alternative option of refinancing only subloans made at 8%. The Government expressed its disappoint- ment at the Bank's position but finally agreed to the proposal. As predicted, CNCA disbursements to medium-sized farmers at 6.5% remained consistently in excese of 20% at an average of 34.7% between September 1, 1972 and September 1, 1975 1/. A large number of loans at 6.5% were thus not refinanced by the Bank. In other words, the Second Project helped finance mostly farmers who, at an average income of $3,500, cannot be considered small--thereby keeping well in line with the Bank's greater concern at the time with CNCA's financial viability than with providing effective support to smallholders, albeit at a lower interest rate. Agrarian Reform Cooperatives 4.06 While no specific amount was set aside under the Project for the financing of such Cooperatives, they were eligible for subloans under Categories I and IV (Grain Farm Equipment & Marketing Facilities). No sub- loans were made under Category IV, however, and most subloans in Category I were made for draft animals and grain farm machinery. Since Cooperatives received a 40% Government subsidy for these investments, CNCA subloans covered 60% of the investment cost, of which the Bank refinanced 70%, bringing its share of financing to 42% of the initial project cost. Cooperatives them- selves contributed nothing to the cost of the subproject. In this instance, the clause stipulating a 30% sub-borrower contribution (Project Agreement Schedule, para 1) has been unwittingly violated. 4.07 In September 1974, a misunderstanding arose between CNCA and the Bank which effectively ended all financing of the Cooperatives. The Bank had requested that CNCA submit the detailed list of the investment items financed for the Cooperatives as it did for all other beneficiaries instead of merely grouping them under a single entry labelled "Cooperatives." The latter suggested the beneficiary rather than the object financed and did not allow the Bank to measure its impact with any detail. CNCA interpreted this to mean that the Bank no longer wished to finance the Cooperatives but did not communicate with the Bank on the matter. It is only during the 1976 appraisal mission of the Third Project that this was discussed with a Bank mission, thus uncovering the misunderstanding. No applications for refinancing were there- fore submitted after July 1974, and total loans to Cooperatives refinanced by the Bank remained at DH 3 million ($0.7 million). 1/ After that date, interest rates were increased to 8.5% for all individual borrowers and differentiation by income group was no longer pcssible. - 24 - State Comoanies 4.08 These companies were mostly responsible for managing che lands that had been seized from foreign settlers. Because of the Bank's poor experience under the First Project with the by-then defunct CGEA (see para 1.04), financ- ing of State companies had not been included under the Second Project. CNCA nevertheless approached the Bank in early 1975 for the refinancing of four subloans to the following State companies: SOGETA (DH 18 million for machinery and DH 9 million for dairy cows) CO1AGRI (DH 4.5 million for dairy cows and stable construction) SODEA (DH 1.2 million for dairy cows) 4.09 Because disbursements were lagging behind schedule at the time, the Bank expressed its agreement to refinance such subloans, subject to Bank approval of each individual subloan. The fact that most of these companies had been created after the signature of the Loan-Credit eliminated any legal conflict. 1/ When CNCA submitted its application for refinancing, it turned out that the SOGETA and CO1AGRI projects did not include any subborrower contribution (as required in the Project Agreement) and were not accompanied by CNCA's own appraisal report on the Project. Supporting documentation was insufficient and repayment periods were considered too short. More important, still, the lands they managed were soon to be distributed to Cooperatives and their corporate future was uncertain. Furthermore, their financial position was deteriorating. Subloans to these two companies were therefore not refi- nanced by the Bank. 4.10 On the ocher hand, thc SODEA project did include a 30% share of self-financing. Although the economic viability of the investment already appeared somewhat doubtful at the time, the Bank decided to refinance it, provided CNCA submitted additional information. As a result, disbursements admittedly caught up somewhat with their schedule (from 93% to 97% of the appraisal estimate). It was later recommended, however, that any additional subloan to SODEA should be subjected to very careful scrutiny by the Bank. Another SODEA project for DH 0.8 million was submitted to IBRD in April 1976 but was not refinanced as the items covered fell somewhat outside of the scope of the Second Project and the necessary appraisal work by CNCA was lacking. CNCA later withdrew its disbursement application for this subloan. The DH 1.2 million loan to SODEA in 1975 for the purchase of dairy cows is thus the only sub-loan to a State company to have been refinanced under the Second Project. 1/ Except for COMAGRI which was created in 1963. - 25 - V. INSTITUTIONAL DEVELOPMENT 1/ Objectives 5.01 Institutional objectives were not explicitly stated in the Appraisal Report of the Second Project. The Bank did express, nevertheless, such great concern for the institutional developments of CNCA during the preparation, negotiations and implementation phases of the Project that they can in no way be relegated to a secondary position and should be covered in this evaluation. After the experience of the First Project during which CNCA financial position had been endangerd, the Bank was concerned with four major points before embarking upon another project. 5.02 Separation of Accounts. All operations performed by CNCA on be- half of the Government or with Government subsidies (SOCAP and CLCA) should be kept in separate accounts and shown on separate financial statements. Government should reimburse CNCA for all losses incurred as a result of these operations. This had been a condition for the reinstatement of the First Project in 1968 and further assurances were obtained during negotiations of the Second Project that this separation would now be fully implemented. At the request of CNCA, the Bank insisted during negotiations that the Govern- ment promptly reimburse CNCA for the overdue loans CNCA had been ordered to extend to the provincial authorities in the late 60s for the administration of nationalized farm-lands after CGEA had been dissolved (see para 1.04), and which amounted to DH 67 million outstanding ($16 million). A softening of CNCA's position caused the Bank to merely include in the Guarantee Agreement a section to the effect that the Government should provide CNCA with adequate resources for all operations administered by it on behalf of the Government such as SOCAPs, CLCA and the provinces (Section 2.04). .5.03 Strengthening Capital Structure. Stopping the drain on CNCA's liquidity caused by the CLCAs was only part of the remedy. The three-fold expansion of CNCA's lending program between 1972 and 1976 would require a commensurate broadening of its capital base. The Bank obtained from Govern- ment the assurances that DH 44 million would be transferred from CNCA's "liquidation account" 2/ to its equity capital along with the proceeds of the IDA Credit. A financial covenant to that effect was included in the Agreements. Transferring the IDA Credit to capital was an innovation for the Bank at the time. 1/ Additional information on CNCA can be found in the Appraisal Report of the Third Agricultural Credit Project (1308-MOR). 2/ An account administered by CNCA in connection with the liquidation of various former credit and savings institutions. - 26 - 5.04 Increased Profitability. The Bank's concern that CNCA remain a financially viable institution led it to heavily emphasize the issue of on- lending interest rates. Increasing operating expenses had to be met by in- creasing interest income. As was seen above, this issue caused considerable delays in both the negotiations and the implementation of the Loan/Credit and remained a central issue throughout the Second Project. A financial covenant was included in the Loan Agreement to ensure that general reserves would be gradually built up from profits to reach 15% of equity capital by 1976. To reach such levels of profitability, however, the Bank first of all felt it had to insist on obtaining the highest possible onlending rates, subject to the following constraints: (a) onlending rates for Bank funds could be no higher than the rates applicable to CNCA funds obtained elsewhere or these funds would be used up first; and (b) rates had to be in line with other lending rates in Morocco and could in no way exceed those in force for industrial development; and (c) medium-term rates had to be consistent with short-term rates to avoid distortions caused by farmers borrowing short-term to invest long-term; Secondly, the Bank also believed that if two rates were to be adopted, the largest possible share should be relent at the higher interest rate. Final agreement was reached to adopt essentially the Bank's suggestion of on- lending only 20% of the Loan/Credit at 6.5% and the remaining 80% at 8%. These rates became effective September 1, 1972. 