Nicaragua - Agricultural Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3125 PROJECT PERFORMANCE AUDIT REPORT NICARAGUA AGRICULTURAL CREDIT PROJECT (Loan 943-NI) September 15, 1980 FIL COPY 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. CURRENCY EQUIVALENTS US$1 = Nicaragua Cordoba 7.00 Nicaragua Cordoba 1 = US$0.1428 Nicaragua Cordoba 1,000,000 = US$142,800 WEIGHTS AND MEASURES Metric System PRINCIPAL ABBREVIATIONS CB - Central Bank of Nicaragua FED - Special Development Fund BNN - National Bank of Nicaragua BANIC - Nicaraguan Bank IAN - Agrarian Institute of Nicaragua INFONAC - National Development Institute SDB - Inter-American Development Bank INTA - National Institute for Agricultural Technology INVIERNO - National Institute for Rural Welfare FED FISCAL YEAR January I - December 31 FOR OFFICIAL USE ONLY Project Performance Audit Report NICARAGUA AGRICULTURAL CREDIT PROJECT (Loan 943-NI) TABLE OF CONTENTS Page Preface i Basic Data Sheet ii Highlights iii PROJECT COMPLETION REPORT Summary 1 I. Background 2 II. Project Formulation 3 III. Project Implementation 7 IV. Project Achievements 9 V. Project Impact 10 VI. Special Issues 12 VII. Bank Performance 15 VIII. Conclusions 16 Annex 1 - Tables Attachment - Reply received from the Government of Nicaragua Nap Appendix - Completion Report of the Project Unit (in Spanish), available in project files. Thi decomem aemstre diibitim andmp be und by mcipiesa only in *A eetfmm of their emi duties. Its contents my not obwise b dicosed without World mank aauheainion.  Project Performance Audit Report NICARAGUA AGRICULTURAL CREDIT PROJECT (Loan 943-NI) PREFACE This is the performance audit of the Agricultural Credit Project in Nicaragua for which Loan 943-NI was approved in November 1973 in the sum of US$8.5 million and closed, fully disbursed, in August 1978. The audit report consists of highlights prepared by the Operations Evaluation Department (OED) and the project completion report (PCR) dated March 10, 1980. The PCR was prepared by the Latin America and the Caribbean Regional Office based on the President-s Report (No. P-1311-NIA, of October 31, 1973); the Appraisal Report (No. 215-NIA, of October 23, 1973); the Loan Agreement dated November 16, 1973; the supervision reports, loan documents and correspondence in Bank files, interviews with Bank staff, and a project completion report prepared by the Project Unit in Nicaragua. No field mission was undertaken to prepare the PCR because conditions of production and asset ownership in agriculture were radically changed after project completion. The draft report was sent to the Borrower on June 12, 1980, for comments. A reply indicating that Government had no comments to make was received and is attached to the report. Under OED-s abbreviated procedures, the audit finds no reason to question the PCRs' analyses and major conclusions.  Project Performance Audit Report Basic Data Sheet NICARAGUA: AGRICULTURAL CREDIT PROJECT (LOAN 943-NI) Key Project Data Appraisal Estimate Actual Project Costs (US$ m) 15.79 19.59 Overrun (%) - 24 Loan Amount (US$ m) 8.50 8.50 Disbursed - 8.50 Repaid )- 0.53 Outstanding )as of 31 MAR 80 - 7.97 Exchange Adjustment - 0.92 Borrower's Obligation )- 8.89 Date Physical Components Completed 6/30/78 6/30/78 Proportion Completed by Appraisal Target Date (%) 100 Delay (% time overrun) 0 Economic Rate of Return (%) 25 25 Cummulative Disbursements (US$ million) FY74 FY75 FY76 FY77 FY78 Appraisal Estimate 250 2,400 5,350 8,000 8,500 Actual 0 621 3,200 5,429 8,500 Actual as % of Estimate 0 26 60 68 100 Other Project Data Original Target Revisions Actual First Mention in Files - 11/2/67 Negotiations - - 9/12/73 Board Approval 11/13/73 - 11/13/73 Loan Agreement 11/16/73 - 11/16/73 Effectiveness 2/14/74 - 4/10/74 Closing Date 12/31/78 - 8/29/78 Borrower Central Bank Executing Agency Central Bank/FED Follow-on Project: None Mission Data No. of Mission Origin Date Persons Weeks Man-weeks Report Date Identification I FAO/Bank CP 4/66 1 1 1 5/68 Identification II FAO/Bank CP 7/68 1 1 1 9/11/68 Identification III FAD/Bank CP 11/69 3 1 3 2/18/70 Preparation FAO/Bank CP 2/72 2 2.5 5 4/14/72 Preappraisal Bank 7/72 1 2 2 8/ 3/72 Appraisal Bank 1/73 5 4 20 3/73 32 Supervision I Bank 1/74 1 4 days 1 2/11/74 Supervision II Bank 5/74 1 2 2 6/16/74 Supervision III Bank 2/75 1 2 2 3/20/75 Supervision IV Bank 8/75 1 4 days 1 9/22/75 Supervision V Bank 2/76 2 3 6 3/26/76 Supervision VI Bank 6/76 1 1 1 7/23/76 Supervision VII Bank 10/76 1 2 2 11/11/76 Supervision VIII Bank 3/77 1 3 days 0.5 4/28/77 Supervision IX Bank 11/77 1 4 days 1 11/30/77 Supervision X Bank 6/78 2 2 4 7/ 7/78 Supervision XI Bank 1/79 1 1 day 0.2 2/ 2/79 20.7  Project Performance Audit Report NICARACUA AGRICULTURAL CREDIT PROJECT (Loan 943-NI) HIGHLIGHTS The loan provided funds through the Central Bank for supervised credit to some 550 farmers and ranchers. Its main objectives were to increase crop and livestock production, raise productivity on new and existing lands, enable export diversification away from cotton and coffee, and encourage the participating banks (PBs) to lend to smaller farmers for longer terms. Sub-loans were to be channelled through state-owned and private commercial banks. Refinancing of advances made by PBs on approved sub-loans was to be through the Special Development Fund (FED) of the Government under the manage- ment of the Central Bank. The project also provided for technical assistance, support services and a livestock marketing study. Project lending moved very slowly throughout the first two years of implementation, mainly because of the slump in international and local beef prices and the existence of cheaper competing funds. Eventually, prices rose and alternative funds were fully committed; project funds were then fully committed and disbursed on schedule. Project success and impact were mixed. The project resulted in increased production. It helped re-stocking drought-affected areas and demonstrated the viability and advantages of improved husbandry and livestock marketing, and of the use of improved pasture seeds and artificial insemina- tion. Fewer sub-loans (372) were made. Average size of sub-loans as well as of farms were much larger than anticipated. Farmers smaller than those typically served elsewhere were reached, as anticipated. This category of sub-borrowers does indeed account for half the sub-loans made and a fifth of total funds on-lent, in line with appraisal expectations. But "smaller" does not mean "small" in absolute terms; for instance, the average sub-loan for grazing investments to the "smaller" class was US$25,000 for 50 farmers averaging 240 ha each. Also, only three of seven commercial banks ever made a "smaller" loan, with an average of little more than one per year. Other objectives were achieved. The project directors performed satisfactorily; staff interest in training was strong. Artificial insemina- tion operated properly and achieved a high pregnancy rate. The livestock sales center proved very successful. Pilot pasture seed schemes were im- plemented. The marketing study was finalized. The Government was not pre- pared to consider the study's recommendations, however, and it produced no discernable results. There is good information on the sub-borrowers' pre-project situa- tion and post-project prospects, but unfortunately no follow-up data were collected in anything more than a subjective manner. With this reservation in mind, it seems fair to conclude that the project-s economic rate of return would fall in the 14% to 50% range, with 25%, same as estimated at appraisal, as the most likely point estimate. Unfortunately, project impact has not been sustained. Even before the onset of difficult country conditions, many weaknesses had begun to become apparent (for instance, the artificial in- semination unit lacked adequate equipment and vehicles). The civil war made things worse; re-stocking gains were lost as herds were reduced. A re- habilitation loan and credit had to be granted after the war was ended.  - iv - The following points may be of special interest: - long time spent on project preparation did not lead to a better designed project (paras. 2.01 and 7.01 - 7.04) - the Bank made serious attempts to include constraints and safeguards to channel project funds to small farmers. However, these were unsuccessfully superimposed on a project whose basic nature - as well as then current country conditions - leaned towards larger farmers and ranchers (paras. 2.03; 2.07; 2.20; 3.02; 5.11 - 5.12 and 6.09 - 6.13) - availability of cheaper competing funds left little room for on- lending project funds - particularly for smaller farmers - during the first two years of implementation (paras. 2.05; 3.02 and 6.02 - 6.04) - changing livestock production and demand conditions would have required a different kind of project design; a sector-loan approach is suggested (paras. 6.05 - 6.08) - frequent turnover of Bank staff resulted in ambiguous guidance, particularly on technical matters (para. 7.05).  NICARAGUA AGRICULTURAL CREDIT PROJECT (Loan 943-NI) PROJECT COMPLETION REPORT Summary i. In 1973 the Bank loaned US$8.5 million to the Central Bank of Nicaragua (CB) to finance the foreign exchange content of its Agricultural Credit Project. By project completion in August 1978, 372 farmers had re- ceived US$14.39 million in loans for beef, dairy and crop development. Large farms received 79% of total farm credit for 194 sub-projects and smaller farms received 21% for 178 sub-projects. A further US$0.88 million was spent on technical support. Farmers themselves contributed US$4.3 million to bring total project costs to US$19.59 million. ii. The project was fully disbursed on time. The target of 20% of financing reserved for smaller farmers was achieved and valuable experience was gained, both by the Bank and by participating agencies. Private banks were induced to use their own funds as counterpart finance for long term agricultural sub-loans. Sub-project appraisal became acceptable to both private banks and the National Bank of Nicaragua (BNN). Innovations were made in the field of livestock marketing, production of improved pasture seed and artificial insemination. iii. Implementation problems were encountered at the beginning because of (a) the presence of competing funds at lower costs; (b) inexperience of project management; and (c) problems of project design. The final structure of activities financed was different from that envisaged at appraisal because of changed market conditions in the livestock industry. Average sizes of subloans were larger than expected partly because of rapid cost increases but mostly because farm and sub-project sizes were much larger than expected. Although the "small" sub-loans were smaller than those classed as "large" and although project management followed the classification criteria set, no clear conclusion can be reached concerning the income characteristics of beneficiaries of the smaller sub-loans because of the looseness of the de- fining parameters. Nevertheless, the persistent reluctance of private banks to extend loans to this category of farmer indicates that it is fair to conclude that the participating state bank (BNN) was reaching a group, smaller than traditionally served by the banking sector....". - 2 - NICARAGUA AGRICULTURAL CREDIT PROJECT (Loan 943-NI) PROJECT COMPLETION REPORT I. BACKGROUND The Sector 1.01 Agriculture continued to be the most important sector of the na- tional economy during the 1970's. Primary production generated 25% of GDP, supplied 80% of merchandise exports and employed one-half of the work force. Within the sector, cropping accounted for 70% of value-added. Production of coffee, cotton, sugar and bananas remained predominant, with cattle ranching contributing most to the value of animal production. Although pork and poultry output were minor in value terms, they were key components of the small farm subsector. 1.02 Prior to the war in 1979, a salient feature of Nicaraguan agricul- ture was the pronounced inequality of land ownership leading to the evolution of two distinct farming systems. Both the subsistence sector and the com- mercial sector contained roughly the same number of farmers, but the sub- sistence sector occupied only 2% of the land. 1.03 Commercial farmers grew cotton, coffee, sugar, rice and beef, mostly for export, and used modern farm production systems. Subsistence farmers grew corn, beans, bananas, plantains, poultry and pork, mainly for domestic consumption, and used traditional technology based on animal draft. Within the commercial sector itself, there was a sharp differentiation between some 2,000 large properties in excess of 350 ha and the 50,000 medium-sized farms covering about the same total amount of land. The large properties were typically owned by urban-based investors and directed by managers. 1.04 Sectoral growth rates have been high. During the project life, 1974-78, the growth rate in total production at constant prices was around 5% per year, compared with 3% during this period for South and Central America as a whole. In per capita terms, also, output grew strongly at some 3% per year. Most of the contribution to growth came from the expansion of the area under production and a partial substitution of crops for livestock. Productivity increases have been small. Growth in the value of output has been affected by cyclical variations in world prices for a few major export commodities. 1.05 Private financial institutions accounted for half the formal short-term farm credit and one-quarter of the development loans. Public institutions supplied the balance, with 18% of their funds going to small farmers and 82% to others in 1976. Special loan programs for small farmers were established, Credito Rural of the National Bank of Nicaragua (BNN), in 1959 to manage Inter-American Development Bank (IDB) projects, Agrarian Institute of Nicaragua (IAN), for land reform beneficiaries, National In- stitute for Rural Welfare (INVIERNO) in 1975, but the subsector remained underfinanced because of the general reluctance of banking institutions to advance long term loans to small farmers and the failure of the Government to provide adequate budgetary support for its own programs. - 3 - 1.06 Technical assistance to the sector has been concentrated around export crops and has been provided by commodity-based associations and credit institutions. Because of insufficient funds, the Ministry of Agriculture has been unable to provide normal extension, education and research support to the majority of farmers. The Project 1.07 The project addressed these issues by providing supervised credit on a countrywide basis in order to (a) raise productivity on new and existing farmland; (b) enable diversification of export production away from cotton and coffee; and (c) encourage banks to lend to smaller farmers for longer terms. The project also provided technical services to sub-borrowers. 1.08 Some 94% of the project cost was for direct production credit: beef raising was allotted 44%, dairying 38% and crops 12%. The balance of 6% was assigned to a cattle sales center, a marketing study, transport services, a pasture seed multiplication scheme, an artificial insemination center and to land clearing machinery. The overall rate of return at economic prices was estimated at 25% with the most profitable enterprise being beef fattening on irrigated pastures. 