Tanzania - Tanzania Rural Development Bank Project

Document of The World Bank F I LE C OPY FOR OFFICIAL USE ONLY Report No. 2362-TA TANZANIA TANZANIA RURAL DEVELOPMENT BANK STAFF APPRAISAL REPORT February 1, 1980 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 Currency Unit = Tanzania Shilling (TSh) TSh 1.0 = US$0.120 US$1.0 = TSh 8.3 ABBREVIATIONS BOT - Bank of Tanzania DDD - District Development Director IFM - Institute of Finance and Management MLC - Management Loans Committee MOA - Ministry of Agriculture NBC - National Bank of Commerce NDCA - National Development Credit Agency NMC - National Milling Corporation PMO - Prime Minister's Office RDD - Regional Development Director RLC - Regional Loans Committee TFA - Tanganyika Farmers Association TFC - Tanzania Fertilizer Company THB - Tanzania Housing Bank TIB - Tanzania Investment Bank TRDB - Tanzania Rural Development Bank FISCAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY TANZANIA TANZANIA RURAL DEVELOPMENT BANK STAFF APPRAISAL REPORT Table of Contents Page No. I. THE ENVIRONMENT ....... .................................. 1 A. Agricultural and Rural Sector ...................... I B. Financial Institutions ............................. 6 C. Interest Rate Structure ............................ 8 II. THE TANZANIA RURAL DEVELOPMENT BANK ..................... 10 A. Background .... .............. ....................... 10 B. Management and Organization ..... ................... 11 C. Staffing and Training ...... ........................ 14 D. The Accounting System ...... ........................ 16 E. Operating Policies and Procedures ............... ... 17 F. Performance ........ ................................ 26 III. THE PROJECT.3 II. TH ROET........................................ 30 A. General Description ................................ 30 B. Project Costs .................................. 30 C. Financing ................. ................. 31 D. Detailed Features ................................. 32 E. Procurement .................................. 36 F. Disbursement .................................. 37 G. Accounts, Audit and Reports ......... ............... 38 IV. PROSPECTS AND JUSTIFICATION .39 V. AGREEMENTS REACHED AND RECOMMENDATIONS .41 This report is based on the findings of an IDA appraisal mission to Tanzania in October 1978, composed of Messrs. T. N. Baddar, P. Santos (IDA) and A. Rath and Ms. S. D. Mueller (Consultants) and a follow up visit by Mr. Baddar in October 1979. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contenst may not otherwise be disclosed without World Bank authorization.  - il - Table of Contents (Continued) ANNEXES 1: TRDB Involvement in IDA Projects 2: Tables 1 - Income Statements 2 - Balance Sheets 3 - Sectoral Distribution of Loans 4 - Cash Flow Projections 5 - Project Costs 3: Training Program 4: Selected Documents and Data Available in the Project File CHART: TRDB Organization Chart (No. 19712)  I. THE ENVIRONMENT A. Agricultural and Rural Sector Background 1.01 Tanzania's population (about 17.0 million in 1979) is increasing at about 3.0% per annum. Per capita GNP for 1978 is estimated at US$230 overall. Real growth of GDP averaged about 4.8% per annum over 1968-78. Roughly 50% of GDP is derived from agriculture and related activities, about half of this contribution coming from subsistence production. About 90% of the population lives in the rural areas, and 90% of the economically active population is engaged in agriculture. About 70% of Tanzania's foreign exchange earnings from merchandise exports are accounted for by unprocessed agricultural commo- dities, and a further 7% by processed farm products. The major agricultural export commodities are cashewnuts, coffee, cotton, sisal, tea and tobacco. 1.02 Large-scale agriculture is confined to a small number of private estates and state farms producing sisal, coffee, tea, sugar, wheat, rice and livestock. The largely traditionally managed national livestock herd, esti- mated at 10 million head, is grazed extensively over the 40% of the country free from tsetse fly. 1.03 The current performance of the agricultural sector has been slug- gish. Over the period 1967-77, the average annual rate of growth of agri- cultural production was 2.7%, almost equal to the rate of population growth. Food crop production failed to keep pace with population growth and, as a result, Tanzania became increasingly dependent on imports of maize, rice and wheat. A severe drought in 1973 and 1974 resulted in poor harvests and large imports of foodgrains. Agricultural production recovered thereafter increasing in real terms at an average annual rate of 7% because of good weather and increases in producer prices but with a noted shift in production pattern away from cash crops towards food crops. Agricultural and Rural Development Strategy 1.04 The Government has undertaken a comprehensive program to support the development of the agricultural sector, in conjunction with efforts to achieve balanced regional growth and more equitable income distribution. Within these objectives, Government is paying particular attention to achieving self-sufficiency in food production and to supporting export crops. Greater emphasis is now being placed on the production rather than the social aspects of rural development projects. In addition, Government has made substantial headway during the past decade in laying the foundations for a long-term program of rural development. Beginning in 1970, the Government launched a wide-ranging program to resettle the country's rural population into villages (paras 1.09-1.12). In 1972, it decentralized government administration to the regional and district levels in order to tailor development programs more closely to the needs of the new villages (paras. 1.06-1.08). With the  - 2 - establishment of new villages, the Government set ambitious targets to provide essential social services. Under a Universal Primary Education Program launched in 1974, close to 100% of all children of primary school entry age were enrolled by the end of 1977. A program of village water supply was initiated in the same year with the objective of providing the entire rural population with an accessible supply of potable water by 1990; so far, 36% of villages have water supply systems. A program has recently been launched to provide the full rural population with access to rudimentary health care. 1.05 However, the rural populace has yet to experience income benefits of the Government's overall strategy. Real rural per capita incomes actually declined by 4% between 1969-75, and represented only 43% of average urban incomes. Although major institutional reforms have been made, the institu- tional structure in the rural sector is still in flux, and may require yet further change. In some respects (for example, changes in the input delivery system, paras 1.19 and 1.20), excessive institutional change may have been partly responsible for the relatively poor performance of the agricultural sector. Rural Organization 1.06 In order to improve the quality of its program and projects, to speed their execution and to encourage the mobilization of local resources, the Government, in 1972, adopted a decentralized administrative structure. Regional and District authorities were granted primary responsibility for the planning and implementation of development activities; but they have no taxing powers and are totally dependent on the central government for their capital and recurrent budgets. Tanzania is now divided into 25 (20 mainland and 5 Zanzibar) Regions and 96 Districts. The political head of each Region is the Regional Commissioner, with the rank of Cabinet Minister, who is Chairman of the Regional Development Committee, and a member of the National Assembly and the National Executive Committee of Tanzania's only political party, Chama Cha Mapinduzi 1/ (CCM). The political head at the District level is the Area Commissioner, who is the CCM District Secretary and Chairman of the District Development Committee. Regional and Area Commissioners are directly appointed by the President. 1.07 The civil service in each Region is headed by a Regional Development Director (RDD), assisted by a Regional Planning Officer. The heads of the twelve Regional functional departments 2/ report directly to the RDD, who, in turn, is responsible to the Central Government through the Prime Minister's Office (PMO). At the District level, the administration is headed by the District Development Director (DDD), assisted by a District Planning Officer and the District heads of the functional departments. The field-level staff of the central ministries are answerable to the DDD through the heads of their functional departments, but receive technical guidance from the functional 1/ Roughly translatable from the Swahili as "the Party of the Revolution". 2/ Education, Health, Lands, Industry, Commerce, Natural Resources, Live- stock Development, Crop Development, Water, Public Works, Ujamaa and Cooperatives, and Culture.  staff at the Regional level and, through them, from the central ministries. All civil servants within a Region are ultimately responsible to the RDD and, once appointed to a Region, can only be transferred with the consent of the RDD. However, all staff have a parent central Ministry. 1.08 This decentralization of government authority is designed to improve communications between the Government and the village and between the Party cadre and the civil service. Villages have more opportunity to participate in the planning and implementation of the development programs which affect their future. The civil service operating at the district and regional levels has a more integrated approach to rural development than was possible when staff reported both administratively and functionally to their parent central technical ministries. However, qualified manpower is insuffi- cient to fill the many positions demanded by a decentralized government structure. Decentralization has not led to the anticipated levels of local participation in the planning process; the division of responsibility between the central ministries, regional and district authorities and parastatals remains poorly defined, and bureaucratic tensions persist. 1.09 Villagization. Since independence, but particularly from 1970, the grouping of dispersed farm families into villages has been a key element of Government strategy for the rural areas in order to facilitate the provision of infrastructure and services to the rural population, and to encourage self- reliance and a community approach to rural development. During 1974, the emphasis shifted from creating additional ujamaa I/ villages (the ultimate goal of which was fully collectivized agricultural production) to forming "planned" or "development" villages, which place less stress on communal production, and more on "block farming" (in which each farmer cultivates his own plot within an overall block of land allocated to the village) and on individual holdings within the village framework. At the same time, the pace of villagization was considerably accelerated, not without some degree of coercion and disruption of production in some areas. There are now almost 8,000 registered villages, containing over three-quarters of Tanzania's rural population. 1.10 The village is intended to act as the country's primary social, eco- nomic and political unit. Basic social services, including health facilities, classrooms and water supply systems, are to be located in each village. Eco- nomic services, including provision of credit, supply of inputs, organization of extension services and marketing of produce, are to be coordinated at the village level. Economic infrastructure, such as storage godowns, processing equipment and small-scale industries, are to be village owned investments. The villages' legal status is spelled out in the Villages and Ujamaa Villages (Registration, Designation and Administration) Act of 1975. Each village of 250 families or more is registered and elects, through a Village Assembly, 1/ "Ujamaa" is a Swahili word meaning "familyhood".  - 4 - a Village Council. The Village Council has the power to allocate land and control its use, to own agricultural machinery and other capital goods (except for livestock and small farm tools which remain individual property), and to borrow. Each village is required to establish a capital fund, a reserve fund and a disposable fund. 1.11 A study carried out for the Bank of Tanzania (BOT) recommended that the capital base of the village should be strengthened through the Rural Finance Fund established by BOT (para. 1.22). Since the village is a corporate entity empowered to borrow, it is suggested that the borrowing power be fixed at a maximum of ten times its capital fund. It is proposed that 50% of the capital fund be contributed by the individual farmers (who would be required to contribute 5% of total loans advanced to them by the village); 25% from the village levy income which it already receives from the crop authorities in respect of produce delivered for sale through them and the remaining 25% from BOT. It is further proposed that if experience should show that the village is unable to cover its expenses from its own resources, the village should be allowed an interest spread of 1% in its onlending activity to the individual farmer. These proposals are still under consideration. 1.12 Early performance has been mixed, with villages in some regions demonstrating an impressive ability to mobilize local support for the construc- tion of social or productive infrastructure. In some areas of high population density, villagization has led to overgrazing and depletion of soil fertility. In other areas, there are substantial diseconomies in that villagers must now travel further to cultivate fields, collect fuelwood and draw potable water. The Government has already acted (through "Operation Correction" in 1976) to rectify the most serious cases of misallocation, but more attention to village siting and size is needed to overcome many of the existing problems of village settlements. 1.13 Cooperatives. The cooperative system in Tanzania, as it existed prior to 1966, was a three-tiered organization. The local primary marketing societies which marketed all major agricultural commodities, were affiliated with regional cooperative unions which provided the link between the societies and the marketing parastatals. The regional unions were themselves members of the Cooperative Union of Tanzania. In 1966, the Government decided that cooperatives should play a central role in agricultural development, and that cooperatives should be established by the Government in those areas where they had not previously existed to eliminate exploitation of the peasants by middle- men. Thus, to strengthen the movement, the Government banned private trading in those crops handled by cooperatives. These decisions forced cooperatives into areas where there was no cooperative tradition and experience, as well as limited commercial farming, and to perform marketing services for crops not previously handled by cooperatives. Extreme shortages of trained and expe- rienced manpower and the inherent weakness of the expanded system led to severe financial difficulties for many societies. Moreover, in the post- Arusha Declaration period and with the growth of the Ujamaa village movement, tensions arose between the Ujamaa and cooperative movements, exacerbated by the mass villagization campaign of late 1974. In May 1976, the Government abolished all primary cooperative societies, the villages taking over their  - 5 - crop marketing functions. Cooperative unions were dissolved and their func- tions were transferred to national, regional and district institutions such as the District Development Corporations, Regional Trading Companies, and the parastatal crop authorities, the latter now required to purchase crops directly from villages. These moves also disrupted the traditional channels for credit and input distribution. The Tanzania Rural Development Bank now has to deal directly with over 8,000 villages, rather than a very much smaller number of cooperative unions. A satisfactory input delivery system has not yet evolved (paras. 1.19 and 1.20). 1.14 Parastatals. There are separate parastatals for coffee, cotton, sisal, tea, tobacco, cashewnuts, pyrethrum, sugar, livestock and dairy products and foodgrains. Generally, ambitious expectations have placed severe strains on their manpower resources. These parastatals provide marketing and processing services and most have development responsibilities. 