5.05 Audit. In order to ensure the reliability of all financial data submitted to it, the Bank required that CNCA regularly submit its accounts and financial statements to be audited by an internationally recognized accounting firm acceptable to the Bank. After some initial resistance from CNCA, a covenant to that effect was included in the Loan Agreement. Financial Performance 5.06 The high caliber of CNCA's management team and its resulting good working relations with the Bank have been the key factors behind the overall good performance of this institution under the Second Project. Only a few minor problems arose during the effectiveness of the Project and they are listed below, along with the main covenants and procedures followed pursuant to the Agreements. 5.07 The separation of accounts between CNCA and the CLCAs was fully introduced in late 1972 and the separation between CNCA and the accounts of the Provinces tock place in January 1973. The loans to the Provinces were in effect reimbursed by the Government (DH 35 million in mid-1973, DH 22 million in 1973-74, DH 20 million in 1975-76). - 27 - 5.08 The increase in capital was made effective in fiscal year 1972-73 when DH 44 million were transferred to equity capital. The proceeds of the IDA Credit were transferred in 1973-74 (DH 37.8 million) and 1974-75 (IDH 4.1 million). 5.09 General reserves reached the following percentages of capital (in- cluding CLCA) on August 31 of each year: 1971 1972 1973 1974 1975 1976 /1 11.9 15.3 17.7 14.9 10.7- 11.1 /1 At April 30, 1976 (unofficial) As stipulated in Section 5.10 of the Loan Agreement, entire profits were transferred each year to general reserves. The ratio fell below the required 15% in 1974 as this coincided with the first transfer of IDA Credit proceeds to capital. It further decreased in 1975 due to the combined effect of the second capital increase from IDA funds and the operating loss of DH 0.5 million suffered in 1973/74 which drew down general reserves. It appears likely that this covenant has not been met by the end of 1975/76, 1/ but this in no way reflects on CNCA's financial soundness, which is adequate. 5.10 Interest rates. Interest rates on loans were held at 6.5% and 8% as stipulated in Section 5.07 of the Loan Agreement. At the Bank's per- sistent suggestion, the Government allowed these rates to be increased as of September 1, 1975 to 7% for loans to all cooperatives and farmers' associa- tions and to 8.5% for all medium-term loans (excluding CLCAs) to individual farmers. Although somewhat smaller than what had been advocated, this in- crease was nevertheless a step in the right direction. These measures were taken in the face of a continuous erosion of CNCA's profit margin due to increasing operating expenses. Indeed, net operating income had decreased from DH 6.5 million in 1971/72 to DH 1.1 million in 1972/73--reaching a deficit of DH 0.5 million in 1973/74 and a relatively modest surplus of DH 1.1 million in 1974/75. 5.11 While only 20% of the Loan/Credit could be disbursed for subloans at a 6.5% interest rate, a higher percentage (34% on average) of CNCA's lending was already made at this 6.5% rate. The introduction of a 20% ceiling on the use of Bank funds could not have any impact on the breakdown of the general CNCA portfolio between loans at 6.5% and loans at 8%: the percentage of CNCA loans at 6.5% remained indeed around 34% as CNCA had initially indicated during negotiations. As a result the 20% ceiling on use of Bank funds did not have any impact on the income received by CNCA since it did not affect the outstanding amounts at the respective interest rates. The only financial impact this ceiling had was to delay Loan/Credit disbursements (in the absence of such a ceiling, the Loan/Credit would have been completely 1/ Audited financial statements have not been received yet. - 28 - disbursed about one year earlier). If the Bank had refused to refinance subloans at 6.5% entirely (but let CNCA continue to make such loans), the financial performance of CNCA would have not been much different from what it was, but Loan/Credit disbursements would have been much slower. It has to be recognized that the impact of this ceiling was not financial, but that it was introduced purely to satisfy the Bank that its funds were not used directly for lending at low interest rates, except within certain limits, not taking into account the fungibility of capital. 5.12 Some differences of opinion arose in early 1974 between CNCA and the Bank due to a misinterpretation of the Agreements on the interest rate applicable to loans for tractors. The CNCA position was that a 6.5% interest rate could indeed be charged on subloans for tractors to cooperatives with an average fiscal income of less than DH 4,000, according to Section 5.07 of the Loan Agreement. The Bank held that under Schedule 1, Paragraph 4 of the Development Credit Agreement, however, all loans for tractors were to be made at 8%. The implicit contradiction between both texts was dismissed by the Bank's Legal Department who interpreted the texts to mean that CNCA could indeed extend such loans at 6.5%, but only loans for tractors at 8% were eligible for refinancing by the Bank. CNCA claimed the legal position of the Bank violated the very spirit in which the text was conceived during negotia- tions. In the meantime, over DH I million had been disbursed by the Bank for tractor loans at 6.5%. A final decision was reached to enforce the Credit Agreement to the letter but not to recover the amount already disbursed. 5.13 CNCA accounts have been audited by the Casablanca office of Price Waterhouse & Co. This work has been slow but overall adequate in its coverage. Continuing collaboration between CNCA and its auditors (with some supervision by the Bank) will help overcome problems of timeliness. All other financial covenants were adhered to and presented no particular problem. 5.14 Deposits Collection. Interest rates have been 1.5% on sight deposits (up to 3% for some special clients) and between 2% and 6.5% for term deposits (depending on the term). As required in Section 5.09 of the Loan Agreement, these rates are indeed competitive with rates paid by other banks, but probably not in terms of opportunity cost on capital. Not only are they in line with those offered by savings banks on term deposits, but CNCA is the only institution to pay interest on sight deposits. In spite of this advantage, CNCA performance in this area has been somewhat disappointing. Collections of deposits have tripled over four years from DH 27 million in 1972 to DH 96 million in 1976 but CNCA remains highly dependent on a few large depositors. Although its management is well aware of the pressing need to tap local savings and has made laudable efforts to this end (all CRCA offices now provide teller services and advertising campaigns have been launched to attract deposits), results have fallen short of expectations. Two main reasons are given: (a) CNCA remains basically a credit institution, both in structure and in outlook; and - 29 - (b) The process of building up sufficient trust between the farmer and a bank to have him part with his cash and then of familiarizing him with bank formalities is extremely slow and immediate returns cannot be expected. The Third Project will provide some technical assistance to assist CNCA in improving its deposits collection efforts. Operational Performance 5.15 The required beneficiary contribution of 30% to the cost of any sub- project was applied in all instances, with the following two exceptions: - Loans to SOGETA and COMAGRI included no contribution and were therefore rejected for refinancing by the Bank; - Loans to Agrarian Reform Cooperatives are most likely not to have included any share of self-financing, as was pointed out in para 4.06 above. This situation occurred without prior knowledge by the Bank. 5.16 The appraisal work carried out by CNCA as part of its subloan ap- proval procedure and required under paragraph 7 of the above-mentioned Schedule, while satisfactory as a whole, did leave room for some improvement. Although it is by no means implied that this situation led CNCA to assume above normal risks, the incremental returns resulting from the investment to be financed could often have been computed in a more careful fashion. The tendency has been towards relying more on regional data for yields and prices than on the particularities of the farm under consideration and towards making a few rapid computations that bear only a slight resemblance to the actual financial situation of the farm. It must, however, be recognized, among numerous other limiting factors, that the availability of data regarding any particular farm operation is in most cases limited to a bare minimum and that the information provided by the farmer is seldom reliable. CNCA management may nevertheless do well in further stressing to loan agents the importance of the beneficiary's income statement as a tool for appraising any particular project. 