1.09 Of the total farm credit, some 20% was reserved for smaller farmers. A "smaller beneficiary" was defined as one whose major source of income was farming and the value of whose non-land, farm assets did not exceed US$20,000 or whose irrigated holdings were less than 20 ha. 1.10 The project was modest in anticipated coverage, expecting to reach 550 farms, being 1% of the total of commercial operations. At full development the addition to the total farm credit supply was to be 5% and represented an extra 12% of the long-term credit available. However, towards the end of the project life, it became the main source of long-term credit supply. 1.11 The loan was the Bank's fifth to the sector, beginning in 1951. It was the first Bank loan to the sector in ten years. With its completion, a followup project was taken to the negotiation stage in May 1978 and then stopped because of country conditions. Reordering of Government priorities and significant changes in basic institutions have occurred since then. A loan and a credit for post-war agricultural and industrial rehabilitation were signed on January 4, 1980. II. PROJECT FORMULATION Identification and Preparation 2.01 The project had an unusually long gestation, taking five missions and seven years before coming to appraisal. The original identification in 1968 was of an Atlantic region development program comprising a fisheries and banana development with a small livestock development component. This evolved into a proposal for a countrywide livestock project with funds to be channeled through commercial banks to large ranches. By this time, an agricultural credit project to be managed by BNN and focusing on crop credit for medium- scale farmers had been prepared. By early 1973, the two concepts had been amalgamated and were appraised as a countrywide farm credit project working through both commercial and state banks with loan allocations reserved for crops and livestock and for large and medium-size operations. -4- Appraisal 2.02 The project was appraised in January 1973, approved by the Board in November of the same year and became effective in 1974 after a two months' delay in appointing an internationally recruited technical director. The major issues raised at appraisal were (a) definition of the "smaller" farmer group, (b) availability of competing funds on better terms, and (c) interest rates and margins for participating banks. 2.03 The beneficiary problem was resolved by reserving a portion of project funds (17.6% of the loan amount and 20% of farm credit) for the farm size class "... smaller than those typically served by the banking system". The subsistence farm subsector was explicitly excluded on the grounds that institutional impediments prevented their participation and that they would be better served by a comprehensive project tailored to their specific needs. 2.04 In addition, it was recognized that the novelty of long-term supervised credit and the poor performance of banks in farm lending in the past would not encourage them to tackle the most difficult group first. 2.05 At appraisal, at least four major livestock credit projects were ongoing. Two IDB loans at 8% to beneficiaries were managed by BNN's Credit Department and by the National Development Institute (INFONAC) with an upper limit on total farm asset value of US$33,000 per beneficiary. A US$14 million livestock credit was available through a loan from British financial institu- tions and a further US$15 million fran a European/American consortium of private banks was available for large farmers. Total unsatisfied demand was thought to be large enough to accommodate the Bank project with a particular need among those farms too large for an IDB loan yet not large enough to be commercially attractive. 2.06 At negotiations, issues centered around interest rates with a compromise of 10 1/4% and 12% being reached between the lower rates of 10% and 11% wanted by Government and higher rates desired by the Bank of 11% and 13%. 2.07 At Board presentation, Bank management made it quite clear that the project was not designed to reach the poverty group in Nicaragua's country- side. No satisfactory institutional framework was available to work through and the target group was once again specifically identified as those too big for the Rural Credit Program, yet not big enough to attract the interest of commercial banks. If successful, the project would provide the basis for reaching increasingly smaller groups in the future. A special feature of the project was said to be its measures to exclude very large farmers whose holdings were typically in excess of 350 ha. Project Description 2.08 In spite of Nicaragua's natural resources, the development of crops and livestock has been constrained by the lack of an appropriate credit struc- ture, especially as regards the commercial banks, and by inadequate extension services. The project was designed to contribute to correcting this situation by providing suitable credit conditions and technical assistance. - 5 - 2.09 The main objective of the project was to increase crop and livestock production by providing medium- and long-term credit to finance investments in the agriculture sector. The sub-loans would be channeled through state and commercial banks which, in turn, undertook to provide the working capital required to implement individual projects. 2.10 This objective was to be achieved through an integrated financing program for 550 farms in five categories corresponding to Part A of the Loan Agreement, namely: (1) rainfed dairy farms; (2) irrigated dairy farms; (3) rainfed breeding and fattening ranches; (4) irrigated fattening ranches; and (5) irrigated crop farms. 2.11 The project was complemented by other components, namely: (a) Part B (1) subloans to ranchers' associations or cooperatives; and (2) subloans to contractors for earth-moving equipment. (b) Part C - the provision of extension services by the Project Unit; (c) Part D - support services in cooperation with the Ministry of Agriculture and Livestock (1) improved pastures center; (2) construction of two livestock marketing centers; and (3) establishment of an artificial insemination center. (d) Part E - a study on the marketing of cattle and beef in Nicaragua. 2.12 The project was national in scope although expenditure was to be concentrated in the Central zone (Boaco, Chontales and Matagalpa) and in the Pacific zone, especially in the department of Leon (see Map). Terms and Conditions of the Subloans 2.13 The amount of Schedule 2, Part A, subloans, would not exceed 80% of the total costs of farm investments, except in the case of smaller sub- borrowers, where it would not exceed 90% of such cost. 2.14 The principal amounts outstanding of Part A, subloans to large sub-borrowers, bore interest at an annual rate of 11%, plus 1% for super- vision; for the small sub-borrowers the interest rate was 10-1/4%. - 6 - 2.15 The repayment periods were not to exceed: Repayment Period Total Subloans for Grace Period (years) (years) Part A (1) 3 7 10 Part A (2) 4 6 10 Part A (3) 4 8 12 Part A (4) none 5 5 Part A (5) 2 8 10 2.16 Not more than 50% of the amount of any Part A subloan could be used in the acquisition of breeding cattle without the prior approval of the Bank. No Part A subloans could be made to finance (a) planting rice or tobacco, or (b) the expansion of existing plantations of cotton or coffee. Not only was commercial credit available for production of these crop but a project objective was to diversify away from them. 2.17 The sub-borrowers were obliged to keep records of the progress and cost of their farm development plans, and to observe proper agricultural practices. 