1.15 Parastatal marketing is usually characterized by lack of competi- tion, high costs, poor service and slow payments to farmers. The Government is aware of these problems; and its Standing Committee on Parastatal Organi- zation is reviewing the structure and managerial performance of parastatals. There have been transfers of staff from over-manned parastatals. The Bank Group is assisting in this process through its analysis of parastatals involved in recent and proposed lending operations, e.g., the Cashewnut Authority, the Tobacco Authority, the Tea Authority, the Pyrethrum Authority and the National Milling Corporation. The World Bank Group also intends to start a broader review of Tanzania's agricultural parastatals as a principal focus of its sector work in FY80 and FY81. Agricultural Services 1.16 Extension. The extension service is staffed by about 100 graduates, 3,000 field officers with some formal training, and 3,500 field assistants, many without formal training. Of field level staff, about 54% are employed by the Ministry of Agriculture (MOA) but under the day-to-day control of the regions (para 1.07), with the remainder employed by crop parastatals. 1.17 Field staff are inadequately trained and supervised, and receive limited logistical support. MOA and the PMO hold differing views on how ex- tension should be reorganized to take account of the villagization program which leads to lack of direction and low morale. The situation has become further confused by the decision in early 1978, to appoint Government-salaried Managers to each Village - 4,000 of these have already been selected, mainly from the ranks of the extension service and education cadres. The relation- ship between the functions of Village Managers, agricultural extension staff and Village Management Technicians 1/ remains unclear. The Bank Group has made some proposals to Government about the future of the extension service 1/ For a description of the Village Management Technician program, see the appraisal report covering the Fifth Education Project Credit No. 607-TA, Appraisal Report No. 954-TA).  on the lines of the Benor training and visit system, suitably adapted to Tanzanian conditions. Discussions are continuing; in the meantime, Government is attempting a reorganization along these lines in two regions, as part of the Mwanza-Shinyanga Rural Development Project (Credit No. 803-TA). 1.18 Credit. Two major institutions provide credit for rural development, the National Bank of Commerce (NBC), and the Tanzania Rural Development Bank (TRDB). In the five years ending June 30, 1978, approximately 93% of the provided credits made were short-term, 6% medium-term and 1% long-term. By far, the larger part of short-term credit requirements was provided by NBC as it is the sole source of short-term credit for the financing of produce marketing. Out of the production credit provided by banks, TRDB provided 37%, mostly in the form of seasonal inputs in kind; NBC provided the other 63%, generally for working capital on large estates. Short-term production credit is also provided by the Tanzania Coffee Authority and the Tanzania Cotton Authority. As the direct beneficiary under the proposed project, TRDB's role, performance and future prospects are analyzed in Chapter II in this report. 1.19 Input Supply. The fertilizer distribution system has recently experienced continuing modifications. Prior to 1975, the Tanzania Fertilizer Company (TFC) sold its output to four principal distributing agencies: the cooperatives, the Tanganyika Farmers Association (TFA), and the State Trading Corporation and some crop parastatals. In 1975, "lead" parastatal crop authorities were designated for each District and assigned responsibility for distributing fertilizer for all crops and not only for crops for which they were responsible. Subsequently, responsibility for input distribution has been transferred-to TFC and to TRDB -- which had always procured inputs for their own borrowers. 1.20 In May 1978, an FAO consultant recommended to MOA the creation of zonal representatives for TFC which would in turn license private traders to stock and sell agricultural inputs in all major population centers and in the villages. While these recommendations remain under consideration by Government, TFC is establishing depots at the main centers; three depots are under construction at Tabora, Mwanza and Mkambako in addition to those already in existence at Dar-es-Salaam, Iringa and Tanga (where the factory is located) and TFC expects to hire stores in Arusha and Moshi belonging to TFA. Beginning with 1979/80 season, TFC assumed the responsibility of moving fertilizer to the depots leaving other agencies only with the responsibility of the physical distribution from the depots to the villages. B. Financial Institutions 1.21 The financial institutions involved in the rural sector in Tanzania in addition to the Bank of Tanzania which is the central bank, are the Tanzania Rural Development Bank, the National Bank of Commerce, the Tanzania Investment Bank (TIB) and the Tanzania Housing Bank (THB). TRDB, which is the beneficiary  of the proposed subject credit, is described in Chapter II. A brief summary of the activities of the other named institutions is given below. Other financial institutions comprise the Post Office Savings Bank, the National Insurance Corporation and the National Provident Fund, all of which are essentially resource mobilizing institutions. In addition, two development banks dealing with the modern sectors of manufacturing, agro-business, tourism, transport, etc. are the East African Development Bank, whose shares are held by the Governments of Kenya, Tanzania, and Uganda and the Tanganyika Development Finance Co. Ltd., which is jointly owned by TIB and the bilateral aid agencies of the UK, West Germany and the Netherlands. 1.22 The Bank of Tanzania (BOT) was established as the central bank in 1966. However, only since 1978 has it been empowered to grant loans and extend rediscounting facilities to development banks and designated financial institutions such as TRDB. BOT is also now required to establish and maintain a Rural Finance Fund to be applied for: (a) the grant of loans or advances to banks or designated financial institutions for periods exceeding one year but not exceeding 20 years for the purpose of: (i) financing rural development; or (ii) enabling the extension of loans or advances made by such banks or designated financial institutions for financing of rural development where such institu- tion certifies to the satisfaction of BOT that repay- ment is in default due to the effects of natural calamities or other exceptional circumstances pro- vided that such extension does not exceed five years; (b) the purchase of bonds, debentures or other negotiable instruments offered publicly, or the guarantee of loans and advances granted by banks and designated financial institutions to finance rural development; (c) the subscription to the share capital of a bank or designated financial institutions; (d) the acquisition, through a designated financial institution of an interest in a village registered under the Villages and Ujamaa Villages Act. An initial sum of TSh 35 million (US$4.2 million) was credited to the fund which would be augmented by annual allocations out of BOT's income. No use has been made of this fund to date. 1.23 The National Bank of Commerce (NBC) was established in 1967 by merger of the eight commercial banks then operating in Tanzania. NBC has expanded its branch agency network; as of June 30, 1978, it had established 99 branches and maintained 204 agencies serving 71 administrative districts. Total deposits  amounted to TSh 6,390 million (US$770 million) of which TSh 4,177 million (US$503 million) were in current accounts, TSh 759 million (US$91 million) in savings accounts and TSh 1,455 million (US$175 million) in time deposits. Credits extended by NBC stood at TSh 4,155 million (US$500 million), of which TSh 1,496 million (US$180 million) were extended to the agricultural sector and were concentrated mainly on produce marketing. NBC's net operating surplus for the year 1977/78 amounted to TSh 261 million (US$31 million); its paid up capital stood at TSh 50 million (US$6 million) and general reserve at TSh 422 million (US$51 million). 1.24 A task force appointed by Government to examine the activities of the financial sector and the role of each institution recommended that NBC should continue to assume the major responsibility of mobilizing rural savings. It also recommended that in order to assist TRDB in building up a country wide structure of branches to reach the villages, TRDB should make use of the facilities at NBC branches. The details of this arrangement between the two institutions are being worked out at selected branches of NBC in accordance with a phased program. 1.25 The Tanzania Investment Bank (TIE) was established in 1970 to promote economic development in Tanzania by providing medium- and long-term finance and technical assistance to projects mainly in the industrial sector and also for the development of large-scale corporate agriculture, ranching, forestry and fisheries. TIB has so far received from the Bank Group an IDA credit of US$6 million, and two Bank loans of US$30 million. A fourth line of credit of US$25 million was approved in July 1979. TIB also administers an IDA Technical Assistance Credit of US$6 million to Tanzania for financing feasibility and pre-investment studies in the industrial and corporate agricul- tural sector and the training of Tanzanian staff in key areas. 1.26 The Tanzania Housing Bank (THB) was established in 1972, to mobilize local savings and external resources for the development of commercial and residential buildings including rural and low-cost housing. THB has been a beneficiary under two Sites and Services Projects assisted by the Bank Group to provide housing loans. C. Interest Rate Structure 1.27 BOT issued a directive giving the interest rates to be paid or charged by the various financial institutions effective July 1, 1978. The following table summarizes the changes in interest rates.  - 9 - Prior to July 1, 1978 BOT Directive % p.a. % p.a. BOT: Rediscounts and advances Commercial bills Crop: 90 days 5.00 5.00 91-180 days 5.50 5.50 Other: 90 days 5.25-6.00 5.25-6.00 91-180 days 5.75-6.50 5.75-6.50 Treasury bills (35 days) Rediscounts 4.27 4.27 Advances 4.77 4.77 TRDB: Seasonal Loans 8.5 7.5 Term Loans 7.5 7.5 NBC: Savings 4.0 5.0 Deposits - up to 91 days 3.5 3.5 3 - 6 months 4.0 4.0 6 - 9 months 4.25 4.25 9 -12 months 4.5 4.5 1 - 2 years 5.0 6.0 Lending 6.5-10.5 7.5-11.5 Normal Rate 8.0 9.0 TIB: Small-scale Industry - Rural 11.0 7.5 - Urban 11.0 8.0 Commercial 11.0 9.0 Plantations 11.0 10.0 Medium and Large-scale Industry 11.0 10.0 Others: Post Office Savings Bank 4.0 5.0 THB - Savings 4.5 5.0 - Deposits 5.5 5.5 Fixed Deposits: 1 year 6.0 6.0 2 years 6.5 6.5 Lending 5.0-10.0 5.0-11.0 These new rates do not apply to loans financed out of foreign credits which are subject to legal agreements governing the use of these funds; loans made out of repayments of the principal of existing loans would be regarded as loans made out of local resources irrespective of the original source of funds and would, therefore, be subject to the new rates. TRDB's interest rate structure is discussed in detail in the following chapter (para 2.30).  - 10 - II. THE TANZANIA RURAL DEVELOPMENT BANK (TRDB) A. Background 2.01 The history of agricultural credit in Tanzania dates back to 1947, when the first agricultural credit agency, the Land Bank of Tanganyika was established which provided credit almost exclusively to large-scale expatriate farmers, using land as a security. Credit to African farmers was minimal and was available only through a series of small funds which were badly organized, inadequately financed and poorly staffed. The Land Bank was replaced in 1961, by the Agricultural Credit Agency which made special provisions for the small- scale peasant farmers. This new agency quickly ran into problems due to the absence of adequate credit administration and supervision combined with the belief among many farmers that loans were granted by the Government as a post-independence gift which made recovery virtually impossible. It was succeeded in 1964 by the National Development Credit Agency (NDCA) which provided credit to the individual peasant farmer through the cooperative movement. This latter institution had inherited large amounts of bad debts from its predecessors largely resulting from marginal investments due to inadequate staffing and unsound capital structure. Credit administration remained weak and major problems arose from the rapid expansion of the cooper- ative movement and the volume of credit which the cooperatives were handling with very limited manpower resources. Collections from the cooperative socie- ties proved more difficult than had been anticipated; by the time NDCA was disbanded in 1971, its arrears amounted to 40% of its loan portfolio. It has been the beneficiary of an IDA credit in 1969 (Credit No. 80-TA) and was the credit intermediary in another in 1970 (Tobacco Project Credit No. 217-TA). 2.02 It was against this background that the Government of Tanzania sought to establish a new institution, TRDB to mobilize domestic and foreign resources to finance the expanding rural development activities. IDA played a large role in the creation of TRDB; both the draft legislation and its investment policy were sent to IDA for comment. TRDB came into operation on May 1, 1971, by taking over the assets and liabilities of NDCA. The total portfolio trans- ferred to TRDB was TSh 73.4 million (US$8.8 million) including TSh 2.4 million (US$0.3 million) in authorized but undisbursed loans, less a provision for bad and doubtful debts of TSh 11.4 million (US$1.4 million). 2.03 The initial share capital of TRDB amounted to TSh 25 million (US$3.0 million) representing the net tangible assets transferred from NDCA in April 1971. This was increased through successive Government contributions partly financed by foreign grants to Government for this specific purpose. As of June 30, 1978, the authorized share capital of TRDB stood at 300 shares of TSh 1.0 million (US$120,000) each of which 172 shares have been subscribed and fully paid for a total of TSh 172 million (US$20.7 million). Other re- sources comprise loans and credits tied to certain crop programs and rural development projects from IDA (TSh 184 million or US$22.2 million), the Inter- national Coffee Organization (ICO) and foreign aid allocated for administration by TRDB (TSh 39 million or US$4.7 million), loans and grants from Government  - 11 - for general and specific purposes (TSh 170 million or US$20.5 million), special Ujamaa Village bonds (TSh 10 million or US$1.2 million) and surplus generated by TRDB (TSh 13.0 million or US$1.6 million). As of June 30, 1978, TRDB's total loan portfolio amounted to TSh 436 million (US$52.5 million) with a provision for bad and doubtful debts of TSh 74 million (US$8.9 million). 2.04 Under the 1971 Act, TRDB was established to: (i) provide long and medium-term finance for rural development; (ii) provide technical assistance and advice to promote rural development; (iii) administer special funds that may be placed with TRDB; and (iv) finance the purchase of agricultural inputs by either making or guaranteeing loans, or through the purchase and resale of agricultural inputs on credit terms. In 1975, the Act was amended to permit TRDB to mobilize domestic resources for rural development by soliciting deposits. However, shortage of trained manpower and lack of adequate facilities prevented TRDB from actively engaging in this field. Other arrangements have now been made to provide TRDB with access to domestic resources through the central bank-BOT (para 1.22). 2.05 TRDB inherited from NDCA responsibility for the credit aspects of the IDA credits referred to in para 2.01. Since then TRDB has acted as a credit channel in several other agricultural credits, namely: Tea Development Project (Credit No. 287-TA), Second Livestock Project (Credit No. 382-TA), Geita Cotton Project (Credit No. 454-TA), Kigoma Rural Devel- opment Project (Credit No. 508-TA), Dairy Development Project (Credit No. 580-TA), Fisheries Development Project (Credit No. 652-TA), National Maize Project (Credit No. 660-TA), and Tobacco Handling Project (Credit No. 802-TA). Details are given in Annex 1. B. Management and Organization 2.06 TRDB is guided by the TRDB Act of 1971. All powers are vested in a Board of Directors consisting of nine members. The Chairman who is also Managing Director is appointed by the President of the Republic. The Minister of Finance appoints the other members who are chosen from among persons with knowledge and experience in economic and financial matters, agriculture, rural development and cooperative institutions. The responsibilities of the Chairman include the development of appropriate policies for TRDB in coordina- tion with the Government, the Bank of Tanzania, other financial institutions, the political party and other institutions and organizations involved in rural development. 