5.17 The danger of overpumping as expressed in para 2 of the Project Agreement Schedule has been lessened due to the regulations enforced (albeit inadequately) by the Ministry of Public Works (Waterworks Department). The country is divided into three types of zones: green, yellow and red. In green zones, pumping is allowed without previous permit and up to 180 m3/day. In yellow zones, a permit is required for pumping. This permit will indicate the maximum average amount (in liters/second) that can be pumped. Red zones would suffer from overpumping and no permits for new pumps or wells are delivered. The Ministry is known to have walled in several wells that had been illegally built in red zones. The geographical delimitations of each zone are reviewed yearly and can be altered at the Ministry's discretion. No loans are made by CNCA for wells and pumps unless the beneficiary can provide - 30 - a certificate from the Ministry showing the zone status of his land and if applicable, the maximum allowance for pumping. The delays in obtaining these permits from the Public Works Ministry are nevertheless considerable and it is said that beneficiaries will often apply instead to the Ministry of Agri- culture who also keeps records of groundwater zones and complacently delivers permits in shorter delays. These permits lack any legal value but have some- times been accepted by CNCA. 5.18 Supervision work, while still elementary, has been carried out as required in paragraph 11C of the Project Agreement Schedule. Indeed, it mere- ly involved controlling the physical existence of the assets (each visit by a loan agent to a farm typically begins with an inspection of the items previously financed by CNCA), rather than the effectiveness of the subloans' contribution towards improving the beneficiary's productivity. An effective monitoring system has yet to be set up. 5.19 The most persistent administrative problem throughout the effec- tiveness of the Project has been one of information flow. CNCA has been particularly slow in submitting data related to the Project. Quarterly reports required under Sections 3.05 and 6.07 of the Loan Agreement were submitted with long delays (3 to 5 months on the average). Annual reports, though of above-average quality, were subject to similar delays; audited financial statements for 1973/74 arrived 12 months late. Updated financial data was unavailable during the early part of the Project. According to CNCA, this problem was partly due to the fact that it had been experiencing serious technical difficulties with its computer system. As a result, a substantial back-log of processing work was built up in mid-1973 and it was not resorbed until early 1975. The situation did improve somewhat in 1975/76. 5.20 Subborrower repayment has been relatively good over the lifetime of the Project, thanks to CNCA's efficient loan collection procedure. The fol- lowing recovery rates apply to individual loans (unless otherwise noted) made by CRCAs and CNCA Headquarters and include all outstanding debts to CNCA at August 31 of each year: 1971/72 /1 1972/73 1973/74 1974/75 81.1 81.9 72.0 79.2 /1 Some loans to companies are included in this figure. The decline in 1973/74 was attributed to adverse climatic conditions (drought) which affected several parts of the country. Recovery rates have persistently been a few percentage points higher for CRCAs alone, i.e., if loans made at Headquarters to large farmers and Government employees and the like are ex- cluded. When considering arrears at any point in time, it has been seen that collections greatly improve during periods extending to approximately three months after due dates--at which point they reach close to 95% for CRCAs. - 31 - Institutional Impact 5.21 CNCA has become one of the most effective credit institutions in the EMENA region. Although the largest share of its success is no doubt due to the professional excellence of its own management and, indirectly, to the overall efficiency of the Moroccan administration, the Bank has made an appreciable contribution as well. While the greatest institutional impact took place under the First Project, it was followed through during the Second Project. 5.22 Financial Strength. The financial health Df CNCA has somewhat im- proved over the past four years. Profit margins have declined due to fixed interest rates but the soundness of its operations has increased to the extent that it was able to tap the local money market by floating two bond issues for DU 30 million each (January 1973 and May 1974). The current ratio (current assets/current liabilities) has increased from 1.33 in 1971/72 to 1.84 in 1974/75. However, the long-term debt/equity ratio reached a high of 0.67 in 1972/73 (up from 0.37 in 1970/71) to then slightly decrease to 0.61 in 1973/74 and 1974/75. This increase in the debt/equity ratio is of course mainly due to heavy IBRD borrowing during the last years (DH 78 million outstanding in 1975 as opposed to DH 37 million in 1972). 5.23 Organizational Improvements. These improvements have been appre- ciable and fall into three groups: network expansion, personnel management and lending procedures. All three have enabled CNCA to build itself up into a self-confident, efficient and aggressive institution which has become one of the central forces in the agricultural development of Morocco. Again, its own management deserves most of the credit for this growth but insofar as it has been persistently supported by the Bank and was matched by a greatly expanded lending program made possible with Bank funds, it may be considered as part of the impact caused by the Second Project. 5.24 Branch Network. When the Second Project became effective, CNCA consisted of 17 regional offices (CRCA) and 51 local offices (CLCA). In order to reach a maximum number of clients, its network was considerably expanded, especially at the local level. Six regional offices and 35 local offices were opened during the past three years, bringing the total number of CRCA agencies to 23 and CLCA agencies to 86 at August 31, 1976. The rapid expansion of CLCA network was performed in order to match the influx of new customers caused by the integration of the SOCAPs. 1/ Along with the quantitative increase in its network, CNCA also emphasized a qualitative upgrading of its existing services. On the one hand, several agencies were renovated. On the other hand, in order to provide its customers with a wider variety of banking services and to 1/ Societes de Credit Agricole et de Prevoyance: agricultural cre-it agencies for s=_1llbolders carried over from the French :dinistra- tion and now absorbed by the CLCAs. - 32 - better tap local savings, 14 CRCA agencies were equipped with full-fledged teller services allowing its customers to maintain current accounts as well as savings accounts, bringing the total number of CRCA agencies providing such services to a full 23. Two CLCA agencies provide similar services on an experimental basis. 5.25 Personnel Management. The extension of CNCA's network went in hand with a heavy recruitment program and increased professional training. Recruit- ment efforts peaked in 1973 and then levelled off to approximately 200 new recruits a year, bringing total CNCA personnel to over 1,300 in August 1975-- double the 1972 staff, as can be seen below. All recruitment in CNCA is done by competitive examination. New Recruits 1971/72 1972/73 1973/74 1974/75 Senior staff 24 29 4 6 Agricultural technicians 12 32 15 14 Accountants 36 172 110 117 Computer specialists 2 11 17 10 Other 35 67 56 51 Total 109 311 202 198 Attrition 20. 