2.18 Participating banks (PBs) were to sub-lend to producers in accor- dance with the Subsidiary Loan Agreements with the CB. Such sub-loans were to be made on the basis of a creditworthiness study and farm develop- ment plans approved by the Technical Director of the Project Unit. Refinanc- ing of advances made by PBs on approved sub-loans was to be through the Special Development Fund (FED) of the Government under the management of the CB. The participating banks had the obligations to supervise and suspend disbursements and to provide short- and medium-term working capital. 2.19 Total planned investment was equivalent to US$15.79 million, of which the loan provided US$8.5 million, or 54% of total costs. The FED contributed US$1.6 million equivalent, the participating banks US$2.9 million equivalent and the sub-borrowers US$2.6 million equivalent. 2.20 While the FED would earn a spread only on sub-loans to sub-borrowers other than small beneficiaries, participating banks would retain a larger amount (3%) on sub-loans to small sub-borrowers than on those to others (2.5%). Other features of the project aimed at ensuring that project lending would not be restricted to a few large ranchers were that (a) smaller con- tributions would be required from banks and beneficiaries for small farmer sub-loans; (b) the stipulation that no subloan in excess of US$100,000 would be made by a participating bank to any sub-borrower; (c) the condition that the annual proportion of sub-loans to small beneficiaries to total project sub- loans made would be at least 15% in the first year, 20% in the second year and 25% in the third year, and (d) the reservation of US$1.5 million out of the Bank loan proceeds for such sub-borrowers. - 7 - 2.21 The project would be administered by a project unit within the FED which itself was a government fund within the Central Bank. The FED would finance sub-borrowers through the Government-owned BNN, the largest bank in the country and the major institutional source of agricultural credit, and through seven private commercial banks whose modest role in agriculture had so far been restricted mainly to production credit. The Project Unit, under an internationally recruited Technical Director and a Nicaraguan co-Director, would employ its own technicians and also guide those engaged by the banks to appraise and supervise their subloans. The project would strengthen BNN's efforts to improve its financial position. 2.21 Estimated financial rates of return ranged from 17% to 40% and the estimated overall economic rate of return was estimated at 25%. With appropriate assurances, the project was considered suitable for a Bank loan of US$8.5 million repayable in 16 years, including five years of grace. The borrower was the Central Bank of Nicaragua and the loan was guaranteed by the Republic of Nicaragua. 2.23 Production goals envisaged at full development were 7,000 m tons of beef annually, equivalent to a 10% increase in national output; incremental milk production of 15.9 million liters, also equal to an extra 10% of national production, and some 13,000 m tons of sugarcane and 7,000 m tons of plantains at full development. The value of incremental output was expected to peak at around US$10 million per year at farmgate prices for a total investment of US$15.7 million. III. PROJECT IMPLEMENTATION Effectiveness and Startup 3.01 After a two months' delay over entering into the Subsidiary Loan Agreement with participating banks and the appointment of an expatriate Project Director, the loan became effective in April 1974. Implementation 3.02 Little progress was made in the first two years. By the end of the first year, March 1975, only 14 subloans had been approved representing 15% of those planned. Six months later, 38 subloans had been approved, instead of the intended 245. Commitments were 40% of the expected amount and the average subloan size at US$60,000 was almost three times that anticipated. With smaller farmers receiving 8% of the subloan total instead of 15%, the CB was in violation of the relevant covenant. The average farm sizes by enterprise type were from five to ten times the farm sizes anticipated at appraisal. Little progress had been made in implementing Parts B, C, D and E. In fact, the seed production and artificial insemination (AI) com- ponents had been postponed. 3.03 Several amendments were made to the Loan Agreement. In 1974, the requirement that PBs submit their total loan portfolio to external audit was changed to include only the Project accounts (Schedule 6). This was done to remove the objection by possible participating banks (PBs) that the costs of participation would be too high compared to the small share of project lending relative to total loans advanced by these banks. Problems arose in - 8 - producing documentary evidence of foreign exchange expenditure on certain items, particularly those purchased locally from dealers' inventories. Accordingly, Schedule 1 was amended to allow Bank finance for 70% of total expenditure under Categories I and VII instead of 100% of foreign expenditure. This allowed financing of part of the local Director's salary as well as equipment and vehicles. 3.04 ,The structure of demand for sub-loans under the various categories differed from that expected at appraisal and changes in the Loan Agreement were necessary. In 1975, rainfed cropping and beef production were added to the irrigation activities in Part A(4) and (5) of Schedule 2. A grace period of one year was introduced for specialized beef fattening and the repayment period reduced from five years to four. The ceiling on the amount of any sub-loan that may be used in the acquisition of breeding cattle without the prior approval of the Bank was increased from 50% to 70% to accommodate herd buildup (Schedule 6, Part C(3)). 3.05 As the Project entered its final phase in December 1977, realloca- tion of funds became necessary with a final reallocation authorized in October 1978. The amount allocated to beef production under Category II was increased at the expense of all other categories except the minor item of US$25,000 for consultant's service for the marketing study. The reallocation of funds among farm activities (Categories I to III) reflected the relative changes in profitability. The reduced amount in Category IV was due to the in- stability of farmer groups and the lack of interest in financing for earth- moving and associated equipment caused by the availability of competing funds. Support services were financed from the Borrower's own funds allowing all Category VI allocations to be transferred to sub-loan categories. The final allocations are summarized below: Initial Final Category Allocation Allocation (at appraisal) . (fully disbursed) ---------(us$ 1000)------------ 1. Sub-loans, multipurpose rainfed and irrigated dairy farms 3,100 1,967 II. Sub-loans, rainfed breeding and rainfed and irrigated fattening beef ranches 3,600 5,558 III. Sub-loans, irrigated and rainfed crops 950 841 IV. Sub-loans, storage and transport facilities, and earthmoving and ancillary equipment 370 38 V. Expert services, vehicles and equipment for extension 240 71 VI. Equipment, vehicles, materials and supplies for support services 180 - VII. Consultants' services for marketing study 25 25 VIII. Unallocated 35 - Total 8,500 8,500 - 9 - IV. PROJECT ACHIEVEMENTS 4.01 By completion date in June 1978, 372 subloans had been made for a total of US$14.79 million. Some 60% of on-farm investment went to beef operations, 26% to dairying and dual-purpose, and 13% to cropping (Annex 1, Table 5). Another US$0.88 million was used for the cattle saleyards, the beef marketing study, the pasture seed component and the AI center. However, the allocations for farmers' associations and earth moving machinery remained largely undisbursed. On-farm Investments 4.02 Livestock purchases accounted for 31% of investment costs with pasture establishment, fencing and buildings adding another 38% in almost equal proportions. Minor items (less than 10% each) were roads, small water reservoirs, wells, machinery and equipment and land clearing for cropping (Annex 1, Table 4). 