2.07 According to TRDB's organizational chart, the Chairman is assisted directly in his duties by the General Manager, the Corporation Secretary and the Internal Auditor. The General Manager is normally in charge of the  - 12 - day-to-day operations of TRDB, with all department heads reporting to him, and he is responsible for translating the policies of the Board into operational guidelines for the staff, for meeting the goals and objectives of TRDB and for the organization, control and supervision of the staff. The Corporation Secretary convenes regular board meetings, maintains board memoranda and ensures that legal requirements are met in all TRDB transactions. The Internal Auditor is responsible for the internal audit of TRDB, and oversees that its procedures are implemented in a manner aimed at preventing misuse of funds. 2.08 In June 1978, the General Manager was reassigned and the post remains vacant, with the Chairman and Managing Director assuming his role. The func- tions of the General Manager are important in ensuring an adequate performance by TRDB in all its operational activities and his duties and tasks are quite distinct from those of the Managing Director. However, Government is consider- ing the abolishing of the post of General Manager in all parastatals and generally combining this post with that of the Managing Director. While this plan may be sound in many cases, given the overall shortage of managerial experience in Tanzania, it is recognized that this action might weaken the effectiveness of TRDB as an institution. To overcome this problem it was agreed at negotiations that a new department to be known as the "Regional Directorate" would be established at head office whose head would report directly to the Managing Director and would be responsible for the day to day operations in all regions assisted by four zonal managers each supervising the activities of about five regional offices. The appointment of the head of the Regional Directorate with qualifications and experience acceptable to the Association would be a condition of effectiveness for the proposed Project. 2.09 TRDB is organized along functional lines (see Chart No. 19712) into four major departments: Operations, Development, Finance and Adminis- tration, and nineteen regional offices. Each department and regional office is headed by a manager, all of whom now report to the Managing Director. In order to alleviate the burden carried by the Managing Director/General Manager, and in view of the increasing responsibility assumed by the regional staff in the recovery of loans following the dissolution of cooperatives (para 1.13), the proposed Regional Directorate would be established at the departmental level to coordinate the activities of all the regional offices. A Loan Collection Division would also be attached to the Regional Directorate to be responsible for supervising loan collection activities in all regions. 2.10 The Operations Department implements the lending program including the appraisal of loan applications from the regions before submitting them to management for decision. The department is organized into six divisions, namely: (i) the Procurement Division is responsible for the procurement and delivery of all seasonal agricultural inputs such as fertilizers, seeds, insecticides, etc., which are required by the clients; and (ii) five Sector Divisions which are Crops and Area Programs, Livestock, Fisheries, Transport and Storage and Small-scale Industries. Each division is responsible for the appraisal, disbursement and supervision of projects within the specific sector.  - 13 - 2.11 The Development Department, as yet not fully operational, provides training, monitoring and evaluation, research, and statistics. It has three divisions: (i) the Training and Manpower Development Division responsible for determining the training needs of TRDB staff, designing and conducting appro- priate training programs within TRDB, as well as scheduling the training of staff through programs of other educational institutions both in Tanzania and other countries; (ii) the Research and Statistics Division is expected to carry out research into problems of rural development and credit, paying particular attention to the effectiveness of the credit programs and collecting relevant statistics for use by the project officers and other staff; and (iii) the Planning Division responsible for identifying new investment opportunities for TRDB and for preparing integrated sectoral and regional plans for investments. The Development Department is being strengthened under the proposed project to accommodate a larger and more active Training and Manpower Development Division (para 3.06), while the Research Division would be also strengthened to look after the monitoring and evaluation of all TRDB 's ongoing projects (para 3.17). Two new divisions would be established within the Develoment Depart- ment: (i) Organization and Methods Division (para 3.15); and (ii) Management Information Center (para 3.13). 2.12 The Finance Department is responsible for maintaining all accounts, providing information on TRDB's overall financial position and implementing appropriate control measures. It is organized into four divisions, namely: (i) the Administrative Division which prepares and maintains salary records of staff; (ii) the Financial Analysis Division which prepares periodic statements showing TRDB's financial resources, loan disbursements, recoveries, arrears, incomes and expenditure; (iii) the Data Processing Division; and (iv) the Loans Division which is responsible for preparing payment vouchers and monthly and quarterly statements of accounts. 2.13 The Administration Department is a service department in charge of personnel policies, legal records and provision of general services to TRDB staff. 2.14 Regional Offices are maintained by TRDB in all the mainland's 20 regions, except the Coast Region which is served by H.O. in Dar-es-Salaam. Each of the 19 offices is headed by a Regional Manager, who may be assisted by one or two project officers, and at least one or more credit supervisors, depending on the volume of business transacted in the region. The Regional Offices play an important role in coordinating TRDB's programs with regional development plans, especially since the Government of Tanzania decentralized the administrative structure of the country (para 1.06-1.08). The Regional Offices prepare credit plans for their respective regions, help prospective borrowers apply for loans, collect the necessary background information on prospective clients, and carry out financial evaluation of the proposals. Based on their appraisals, the regional Offices may approve loans through the Regional Loan Committees (para 2.37). Regional Offices are also responsible for follow-up and supervision of all projects in the region and for the collection of loans. In view of the substantial increase in the number of loans to be processed by the regions following the dissolution of the coopera- tives (para 1.13), management is planning the decentralization of the loan approval procedures (para 2.40), to go hand in hand with the strengthening of the regional offices.  - 14 - 2.15 District Offices are organized under the Regional Office in districts where the volume of credit is large, with up to two credit supervisors. There are only eight district offices at the moment, but significant expansion is ex- pected to take place in keeping up with the expected increase in the number of borrowers. C. Staffing and Training 2.16 Staffing: The main objective of TRDB staffing strategy has been to obtain a team of people who are capable and dedicated to provide the requisite services to the rural sector. Staffing efforts are concentrated on three main categories: project officers, 1/ credit supervisors 2/ and accounting staff. The cadre of project officers has been drawn from persons with degrees or diplomas in commerce, economics, business administration or agriculture. The number of project officers increased from less than 15 in 1971 to 73 by June 1979, of which 43 are posted in the regions. While TRDB's management has repeatedly approached the Government to place a greater number of university graduates with it, those efforts have not been particularly successful due to the critical shortage of qualified personnel in Tanzania. A number of parastatals, ministries, and the Prime Minister's Office all compete for the insufficient number of qualified candidates graduating from the universities. This situation incited TRDB to consider augmenting the number of project officers through training and upgrading of credit supervisors. Nevertheless, in view of the increase in the volume of lending and the much larger increase of clients, TRDB's requirements for new recruits are expected to increase considerably. Due to the wide gap between the demand for univer- sity graduates by different organizations and the number available, Government has established a High Level Manpower Committee which makes annual allocations to all sectors. Hitherto, the annual allocation of university level graduates to various parastatals has been below the number required. Therefore, assur- ances were obtained at negotiations that Government would undertake to satisfy TRDB's requirements for university graduates provided for under the project and estimated at 14 in FY81, six in FY82 and five in FY83. 2.17 Credit supervisors are drawn from persons with high school certi- ficates, and in a few cases from persons with certificates in agriculture and animal husbandry. The number of credit supervisors increased from 15 in June 1971, to 84 by June 1979, of which 58 are posted in the regions. The minimum educational qualifications of credit supervisors recruited by TRDB is a Form IV level education. A number of them are also recruited after the completion of Form VI. In the Tanzanian educational system, a Form VI grad- uate is eligible for university education, but must first have work exper- ience of two years in order to be admitted to the university. Thus, the credit supervisors with Form VI education become eligible, after two years 1/ Responsible for appraisal and supervision of TRDB loans. 2/ Responsible for the monitoring of project implementation and ensuring the maintenance of adequate records by TRDB's borrowers under the supervision of the project officers.  - 15 - at TRDB, to enter into a university degree program and are naturally eager to do so. Once they complete their university education, they form a part of the national pool which is allocated by the national committee. TRDB has no preemptive rights over these individuals. Hence, to minimize such disruption, TRDB is moving towards recruiting credit supervisors with Form IV level education. 2.18 There is a general shortage of experienced accountants in Tanzania and the high turnover in TRDB's accounting staff reflects the acute shortage in this area and the pull of the relatively high salaries in the private sector. It is expected, however, that the installation of a small computer under this project (para 3.13) would relieve some of this pressure. 2.19 Training: Management has vigorously pursued a policy of training new recruits and existing staff through programs either funded by bilateral agencies for training of personnel abroad, or from TRDB's own sources for training in Tanzania. Until 1976, the Institute of Finance and Management (IFM) in Dar-es-Salaam trained TRDB's project officers and credit supervisors in sandwich courses that gave fresh recruits intensive orientation courses followed by on-the-job experience in the field, and further courses at IFM. Since this program was geared more towards commercial banking than rural credit, TRDB discontinued its courses with IFM and started training its staff under the tutelage of senior officers of TRDB, with the help of a technical assistance program provided by the UNDP/FAO from 1975 until 1978. 2.20 Generally, credit supervisors' initial training is a full-time one month orientation course on TRDB's operations, brief introduction to farm level operations, and emphasis on bookkeeping and accounting. This is followed by a six-month placement in the field. The credit supervisors, then return for a second course of four weeks which consists of in-depth study of the subjects previously covered and case studies. The trainees are sent back for a second assignment in the field, usually seven to ten months in duration, followed by a final course, five weeks long, covering project identification, preparation and analysis. While the subject matter covered is adequate, the usefulness of these courses to TRDB could be enhanced by (a) placing greater emphasis on practical problems faced in the field; and (b) reducing their range to permit greater emphasis on village level accounting and bookkeeping, since lending to villages will be the main focus of TRDB's future increase in business. 2.21 The course for project officers is divided into two parts. Part I is of five weeks duration and covers project identification, preparation, and appraisal. After nine months of placement in the field, the project officers are brought back for a Part II course, also of five weeks, placing greater emphasis on case studies generally prepared by senior officers teaching the courses. The curriculum tends to place more emphasis on theory than is necessary; the analytical techniques introduced are, for the most part, far too sophisticated for the type of projects to be analyzed. Furthermore, the courses are general in nature, making some aspects of the program redundant for personnel qualified in specific areas. The modification of the curric- ulum and the introduction of refresher courses designed to eliminate problems that usually arise from different interpretations of existing policies and loan appraisal procedures would produce better results.  - 16 - 2.22 TRDB management feels that additional resources are required to fur- ther recruit and train additional staff, which is of vital importance to insti- tution building. Training of existing and newly recruited manpower becomes all the more essential in view of the fact that TRDB must now deal directly at the village level on a massive scale (para 1.13). The problems of assessing the credit worthiness of clients with little or no previous experience in book- keeping, inadequate records and limited managerial skills can hardly be over- emphasized. While the Prime Minister's Office is planning to mitigate these problems by actively recruiting and training management personnel to be placed at the village level under the Village Management Technicians program (para 1.17), nevertheless, the role of TRDB's staff is a challenging one and is likely to be more demanding in the coming years. 2.23 It is recognized that further effort should be given to training of staff for the development of administrative village staff. In order to educate the villages in the concept of agricultural credit and to supplement the village staff's education in the proper maintenance of books and records, TRDB has started a series of seminars conducted by their regional managers. Although these seminars were started on an ad hoc basis, TRDB's management is formalizing this process, to make it part of a complete training program for village staff. It is, therefore, proposed under the project (paras 3.11 and 3.12) to form six mobile field training units, each serving three to four regions, manned by qualified instructors for the training of village staff. 