63 60 Net Increase 291 139 138 Total End of Year Personnel 739 1,030 1,169 1,307 CNCA's training program has been expanded to include correspondence courses, in-service training sessions for both new and existing staff and outside courses (seminars in Morocco as well as courses at EDI and other banks in Europe). The in-service training programs are considered among the most successful in Morocco and are being copied by other institutions. 5.26 Lending procedures were simplified in order to keep up with the growing number of loan applications. Furthermore, the appointment of six regional directors and the creation of regional credit commissions has accel- erated the administrative procedures and decreased the burden previously imposed on Headquarters. This new system is described in greater detail in the Appraisal Report of the Third Project (1308 MOR, December 17, 1976). Conclusions 5.27 Altogether, CNCA has over the past few years grown to become a relatively sophisticated institution. Not only is it better staffed and better organized, but its image has improved appreciably among its customers and in the country as a whole. Consequently, it is now able to play a more important role in the development of Moroccan agriculture. To the extent that the Bank supported this growth by financing a large share of CNCA's landing program and by providing some occasional counselling, the institu- tional ipact of the Second Project can certainly be considered beneficial. - 33 - 5.28 While explicable in view of the developments that had taken place under the First Project, the original skepticism and concern of the Bank proved unfounded. In this context, a few lessons can be drawn. In retrospect, it seems indeed that the institutional impact of the Project could have been even more beneficial if: (1) The Bank had not at the outset excluded the CLCAs. In 1974, the Bank approached CNCA to discuss the possibility of financing the CLCAs under a Third Project. The Bank received and reviewed the Preparation Report but the Govern- ment and CNCA preferred to turn to the Government of Iran for the financing of the CLCAs; this may well have been a result of the Bank's exclusion of the CLCAs in the Second Project; (2) It had been more flexible on the interest rate issue. The impact of the Project could have been greater had the Bank financed a larger share of medium-sized farmers instead of concentrating on the relatively large; and this would not have endangered CNCA financial position (para 5.11). In retrospect, the emphasis on creditworthiness was probably not warranted and the Bank's insistence was probably based more on internal Bank considerations than on a real concern for CNCA financial performance; (3) It had not insisted at first upon unnecessarily complicated paperwork for disbursement procedures. This situation placed a heavy work burden on both the CNCA and Controller's, slowed down the progress of the Project and caused CNCA minor cash flow problems. VI. ECONOMIC OBJECTIVES, PERFORMANCE AND IMPACT Production 6.01 The comparative economic performance between appraisal estimates and actual data is discussed below and summarized in Table 5. The shift of emphasis during the life of the Project away from grain, citrus and winter vegetables and into livestock development is reflected here. The areas affected are well below expectations as only half as many harvesters and tractors as expected were purchased under the Project. On the other hand, benefits derived from livestock development are close to three times those estimated at appraisal. In addition, the slow real decline in relative prices of agricultural products in Morocco is partly responsible for the fact that the value of the incremental output generated under the Project (DH 140 mil- lion) fell short of the ex7ected DH 240 million. It should be kept in Mind, however, that all "actual" fiures giaen here are to be considered with some prudence as they are only indirectl-, derived from the total loan a7ounts ex- tended under each category. Sincej-ore dccurate data is not available they should :erely be taken as educated estiates. - 34 - 6.02 Grain. Areas affected by the Project under grain are estimated to amount to approximately 150,000 ha as opposed to 350,000 ha at appraisal. This difference is mainly due to the lower degree of mechanization than what had been expected. Instead of affecting 8% of the total area in Morocco under grain, the Second Loan merely affected 3.4% of the total area. In terms of output, however, the Project produced an estimated incremental production of 142,000 tons of grains, representing 84% of what had been estimated at appraisal and 3.25% of the average annual grain production over the past five years. The seeming inconsistency between the disappointing results in area coverage and the relatively good results in terms of output is due to the fact that some of the factors contributing to increment grain output, such as destoning and the use of harvesters or draft animals may not have been reckoned with at appraisal. A substantial part of the additional output has no doubt been in durum wheat as a drop in the price of bread wheat and a persistent increase in the price of durum wheat triggered a shift in production patterns from bread wheat to durum wheat. 6.03 Citrus. Because of poor export prospects during the years 1974-75, investments in this area have remained low. The expectations for citrus production were thus considerably higher than the actual results. For the country, peak production was reached in 1973 with over I million tons, drop- ping to 0.8 million in 1974, and exports peaked at 0.7 million tons in 1973 and fell to 0.4 million tons in 1975. The Second Project was expected to create an incremental output of 126,000 tons for export (26% of all citrus exports) out of a total production of 180,000 tons. However, increases in production attributable to the Project can be estimated to barely reach 27,000 tons a year at full production (1985), 19,000 tons of which will be exported. At 1971 FOB Casablanca export prices, incremental exports would amount to DH 15 million. The increased total output would equal 15% of expectations and would not exceed 3.5% of all citrus exports. The areas affected by investments under the Project amount to 1,500 ha or barely 2% of the total area planted with citrus. Actual decline of citrus exports is due to factors such as (i) expropriation of plantation owners and poor performance of their successors; (ii) competitive market conditions; and (iii) failure to modernize old planta- tions. In retrospect this need to modernize old plantations was probably the best justification for including this component. However its success appears to have been very limited. 6.04 Winter Vegetables. Here again, actual estimates are somewhat below the figures arrived at during appraisal. Incremental production is estimated at 67,000 tons as a total area of approximately 4,500 ha was drained and ir- rigated under the Project. This represents merely 4% of all land under winter vegetables, instead of 11% as expected. Total incremental output was expected to be 120,000 tons, 50,000 of which would be exported. Actually, close to 25,000 tons are estimated to be exported yearly. No value figures are avail- able for the total production of vegetables. 6.05 Dairy Production. Increased milk production was assumed at appraisal to reach 4,000 tons in 1978 and 9,000 tons by 1983. While data is very tenuous, it seems that additional milk production due to the Project was two or three - 35 - times higher than these forecasts. The additional production generated by the Project has helped to ease the chronic shortages of milk. It is estimated that cull cows under the Project would provide approximately 1,900 tons of carcass weight of beef by 1984-85 and by then the herd of 15,500 cows financed by the Bank would have grown by 113,150 cows (excluding the 93,000 calves sold at age one during these 11 years). This herd would include the 15,500 cows to be culled and 97,650 milk producing cows. These cows would produce approximatley 158,000 tons of milk a year by 1985 and 200,000 tons of manure. 