4.03 The smaller farmer category of beneficiaries received 48% of subloans made (178 out of 372), for a total of 21% of overall financing (Annex 1, Table 8). Sub-loans to larger farmers financed 74% of their investment costs. For smaller farmers the figure was almost 90%. 4.04 The structure of investment demand varied by farm size class. Larger farmers invested two-thirds in beef production whereas smaller farmers put two-thirds into dairying. While large farm investments in cropping were considerable at 15%, only 5% of improvements on smaller farms went to this activity. Another striking feature is that most smaller farm dairy operations (84%) were dual-purpose while the situation was practically the reverse on larger farms with 87% of dairy operations being specialized. This pattern suggests that smaller farmers in Nicaragua are somewhat more risk-averse than the larger ones and prefer to maintain incomes by diversification at the loss of some performance. 4.05 There was practically no demand for subloans to cooperatives, associa-tions or contractors (Part B). Only one subloan in this category was made representing less than 10% of the allocation. The subloan of US$42,000 was for a storage building for a ranchers' association in Boaca. Technical Assistance 4.06 Interest was strong in participation in training courses (Part C). In order to prepare subloan studies, supervise expenditure and provide sub- borrowers with technical advice, the Project Unit set up a training program in cooperation with various institutions for specialists from the participating banks. Five specialists were sent abroad and 37 were trained locally at an overall average cost of US$13,500 each. Support Services 4.07 AI work began in 1976 with the Ministry of Agriculture and, at full development after two years, 2,728 cows were being inseminated yearly at an 81% pregnancy rate. The program served 93 small dairies in the central zone. - 10 - 4.08 The livestock sales center was opened in 1977, at a cost of US$88,000. By the end of the following year, over 9,000 head had been sold for US$1.08 million. The saleyards are owned by the FED and are managed by the FED, the Boaca Rancheros' Association and initially by the National Livestock Auction Company. 4.09 The National Institute for Agricultural Technology with direct FED participation has implemented a pilot pasture seed scheme financed by the project. Expenditure on production and distribution of improved varieties over the two years - 1976-1977 - reached US$22,000 with sales of US$32,000. An area of some 1,500 hectares has been established - mostly to Panicum species. Marketing Study 4.10 The livestock marketing study looked at problems with the beef industry in Nicaragua. The consultants' major recommendations were (i) introduction of a beef grading system with price advantages for better grades, (ii) establishment of auction saleyards within small farmer concentrations, and (iii) improvement of technical assistance to producers with stress on better quality meat production. The study cost US$74,000 under Part E. Participation of Banks 4.11 One of the principal project objectives was to promote active interest among the commercial banks to lend for agricultural development. Three of Nicaragua's seven commercial banks plus BNN and INFONAC, the develop- ment agency, participated in handling project credit. 4.12 Of the total cost of on-farm investments, 45% was supplied by IBRD, 14% by FED, 18% by participating banks and 23% by. the beneficiaries. V. PROJECT IMPACT Production Effects 5.01 The project increased production, helped restock drought affected areas and demonstrated the advantages of improved husbandry. The project's Technical Unit estimated that the value of incremental production at current prices is of the order of US$7 million per year, of which half is exported. This represents only 1% or 2% of the current value of farm output. Never- theless, the concentra-tion of some 12% of long-term credit on only 372 of the nation's 50,000 commercial farms would have had a major impact at the farm level. 5.02 The Technical Unit maintained some farm data. Initially gathered at the time of subloan application, these data were updated during investment inspections. Since no formal monitoring system was required or implemented, the information recorded tends to be insufficient and limited in suitability for use in measuring project impact. Only broad conclusions may be drawn from them. - 11 - 5.03 Firstly, the carrying capacity of pastures sown to improved grasses rose fran one to two beasts per hectare. Secondly, the conception rate of cows serviced by the AI unit rose fran 49% to 81%, as verified by the AI unit's herd records. Thirdly, milk production per cow rose by an average 60% and beef production performance improved with the infusion of improved breeds into these herds. Overall, these effects are within the range to be expected from the general application of improved technology. 5.04 At the time of appraisal (1973), a severe drought hit the breeding areas of northern Nicaragua reducing the number of breeding stock available for sale to other areas in subsequent years. Restocking was initially slow because of high cattle prices. As prices fell, the demand for project credit to buy breeders increased. By project completion (1978), 31% of investment funds had been spent on 23,000 head of cattle. This is over five times the number estimated at appraisal. 5.05 Although this number of cattle is less than 1% of the national herd, it approaches 5% of the annual increase. In addition, most of the other investments were complementary to cattle, such as fences, pastures, water, tanks and stockyards. Altogether 61% of project costs were spent on re- stocking and increasing beef herds. Maximum farm impact was on those dairy farms planting improved pastures and participating in the AI scheme. 5.06 The different impact of the two contrasted approaches to beef marketing problems is interesting. On the one hand, the consultant's study on the subject has produced no discernable effect. On the other hand, the livestock auction center at Boaca proved so successful that it was unnecessary to build the intended second unit. Private entrepreneurs copied the design and concept to build others using private funds. The frequency of sales had to be increased from bi-monthly to weekly to handle the traffic. 5.07 Demand for project funds for cropping was minor. Only 25 projects out of the 372 in total were for this purpose. Most of the investments were for 1,400 ha of sugarcane expansion. When the price of sugar fell, the beneficiaries used further funds to diversify away from sugar production into 1,000 ha of maize, sorghum, beans and plantains. Financial and Economic Effects 5.08 The Technical Unit calculated financial returns to be expected for each sub-project at the time of subloan application. Unfortunately, no follow-up data were collected in anything more than a subjective manner. The most that can be derived is that the standards used in proposals for later investments were based on experience with earlier investments and that the Technical Unit's final calculations reflect this experience. 