2.24 A measure of the task ahead may be obtained by considering the numbers of staff needed to provide elementary credit facilities to all vil- lages. One credit supervisor for every twenty villages would require about 400 credit supervisors in the field compared to the current level of 51 (para 2.17); and one project officer supervising four credit supervisors would require about 100 project officers in the field compared with the current level of 41 (para 2.16). In summary, it is imperative that more concentrated rural credit instruction be made available to TRDB project officers and credit supervisors for the training of new recruits, rotational up-training of operational staff, and training of personnel as instructors for project and village staff. Training is thus a major element of the proposed project. D. The Accounting System 2.25 The loan accounting system in use in TRDB was until recently the one inherited from NDCA, using a second-hand NCR 400 machine. This was essentially a mortgage-type loan system designed to cater for the disburse- ment of a pre-determined sum at a specific point in time which is repayable in fixed equal installments over the term of the loan. Subsequent changes in the disbursement data due to delays in or phasing of procurement resulted in repayment schedules being unrelated either to the actual amount disbursed or to the actual dates the borrower has received the inputs or equipment. In addition, the calculation of interest was linked to the automatic entry of installments on the loan cards, resulting in a considerable amount of time being spent in calculating manually journal adjustment entries and in pro- cessing them on the ledger cards. Miscalculation of the journal entries has  - 17 - resulted in errors being compounded with journal adjustment entries outnumber- ing normal transactions. With the dissolution of the cooperatives and the resulting increase in the number of loans processed by TRDB in its direct lending to a large number of villages, some delay is experienced at present in the production of timely accounts. This is also reflected in the rather limited financial analysis of the accounting data available. Very little use is at present made of this information and little, if any, work is done on current estimates of financial position and a comparison of resource avail- ability with expected demand for credit. The shortcomings of the accounting procedures are a contributory factor to the present poor arrears position as disputes over loan balances provide an excellent excuse for borrowers to delay or avoid loan repayment. 2.26 In June 1977, TRDB's management commissioned a firm of consultants to improve the accounting system while retaining the old NCR 400 machine. The new system was fully operational by mid 1979. While it is premature to pass a judgment on the effectiveness of the new system, the frequent breakdowns of the old NCR 400 machine and its limited capacity to cope with the expected significant increase in the number of loans following the dissolution of cooperatives are already causing serious concern to the senior management of TRDB. The proposed project, therefore, provides for consultants to be employed to design and install a computer capable of handling the increased load, producing timely loan accounts, improving the billing procedures and producing a wide range of information necessary for effective management (para 3.13). E. Operating Policies and Procedures 2.27 Under the 1971 Act, TRDB was established to provide short, medium and long-term financing for rural development. Eligible borrowers included: District Development Corporations (DDC); the now dissolved cooperatives, Ujamaa and Registered Villages, and Individuals or Corporations engaged in rural development. However, with the dissolution of cooperatives, the basic thrust of TRDB's lending in the future is expected to be the villages. 2.28 Basic guidelines of TRDB lending include (a) that the loan amount should not exceed 75% of the total cost of the project; (b) that the value of the loan is always extended in the form of goods, i.e., there are no cash disbursements to borrower; (c) that the borrower maintains a regular account with NBC and sign an irrevocable order instructing a percentage deduction from crop payments be made directly by crop parastatals to TRDB; (d) that lending to villages is made only to those which meet the usual lending criteria such as good management, proper maintenance of books and accounts, prompt repayment of previous loans; and (e) that the sub-project is economically viable. The guidelines suggest that for all sub-projects, a rate of return of not less than 10% and a benefit/cost ratio of not less than 1 using a 10% discount rate should be criteria for acceptability. TRDB is considering raising both these rates to 12%. TRDB is supposed to obtain a security for its loans; however, in practice, security does not form an important part of the loan; the viabil- ity of the project and good management being rightly considered more important  - 18 - elements. If and when TRDB takes a security, particularly in the case of development loans, it consists of a chattel mortgage on movable property. For purposes of assessing loan limits to borrowers, TRDB finances up to 75% of the value of the property and up to 100% of the value of Government of Tanzania Bonds. Assurances would be obtained at negotiations that TRDB would continue to follow the above guidelines. 2.29 Special Funds: The Act establishing TRDB stated that it shall be guided in its operations by sound banking principles and shall finance only economically productive and technically feasible projects. The requirements for TRDB to fulfill a development role and at the same time operate on the basis of "sound banking principles" was clearly recognized in the legislation setting up TRDB which allows it to administer "special funds." Any losses or liabilities arising out of the use of these funds would not be charged against the ordinary capital resources of TRDB. Assurances would be obtained from Government that the spirit of the 1971 Act establishing TRDB would be adhered to rigorously and that any projects which may be considered of national priority but involving higher than normally acceptable risks or otherwise not meeting TRDB's lending criteria would be financed through special funds with Government bearing the risk of any such projects. 2.30 Interest Rate: Before July 1, 1978 TRDB's interest rate charges were generally 8.5% on seasonal loans and 7.5% p.a. on term loans calculated on the outstanding balance. 1/ Effective July 1, 1978, TRDB's management decided to charge a flat rate of 8.5% on all seasonal loans irrespective of the length of the loan period in order to simplify accounting procedures. At exactly the same time, BOT issued a directive reducing TRDB's interest rate on all loans to 7.5% p.a. effective July 1, 1978 (para 1.27). By the same directive NBC's interest rate charges to registered villages was increased from 6.5% to 7.5% and to crop authorities from 7.5% to 8.5% while the rates charged by TIB were reduced from a standard rate of 11% to 7.5% for rural small-scale industry; 9% for commercial farms and agribusiness and 10% for plantations and medium and large-scale industries. 2.31 To examine the appropriateness of TRDB's interest rate structure, it is necessary to consider three elements: its administrative costs, its likely default risk costs and the "cost" of TRDB's resources used in lending. TRDB's administrative costs have averaged 2.6% as a percentage of average outstanding portfolio over the last four years. These are expected to increase substan- tially during the Project period due to the impact of temporarily higher train- ing and other costs. If these costs are spread over a suitably longer period of time, overall administrative costs are estimated to average 3.2% in future. On the other hand, the historical default risk cost to TRDB is difficult to compute with any accuracy due to the absence of reliable information. A crude measure had to be used whereby bad and doubtful debts over the period since TRDB began its operations up to June 30, 1978 were compared to its total 1/ In recent years the interest rate charged on term subloans under IDA financed projects channelled through TRDB has been 8.5%.  - 19 - disbursements during that period. This ratio was 10%, dropping to 8% if the debts due from cooperatives which were dissolved by Government in May 1976 are excluded. In looking at future operations of TRDB, there appears to be a greater risk in lending directly to villages with little or no experience in maintaining proper books and records. This risk may be outweighed however, by the expected improvement in sub-project appraisal and supervision by TRDB, by the availability of rescheduling facilities to be extended by BOT in case of natural calamities (para 1.22) and by the training to be provided to village administrators. This report, therefore, assumes that an average provision of 8% of amounts disbursed by TRDB would be sufficient to cover the default risk in future. The interest spread required to cover this cost depends on the mix of loan terms. Assuming that 68% of future loans are seasonal, 12% medium-term and 20% long-term, the required spread would be 3.1%. 1/ Thus, the spread required by TRDB to cover the cost of its operations (excluding cost of funds) is estimated to be around 6.3%. 2.32 Assessing the "cost of funds" to TRDB poses some conceptual problems. BOT considers that the "costs" should be considered as the actual costs paid by TRDB, considering Government equity and grant contributions as cost free. Under this formula, TRDB's current costs are about 1.5%, since TRDB's debt- equity ratic is about 40:60 and TRDB has been charged about 4% on its long- term borrowing. In the future, the debt-equity ratio is expected to rise to about 55:45. Should Government continue the practice of charging TRDB only 4% on loan funds channelled to TRDB, TRDB's cost of funds on the BOT formula would rise to about 2.2%. Therefore, even under these assumptions, TRDB would need to charge a minimum interest rate of 8.5% to cover its costs of funds, administration costs and default risk costs; and charging this interest rate would provide no return to equity nor maintain the real value of the equity base. 2.33 This 8.5% would not allow any return on TRDB's equity which raises two issues. First, Government's own guidelines and expectations call for a minimum of 9% return on equity on all parastatals. Secondly, the onlending rate to TRDB of 4% is only possible financially, because the original source of such funds is usually a bilateral or multilateral source (such as IDA) provided to the Government at very low cost. The interest rates that would give TRDB a 0%, a 4.5% and a 9% return on equity are given below, taking into consideration the three obvious options regarding the "cost" of borrowed funds which are: 2/ (a) to accept the Governmental onlending rate of 4%; 1/ Different assumptions about the mix, within reasonably likely limits, lead to spreads in the range of 2.5% to 3.5%. 2/ Such rates do not cover the maintenance of TRDB's equity base in view of a current inflation rate of 17%.  - 20 - (b) to use the average costs that TRDB would have to pay if it raised its own funds directly, i.e., about 6% -- this is the rate NBC pays on public deposits, plus 1% to cover mobilization costs; and (c) a measure of the cost of international funds. The current interest rate (8%') would be the lowest possible measure o' this, which takes into account the fact that TRDB is not expected to take any foreign exchange risk. Gombining the lifee rates noted above for the return on equity, with the three rates for costs of borrowed funds, and taking into account the 6.3% minimum spread to cover administrative and default risk costs and the future estimated debt-equity ratio of 55:45, gives the following matrix of minimum acceptable interest rates for TRDB: TRDB MINIMUM INTEREST RATES Costs of borrowed funds Return on Equity 4% 6% 8% (%) 0 8.5 9.6 10.7 4.5 10.5 11.6 12.7 9 12.6 13.7 14.7 2.34 In the light of the above and the present inflation rate in Tanzania, it is clear that TRDB would have to raise its interest charges substantially on all its lending to achieve a positive rate in a real sense. However, while a higher interest rate would appear desirable, any increase has so far been resisted by Government in view of the weakness of the agricultural sector and Government's keen desire to support it. In addition, Government has argued that the role of interest rates is less critical in a rural economy where the prices of essential agricultural inputs and final produce are both tightly regulated. Government (including BOT) and TRDB agreed to restore the lending rate of 8.5% on all short term lending to villages while maintaining the reduced rate of 7.5% on medium and long term loans. Loans to parastatals and District Development Corporations (DDCs) would carry a charge of 9%, while the interest rate on loans to individuals, partnerships, companies and associations engaged in rural developmentL would be raised to 10%. At an average outstanding portfolio mix of 50% short term and 30% medium and long term loans to villages, 10% to parastatals and DDCs and 10% to individuals, partnerships, companies and associations, the weighted average annual interest rate would approximate 8.5% which would be sufficient to allow TRDB to break even. IDA would continue to review with TRDB and Government the interest rate question on a regular basis taking into account developments concerning TRDB's administrative, funding and default risk coSts. 2.35 Loan Procedures. A prospective borrower such as a village may become aware of TRDB and its credit: program from neighboring villages, the agricul- tural extension staff, crop development authorities, the regional authorities  - 21 - or from the credit seminars which have been initiated by TRDB. The borrower may then directly contact the district or regional office of TRDB for credit. Very often the regional development authorities take the initiative and suggest selected villages to TRDB on the basis of their own assessment of management and production programs. In either case, the prospective borrower fills out an application form, providing details of its organization, location, past produc- tion and financial transactions, assets and liabilities, details of any earlier credits from TRDB, repayments and arrears if any, as well as details of the proposed project, its costs and the amount of finance required. Normally, TRDB officers help the village fill the application form, and make their own assessments of past production, as often adequate records are not available. In assessing the credit request, TRDB regional staff check on the availability of agricultural extension agents, suitability of the local conditions for the proposed crops, the marketing channels, and the type of records, and the organizational and management skills which are available in the village. In the cases of loans for machinery, they examine the level of use likely to be achieved, the facilities for servicing and maintenance, the existence of similar equipment nearby and so on. 2.36 Before a formal application for credit can be accepted, a registered village must obtain a certificate from the district authorities or the Regis- trar of Cooperatives providing details of any past loans outstanding and the maximum credit limit which is allowable to that entity (para 1.11). TRDB also ascertains from NBC the financial background of the borrowers, and whether they have had any banking transactions with NBC. When all the neces- sary information is available, the application form is completed and the borrower makes a formal application and pays the application fee of 0.1% of the requested loan amount subject to a minimum of TSh 5 (US$0.60) and a maximum of TSh 500 (US$60). 2.37 The case is then put before the Regional Loans Committee (RLC). The Chairman of each RLC is appointed by the Ministry of Finance and is normally a senior regional administrative officer. Other members include the Regional Officers in charge of Planning, Livestock Development, Agricultural Develop- ment, the Manager of the local office of NBC, a local Member of Parliament, besides the Regional Manager of TRDB. The RLC earlier had a purely advisory role but with the progress in decentralization has been given certain sanc- tioning authority. At present, the RLC is authorized to approve fully secured loans up to TSh 200,000 (US$24,000) or unsecured loans up to TSh 50,000 (US$6,000). In cases of applications for larger amounts, or loans to be funded from external sources, or projects involving foreign exchange expen- diture, the RLC may also make a recommendation and the cases must be decided at TRDB head office. In practice, because of these restrictions, not many cases are approved by the RLC. 2.38 Subsequently, the application forms together with the supporting details are sent to head office for further action. The Operations Depart- ment re-examines the first appraisal report prepared by the Regional Office  - 22 - and may request the Regional Office for more information, undertake visits to further examine the project feasibility, and if necessary, may prepare a modified appraisal report. At this stage, the repayment schedule is also drawn up depending upon the estimates of project cash flow, and a final report prepared. 