6.06 Beef Cattle and Sheep Fattening. Approximately 60,000 calves are estimated to be fattened in Morocco in stables built under the Project. No data is available on sheep fattening. The extra beef produced (6,500T) in- creases the existing yearly marketable supply of about 70,000 T by 9%. This increased production has been readily absorbed by the growing urban markets. An increase in the retail prices of meat over the last few years has en- couraged many farmers to go into cattle fattening. Appraisal estimates of incremental output of beef have, therefore, been widely surpassed. Macroeconomic Impact 6.07 Balance of Payments Effects. As a result of the Project, exports are estimated to have increased by DH 29 million a year (15 million in citrus and 14 million in vegetables) and imports to have decreased by DH 31 million a year (DH 9 million in cereals and DH 22 million in milk). The total possible effect on the balance of payments would thus be DH 60 million a year at full development. When operating costs, replacement costs and debt service have been deducted, net foreign exchange savings would accrue to approximately DH 45 million a year. This figure is somewhat below the expected DH 68 million due to the low level of investment in citrus and winter vegetables, the two main export items under the Project. 6.08 Import Duties and Subsidies. Import duties levied on equipment and other investments financed by CNCA under the Second Project amount to approxi- mately DH 22 million over three and one-half years (see Table 6). This figure includes the import duties levied on fuel (the main foreign exchange component in land improvement). If all applicants were to receive the Government subsi- dies they are theoretically entitled to by law as per the Agricultural Invest- ment Code, total subsidies for investments made under the Project would amount to DH 37 million. Realistically, however, this figure should be lowered as some farmers have failed to receive the subsidies because of bureaucratic and financial constraints. In addition, most subsidies (livestock, animal shelters, heavy equipment, etc.) are generally paid out two years after they have been applied for, thereby reducing their present value. Additional subsidies are paid to reduce the cost of inputs (fertilizers, seeds) and to encourage milk production. 6.09 Prices. Table 8 compares the appraisal report price assumptions and the actual constant prices (in 1971 dirhams) of inputs and outputs. Although prices did not quite follow worldwide inflation, they were readjusted often enough to decline only slowly in real terms. - 36 - Microeconomic Impact 6.10 Because no full-scale monitoring work is undertaken by CNCA, it is impossible to assess with any degree of precision the overall impact of the Second Project in terms of increased productivity or income to individual farmers. The only data available are the skeleton surveys made by CNCA loan agents when their prospective clients apply for a loan. A tentative income statement of the farm is drafted at the time of loan application, based on the estimated cropping pattern for the following season. Average regional yields and prices are applied. Needless to say, these forecasted income statements are only an approximation of reality. Actual cropping patterns are seldom what the farmer planned six or nine months before and both yields and prices obtained vary considerably from farm to farm so as to make regional averages inadequate measures. 6.11 It was not possible to assess the economic impact of the Project by comparing forecasts of income statements from one year to another. Indeed, farmers had seldom applied for a second medium-term loan with a sufficient time span between both loans so as to warrant a new appraisal by CNCA. In the few cases where such a sequence did exist and where differences in income and productivity could be directly attributed to the investment financed by the Bank, essential information was lacking. Case studies could thus only be grossly inadequate. The alternative would have been to interview farmers directly and reconstruct their income statement for the years prior to the investment. As could be seen from the extensive evaluation by OED of the First Project (para 1.05), the evasive answers of the interviewees, and their difficulty in recalling their detailed results for previous years would make such an exercise not very fruitful nor reliable (very few farmers keep even rudimentary accounts). In view of the constraints imposed by the unavail- ability of useful and reliable data, it is even doubtful that a wide-scale, in-depth survey of a representative group of farmers would shed more light on the economic impact of the Project. 6.12 As a result no direct conclusion can be drawn on the microeconomic impact of the Project. However the farm models prepared during the appraisal of the Third Agricultural Credit Project represent, to some extent, the results of investments undertaken during the period under consideration. Their financial rates of return range from 14% to 25%. 6.13 By comparing the investments financed under the project with those to be assisted under the Third Agricultural Credit Project, the project's economic rate of return has been recalculated to be 20-25%, slightly higher than the 18% estimated at appraisal. The increase in the ERR is due to the fact that the livestock component with its high value output received 32.4% of total project funds as opposed to only 10.3% allocated at appraisal. The economic benefits from milk and meat production greatly exceeded appraisal forecasts. 6.14 These frustrated attempts at measuring the effects of the Project in terms of income and productivity at the farm level strongly illustrate once more the absolute necessity of a continuous monitoring system, however elementary and unsophisticated. CNCA will implement such a system under the Third Project, with Bank assistance. - 37 - VII. CONCLUSIONS CNCA Performance 7.01 As detailed in Chapter V, CNCA performance has been very good. It has grown to become one of the best agricultural credit institutions in the EMENA region. Its management and staff are excellent; its financial position is quite sound essentially thanks to excellent recoveries. On the operational side, its efforts to reach an optimum balance between the desired thoroughness of appraisal and the objective of reaching large numbers of farmers, have resulted in flexible procedures for loan appraisal and approval. On the other hand CNCA has not developed an effective system of measuring the benefits being derived from its lending. 7.02 The main challenges facing CNCA in the future are to further expand its lending especially to smaller farmers. While CNCA is fully autonomous operationally, its financial independence needs to be strengthened. In the longer term, in order to further expand its lending to small farmers within adequate administrative costs limits, CNCA will probably need to experiment with new mechanisms for delivering credit, for example, group credit and of course develop an effective system to monitor and evaluate the levels of benefits being achieved by its borrowers. Government Performance 7.03 The Government was directly involved in the Project only at the negotiations stage. However its policies had a continuous impact on the implementation of the Project. Agricultural policies are analyzed elsewhere (Appraisal Report of the Third Project, Agricultural Sector Survey). Other policies directly relevant to the Project were the interest rate policy and the policy with respect to CNCA staff. With respect to interest rates, the Government was initially reluctant to allow increases in interest rates, even when it was necessary for CNCA's income; however in recent years its actions have led to both general increases in interest rates as well as specific solution rate increases for CNCA's lending and it has tentatively agreed on the principle of financial autonomy for CNCA (i.e., elimination of Government subsidy) over the long term. As for CNCA staff statute, the Government has been opposed to granting more autonomy to CNCA, but has allowed CNCA to im- prove significantly its staff compensation system in July 1976. However, not withstanding these two aspects, the Government has in general been very supportive of CNCA and has remained quite neutral and non-involved in opera- tional matters. Its performance can therefore, on the whole, be commended. Bank Performance 7.04 Most of the credit for the success of this Project, and of the Moroccan agricultural credit system, lies with CNCA and with the Moroccan Government. Once CNCA had become a strong independent institution--and this was essentially achieved during the First Project--it deserved most of the credit for its successes and the Bank's contribution could only be secondary. - 38 - In fact the Bank's contribution, in retrospect, appears mixed. The Bank's attitude seems to have fluctuated between, on the one hand, reliance upon and confidence in CNCA management and, on the other hand, a reluctance to modify the legal documents, sometimes to the detriment of the Project. Lack of continuity of Bank-staff involved does not appear to have much affecced the Project. 