5.09 With these reservations in mind, it is fair to conclude that the financial rates of return on sub-projects are likely to have been in the 14% to 50% range, as shown in the Project Unit's Completion Report (Annex 1, Tables 6-8). Since there is little divergence between Nicaragua's domestic and border prices, the economic rate of return would fall into the same range. The overall economic rate of return appears to be in the order of 25%, as estimated by the appraisal team. - 12 - 5.10 No follow-up program is contemplated or recommended to gather actual farm data from beneficiaries. The war has so altered conditions of production and land ownership that results of acceptable confidence could not be expected within reasonable time. Institutional Effects 5.11 Overall, the impact on the degree of active participation of private credit institutions in small-farmer lending was marginal. Only Banco de America was involved to any degree. That bank lent 57% of the project loan funds, yet only 12 of the 93 subloans it made were to the smaller farmer category (Annex 1, Table 2). Even with these, it is difficult to detect a real shift in interest to smaller farms since the average amount of "small" subloans made by that bank was US$33,700. 5.12 Of the state financial institutions, only the BNN was involved in any degree. Its emphasis was concentrated on smaller farm sizes (Annex 1, Table 2). Subloans to this category were, on average, one-half the size of those made by the private banks. Of the 178 smaller sub-loans made for the whole project the BNN made 152. 5.13 The effect on the Project Unit within the FED was considerable as experience built up in techniques of sub-project appraisal and supervision. 5.14 The major insitutional effects seem to have been in demonstrating what could be done. Banco de America's experience showed other private banks that long-run credit to agriculture was profitable; BNN showed that smaller farmers could be reached with long-run development credit and that there was a demand from this group for such funds. The auction center changed relation- ships in cattle marketing. Both the AI program and the improved pastures' components were important and successful experiments which, despite their shortcomings, show a way towards improving productivity and incomes of small farm dual-purpose dairies. 5.15 Unfortunately, the impact has not been sustained. Even before the onset of difficult country conditions, many weaknesses had begun to appear. For instance, the AI Unit's equipment and vehicles were inadequate for the necessary reliability of service (para. 13.15, appendix). Serious technical and organiza-tional problems had shown up. In order to capitalize on this project's sub-stantial achievements in initiating technological change, a series of follow-up projects is needed with relatively more concentration on farm technology and practices than on credit supply. 5.16 The restocking gains were lost during the civil war as herds were reduced. The number of cattle slaughtered for local consumption in 1979 rose by 25% and the number taken across the border increased ten-fold to give a net reduction in Nicaragua's cattle numbers of some 12%. VI. SPECIAL ISSUES 6.01 This project experienced many of the difficulties common to most credit projects, such as cost increases, land-titling deficiencies and manage- ment weaknesses. General cost increases are not specific to this project. Titling and management problems ceased to be of major concern after competing credit became fully committed. Three problems are put forward as special - 13 - issues because they pose important considerations for other credit projects in Nicaragua and elsewhere. They are (1) availability of competing funds at lower cost, (2) trends in the livestock industry, and (3) equity requirements of the loan agreements. Competing Funds 6.02 During the first two years, IDB funds were available to small farmers at 8% compared to 10.25% under the Bank project. BNN's accounts for this period show that is had received US$7.7 million for small farmers from IDB in three loans at interest rates of 2-1/4%, 3-1/4% and 4%. The cost to the Central Bank of Bank funds was 7-1/4%. Larger clients could obtain loans from INFONAC at 8% compared with the Bank's 12% for this group. Other funds were available through the private banks from large loans made by consortia of British/American/European commercial banks under simpler conditions of dis- bursement and supervision. 6.03 The presence of such funds was presented as an issue at appraisal in 1973 but was not considered likely to be troublesome. By June 1976, disburse- ments were 26% of expected and the value of smaller subloans had fallen to 5% of the total instead of the required 15%. The Central Bank advised the Bank that, with the full commitment of IDB funds in late 1976, the lending targets could be met. Upon reaching that point, as forecast, interest rates on small subloans were raised to 12% and, on large subloans, to 13.25% with the ex- ception of Bank project borrowers. Within one year, the project was sub- stantially on target with commitments rising to 64% of expected and with the smaller farmers' allocation rapidly being approached under the encouragement of a new project director (the former co-director). However, an examination of the size of subloans under the project (Annex 1, Table 3) shows that 171 of the 178 smaller sub-loans given at 10-1/4% were for less than US$40,000 each and could have been obtained from the IDE funds at 8%. Some 76 of the 194 larger sub-loans granted at 12% also were for less than this limit of US$40,000. Presumably, the 59 large sub-loans of US$100,000 would have been of interest to private banks, had the British funds lasted. It seems fair to conclude that at least some of the early problems with disbursement were caused by the presence of competing funds on better terms. 6.04 The buoyant conditions in the livestock industry at preparation and appraisal led not only to the formulation of this project but attracted other funds for similar purposes. Had industry conditions continued, competing funds may have been exhausted earlier, but not necessarily so. As it was, the unprecendented collapse in world beef markets just after effectiveness slowed down demand, particularly for more expensive money. Although the issue of positive and negative interest rates may have been important to economic development, the issue for the project was the cost and availability of alternative farm credit. Livestock Industry Trends 6.05 The project had been designed with the expectation that market con- ditions would continue. At appraisal, beef prices were at an historical high in both current and constant terms. Within two years, export prices were halv- ed and stayed low. The beef/grain price ratio fell from 1.6 in 1973 to 0.5 in 1976, altering the structure of subloan demand away from the specialized and - 14 - intensive operations towards multi-purpose and extensive ones. As livestock prices began to recover slowly, a conservative investment trend emerged. No subloans were made under the specialized custom-fattening category and only 14% ot investment costs went to specialized dairying, instead of the antici- pated 41%. Instead, cattle purchases and associated investment for grazing rose from an expected 25% to 60% and investment in dual-purpose stock activi- ties rose from an expected zero to 12% of investment costs (Annex 1, Table 5). 6.06 A further modifying factor was the end of the serious drought in breeding areas. Coupled with low stock prices and credit availability, restock-ing, rather than development, became important. The actual count of breeding stock financed was 23,342 head for 31% of investment cost instead of the planned 4,000 head accounting for 13% of costs. 