2.39 Projects which require financing up to TSh 500,000 (US$60,000) for new borrowers or TSh 1,000,000 (US$120,000) for borrowers with previous credit from TRDB, are submitted to the Management Loans Committee (MLC) for decision. The MLC is headed by either the General Manager or the Managing Director and has as its members the Senior Officers and department heads of TRDB. It meets two or three times a month. Projects which require larger investments are examined by the Loans Committee which is a subcommittee of the TRDB board. It has the Chairman of TRDB as its chairman. Only a small number of projects need to be examined by this committee. 2.40 Over the years, RLC's authorized less than 5% in value of all loans approved in each year. Management is aware of the delays caused by this procedure which can take up to six months from the time the application is received until it is finally approved by head office. In view of the sub- stantial increase in number of loans to be processed due to the dissolution of cooperatives and the importance of timely delivery of seasonal inputs, TRDB's management began to simplify and decentralize loan processing procedures with regard to seasonal loans on a phased basis beginning with the 1979/80 season. In this case, any loan approved by the RLC against the recommendations of the Regional Manager would be referred to the head office which would continue to exercise overall control on these loans by establishing basic parameters for loan evaluation, institution of periodic audits and applying more stringent reporting requirements. Management also intends to strengthen the regional offices and place greater responsibilities on them in the approval of medium and long-term loans as and when the region develops more experience; each case will be judged on its own merits. It is expected that the above procedure would alleviate the burden on the head office staff leaving them to handle projects involving more complex problems and at the same time reduce the time required for approval of loans by about 50%. These changes are predicated on improvement in loan appraisal techniques and staff training as described below. 2.41 Loan Appraisal. TRDB has generally emphasized the importance of the training of its project officers and has made a number of documents available to them as appraisal guidelines, both in the regions and at head office. Nevertheless, the quality of appraisal leaves room for improvement. There are instances of failure to distinguish between economic and financial analysis, lack of analysis of the incremental impact of a project on the business as a whole, inadequate justification for prices used in the analysis, lack of uniformity over the treatment of contingencies and the inappropriate use of discounted cash flow techniques in appraising seasonal loans. More- over, project appraisals are frequently based on optimistic assumptions. It is recognized that several constraints make a realistic appraisal both difficult and lengthy. The lack of information about past performance  - 23 - and the limited availability of technical data covering the use of improved technology by smallholders, and the difficulty in assessing the management ability of many new organizations such as DDC's or newly registered villages are but a few examples. Further, the shortage of staff, particularly in the Development Department, handicaps TRDB's efforts to provide the necessary back-up information covering all aspects of rural development in which TRDB is involved. 2.42 Appraisals are often inadequate not only in the data base but also in the analysis of the available data which is often carried out in a mechan- ical fashion. Standard yields are used without taking account of regional variations of agro-climatic conditions, infrastructural facilities and the management capabilities observed in the field. This is particularly so for crop and small machinery loans, though less marked in livestock and transport projects. This often leads to unrealistically inflated values of project benefits. The rates of return calculated for projects reflect more an idealized value, rather than rates of return which will be obtained in practice. 2.43 A number of L.,a,eS would be calleu tor in the appijaa_i 'pioc_ai'E6 which would be developed by the new staff in the Development Department to be employed under the project (para 3.15). For instance, for crop loans, it is unrealistic to make an economic evaluation of each village input loan. Rather a sufficient number of farm models should be developed taking regional varia- tions in agro-climatic and farming conditions into account. For each one of these farm models detailed and careful analysis can be carried out. The operations staff then need not carry out fresh analysis for each case but use one of the appropriate models developed. Similarly, for each grain mill, the variation in the rate of return will depend only on the capacity utilization which will depend on grain availability and machine maintenance. For most of TRDB's sub-projects de novo calculations for each loan cannot be justified but must be done for sectoral models. Many improvements can also be made in the format of presentation, by use of greater standardization and the highlighting of key information. 2.44 To improve the appraisal of sub-projects and the necessary technical skills of TRDB staff, a number of new training schemes will be implemented. The project provides for considerable strengthening of the Training Division (para 3.06, et al.), and the provision of a small team of qualified experts to carry out the training programs. This team would also be required to assist in the preparation of manuals on the technical aspects of the different sectors as well as a sample of economic evaluations of different types of sub-projects. 2.45 Loan Supervision. It is a recognized principle that a lending in- stitution should be in a position to ensure that the loans to its borrowers are used for the purposes for which the funds were sanctioned. Although virtually all TRDB loans are disbursed in kind, the credit may still be used for a purpose for which the loan was not intended such as the sale of fertilizer to other villages or its use on crops other than those for which the loan was sanctioned. Lending for agricultural development is typically a high-risk operation unless proper supervision is maintained at all times.  - 24 - The most severe disadvantage of agricultural lending is high administrative costs, which are unavoidabLe if borrowers are to be effectively supervised and defaults minimized. 2.46 The shortage of staff has affected the quality of loan supervision which is currently somewhat cursory. The required data are compiled without making an effective judgemental contribution that permits a serious analysis of the client and the impact of the loan itself. Supervision is also irre- gular; acute shortage of transport facilities undoubtedly contributes to the lack of timely and proper supervision. Where vehicles are available, they are generally old and unreliable. 2.47 TRDB has made a considerable effort over the years to expand its lending programs, and it has become increasingly apparent that more emphasis should be placed on loan supervision and collection. Supervision is mainly in the hands of the regional offices who would need the necessary complement of credit supervisors and vehicles to ensure their mobility in order to monitor the wide range of projects and carry out a regular programmed supervision. In view of the logistical and other practical problems that TRDB will face in supervising the villages directly, TRDB's management would intensify its training of credit supervisors who would, in turn, provide technical assis- tance to villages particularly in record keeping (para 3.11 et al). To ensure periodic and regular programmed supervision in each region, credit supervisors would be provided under the proposed project with motorcycles which are generally considered more appropriate for operating in the Tanzanian conditions (para 3.19). 2.48 Monitoring and Evaluation: Proper supervision would also lead to proper monitoring and evaluation of projects; a task currently not attempted. TRDB intends to seek from the borrower on a regular basis during supervision the physical and financial data which can readily be compared with appraisal estimates by the Monitoring, Evaluation and Research Division which is to be strengthened under the project for this purpose (para 3.17). Adverse variance in project implementation would give an early warning of likely poor repayment. In the final analysis, effective loan supervision depends on TRDB's management at all levels receiving an adequate and appropriate flow of information showing the progress of a project compared with the original plan and the status of the loan account compared with the repayment schedule. 2.49 Loan Recovery: At present, TRDB enforces its loan collection by (i) requiring the borrower to open a regular account with NBC and simultan- eously having the borrower sign an irrevocable letter of authority authorizing collection through crop parastatals, by having the crop authorities deduct a certain percentage out of the proceeds from village accounts at the time of purchase; (ii) direct contact through credit supervisors at the regional offices; and (iii) exhortation from local government and party workers. The collection through NBC presupposes that the village borrowers will maintain active accounts which is not a regular practice in rural areas. Given the lack of transport facilities and the shortage of staff in TRDB's regional  - 25 - offices, credit supervisors have not been as heavily involved in collecting TRDB's loans as might be desirable. Mostly loans are recovered at source through crop purchasing parastatals who have collected on TRDB's behalf at various times. With the exception of the Tea Authority, the relationships with the crop authorities have been less than satisfactory as such arrange- ments were not based on contractual relationships between TRDB and the crop authorities. In future TRDB would inform the crop purchasing parastatals, within two weeks prior to the date of the commencement of each crop marketing season, of the aggregate amount of principal and interest due from each borrower and such parastatals would be required to deduct at source any amounts due to TRDB relating to inputs as notified by TRDB. Assurances that these arrangements would be put into effect were obtained at negotiations. 2.50 TRDB is planning to strengthen its regional offices particularly with the increased resources provided under the project which should result in improved supervision that would increase efforts in the recovery of its loans, also, the project would provide consultants for establishment of controls and specifications to improve the collection system. 2.51 RX - ' > Q0 _' lcct4-i problems may well depend on an increased awareness of the role played by rural credit, and efforts to encourage repay- ment through political channels are extremely valuable at all levels but it is also essential that TRDB possesses up to date information of borrowers and their activities. The project, therefore, provides for the installation of a small computer capable of handling the increased load and, producing timely information of borrowers loans. 2.52 Loan Disbursement: TRDB provides credit in kind, not in cash. Either TRDB arranges for procurement and delivery of needed inputs directly (see immediately below), or disbursements are made directly to a supplier; on a loan becoming effective, headquarters staff of TRDB issue local purchase orders (LPO) for the goods authorized under the loan. 2.53 Procurement: Because of the state of the input distribution system (para 1.19), TRDB has been directly involved in the procurement and delivery of inputs required by smallholder beneficiaries of its loans. TRDB would prefer to be out of the input distribution role which places a tremendous burden on its limited manpower resources, as the collation of data for bulk ordering, the placement of tenders, the actual execution of orders and the arrangement for transportation pose tremendous problems in an environment in which trucks are not easily available, roads are in poor condition, the harbor is often congested, and communications are poor. However, it rightly considers that it must continue to provide this service until a workable alternative is available. Some moves in this direction are already being considered (para 1.20) and would be further supported under the project (para 3.20). In the meantime, TRDB is planning to strengthen its Procurement Division at head office as it would be realistic to expect that any general solution would require some time before it is fully implemented. However, the transportation problem will be eased somewhat as soon as TFC has established its zonal depots (para 1.20).  - 26 - 2.54 TRDB undertakes the procurement of agricultural inputs both from local and foreign sources, virtually acting as a wholesaler, including the organization of transportation to the village. In the case of machinery and equipment, procurement is limited to dealers who agree to provide training in the operation and maintenance of such machinery and equipment and who can guarantee the supply of spare parts and technical services and provide proper repairs and maintenance facilities. All goods and services are procured whenever possible on the basis of competitive bidding. TRDB encourages the use of locally produced goods provided this is in keeping with internationally accepted prices. 1/ F. Performance 2.55 Background. Under the 1971 Act, TRDB was given the task of promot- ing the use of credit as an instrument for increasing agricultural production and, in particular, for ensuring that this form of support reached the small farmer. It was stressed that TRDB should only extend credit activities which were economically viable. Thus, TRDB's lending activities were expected to support the long-term political and social objectives of the Government, i.e., to raise the living standard of the small peasants and to induce them to cooperate in production as well as in marketing. At the same time, it was made clear that TRDB should act as a financial institution which could, over a period, generate a surplus from its lending operations. It was recognized that TRDB's surplus would be small in the initial years of its operations, but it was not expected to operate at a loss. 2.56 To understand how the principles have been translated into action, it is necessary to trace and identify the major changes which have taken place in the field of rural development since 1971. These developments which have affected the activities of TRDB may be summarized as follows: (a) In 1971, when TRDB started its operations, the policy of forming Ujamaa villages had reached a stage of widespread implementation in many regions of the country (para 1.09). This required TRDB to work with a new type of client. Its task was not only to assess the creditworthiness of Ujamaa villages applying for loans; it was also expected to assist these villages in their development by promoting the use of credit as an instrument for increasing agricultural production. 1/ When acting as a credit agency under a Bank Group financed project, it employs international competitive bidding according to the Bank's procurement guidelines.  - 27 - (b) The decision to decentralize the Government in 1972 (para 1.06), established strong regional authorities. From that time the lending of TRDB has to be seen in the light of regional priorities formulated by new Regional Development Committees. Amiong the clients of TRDB, a new type of borrower, the District Development Corporation (DDC) was created in 1971/72 with new demands and pressures for loans. These new politically important and inexperienced customers augmented TRDB's problems. (c) The cooperative unions were the most important borrowers from TRDB. Because of continued gross mismanagement, lack of effec- tive records and a degree of misuse of funds, the cooperatives were abolished in May 1976 (para 1.13). This action radically changed the pattern of lending for TRDB by increasing its service responsibilities and having its loan portfolio with cooperatives become dormant. Therefore, a review of the activities of TRDB since it began its operations in May 1971, and an analysis of its achievements must be seen against a background of extensive and sweeping changes in the organizational and admin- istrative structure in the rural sector, accompanied by food shortages brought about by the drought and significant price increases for inputs to agricul- tural production following increases in oil and fertilizer prices. 