7.05 On the positive side the Bank provided general support to CNCA and a continuous trustful dialogue was established. The financial covenants under the Project were quite effective and adherence to them ensured CNCA's finan- cial soundness, although the covenant on general reserves could have been better designed. The Bank continuously emphasized the need for improved deposit collection and prompted CNCA to allocate more staff resources to the tapping of rural savings. The Bank's insistence on the subject of interest rates was no doubt a factor in the decision to raise CNCA rates in September 1975. However the general economic policy discussions between the Bank and the Moroccan Government (more than Project supervision efforts proper) deserve most of the credit for this increase since it followed a general increase of interest rates in the country in July 1975. By insisting (although with not much success) on an adequate flow of information (reporting requirements), the Bank probably helped CNCA somewhat improve its own internal reporting system. Finally, the general discussions between Bank missions and CNCA management on the preparation of the Third Project greatly helped CNCA management define its objectives and plan its future growth. 7.06 On the negative side, the Bank could have shown more flexibility in the design and the supervision of the Project. In the design of the Project (see para 5.28) the Bank excluded the CLCAs from its financing more for institutional reasons than for policy reasons; one year later it reversed its position completely and attempted to have CNCA prepare a Small Farmers' Credit Project for Bank financing. This turnabout puzzled the 1oroccans and the earlier intransigence shown by the Bank appeared to them even more diffi- cult to justify. The fact that the institutional reasons that had prevailed the year before (and that were still valid) did not override any more the policy choice of lending to small farmers, was difficult to understand. 7.07 The Bank also showed inflexibility on the question of interest rates. Once it was agreed that the "lower-income" farmers would be eligible for subloans at 6.5% (vs 8% for other farmers) there was no reason, either financial or economic, to apply a ceiling on the amount to be disbursed under this category. The fiscal income test to determine whether a farmer belonged to the "lower income" group or not is a rigorous one that could not be evaded. CNCA had extended about one third of its loans under this category in the past and did not plan to alter this proportion in the future. The decision to limit Bank disbursements under this category to 20% of the Loan/Credit amounts had the effect of penalizing CNCA since it could not easily reduce lending to the "lower income" group (which remained at about 35% of total loans for the three years 1972-1975). CNCA was left with the alternative of either deliber- ately reducing its lending to "lower income" farmers or of maintaining it and then not having access to Bank funds under this category once che 20% of the Loan/Credit was exhausted. The imposition of this ceiling seems to have been - 39 - made to keep in line with Bank policy on ensuring the financial strength of financial intermediaries but in this case the financial advantage was minor, while the impact on the types of beneficiaries reached was major. 7.08 The design of the Project by farm types (grain, dairy, vegetables etc) provided a clearer description of the Project in the Appraisal Report, but introducing the same distinction for disbursement categories implied a heavier administrative work load for CNCA (i.e., classifying borrowers by categories). The benefits of such a distinction are not clearly visible. The extraordinarily cumbersome disbursement procedures initially introduced were fortunately rescinded shortly thereafter. The existence of the market- ing facilities component was rational in the Project design from an economic viewpoint but the administrative difficulties and especially the role of OCE (para 3.12) do not seem to have been taken into account. The Bank did show some flexibility in one case: when disbursements fell seriously behind schedule the Bank agreed to consider financing subloans to some companies. There is reasonable doubt however that the SODEA investment refinanced by the Bank may not have been quite justified economically and that CNCA may not have been entirely free of interference in reaching its decision to finance this investment. The Bank's rejection of subloans to COMAGRI and SOGETA, gave CNCA a stronger case for refusing to grant any more loans to these two companies. 7.09 The other major deficiency in Bank performance concerns the lack of a more active effort to induce CNCA to establish a monitoring system. Although briefly mentioned in the Appraisal Report it was not introduced in the legal documents, and was conveniently forgotten by all until early 1976 shortly before Project completion. At the same time it must be recalled that the Bank still does not have an example of comprehensive low cost monitoring and eval- uation systems which it can suggest to its Borrowers. 7.10 Overall Bank performance can be deemed satisfactory in spite of these few deficiencies. Hopefully lessons can be drawn from these and applied to future projects. Lessons 7.11 The main lessons to .be learned from the Second Project are: (a) that CNCA is now an "adult" agricultural credit institution that can be. relied upon to a greater extent than previously done; and (b) that a monitoring and evaluation system needs to be established. Greater reliance upon CNCA can be seen in the design of the Third Project, in the performance covenants attached to it and in the style and frequency of Project supervision by the Bank. A monitoring and evaluation system will be established with Bank assistance during the first half of 1977. Appendix I - 40 - Number of Loans & Average Loan Amounts (Table 7) Number of Loans 1. The number of loans for each investment item is evenly spread over the three years of the Project, with slight increases from year to year for most items. The greatest increases were for pumps (over 40% yearly increase in the number of loans); dairy cows (60% increase in 1973-74, due to the massive importation program, followed by a 10% decrease in 1974-75); and draft animals (130% increase in 1973-74 and 13% in 1974-75). The decreases in the number of loans were felt mostly for destoning (20% a year) as stricter con- trols were enforced to cut back leakages and for tractors (5% in 1973-74 and 20% in 1974-75 due to the heavy price increases that year). Average Loan Amounts 2. Generally speaking, loan amounts have followed the cost increases for each item, especially for those items where financing is extended as a percentage (normally 70%) of the total cost (such as tractors, pumps, small equipment and livestock). Harvestors are the exception as prices rose con- siderably in 1974-75 (close to 20%) and farmers consequently purchased lower- priced models. This therefore reduced the average loan amount for harvesters by 7% for that same year. The same is not true for tractors where Massey- Ferguson has managed to build up strong customer loyalty for its MF185 model. Loan amounts followed price increases quite closely for this category (in- creases of 6% in 73-74 and 22% in 74-75) thereby indicating that no down- grading took place, although fewer farmers applied for such loans. 3. For reasons mentioned above, average loan amounts for destoning de- creased by 24% in 1974-75 although part of this decrease was also due to a reduction in the areas to be destoned and cleared. Loans to citrus planta- tions have decreased in amount as well, due to the lack of emphasis received by this sector in recent years (20% decrease in 1974-75 for new plantations and a 35% decrease for plantation maintenance). Total amounts borrowed for citrus plantations also decreased considerably, especially in 1974-75 (average yearly decrease was 25% for new plantations and 50% for plantation maintenance). 