6.07 Both the structure of activities financed and the speed of disburse- ment of competing funds were the result of radical change in industry con- ditions. These could not have been foreseen by the appraisal mission. 6.08 The issue that arises relates to the implications for the design, analysis and implementation of credit projects. When a project is country- wide, covers diverse activities and lasts several years, the dynamics of production and marketing can be expected to alter the structure of activities financed. The question becomes one of whether or not such projects should be processed as sector loans with activities being chosen by the loan institu- tions at the time of sub-project appraisal. This would eliminate the pro- cedure of having allocations by categories changed with the unwarranted implication that someone erred in the original classification of expected demand. This approach, now commonly used, improves the meaning and usefulness of the sensitivity analysis since tests can also be done on changes in the sub-project mix. Equity Requirements 6.09 The loan agreement required that 20% of subloans be to "smaller" producers. The subloan allocation reserved for smaller farmers was reached with the final figure being 21% of the total amount (Annex 1, Table 8). The figure for the state organizations was 31% and for the private banks 6%. The 6% figure represented 18 sub-loans over four years among three banks, with a further four not participating (Annex 1, Table 1). Each participating bank, then, made an average of little better than one smaller sub-loan per year. 6.10 The average investment cost per sub-project was US$50,000 instead of the anticipated US$27,000. General price increases are not sufficient to account for the increase since the cost of the major item, breeding stock, actually fell. The difference is explained by the larger than expected size of sub-projects in physical terms. For instance, the average beef cattle project purchased 141 head each instead of 27. 6.11 The interpretation of "small" subloans and "small" farms is diffi- cult and subjective. For the purpose of the project, a "small" farm was defined as one with less than US$20,000 in non-land farm assets. Yet, the average sub-loan for grazing investment to the "small" class was US$25,000 for 50 projects on farms averaging 240 ha each (Annex 1, Table 6). A profile of 160 smaller sub-borrowers provided by project management shows properties - 15 - of up to 1,400 hectares with 350 hectares under pastures classified as "small." No relationship between the value of non-land assets, income or farm size could be discerned which would enable the equity concerns expressed at Board presentation to be accommodated. 6.12 The expected and actual average farm sizes by activities differ some- what, leading to the conclusion that, although project management followed the guidelines for subloan classification, these were inadequate to prevent an up- ward shift in beneficiary size in terms of total assets and average incomes. Average Farm Size in Hectares Expected at Actual at Activity Appraisal Completion Irrigated dairy 20 150 Dryland dairy 50 120 Grazing, wet zone 300 581 Grazing, dry zone none 823 Dual purpose none 207 Irrigated cropping 35 92 At the least, the project management's suggestion of calling the smaller group "medium" instead of "small" seems appropriate. 6.13 The issue becomes one of whether or not an investigation of farm class by income, asset or area should be done at preparation. Given serious problems of definitions and non-homogeneity in agriculture at the level of countrywide farm credit, other approaches may be more appropriate. One option is to channel target group funds only through institutions that have no alternative clients. VII. BANK PERFORMANCE 7.01 At least some part of implementation problems belongs with the project concept and design. Neither was unambiguous. Seven years passed between first identification and appraisal. The project was the first to the sector in 18 years with the exception of the cancelled Rivas Irrigation loan in 1963. Sector experience was not strong. The documents show that the project evolved from regional development of the Atlantic Coast, with a small livestock component, to a traditional livestock project proposal with no equity considerations. 7.02 Just prior to appraisal, a credit project for crops with an ex- clusive focus on medium-scale farmers had been partly prepared by the FAO/Bank CP. The two projects were merged, with the cropping and equity considerations included as minor elements in what was to prove to be essentially a livestock loan. 1/ At the time of the merger, no basic restructuring followed. Defini- tions open to various interpretations were added, which not only gave rise to lasting problems during implementation, but also leave many questions about project success unanswerable. 1/ Investments in crops reached 13% of the total, compared with 12% estimated. This was, however, in 25 Sub-loans of which 21 were classed as "large". The average size of the Sub-loans in the "small" class was US$27,000. - 16 - 7.03 Senior FED staff considered project design the major implementation problem. As early as 1971, the Government had decided on a livestock project. On creation of the FED in 1972, World Bank financing was requested because of expectations about the type of technical assistance available from the Bank. Since the FED had no prior experience in supervised farm credit, they deferred to Bank staff views, on occasion, against their own judgment. For instance, the final form of the project as Agricultural Credit was not in accordance with the FED's decision on a Livestock Credit. 7.04 The interest rate subsidy for small farmers and the width of the interest rate spread caused continuing problems. The margin of 3% and 2.5% on small and large loans, respectively, was insufficient to cover operating costs. The shortfall had to be taken from counterpart loan funds. However, it should be noted that the subloan interest rates requested by Government were lower than those finally agreed on. 7.05 With 11 supervisions in 4-1/2 years, it would be expected that Bank staff would have remained close to project conditions giving detailed and timely guidance. Nevertheless, senior FED staff complain of the frequent turnover of Bank staff giving ambiguous guidance. This was particularly acute on technical matters, such as the pasture seeds component. On the other hand, such direction was the responsibility of the Technical Director. It was further felt that the Bank's relationships with the FED did not fully reflect an appreciation of the FED's role in Nicaraguan banking. Far from simply being a project unit created by the Bank, the FED processed over US$500 million for all sectors and from all sources between 1972 and 1979. Of this, the Bank contributed some US$8.5 mill.ion to this project's total cost of US$19.59 million. VIII. CONCLUSIONS 8.01 The success of the project, in terms of the explicit objectives given at presentation, has been mixed. These objectives are set out in the President's report, para 21, as "The main objective is to expand and diversify livestock and agricultural production and exports by (a) increasing the flow of medium- and long-term credit into agriculture, particularly to smaller and medium-sized producers; (b) encouraging private banks to make medium-term loans for agriculture; and (c) providing technical and supporting services to producers". The large cattle purchases and the growth of the dual-purpose activities are evidence that livestock production goals were reached, but the same cannot be said for cropping. 8.02 The increase in development credit for medium-sized producers remains in question because of the substitution problem with IDB funds and the difficulties with definitions. Only one of seven private banks participated to any extent. The consultant studies produced no effect because the national administration at that time was not prepared to address the many issues it raised. 8.03 On the other hand, the marketing center proved successful and the FED emerged as a successful conduit for development funds. The Project Unit showed competence and concern in its work. Had no fundamental changes in policies and institutions occurred, then the lessons learned from this project would have been invaluable for repeater efforts. Already, private - 17 - banks were showing interest in participating. These lessons, to a large extent, had been incorporated in the proposed Second Agricultural Credit Project. However, basic changes have occurred and a new approach from first principles is required. As a first step, the proposed credit project was replaced by a rehabilitation loan and credit. Aside from the continuing need for farm credit, the project has demonstrated the real opportunity for small- and medium-size farm development based on dual-purpose and dairy activities, using improved pastures and AI, associated with area development. 8.04 The difficulties concerned with the design of the equity components have to be considered in the light of institutional experience and policy existing at the time, both in Nicaragua and in the Bank. Since then, Bank experience indicates that probably both the agriculture credit project and the livestock credit project should have proceeded separately with their separate distribution emphasis since equity considerations have proven to be an integral part of project design.  -18 - ANNEX 1 Table 1 Projects Financed by Participating Banks (April 1974 - June 1978) No. of Investment Financial Institution Projects % Cost % (US$ million) Large Farms Banco de America 81 22 8.42 45 Banco Caley-Dagnall 1 - 0.02 - INFONAC 10 3 0.56 3 Banco Nacional de Nicaragua 87 23 4.49 24 Banco Nicaraguense 15 4 1.81 10 Subtotal 194 52 15.29 82 Small Farms Banco de America 12 3 0.40 2 Banco Caley-Dagnall 1 - 0.23 - INFONAC 8 2 0.14 1 Banco Nacional de Nicaragua 152 41 2.66 14 Banco Nicaraguense 5 1 0.19 1 Subtotal 178 48 3.42 18 Total 372 100 18.71 100 Source: FED/PCR. Subloan Frequency by Sub-loan Size (April 1974 - June 1978) Large Farms Small Farms Size Class No. Sub-projects % Total Amount % No. Amount 1/ No. Amount _ TUS$ '000 (US$ '000) (US$ '000) (US$ '000) 0.0-7.0 3 1 14 0.09 1 6 0.03 2 8 0.05 7.1-10.0 30 8 255 2 2 16 0.1 28 239 2 10.1-20.0 131 35 1,948 14 17 263 2 114 1,685 12 20.1-30.0 53 14 1,291 9 35 849 6 18 442 3 30.1-40.0 30 8 1,042 7 21 731 5 9 311 2 40.1-50.0 19 5 844 6 16 714 5 3 130 1 50.1-60.0 19 5 1,042 7 16 889 6 3 154 1 60.1-70.0 10 3 635 4 9 576 4 1 60 0.4 70.1-80.0 9 2 682 5 9 682 5 - - - 80.1-90.0 9 2 781 5 9 781 5 - - - 90.1-100.0 59 .16 5,851 41 59 5,851 41 - - - Total 372 100 14,391 100 194 11,359 79 178 3,032 21 1/ As percent of total amount. Source: FED/PCR. -20 - ANNEX 1 Table 3 On-farm Investment by Classification (amounts in US$ millions) Classification Expected Actual Amount % Amount % Pastures 2.63 17 2.78 15 Buildings 2.24 14 2.17 12 Machinery 0.66 4 1.27 6 Irrigation - - 1.67 9 Water supply 5.50 35 0.50 3 Breeding stock 2.13 13 5.73 31 (a) bulls - - 1.18 - (b) cows - - 4.55 - Fencing 0.86 5 2.06 11 Cultivation - - 0.63 3 Roads - - 0.29 2 Contingencies 1.57 10 1.60 9 Project Total 15.78 100 18.71 100 Source: FED/PCR. -21 - ANNEX 1 Table 4 On-farm Investment by Activity Activity Estimated % Actual % Difference Dairying - wet zone 28 3 -23 Dairying - irritated 13 7 -5 Dairying - dry zone -4 +4 -Grazing - wet zone 28 41 +15 Grazing - dry zone - 19 +19 Dual purpose 12 +12 Crops - rainfed - 0.6 +0.6 Crops - irrigated 12 13 +1 Custom fattening - irrigated 18 - -18 Source: FED/PCR. ANNEX 1 -22 - Table 5 Average Investment Parameters (amounts in US$ '000) Actual Activity Expeted Large Small Overall Total (actual) (actual) Value % Dairying - Wet Zone Number of sub-projects 150 12 5 17 11 Investment costs 25 40 21 34 137 Sub-loan amount 20 32 19 29 143 Farm size (ha) 50 251 51 192 384 Financial rate of return 19 26 16 26 - Dairying - Dry Zone Number of sub-projects 0 12 7 19 - Investment costs 0 54 16 39 - Sub-loan amount 0 41 13 32 - Farm size (ha) - 158 53 120 - Financial rate of return - 27 37 31 - Dairying - Irrigated Number of sub-projects 50 23 1 24 48 Investment costs 34 53 6 51 151 Sub-loan amount 26 37 5 38 137 Farm size (ha) 20 156 36 151 755 Financial rate of return 17 31 43 32 - Source: FED/PCR. - 23-- ANNEX I Table 6 Average Investment by Sub-project (amounts in US$ '000) Actual Activity Expected Large Small Overall Total (actual) (actual). Value Z Grazing - Wet Zone Number of sub-projects 150 83 39 122 81 Investment costs 25 82 24 64 36 Sub-loan amount 20 61 20 49 35 Farm size (ha) 300 752 218 581 194 Financial rate of return 25 26 28 26 - Grazing - Dry Zone Number of sub-projects 0 32 11 43 - Investment costs 0 101 31 83 - Sub-loan amount 0 77 26 64 - Farm size (ha) - 997 317 823 - Financial rate of return - 26 28 26 - Dairying - Irrigated Number of sub-projects 0 10 112 122 - Investment costs 0 45 16 18 - Sub-loan amount 0 35 15 16 - Farm size (ha) - 434 187 207 - Financial rate of return - 29 31 31 - Source: FED/PCR. ANNEX 1 - 24 - Table 7 Average Investment by Sub-project (amounts in US$ '000) Actual Activity Expected Large Small Overall Total (actual) (actual)* Value % Agriculture - Rainfed Number of sub-projects 0 1 0 1 - Investment costs 0 127 0 127 - Sub-loan amount 0 100 0 100 - Farm size (ha) - 89 - 89 - Financial rate of return - 24 - 24 - Agriculture - Irrigated Number of sub-projects 100 21 3 24 24 Investment costs 34 109 32 100 298 Sub-loan amount 27 69 27 64 237 Farm size (ha) 35 101 24 92 263 Financial rate of return 26 32 45 34 - Source: FED/PCR.  -25 - ANNEX 1 Table 8 NICARAGUA AGR?ICULTJAL C'nDIT ??0JECT 943-71 SUTMARY OF rRINCIPAL INDICATORS (US$ aillions) Estimated Actual A. Total project costs 15.79 19.59 1. (a) Loan 943-NI 8.50 8.50 (b) FED participation 1.60 3.41 (c) participating banks 2.90 3.36 (d) Sub-borrowers' participation 2.80 4.32 B. Farm investments (Part A) 14.81 18.71 1. Number of sub-loans 550 372 (a) "Large" sub-loans 194 (b) "Small" sub-loans 178 .2. Total financing 13.00 14.39. (a) "Large" 11.36 (b) "Small" 3.03 3. Principal investment categories (a) Dairy farms 5.99 4.84 (b) Breeding and fattening 6.98 11.35 (c) Crop farming 1.86 2.53 C. Other Droject costs 0.96 0.88 1. (a) Associations or cooperatives Part B 0.40 0.05 (b) Technical assistance Part C 0.70 0.57 (c) Support services Part D 0.20 0.19 (d) Meat marketing study Part H 0.04 0.07 - 26 - Attachment Commeats Received from the Government of Nicaragua rvR SHIV S KAPUP ACTING rIPECTOR GENERAL OPERATIONS EVALUATION INTbAFRAr WASH I NGCNDC2041? PE PPCJECT PERFORMANCE AUtIT REPORT NICARAGUA AGRICULTURAL CRErIT PRCJECT LOAN 943-NI WE APE PLEASED TC INFCPr YOU THAT AIE HAVE FCUND SATISFACTORY THE rRAFT OF THE PPCJECT PERFCRMANCE AND HAVE NO FURTHEP COMENTS TO MAKE WE AGREE WITH THE MAIN ISSUES OF THE REPORT WHICH ARE IN LINE WITH THOSE DRAFTED IN OUR " REPORTE LE CONCLUSION DEL PROYECTC '' SENT TC YOU IN OCTCEER 1979 NOEL I GONZALEZ rIRECTOR FOrP4 ESPECIAL rE rESARROLLO IBRD-10449R - - --- -1 -- - --- ---. . T(l ERs p ' N'I CARAG6JA4 NCRGAH 0 N D U R A S 5 AGRICULTURAL CREDIT PROJECT PROJECT AREAS OF CONCENTRATION H1-. 'j . 1 -I i ..f. c sar.I I, -IFi,-f 7. -- -(x - 1 -1 I - - I,r J,ý,d. T r -.) - -j- I _ --IL- _ ._ _ ._. _ --..».i., .... -- --i . - - - --. . -- -* i 6 on -- ---I <,