4. For all other items listed in Table 7, the amounts and the number of loans involved were too small to allow for any meaningful conclusions and the variations from year to year too erratic to be considered representative of any trend. - 41 - Appendix 2 Page 1 Physical Execution & Incremental Output (Table 5) Physical Execution 1. Although little data is available regarding the exact number of items financed under the Project (only the number of loans is available), approximate figures have been deduced and are shown for each category in the following table: Live- Grain Farm Citrus Winter stock Market- IA & B Plantations Vegetable IIIA ing IIA IIB & B IV Total Destoning-clearing (ha) 17,110 976 536 26 - 18,653 Drainage-irrigation (ha) No. of wells 918 902 458 159 31 2,468 (or equivalent ha) /1 4,039 3,968 2,015 - 136 10,159 Animal shelters (units) 41 - 15 5,629 - 5,685 Barns & other bldgs (units) 66 22 22 92 3 205 New plantations (ha) - 117 - - - 117 Plantation increases (ha) 900 - - - 990 Plantation maintenance - 1,550 - - - 1,550 Alfalfa seeding (ha) - - - - - 75 Harvesting equipment 190 1 1 2 - 194 Draft animals (units) 15,917 48 48 593 - 16,608 Livestock (units) 180 - 15,362 - 15,542 Small equipment (no. loans) 580 56 42 37 - 725 Tractors (units) 1,437 82 97 40 1 1,658 Trucks & pick-ups (units) 343 126 198 71 5 743 Pumps & attachments (units) 300 648 1,014 .26 - 1,989 Irrigation-electrification 6 12 3 4 - 25 (No. of loans) Stables & sheepfolds (units) - - - 50 - 50 /1 Assuming one well will pump 2.2 1/s (equivalent to irrigating 4. 4 ha at 0.5 1/s) and that all wells are built for irrigation (except those in Category III). - 42 - Appendix 2 Page 2 Incremental Output 2. When computing the additional output generated by the Project (see Table 5), the following factors were taken into consideration (with a compounding effect): Grain Farms: (1) Destoning & clearing (2) Drainage & irrigation (wells) (3) Tractors (4) Combine harvesters (5) Draft animals Citrus Plantations: (1) New plantations (2) Maintenance of existing plantations (not already counted as new) Winter Vegetables: (1) Drainage & irrigation (wells) (2) Pumps (excluding those fitted onto new wells and counted under 1) Livestock IILA: Number of cows purchased x average milk production IIIB: Animal shelters & stables (housing capacity) MOROCCO COMPLETION REPORT Second Agricultural Credit Project - Loan 861/Credit 338 Allocations & Disbursements Disbirsements Cat ogory Number Original as a % of & lescription Allocation Real i.ocation Total Disbursed Reallocated Funds Tmay 5, 1975) (May 28, 1976) 1. A & 1 Grain Farm $18,000,000 53.0 $18,000,000 53.0 $15,3511,503.79 45.2 85.3% Equipment If. A & B Development 11,500,000 33.8 7,000,000 20.5 6,9511,766.17 20.4 99.3% of CItirus & Vegetable I Production III. A & h Livestock 3,500,000 10.3 8,500,000 25.0 11,008,112.90 32.I 129.5% Devel opment IV. Market.ing aclliLties 1,000,000 2.9 500,000 1.5 682,617.1)4 2.0 136.5% ToLl $31,000,000 100.0 $311,000,000 100.0 $14,000,000.00 100.0 - 44 - Table 2 MOROCCO COMPLETION REPORT Second Agricultural Credit Project - Loan 861/Credit 338 Schedule of Disbursements IBRD/IDA Actual Fiscal Year Total Appraisal Actual Disbursements & Quarter Disbursements Estimate 1/ % of Appraisal Estimatl (US$ Million) 1972-73 3rd 4th 4.1 1.8 229 1973-74 1st 4.1 3.8 108 2nd 4.1 6.0 69 3rd 7.5 8.3 90 4th 9.0 10.9 83 1974-75 1st 11.1 13.5 82 2nd 15.3 16.1 95 3rd 17.5 18.8 93 4th 20.9 21.5 97 1975-76 1st 23.3 24.4 95 2nd 25.5 27.4 93 3rd 28.0 30.5 92 4th 34.0 33.6 101 1976-77 1st 34.0 34.0 100 1/ The date of effectiveness was estimated at time of appraisal to be October 31, 1972 but was in fact three months later. The appraisal disbursement estimates were re- scheduled accordingly. COMPLETION REPORT Second Agri o,ilturaI Credit Project - loan 861/Credit 338 Withdraiwal Applications & nisburaennts/Appals do Fond" et elocages (Dif000) (1) (2) (3) (4) Date of Application Amount of Ao-,nt of Aiount Di.bursement as Diabors-eet Number Subloan Applicrion Disbursed a 7. of Subloan Comments Rerques Date de Debiocage Numero Hontant Jt) a .70n (3) (1) d'Appel des Souepreta Montalt Dbloque d o Appele % du Hontant des Sousprts Debloques Credit 7/03/73 1 22,310,476 15.617.333 15,617,333 701 1/17/74 2 21,885,309 15,319,716 15,319,716 701 6/24/74 3 9,845,809 6.892,066 6,761,948 68.7% 7/23/74 4 13,852,758 9,696,930 4,159,764 30.0% Exhaustion of IDA Ligne do credit IDA opuisee credit line Loan 10123/74 2 12,916,964 9,041,874 9,041,874 70% 12/23/74 3 12,721,139 8,904,797 8.904,797 70. 2/11/75 4 12,909,057 9,036,340 9,036,340 701 5/09/75 5 21,623.405 15,136,383 840,000 3.91 Only DlI 1.2 million loan Soul le pret SODEA (DH 1.2 million) to SODEA waa refinanced a ate refinance 3/09/75 6 24,521,347 17,164,943 12,628,954 51.51 Ceiling aount for Plafond pour pr;tsa' 6.5% oat atteint subloane at 6.5% was (soulement 5% do coum-ci ont it refinanc4e) t reached (nly 5 of those could be refinanced) 7/25/75 7 13,672,261 9,570,583 9,570,582 701 10/29/75 8 13,307,714 9,315,399 9,245,931 69.5% One item (Di1 69,468) re- Un pr4t de OH 69,468 a oft; rejete jected for lack of pour documentation inauffisante documentation 1/27/76 9 14,848,609 10,394,026 10,394,026 701 4/09/76 10 21.108.951 14,776,265 14,776,265 70% 5/28/76 12 12,523,068 12,268,947 11,508,382 65.71 Exhaustion of loan Ligne do credit du pret BIRD epulae credit line 233,050,867 163,135,602 137,805,911 59.1% Total Total 1/ or 84.51 of total 1/ 84.51 des appets totaux applications NB: L'Appel No. 11 (Dil 840,000 1 .70 - DH 588,000) West pas compris pulaqu'll couvrait des prets non-refinancables NB: Applitcation No. 11 (DH 840,000 x .70 - D11588,000) is not included as it covered subloans that were not eligible for refinancing. 〔〕〕〕〕〔豁；：〔〔！〕〕〕讓〕〕〕〕！〕〕〕〕〕：〕〕〕：：〕 〕〕！〕”〕，一〔！:;’侈〕’;：誹：〕：辭’! “論一：!’〔‘i。 邑―三濾 呈i縴 〕三、“一！; - 〔邑煙壇：；震煙；，翅；煙煙：:；震三！& - 〕日霆鳥亡一韋，；屆徑：煙屆’蓄：徑蓬―一三！; ,：煙！一：：莖：:/!，震：呈煙：&；〔．! !!！、〕！＇〕〕’〕：一‘〕／〕！〕〕‘!! 〕：！〕〔〕〔！“籐‘震：，一’:&”·‘甲”& ！〕：！〕〕〕〕；、．:;.;;:；、；::：、：巴、；;:::;-; ：計！!‘二―：一〕－－一，---－一 〕！‘〔‘；〕：！〔〕！〕〕’〕〕！〕！〕〕〕〕〕！〔〔 〕〕‘!：〔‘&:’『：,‘〕‘, 一1&:! 二97- MOROCCO COKPI.ETION REPORT Second Agricultural Credit Protect - Loan Obl/Credit 338 Comparteon B tween Approt.9fil Estimates for Incremental Outpi3t & Actual Data Augmentation d"roduction: Comparnixon entre ten Estimations du Rapport d'Evatuation at lee Rialisations --Winter vegetables/-- --Dairy Farm (Milk)/---- - Cattle FattentnX I/ ---- ---- Citrus/Agrumea ----- Elevage lAitier Embouche ........ Total --------- Actual as Actual an Actual as Actual an Actual as Actual as Ap- %of Ap- Ap- %of Ap- Ap- %of Ap- Ap- % of Ap- Ap- % of Ap- Ap- % of Ap- praisal Actual protest protest Actual pralsal protest Actual protest praise! Actual protest protest Actual protest Protest Actual Protest Arse* affected (He 000) 350 150 43 7.6 1.5 20 13 4.5 35 371 156 42 Surfaces touchies (&WM % of total area affected 8 3.4 - 11 2 - 11 4 - a 3.4 . % du total de@ surfaces touchles Incremental output (000T) 170 142 84 180 27 15 120 67 56 4-9 25 280 2.8 6.5) - Production additionnelle B 155 11.4 - (OOOT) Incremental exports (000T) - - 126 19 15 50 24 48 - - - - - - Exportation* additionnaltee (000T) increment output value 6t 57 93 74 9 12 63 29 46 2-5 13.5 270 B8 7 26 240 134.5 56 Velour do Is production (w million) M4:8 - additloonalle (CH stillus) Total Average Yearly 4,600 4,100 89 830 815 98 200-2' 215 107 300V 5381/ - B51 69-3/ 135 - - - Moyeane Annuetle do Is Production (1971-75) M21 24 Production Total* (00UT) (1971-73) (OOOT) Incremental output as 8.7 3.5 22 3.3 - 2 5,2-' It 4.6 - B5 9 - Production additionnelle a % of total productlun M7 an % do I& production totele Benefits at full development (Year 11) Velour do I& production a plain developpe nt ILI Atk) 00(yr DII Million Milk 158 85 Left Beef 1.9 9.5 Viande Manure 200 a Fumure Total 102.5 Total 11 3 - Beef It B - Vtande de boeuf M . Mutton M - Viande do mouton Exportm only Exportations uniquement 3/ 1974 - Annuaire Statiatique du Maroc 3/ 1974 - Annuaire Statistique du Maroc Z/ Estimate as for 1968 Z/ Estimation pour t968 3/ So urce: Appraisal Report for Doukkale Irrigation Project; figure is an estimate for 1973 3/ Source: Rapport d'Evaluation du Projet d'Irrigation do Doukkala Estimation pour 1973 a All prices In 1971 Dirbams Tous lea prix donnto an Dirhama 1971 COMPLETION REPORT Second Agricultural Credit Project - .oan 861/Credit 33 Foreyn Exchange Coat - Inport Duties & Subsidjies/Coàt en Devbut - Droite de Douane et Subventions (DH million) Cout en Cort Total d' Devises Droits Droitu de Investissement 7% Devises Fore i go de Douane Dot.ine 'oauux Taux de Subvent ions Totai % Foreign Exclange Average Total Subvention Totales Investment Cost Exciange Component import Duty Imoort DLy Subsidv Rate lotal Subsidies Deatoning - clearing 8.0 30 2.4 6% .14 6% + 35% 2.94 Epierrage - déefrichement Drainage - irrigation 13.0 20 2.6 6% .16 6. .16 Drainage - irrigation Animal sieltera 38.4 37 14.2 57. .71 Dl[ 64/head 3.77 Abris à bestiaux üther buildinga 2.2 37 0.8 5% .04 - - Autres bàtimetrs. New plantations 0.7 50 0.3 - - )DH 0.50/year/ha 5.912 Création de plantations Plantation increases 5.9 50 2.9 - - ) ) Extension de plantations Plantation maintenance 2.8 30 0.8 . - - - Entretien de plantations Alfalfa seeding .1 50 - - - - - Creation de luzernières OD liarvesting equipiment 14.9 61 9.1 18% 1.64 20% 2.56 Matériel de récolte Draft animal@ 17.8 0 - - - - - Animaux de trait Livestock: imported 42.4 90 38.2 0.57. 19 Détail: importé purebred 14.1 45 6.3 - - ) race pure mseil aquipment 9.7 48 4.6 50. 2.3 30% 2.91 Petit matériel Tractore 63.9 58 37.1 6.5 i 12% 7.1 20% 10.96 Tracteurs Phytosanitary equipment .9 46 .4 157. .06 30% 0.27 iatérieL de traitement Transportation equipment 18.9 58 11.0 25% 2.75 - - Matiriel de transport Pumpa & pumping equipment 28.5 55 15.7 40% 6.28 - - Motopompes et matériel de pompage Irrigation - electrification 1.0 45 .4 - - - - Irrigation - electrification Stables, sheepfolde .4 37 .1 - - - - Equipement d'étable, de bergerie Other 98 41 .0 I& • 0 - .32 - - Autres Total DII 293.4 51.4 150.9 21.69 37.25 Total Di US$ 72.4 - 37.2- US$ Average Exchange Rate 1972-75: US$1 - Dii 4.05 Taux de change moyen 1972-75: US$1 - DiI 4.05 1/ For some items, oubborrower participation was above 30% su 1/ le cout en devises total du projet a depussé les $34 millions car toreign excehange coste exceeded $34 million - pour certains investissements la participation du bénéficiaire a éte supérieure a 307. 2/ DiH 0.50/troe (on averago) x 276,750 traes - Diii 553,500/yentr Z/ DII 0.50/arbre (en moyenne) x 276,750 arbres - Di 553,510/an biacounrod at 0% over 25 yogru - Dii 5.91 million Escomptes a 8% sur 25 ans - Dii 5.91 millions - 49 - Sec04d A.riculturfal Credlo Proloog LOdi B41/Credio 338 - ihambe7.4r of Subloans RIatO ced !'ader Second Protect i Correlation between Subloan Asun & Co.t incress. A- dellgäl.01 C ... . o arnn .CI la..:.o. 8 0 Total Averag number of Average Yearly Average- A O *t gig1bl L00• Loa sm O* 1e Ref.---- 9ariatis 1n Yearly Caet for RafI .nain 1972-75 (Appro2i01mal) !im m-As t (1) laocrme L) Total do. Montent M4on Nombr doe0 Pr0 Variation Noyon Vari.tic. 1yel 8aftoangeblea 80ye des EeIn01.ade Anull. des Anulle dos C..Et Deson ~ - clarig ' 5,593.730 3.341 1,673 • Ept~rrage - dtlth-t Drainage - 1rrigatto0 9.118.891 3,343 2.726 1 D Dr.it~ge - Lgrrggett Animal .helter0 26.904,80m 4.73 5,685 16 11 A1.1 'a b-Ia Other b«LldL.g. (b-..s, etc.) 1.577,613 7,677 205 5 . 11 Aå-ree bar.eb d'..poitto (grol9 tr..l) m-. plant-ton 486,300 12.135 40 22 C.actio d. plas.tto lattlog L_~creas 4,124.630 12.153 339 22 9tonl d plantaions PtItion ai-l ~. 1,959.833 26.475 74 -14 9 Etratlo d. plantatican Ailf.lf. .ding 53,100 1.41a 37 33 7 Cr-atto d. losenieroe H-~s.Cing .qui- 10,451,076 53.813 1964 2 12 Ma....1 d. '&ol.c Draft a--Ld 12.453.680 1.828 6.814 5 0.. A~ do ltrtt Liv ~.ok 39.570.658 16,411 2.411 1: 25 Anit-0m d. -e ~all eq.ipment b ~uiliary eqinen 6,775.931 9,350 723 6 P.Cit meålr.I *t -tal d'~o~pag-. Tr-~~oro 44,731,906 26,981 1,638 14 11 Trto.er 7yt-ssaI-ar7 .upmnl 665,045 0.a. - .a. o.c. M-1r1.1 do -trai n Transp ort--on l qp~tP-c 13.258,940 17,833 743 5 11 M,t1.e d. Crnp.or p~. b, Pu-pin qipoont 19.982.729 10.045 1,989 9 10 4oo.-poo,.e - 0 8.000rin do p o Irrigation - 'lectri-cation 694.100 27,070 25 55 o.a. irrigaoo - *lectifia1ic Stabl-0, 1he-pf,ld.. chJckn coope 284,750 .0. - n.a. tquip.t dtbl« , d* b-rgartI. d. poa.Cr fth-re 6,873.933 ".. - - - Autres Total 205,492,910 T..1 1/ EquIval4~n to 8,300 patr. of an1m-1., or 16,800 .oO.o j/ Equ.vent a 8.300 atteages, s.o1 16,600 animu d. trait 2/ Eq.vlent 0o 15,500 co0s, approxma~ejy jv-g* of 6.4 to-. par loa«) / Equi=.ve '0 1-5,500 weehas evron (0.6 vech-s o nye p r .-t / Igs-ed tr of c _oases for Iabor (77. ( .30). tractor. <11% a .10) >/ Moye. ponderå. di-one du otl d. la 0s10 d'1oeure (77 - .30), d.. cra:ru and fuel (5<0x .60) 111. .10) .t carbr1. 1 3 .60) 4' tinate0 4/ Estimation Wei4oghted average of oost increases for labor (72 * .25), ce.t (81 = .25) 5f May.nne ponder,.e des augsmutation. do eauo do la saia d'oeuvr. <71 o .20), do c. and 00h.r .aterials <131 = .25 (82 o .25) et do. autres otdrtaux (132 = .55) l Wighted averago of . o.r i0' for1- la l.bo, (7% . .40), cuttings (71 x .&0) ,/ Moyn po~derdo d4 « ug-entalo du coåt d, la a0 d'ocro <7 a .40), dag .ad fer-ilLr -2*(22. .20) pl« (n 71 .40) 0t do. grat (22% o .20) N0ta 1: 00 Avrge lo.. .mon fgur1.. do not in.lud. p-rlod b.twen 9/75and 2/76 ond L. calc1 du ot«t my~ da~ prte ne ed po& lm l pdriode enr. 9/75 0- Z-1.. r ereforo b,..sd don-ardo. Th. number of loan. refananced i. th-s La ota . y- ffectifs d~~ono don ..r. corrigde ' a. bou-se et l .nombr slightly t.flad. d. prl. 1bgerement corr151 a 1a b.1.-. '4°0. '- pN.C 2: The 0 igures th tbenldolth. -1.o uboitt-d by Mpå4 for Lao chiff-.r d t table. 0 c~o .e lo. monente appelle por la CCA 00 retnbursemfnt and refionoed by 04e loak (even 0.hough .he eotent of 04he rofioannac s01oi0. .110 0040 0d1t 0 ~atalit t pr le 81iD (» 0r l« A 04 pur refinancing may (all 040r0 of 702 in sm cases, as shon in Annas 3 Table 3). rfinancemen 000 on doça do 702, coe il 0. ressort do la Tab1e 3 Anne.. 3). 1.. Th. CxcLude th ffollowing iton: anon suiv n son par conjr- .1Pl.: -, -10an. made 00 SOGITA <Dg 3.9 hr 1lion) and C0HAI 'na 0.9 tillon) -PrOt. SGTA <D0 3.9 0illion) 00 CDMA81 (3 O.9 millica) do mrs 1975 4n 111rch 1975 -Phich 5he -k did n0t refinanq; que J''t"~ -o p(M ref1ido19; -kithdrawal aoplction 4., 11 covering a oa0t 505EA for 40,0000 Appe do fondo 0.. 11 pour . 840,000. .70 - 388,000 qui 8 'te' retir .70 - 1 186,000 0hat o ithbdrawn by C 8,CA (5/20/764); par P- 00a (20/5/74); .A pr0c0ss00g equipeant it.n ln Caory7 V(8 9,468) t.ha was not -Prk0 oour P quipament do ~ranCform-tion d-ns 1. Categorieott < IV ( 9,468) q refinanceod under w4oi .Iral application oo. 8 doe to 4ack of documentatonL. 0'a pas 0té refinancé 000c l'appel de fond. o. 8 0our d8.ouateion in~offa. Sicind-A1e_cii t<_ra i _Creil_i t Projrt - lusp_ 86_1/Credit t_3J9 .iiiortsin liieweiiYield & Price Assumtlns in Apraisni øf Second Prolert & Acr. n ?r oel iiiiiit:.!'Jp_aisonnore a ls Et ite jins du lpnrtd Esvnluar Ion et L Re L it.c st Iat ion d,i gappurt ---Raup<irt d-'vuat lin- - d'Evslunion en 7. de -----Arr_n sa i «<'flrt - ---- H 0enn la Mjoynne~ fetiuve- Anni Prolet Ar?sProjet - - ii,nal An1 sfHo4ennes Na_ole-- Avir,n Appraisal E"t mt e Ylidii (us/hul Before Project After ._roje. !2._-71 197 i-72 i9g_ 972-7 4 i7i7 1_974-75 1971-7_5 os t Ac_iisi Averag- Rendetne_nta (Qs/ha) rrir At Pr is i".r Pn: Prodults_: lii,m whenu 44 47 4i.1 49.5 5V.9 50.2 4s.3- 91 Ble dur f,.) ht 40 42 18.4 39.6 35.9 38.8 1.92 113 Bl tendre rlte 75 31) 29.1 3H.8 31.7 13.1 32.7 76 r.e lion tban 45 40 16.5 53.3 38.5 1N.3 413 109 [ves t:Ak pføn ii 101 .2 74.f, (7.7 58.2 78.9 63 Pis chilce Y),itn 41 41 39.i 797 . 2.9 32. %2 126 Agrume- -l.iiiia - export lo lo m1.1 56.8 42.1 l.6 57.7 2 21 T males - exporteen lænl i1 1 9.6 7.6 9.0 l.4 9.4 177 lo le. (ø.r bi0l 6, 6 13.3 57.0 57.5 4..8 28.7 102 Det ter-ne sarte Milk (11/i er) 0.53 o.4 0.614 <.59 1.54. I) 0.5 2 99 Ialt (lill/ltre) Jyyu)p.'int_ra.01ta 1/ Truttor 25,,000 25.41 10,66) 30,774 29,874 37,471 30 755 81 Tri,trir Iob in rvestir 71,n00 70,000 74,6b 75,138 67,92< 82,411 74 046 - 94 MIsonniuse batteitse t e"riiro " r clrce rurge <ll/hv) 45 45 53 74 71 78 6t 70 Travau a fa(.on--moisson mc.nish (Du/lis) k-rt i l -t Døi I0 n.- 143 314 27< 32 318 157 ngrai lil./tonne) noil (Ill/I tre) perrol n.u. n.0. 0.92 <.21 1.10 l. 2 I 1I - Carburants (It/Iltre) essence t<ure n.t. n.a. 1.38 0.37 .36 t1)3 1.31, - ga-ol i 6/ i).ritel h-dbred hel f,er 2,R>0 i,Boo 2,171 2,106 2,25) 7 ,802 2,224 12- Vsee race pure impirtie himrhr') lfr or n nM,,roco 2,110 61,00 1,7 1,896 1 875 2,35 1,99M 10 Vache rare pure née nu HArnc a (.50 4.82 4.65 4.fti 4.49 4.66ý <07 Hein d'ivnre (il/hnuoe/lour) il All prices in 1971 outni t To'l,n. s/ ti - ry prix en Dirhineico tnt.s de 1971. ti olutwieic elat.rs gibiloe by thre Srt I.l,t d'rr ni pi,. lO.s Indlces des Prix -ilvait. pubiles par le Secretrirlat d'Etat au Pisa ont etc reten,,. weureil apl,i ti. tur rt prIcen: n/ nn:,bi In who.ile price ...i--Fu.d r.irot--dmnir it 2/ Itdire dey prix de grs B C1s-lnta--Alenaio iticale 1/ rasabni,linn w ol- ile trIe indei-- ilnstrial <r.ut tu--tital 3/ Indire den prix de gros CInola sno- -Tons prodtits tiditrieis 4/ cmp iml"iltul pri,e de(i 4/ .iCeffit let le defl.tin d,. Pil 5/ o:i'unet n woliin r' "ttlen--AI I Itm 5o '/ 'i.dice 'des pris de r,ron Casl:ncs--Tou- prudulIts 6/ t-lC t l,it. w .h 1evi'. . pr'i toox--I .l il l liuc-d-te f/ Indce des prix de gr- 'h Casnbl-nca--ALimentation 5° å SPAIN 36 MOROCCO Meo'/erranean Sea AGRICULTURAL CREDIT PROJECT on CNCA ORGANIZATION: Head office A Regional offices -----Regional boundories MAJOR SUB-PROJECT AREAS: Grain forms - Dairying Vegelobles ven za Citrus Beef end sheep fattening Rao International boundories El Jadida 11 A /a/ n / / c -32° 02- 3t ~ Oce an 3 AgodALGERIA 5100 150 MILES 0 50 100 150 200 250 A L G E R I A KILDMETERS - -o o n thsmap d h '2 pta e o YWo thlgittu ayer0oyrnenosmno