2.57 Growth of Operations. TRDB began its operations on May 1, 1971, with a total portfolio transferred from NDCA of TSh 73.4 million (US$8.8 mil- lion) of which TSh 17 million (US$2.0 million) were already in arrear. As of June 30, 1978, the total outstanding gross portfolio amounted to TSh 436 million (US$52.5 million). Although there is no available information to express in quantitative terms the impact of TRDB on the rural sector measured in numbers of incremental hectares planted or tons produced, the number of loans approved, may give an indication of its achievements over the years which is not unimpressive. The following table shows the increase in the volume of TRDB's operations while Tables 1 and 2 of Annex 2 give TRDB's financial statements for the years since its inception. Approved Loans 1971/72 to 1977/78 Number Amount TSh (million) Av. value TSh '000 1971/72 91 36 393 1972/73 103 108 1,045 1973/74 219 161 734 1974/75 176 203 1,154 1975/76 158 101 636 1976/77 238 77 325 1977/78 1,036 253 244 Total 2,021 939 2.58 The composition of TRDB's loans approved between 1973 and 1978 is made up of approximately 68% seasonal loans; 12% medium-term loans; and 20%  - 28 - long-term loans (Annex 2, Table 3). There are a number of factors which contributed to the decline in the value of TRDB's operations in 1976 and 1977, of which the most significant are: (i) the excessive amounts of unsold stocks of seasonal inputs carried over by TRDB's clients from 1975; (ii) the dissolution of the cooperatives in May 1976, leaving the institutional vacuum where villages were unfamiliar with the procedures of dealing with TRDB leading to a decline in lending; and (iii) TRDB generally discouraged lending in 1976 and the early part of 1977 due to a shortage of funds. 2.59 The apparent decrease in the average size of loans and the major increase in the number of loans in 1978 are a direct result of the dissolu- tion of cooperatives and are expected to continue as more and more villages approach TRDB individually for loans. In total, during the seven years of its existence, TRDB managed to process over 2,000 loans of which about 70% were for seasonal inputs and the remaining 30% covered a wide range of activ- ities such as farm machinery, rural transport, storage, livestock, farm development and small-scale industries. 2.60 Financial Position. Looking at TRDB's results of operations over the years since inception, it is clear that the continuous changes in accounting procedures makes a comparison difficult. Prior to 1974, TRDB followed the practice of cash basis accounting whereby only interest received was credited to the income statement. In 1974, the accounting procedure was changed to accrual basis; accrued interest, however, was charged against TRDB's net income and shown separately as "unrealized loan interest receiv- able." This was in effect a continuation of TRDB's policy of taking credit only for loan interest actually received during the year as income for that year. In 1977, this procedure was finally changed to full proper accrual basis accounting. 2.61 Prior to 1977, TRDB followed the practice of providing 1% of the loans approved in any year for bad and doubtful debts. As of June 30, 1976, the arrears of principal and interest amounted to TSh 72 million against which the provision for bad and doubtful debts amounted to TSh 16 million or about 22% of the arrears. During FY1977, the amount of principal and interest in arrears reached TSh 124 million rising in1978 to TSh 173 million due mainly to the dissolution of cooperatives and the liquidation of the Tanzania Road Haulage Company. Faced with this situation, TRDB increased its provision for bad debts to TSh 55 million in 1977 by charging TSh 20 million against its income for that year and transferring the provision of unrealized income of TSh 19 million. In 1978, TRDB further increased its provision for bad and doubtful debts to TSh 74 million by charging an additional TSh 19 million against its income for that year. While at  - 29 - first glance, the percentage of arrears appears to be high, a large percentage belongs to the now defunct cooperatives and to a recently dissolved para- statal. There are indications of poor repayment records by some villages for medium-term loans and seasonal loans. However reasonable or good repay- ment records by other selected groups have been disclosed and much of the adverse picture may be occasioned by earlier lending to now defunct coopera- tives or to villages through these cooperatives. Thus, there should be some caution in using gross loan repayment performance as a subjective criteria of TRDB's ability at this juncture. 2.62 Due to the absence of reliable data (para 2.31), a crude measure was used to evaluate TRDB's portfolio whereby the total of its bad and doubtful debts during the period 1972 to 1978 was measured against the total amounts disbursed during the same period and was found to average 10%. By excluding the debts due from the now defunct cooperatives from both sides, the ratio fell to 8% of disbursements. In order to maintain TRDB's capital, it was agreed at negotiations that Government would remedy any financial loss to TRDB resulting from unpaid debts due from cooperative unions and societies which remain outstanding and unpaid as of June 30, 1981, in the light of TRDB's financial position at that date. 2.63 During the five fiscal years 1974 to 1978, TRDB's outstanding loan portfolio almost tripled in size while its long-term liabilities increased from 40% in 1975 to 53% in 1978 as a percentage of its total portfolio. However, the debt equity ratio remained fairly constant over those years at around 40:60 reflecting a matching increase in the equity base through Government grants which increased from TSh 22 million in 1975 to TSh 170 million in 1978. In general, the bulk of TRDB's medium and long-term loans are financed through long-term onlending of IDA and bilateral aid agencies' credits and grants, while the bulk of its seasonal lending is financed through its equity comprised of its share capital and Government grants. TRDB had no other available source of finance to meet any increase in demand for credit other than Government budgetary allocations. This situation has now been remedied by the amendment of BOT's Act (para 1.22).  - 30 - III. THE PROJECT A. General Description 3.01 The principal purpose of the Project is to strengthen TRDB as an instituion and to help develop its capabilities over a period of three years to provide needed credit for economically viable rural sector projects in an efficient manner bearing in mind that the basic thrust of TRDB's future lend- ing activities will be to the villages. The Project includes the following: (a) Improved training of new and existing TRDB staff and the establishment of six mobile units for the training of village administrators. (b) Strengthening TRDB's organizational structure by: (i) establishing a Management Information Center with a small computer suitable for TRDB's operations, and the employment of consultants to implement the computer system; (ii) establishing an Organization and Methods Division and the employment of consultants to develop work routines, controls, and a procedures manual; (iii) enlarging the Research Division to cover Monitor- ing and Evaluation of TRDB's activities; and (iv) establishing of a "Regional Directorate" at head office to coordinate and supervise the activities of the regional offices. (c) Strengthening TRDB's infrastructure by improving office accommodation and transport facilities. (d) Employment of consultants to assist Government in resolving the input distribution problem. (e) Credit to assist in financ;,ng TRB's lending program. B. Pr)ject ,osts 3.02 Total Project Costs are _stim_ied at TSh 110.0 million (US$13.3 million) of which about TSh 56.4 m_llir_ (US$6.8 million) or about 51% repre- sent foreign exchange requirements. Ic.al taxes, principally import duties, estimated at TSh 3.9 million (US$0.. m_iLlion), are included in the Project Costs estimates. Details of Projec-, costs are presented in Annex 2, Table 5 and are summarized below:  - 31 - -------TSH '000-------- -------US$ '000---- - Foreign Local Foreign Total Local Foreign Total Exch. % Training 4,967 8,220 13,187 599 990 1,589 62 Organizational Improvements 5,237 10,171 15,408 631 1,225 1,856 66 Infrastructural Improvements 6,984 9,491 16,475 841 1,144 1,985 58 Input Distribution Study 112 448 560 13 54 67 80 Credit 29,880 19,920 49,800 3,600 2,400 6,000 40 TOTAL BASE LINE COSTS 47,180 48,250 95,430 5,684 5,813 11,497 51 Contingencies: - Physical 1,730 2,834 4,564 208 341 549 62 - Price 4,657 5,339 9,996 561 643 1,204 53 Total Contingencies 6,387 8,173 14,560 769 984 1,753 56 TOTAL PROJECT COST 53,567 56,423 109,990 6,453 6,797 13,250 51 Less: Taxes and Duties 3,900 - 3,900 470 - 470 - TOTAL PROJECT COST EXCLUDING TAXES AND DUTIES 49,667 56,423 106,090 5,983 6,797 12,780 53 3.03 Costs have been estimated at prices expected to prevail in December 1979. Physical contingencies of 10% have been included for all Project costs, except the credit component. Allowances for price contingency have been applied to all Project costs, except the credit component at the following rates: 12% for 1980 and 1981 and 11% for 1982 on local costs and 9% for 1980, 8% for 1981 and 7% for 1982 on foreign exchange costs. C. Financing 3.04 The financing of Project costs would be as follows: US$ '000 % IDA 10,000 78 Government 1,980 16 TRDB 800 6 12,780 100 3.05 The proposed IDA Credit of US$10.0 million would be on standard terms to the Government of Tanzania, and would finance 75% of total Project costs, or 78% excluding taxes and duties. The credit would cover 100% of  - 32 - foreign exchange costs (US$6.8 million) and 54% of the local costs (US$3.2 million). Government's own contribution to Project financing of US$2.5 million (US$2.0 million net of taxes and duties) would be provided to TRDB as a grant while Government would onlend the proceeds of the IDA credit to TRDB at a rate not exceeding 4% p.a. repayable over 20 years, including a five-year grace period. These terms and conditions would be incorporated into a subsidiary loan agreement between Government and TRDB, conclusion of which, in a form satisfactory to IDA, would be a condition of effectiveness of the credit. TRDB would provide out of its own resources US$0.8 million to finance approxi- mately 50% of its acquired share in a new office building. These arrangements would lead to an overall acceptable debt/equity ratio for TRDB of about 55:45. D. Detailed Features (a) Training 3.06 (i) Staff Training. A principal focus of the project is improved training of TRDB's staff; the present arrangements and indications of areas for improvement have been described in paras 2.19-2.22. At present, the training courses for project officers and credit supervisors conducted by TRDB show a considerable bias towards theoretical development of the subjects and insuffi- cient use of case studies. The training program financed under the project would be designed to provide the maximum scope for problem solving by the participants both on an individual basis and in groups. Project appraisal would be developed using case studies from actual projects financed by TRDB. They would be designed to i:Llustrate the correct methodology and involve the participants. Field visits by the participants to borrowers with the objec- tive of collecting the basic information necessary for proper evaluation would be made. Similarly, participants would be set the task of making independent supervision visits to report on implementation progress, attendant problems and possible solutions. It is only by providing such practice-oriented bias in the training program that maximum benefits can be achieved by both the participants and the organization. 3.07 Courses would be organized in two parts for both Project Officers and Credit Supervisors, each of about six weeks duration. To allow for better interchange of theory and practice, the second part would normally take place after one year of field experience. This would also reduce disruption of normal duties and the resultant organizational problems. 3.08 Two further courses would be provided for project officers and credit supervisors which wouLld be in the nature of refresher courses bringing in their ambit all operational staff in a cycle of three to four years and would be designed to provide further opportunities to remedy skill deficien- cies. Each course would last from seven to ten days and would cover topics in project appraisal, new de!velopments in agricultural practices and problem areas in operations identified from time to time.  - 33 - 3.09 With the administrative decentralization in Tanzania and a parallel movement by TRDB, the roles of the Regional Officers and their managers have assumed greater importance. The Regional Managers have to coordinate all TRDB activities in the region; they have to liaise with various other admin- istrative organizations and departments, prepare annual credit plans, are responsible for the overall volume of operations and for loan recovery. They also have to manage the office and all its staff, in addition to taking part in individual projects as project officers. While they have, in general, received sufficient training in project appraisal and related topics through the basic TRDB course for project officers, they have no training in various management subjects relevant for them in their management role. For this purpose, a one week program would be conducted annually bringing together all Regional Managers. This seminar would be used to direct discussions on specific problems faced by the regional managers in their operations. This would include topics such as personnel management problems, difficulties in communications and relations with head office, difficulties in receiving agricultural extension or marketing services and so on. The pooling together of their experience and the sharing of successful practices would contribute greatly to improving their performance, to the building up of morale and would provide a forum for discussions. 3.10 An overall schedule for the training program is set out in Annex 3, which also includes a detailed description of the duties of the Training Division and of the following internationally recruited specialists who would be recruited under the project: (i) a Chief Training Officer with a minimum of 10 years work experience in institutions dealing with agricultural credit who would head the division and coordinate its activities with those of the Monitoring, Evaluation and Research Division. He would be responsible for the design and preparation of teaching materials and training programs; (ii) an Agricultural and Farm Management Specialist with relevant experience preferably in the developing countries to develop adequate manuals on the technical aspects of agricultural projects (para 3.17) and assist in the training of TRDB staff; and (iii) an Agricultural Economist with experience in the preparation and appraisal of agricultural projects in developing countries to develop appraisal guidelines and assist in the overall training of TRDB staff. The project would also provide housing for these three expatriates due to existing shortage of houses in Dar-es-Salaam. Assurances were obtained that the staff so recruited would have terms of reference, qualifications, experience and conditions of employment satisfactory to the Association. 3.11 (ii) Village Training: As noted in para 2.23, six two-man mobile training teams would be established under the project which would travel to centrally located villages covering 8 to 15 neighboring villages to provide instructions to village bookkeepers in the proper maintenance of books and records. It is intended to operate on a nationwide basis covering at least 1,000 of the villages within the project period. The program would be coor- dinated by a Rural Credit Training Officer to be employed under the Project within the Training and Manpower Development Division of TRDB.  - 34 - 3.12 The efforts of the mobile training program would be supplemented by more frequent visits of the credit supervisors who would check village records and provide any needed assistance and guidance. It is expected that as this coordinated approach becomes successfully applied in a sufficient number of villages, TRDB would ensure that one of its requirements for eligibility for credit by a village, i.e., the presence of a trained bookkeeper and the maintenance of proper records is adequately met. (b) Strengthening TRDB's Organizational Structure 3.13 (i) Management Information Center: The Project provides for the employment of consultants (40 man/months) 1/ to recommend a small computer suitable for TRDB's operations, provision is also made for the procurement and installation of the recommended computer and recruitment of support staff. The supplier would be required to provide the necessary training. 3.14 The computer center would be part of an integrated information system in which applications would go beyond the pure accounting functions to include statistical information and improve billing procedures. It is anticipated that with the proposed eventual decentralization of the regional offices, timely information with regard to loans outstanding and arrears would be provided to each region which would be of vital importance in the loan recovery process. 3.15 (ii) Organization and Methods Division: This division would be established within the Development Department to be responsible for the preparation and updating on a continuous basis of manuals and procedures and to organize the flow of information within TRDB the need for which has been described in para 2.49. Consultants would be employed (48 man/months) 2/ to assist TRDB in setting up this division and defining the rules, practices and procedures by which TRDB staff are to operate. The consultants would, in particular establish controls and specifications for the collection system and implement new procedures manual.Provision is made for the recruitment of staff to man this division (including its head) who would be trained in their functions by the consultants. Provision is also made for the procurement of the necessary office furniture and equipment. 3.16 (iii) Monitoring, Evaluation and Research Division: The Project would strengthen the existing Research and Statistics Division (para 2.11) by incorporating the monitoring and evaluation function of all TRDB's activities. Provision is made for the recruitment of staff and the procurement of office furniture and equipment. An indication of the role of monitoring and evalua- tion has been given in discussing TRDB's operating policies and procedures (para 2.48). 1/ Cost per man/month US$10,000 including overheads. 2/ Cost per man/month US$8,000 including overheads.  - 35 - 3.17 This Division, with the assistance of the Training Division, would be responsible for the development of manuals. In this respect, special attention would be given to the development of simple, basic technical manuals for each crop and activity financed by TRDB. These would provide information on the types of farm inputs, good crop farming practices, pests and diseases, suitable farm models for different climatic conditions and social organiza- tion. Examples determining investment needs of projects, likely problems and the methodology for project appraisal would also be covered. A good beginning has already been made with the development of a manual for live- stock projects and this effort would be continued to cover all other activ- ities of TRDB. Strengthening TRDB's Infrastructure 3.18 (i) Office Improvement: The existing TRDB office facilities are inadequate, filing cabinets and stationary supplies are piled in the corri- dors. In view of the expected expansion of its activities and the increase in its staff TRDB has contracted with other institutions to acquire a share participation in the construction of a new office building. Construction of the building began in 1978 by contractors chosen in compliance with local competitive bidding p5ocedures. With the construction of this building TRDB would acquire 3,300 m of office space which is adequate to cope with its office needs, training facilities and data processing space requirements. The cost of this new office space would be financed by TRDB and Government. Provision is also made under the Project for the procurement of additional office furniture and equipment. 3.19 (ii) Transport Facilities: To increase the mobility of TRDB staff engaged in project appraisal and supervision (para 2.47), funds are provided under the Project for the purchase of three cars for head office staff; 25 four-wheel-drive vehicles for regional offices; and 67 motorcycles for field credit supervisors. Each regional office would be provided with at least one four-wheel-drive vehicle and credit supervisors would be provided with a motorcycle each in all the regions where the terrain allows the use of this mode of transport. To encourage proper maintenance of motorcycles, credit supervisors will obtain them through purchase from TRDB. (d) Input Distribution Study 3.20 In view of the difficulties faced by TRDB in the physical distribu- tion of inputs (para 2.53), Government has undertaken the responsibility of resolving this problem (para 1.20) with a view to relieving TRDB of this burden, thereby enabling it to act as a purely financial institution. Funds are, therefore, provided under the Project for the employment of consultants (8 man/months) 1/ to assist Government in this task. The Terms of Reference of these consultants would be subject to prior consultation with IDA. 1/ Cost per man/month US$8,000 including overheads.  - 36 - (e) Credit 3.21 Funds are provided under the Project to assist in the financing of TRDB's lending program over the three-year project period (Annex 2, Table 3). These funds would be in the form of a general line of credit to be used by TRDB in the course of its normal operations. It is intended that this would be in the nature of a pilot project since it is the first such general line of credit offered to TRDB by IDA. It is of a modest size, representing only 6% of TRDB's projected annual loan disbursement. Certain limits would be placed on the application of these funds, particularly on the size of the subloans which would be made without IDA's prior approval. First, there would be a free limit of US$30,000 for seasonal inputs and farm machinery loans, US$70,000 for livestock loans, and US$100,000 for all other loans with an overall limit of US$200,000 to any individual village or entity. These limits are suffi- ciently high so as to give TRDB proper decision making responsibility. Secondly, funds under the credit allocated to seasonal loans would be limited to crops for which there are established practices and would only be disbursed on an incremental basis. Lending would also be made only to villages which meet the usual lending criteria such as good management, proper maintenance of books and accounts, prompt repayment of previous loans and economic viability of the enterprise. Finally, funds under the credit would be limited to five regions to be selected in consultation with the Association which are active regions with an already established demand for credit and where TRDB's activ- ities are expected to expand at a faster rate than other regions. This would facilitate monitoring and evaluation of project results within the short span of the project period as a gauge for future lending to TRDB and expansion of its activities under future projects. Assurances were obtained at negotia- tions that the above limits and conditions would be adhered to. E. Procurement 3.22 Procurement under the project would be in accordance with the Bank/IDA guidelines: (a) orders for furniture, office equipment, and computer materials (US$0.4 million) would be bulked to the maximum extent possible and procured through local competitive bidding (LCB); (b) vehicles (US$0.7 million) would be procured through international competitive bidding (ICB); (c) consultants to study TRDB's accounting and management information system and support computer programming and installation (US$0.5 million), consultants to establish routines and procedures (US$0.4 million), and consultants to prepare an input distribution study (US$0.1 million) would be procured in accordance with Bank/IDA guidelines for selection of consultants; (d) houses (US$0.2 million) would be procured under local competitive bidding. Office accommodation (US$1.4 million) has been tendered and awarded in accordance with local competitive bidding. Computer machines (US$0.7 million) would be procured in a manner to be decided, in consultation with IDA, after the recommendations of the consultants are known. TRDB would use its regular procurement procedures which are satisfactory, in respect of purchases on behalf of borrowers under the general line of credit.  - 37 - 3.23 Draft tender documents for all contracts (except the office accom- modation), expected to cost in excess of US$50,000, would be submitted to the Bank for approval before invitations are issued. Bid analysis and recommenda- tions for award would be submitted to the Bank for comment before contracts are awarded. Assurances that the above procurement procedures would be followed were obtained at negotiations. F. Disbursement 3.24 IDA would disburse on the following basis: (a) 100% of the foreign expenditures or 80% of local expenditures for vehicles (US$0.7 million), consultants (US$1.0 million), computer machines (US$0.7 million), training courses (US$0.2 million), and salaries and benefits of expatriate personnel (US$0.5 million). (b) 80% of local costs for furniture, office equipment, and computer materials (US$0.4 million). (c) 70% of local expenditures for houses, salaries and benefits, travelling allowances, and running costs of training mobile units (US$0.6 million). (d) 80% of the incremental cost of loans disbursed by TRDB under the general guide line of credit (US$5.0 million). As noted above (para 3.05), Government and TRDB would fully finance the office buildings. In order to expedite project start-up, provision would be made to disburse retroactively up to US$100,000 for expenditure incurred after October 31, 1979 on recruitment of consultants to study TRDB's accounting and manage- ment information system and to recommend a computer suitable for TRDB's operations. 3.25 Disbursement against vehicles, computer machines, furniture, con- sultants, civil works by contracts would be fully documented. Disbursements against local salaries and benefits, travelling allowances and running costs of training mobile units would be against certificates of expenditures signed by the Managing Director of TRDB. TRDB is capable of maintaining the documen- tation and records which would be retained by TRDB until one year after the closing date. The records and accounts covering such expenditures for which disbursements would be made against statements of expenditure would be subject to specific auditing. Disbursements against the general line of credit for subloans (para 3.21) would be against certificates signed by the Managing Director specifying (i) that subloans are made in one of the selected regions; (ii) that for seasonal inputs loans, such subloans are incremental to the total previous year's loans in that region and (iii) that no funds were received by TRDB to cover the specific subloan from any other source. The documentation which would not be submitted to IDA would be retained by the Borrower for inspection by supervision missions. A schedule showing the estimated pattern of disbursement of the IDA credit is presented in the following table:  - 38 - Schedule of Estimated Disbursements of IDA Funds (US$'000) Disbursements Cumulative IDA Fiscal Year in Disbursements at and Quarter Ending Quarters the End of Quarter 1979/80 March /a June /b - - 1980/81 September 600 600 December 800 1,400 March 1,000 2,400 June 1,200 3,600 1981/82 September 1,200 4,800 December 1,000 5,800 March 800 6,600 June 800 7,400 1982/83 September 600 8,000 December 600 8,600 March 400 9,000 June 400 9,400 1983/84 September 300 9,700 December /c 300 10,000 /a Estimated quarter of signing of loan agreement. /b Estimated quarter of loan effectiveness. /c Estimated quarter of project completion. G. Accounts, Audit and Reports 3.26 Separate accounts geared to produce information and control related to the lines of credit financed under this project, would be kept by TRDB. TRDB's accounts are presently satisfactorily audited by the Tanzania Audit Corporation. Audited financial statements for the years up to June 30, 1977, have been submitted to IDA. Assurances were obtained at negotiations that the above accounts would be maintained, that TRDB's accounts would continue to be audited by independent auditors acceptable to IDA and that the accounts and auditors report would be submitted to the Association within six months of the end of TRDB's fiscal year. A separate report in respect of the expendi- tures and records related to statements of expenditures would be prepared by the auditors and submitted to the Association not later than six months after the end of each fiscal year. Assurances were also obtained at negotiations that TRDB would submit quarterly financial statements together with a progress report within three months of the end of each quarter and that within six months of the end of the project period, TRDB's management would prepare a project completion report.  - 39 - IV. PROSPECTS AND JUSTIFICATION 4.01 TRDB remains the main vehicle for rural credit in Tanzania. It is charged with a major role in the development of the rural sector and is di- rected toward assisting a large number of people through emphasis on lending to villages. The principal purpose of the proposed assistance to TRDB is to strengthen it as an institution. In the area of achieving institutional com- petence, however, there appears to be an inverse relationship between the number of limitations and requirements placed on any funds available to the institution and the development of institutional ability; the more restrictions imposed, the less the need and opportunity to develop an ability. So far, TRDB has been acting as a conduit for IDA and other bilateral aid funds aimed at a specific crop or project. Decisions on who gets the funds and for what purpose are made largely outside TRDB. Consequently, these credits have con- tributed very little to TRDB's institutional capability and future viability even though they may have influenced short and medium term crop production. 4.02 Following the dissolution of cooperatives, the number of loans pro- cessed by TRDB in its direct lending to villages has increased sharply. This sharp increase necessitates the recruitment of additional project officers, credit supervisors and accounting staff that would be required to help TRDB in dealing with this increased number of clients and in assessing the credit worthiness of villages with little or no previous experience in bookkeeping, inadequate records and limited managerial skills. For this purpose, training of TRDB staff at all levels would be of major importance. The strengthening of TRDB under the Project is expected to yield a number of dividends; at the most basic level it would allow TRDB staff to fulfill routine demands which must be carried out by any financial institution. The streamlining of its organizational structure and the installation of a computer capable of handling the increased load would produce the added advantages of pro- duction of a wide range of information necessary for effective management. TRDB's loan collection problems may well depend on increased awareness of the role played by rural credit, and efforts to encourage repayment through political channels would be extremely valuable at all levels, but it would also be essential for TRDB to possess up to date information on its borrowers and their activities. Lack of proper information is in most cases a contri- butory factor to arrears and provides an excellent excuse for borrowers to delay or avoid loan repayment. Further, by the use of the threat of withhold- ing any financing to an area if adequate extension services are not provided, TRDB can act as a positive force in coordinating extension services and increasing rural productivity. 4.03 Financial projections were prepared for TRDB based on the followng assumptions: (Annex 2, Tables 1 and 2) (a) All new subloans will be made at an average annual interest rate of 8.5% (para 2.34). (b) Default risk cost was calculated at 8% of annual disburse- ments (para 2.31) and provided for in the year the funds were disbursed.  - 40 - (c) Loan recovery is assumed to improve gradually during the project period from 70% repayment on the due date for loans disbursed in the first year to 80% for loans disbursed in the third year. (Total repayment in all cases 92%.) (d) Government would remedy any financial losses to TRDB arising out of the dissolution of cooperatives estimated at TSh 30 million (US$3.6 million) (para 2.62). (e) Funds onlent to TRDB would carry an interest charge of 4% and would be repayable over 20 years including a five-year grace period (para 3.05). 4.04 With the increasing long term liabilities of TRDB under this project as well as under other IDA projects, the equity base would relatively decrease thereby increasing the cost of funds to TRDB. However, the projec- tions show that the debt/equity ratio of TRDB would average 55:45 during the project period. This gives TRDB a sound equity base and adequate cushion against possible erosion of equity due to portfolio losses. The projections also show that TRDB's interest revenue averaging 8.5% per annum may be suffi- cient for it to break even assuming an average default risk cost of 8% of annual disbursements. As TRDB's long-term debts continue to rise relative to its equity base, its cost of funds would increase. TRDB's ability to generate a surplus would depend to a large degree on its ability to improve its record of loan recovery while maintaining its debt/equity ratio constant. The Government's keen desire to support the agricultural sector is matched by its interest in supporting TRDB's loan recovery efforts (para 2.50) and maintaining it as a financially viable institution. Interest rates charged by TRDB would also be kept under constant review by Government and the Association (para 2.34). 4.05 Under the Project, Government would provide TRDB with its contribu- tion to Project financing in the form of a grant so that the debt/equity ratio does not fall below 60:40 giving TRDB a sound financial basis and keeping its cost of funds within manageable limits (para 3.05). The cash flow analysis (Annex 2, Table 4) shows that TRDB would have sufficient funds during the pro- ject period and would only run into cash deficits after that period while con- tinuing to maintain a cash balance of TSh 60 million. It is assumed that such deficits could be easily covered from the now available resources through DOT. 4.06 The project is not without risks; but the risks are basically those attached to the credit component, i.e., the problems of credit recovery. Because large grants and subsidies in one form or another were given to settle- ment schemes and Ujamaa villages, loans in the minds of many people came to mean grants. However, TRDB has already begun a policy aimed at educating the villages in the concept of credit through seminars to village administra- tors, cutting villages off from future loans unless they repay outstanding ones and in some cases foreclosing on defaulters. If all or any of these measures can bring villages and peasants to realize that a loan must be re- paid then the risks would have been reduced to a minimum. 4.07 This Project does not lend itself to a ready calculation of the economic rate of return. However, under TRDB's present policy statement, the criteria of acceptability of sub-projects would be a rate of return of not less than 10% and a benefit cost ratio of not less than one using a discount rate of 10%.  - 41 - V. AGREEMENTS REACHED AND RECOMMENDATIONS 5.01 Assurances were obtained during negotiations that: (a) Government would undertake to satisfy TRDB's requirements of university graduates (para 2.16). (b) TRDB would follow the guidelines in its lending operations outlined in paragraph 2.38. (c) Any projects which may be considered of national priority involving higher than normally acceptable risks or other- wise not meeting TRDB's lending criteria, would be financed through the provision of special funds with Government bearing the risk of any such project (para 2.29). (d) TRDB would charge the annual interest rates outlined in para 2.34 on its loans beginning with the date of signing of this project. (e) TRDB would inform the crop purchasing parastatals within two weeks prior to the date of commencement of each crop marketing season of the aggregate amount of principal and interest due from each sub-borrower which the crop parastatals would be required to deduct at source for account of TRDB (para 2.50). (f) All debts due from dissolved cooperatives would be liquidated by June 30, 1981 (para 2.62). (g) The financing arrangements would be in accordance with the terms and conditions outlined in para 3.05. (h) all internationally recruited staff provided for under the project would have terms of reference, qualifications, experience and conditions of employment satisfactory to the Borrower and the Association (para 3.10). (i) All funds under the general line of credit would be subject to the limits and conditions stated in para 3.21. (j) TRDB's accounts would continue to be audited by independent auditors acceptable to IDA, and the audited accounts and the auditors' report would be submitted to the Association within six months of the end of TRDB's fiscal year (para 3.26).  - 42 - (k) TRDB would submit quarterly financial statements together with a progress report within three months of the end of each quarter and that within six months of the end of the Project period, TRDB's management would submit to the Association a project completion report (para 3.26). 5.02 The following are conditions of credit effectiveness: (a) Appointment of a head of the "Regional Directorate" with qualifications and experience acceptable to the Association (para 2.08). (b) Execution of a subsidiary loan agreement between Government and TRDB in a form satisfactory to IDA incorporating the arrange- ments in para 3.05. 5.03 Subject to the above agreements and conditions, the Project would be suitable for IDA financing of US$10 million.  - 43 - ANNEX 1 Page 1 TRDB TANZANIA RURAL DEVELOPMENT BANK TRDB's Involvement in IDA-assisted Projects 1. Agricultural Credit Project Credit No. 80-TA This credit became fully disbursed at roughly the same time that TRDB came into existence. TRDB has inherited the collection task only. 2. Flue-Cured Tobacco Project Credit No. 217-TA TRDB took over its functions under this project from its pre- dessor institution. It acts merely as a credit channel based on information provided by the Tobacco Authority. 3. Smallholder Tea Development Project Credit No. 287-TA TRDB acts only as a channel for credit to growers on the basis of information given to it by the Tea Authority (TTA), and loans to TTA for tea factories and establishment of nurseries, as appraised in advance by IDA. 4. Second Livestock Development Project Credit No. 382-TA The project was designed as a broadly based integrated program aimed at increasing beef production in Tanzania through the development of ranches, cattle markets, stock routes, holding grounds and meat plants and the provision of technical services. The ranches include major parastatal ranches, ranches owned by the District Development corporations and village ranches. TRDB acts as the lending channel for loans to project beneficiaries. The Project Management Unit advises TRDB in evaluating all investment plans as to their technical, financial and economic suitability. However, TRDB approves or rejects loan proposals on the basis of its own evaluation. TRDB carried out its obligations satisfactorily and played a positive role in the financial rehabilitation of some parastatal ranches that were facing financial difficulties. TRDB has (rightly) suspended disbursements to some DDC ranches and village ranches; and has (again rightly) refused to lend to any further DDC ranches and village ranches in high density, over-grazed areas.  - 44 - ANNEX 1 Page 2 5. Geita Cotton Project Credit No. 454-TA TRDB was to act merely as a credit channel to cooperatives who onlend to farmers. After dissolution of the cooperatives, it has acted only on the basis of information from the Cotton Authority. 6. Kigoma Rural Development Project Credit No. 508-TA The project supports village development in the Kigoma region and consists of: investment in village social infrastructure (e.g. water supply, education and health facilities); loans to eligible and creditworthy villages for economic infrastructure and agricultural inputs; loans to creditworthy sub-borrowers for transport and storage facilities; investments in regional supporting services and technical assistance. TRDB acts merely as a credit channel to cooperatives who onlend to farmers based on recommendation by project management. 7. Dairy Development Project Credit No. 580-TA The project respresents the first stage of a long-term program to develop dairy farming in Tanzania. It is designed to support the reha- bilitation and expansion of commercial diary production on parastatal farms, improve milk collection and processing facilities and provide the basis for dairy development in the traditional sector by supporting a pilot ujamaa dairy program and by producing upgraded heifers. TRDB acts as a channel for IDA-financed loans for the various project beneficiaires. It has direct responsibility for preparing and supervising loans for ujamaa dairy units in conjunction with the regional livestock services and approves loans on the basis of investment plans prepared by the responsible agencies. TRDB has carried out its obligations under the project in a satisfactory manner and is investigating alternative ways of assisting the village smallholder due to poor response to the ujamaa component. 8. Fisheries Development Project Credit No. 652-TA The project represents the first stage of a long-term program to develop fisheries production in Tanzania. It is designed to support the establishment and development of commercial fisheries at selected centers along the coast and on Lake Tanganyika and assist in the adoption of improved fishing techniques, improve marketing and provide the basis for fisheries development in the traditional sector by supporting a pilot fisheries program in about 20 ujamaa villages located on the shore of Lake Tanganyika. In addition to its role as a channel for funds to the commercial centers, TRDB was assigned the task of preparing investment plans for the ujamaa villages. TRDB has carried out its task satisfactorily in spite of delays caused by circumstances beyond its control such as the outbreak of cholera.  - 45 - ANNEX 1 Page 3 9. National Maize Project Credit No. 660-TA The project aims at improving and expanding the maize production program started by the Government in 1973 by providing input and extension packages designed to increase maize production in about 950 villages located in the best maize growing areas in 13 regions of Tanzania; it also provided for village stores. TRDB's Role: (a) TRDB was not assigned any role to play in financing inputs under the project at the outset, since these were supposed to have been sold on a cash basis only. However, after facing considerable difficulties, Government made a decision on October 1977 that imputs should be provided under credit and that financing function be handed over to TRDB. TRDB assumed its role beginning with 1978/79 season on the understanding that under the redesign maize project it would apply its own operational policy guidelines in evaluating eligible borrowers. (b) TRDB was expected to appraise villages for the financing of stores, on the recommendation of the Project Implementation Unit. PIU has recently submitted a standard design and a list of villages to TRDB - but the latter has (rightly) rejected the store design, as being too elaborate and expensive for many areas. Designs reflecting local area conditions, gen- erally leading to lower cost structures, are now being drawn up. The lending for villages stores would, however be under- taken only on an experimental basis until profitability of such investment is fully established. 10. Tobacco Handling project TRDB will have specific responsibility for the administration of seasonal imput credit for bulking bags and long-term credit for the construction of grading and baling centers.  ANNEX 2 TANZANIA Table 1 TANZANIA RURAL DEVELOPFENT BANK Income Statements (TSh Million) -_____ Audited ------------ 1/ 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 Interest Income 19 33 32 40 49 54 58 62 64 65 67 Other Income 1 3 5 5 5 5 5 5 5 5 5 Total Revenue 20 36 37 45 54 59 63 67 69 70 72 Cost of Funds 4 6 7 11 14 16 18 20 22 24 26 Gross Revenue 16 30 30 34 40 43 45 47 47 46 46 Administrative Expenses: - Salaries & Benefits 3 4 5 6 8 10 10 10 10 10 10 - Transport 1 2 2 3 3 5 5 5 5 5 5 - Occupancy 1 1 1 1 1 1 1 1 1 1 1 - Depreciation 1 1 2 2 2 3 3 4 4 4 4 - Other Costs 1 1 1 1 2 3 3 3 3 3 3 Total 7 9 11 13 16 22 22 23 23 23 23 2/ Bad & Doubtful Debts 3 20 18 20 21 22 23 24 25 25 25 3/ Net Income 6 1 1 1 3 - - (1) (2) (2) Ratios: 4/ As a % of average portfolio - Intcrcst Income 5.9 8.6 7.4 8.1 8.2 8.1 8.0 8.0 7.9 7.7 7.6 - Cost of Funds 1.2 1.6 1.6 2.2 2.4 2.4 2.5 2.6 2.7 2.8 3.0 - Administrative Costs 2.2 2.3 2.6 2.6 2.7 3.3 3.0 3.0 2.8 2.7 2.6 - Bad and Doubtful Debts 0.9 5.2 4.2 4.1 3.5 3.3 3.2 3.1 3.1 . 3.0 2.8 - Net Income 1.9 0.2 0.2 0.2 0.5 (0.2) - - (0.1) (0.2) (0.2) 1/ Interest income was recorded on a cash basis up to'75/76 and on accrual basis thereafter. For projections it was assumed that interest rate averages 8.5% p.a. 2/ Assumed for projection purposes at 8% of total disbursement in each year. 3/ TRDB was exempted from income tax in 1973/74. 4/ Including overdue interest. January 1980  ANNEX 2 Table 2 TANZANIA TANZANIA RURAL DEVELOPMENT BANK Balance Sheets (TSh Million) _____----- Audited -------- 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 ASSETS Loan Portfolio 344 425 436 549 641 698 752 798 826 862 897 Less: Provision for doubtful debts 36 55 74 94 115 137 160 184 209 234 259 Net Loan Portfolio 308 370 362 455 526 561 592 614 607 628 638 Fixed Assets 4 12 15 16 17 32 48 66 70 74 78 Less: Accumulated Depreciation 2 3 3 4 6 9 12 16 20 24 28 Net Fixed Assets 2 9 12 12 11 23 36 50 50 50 50 Current Assets 4 - Inventories 31 14 70 70 70 70 70 70 70 70 70 - Sundry Debtors 15 24 39 69 69 69 69 69 69 69 69 - Cash & Bank Balances 71 110 114 78 80 75 62 60 60 60 60 Sub-Total 117 148 223 217 219 214 201 199 199 199 199 Less: Current Liabilities 6 9 9 11 12 12 9 14 16 15 14 Net Current Assets 111 139 214 206 207 202 192 185 183 184 185 421 518 588 673 744 786 820 849 851 862 873 Financed by: - Long-term Liabilities 164 199 233 317 385 421 448 471 474 487 500 - Government Grants 74 135 170 170 170 177 184 190 190 190 190 - Share Capital 172 172 172 172 172 172 172 172 172 172 172 - Retained Earnings 11 12 13 14 17 16 16 16 15 13 11 421 518 588 673 744 786 820 849 851 862 873 DEBT/EQUITY RATIO 39:61 38:62 40:60 47:53 52:48 53:47 54:46 55:45 55:45 56:44 57:43 January 1980  TANZANIA TANZANIA RURAL DEVELOPMENT BANK Sectorial Distribution of Loans (T. Shs Million) Actual Projections 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 (Project Years) (1) (2) (3) (4) (5) I. VALUES Seasonal Inputs 20.9 61.9 85 9 141.8 38.4 52.9 172.3 173 180 187 194 202 211 Farm Machinery 1.0 2.0 1.3 4.1 1.0 0.3 1.5 3 3 4 4 4 5 Rural Transport 6.6 8 6 30.4 15.7 1.1 5.2 4.6 10 15 20 20 20 20 Storage 5.3 1.9 0.4 0.2 1.4 0.7 .2 6 7 9 10 11 12 Farm Development 1.0 24.5 12.8 0.1 - 0.5 - 1 1 1 - - - Livestock 0.5 7.8 25.8 37.6 57.7 14.7 60.1 35 28 29 29 30 30 Fisheries - 0.9 1.3 1.1 - 0.6 10.7 19 20 20 20 20 20 Small Scale Industries 0.5 - 2.7 2.7 0.9 2.4 3.9 6 7 8 10 12 15 TOTAL 35.8 107.6 160.6 203.3 100.5 77.3 253.3 253 261 278 287 299 313 II. GROWTH RATES Seasonai Inputs 196 39 65 -72 38 226 - 4 4 4 4 4 Farm Machinery 100 -35 212 -75 -71 400 100 - 33 - - 25 Rural Transport 30 253 -49 - - -12 117 50 33 - - - Storage -64 -79 -50 _ -52 -71 - 17 29 11 10 9 Farm Development - -52 - - - - - - - - - Livestock - 231 46 54 - 309 -42 -2 2 _ 2 Fisheries - 51 -15 - - - 78 5 - - - - Small Scale Industries - - -67 _ 63 54 17 14 25 20 25 TOTAL 201 49 27 -51 -23 228 - 3 6 3 4 4 III. NUMBER OF LOANS Seasonal Inputs 56 71 140 62 71 190 882 1,150 1,200 1,255 1,315 1,380 1,455 Farm Machinery 13 6 6 16 7 1 9 17 19 21 23 25 27 Rural Transport 12 7 17 20 5 5 8 17 23 28 28 28 28 Storage 1 2 2 1 19 23 - 100 100 110 110 110 110 Farm Development 3 5 4 1 - 1 1 50 50 50 - - - Livestock 1 7 16 22 27 11 24 43 44 54 64 74 74 Fisheries - 3 4 3 - 4 9 20 20 20 20 20 20 Small Scale Industries 5 2 30 51 28 3 103 110 110 120 130 140 150 Others _- - - _ _ _ _ _ _ - TOTAL 91 103 219 176 158 238 1,036 1,496 1,566 1,658 1,690 1,777 1,864 IV. AVERAGE VALUE OF THE LOANS (T.shs '000) Seasonal Inputs 375 873 614 2,287 540 274 200 150 180 149 148 146 145 Farm Machinery 78 335 220 256 147 293 162 180 180 190 190 190 190 Rural T-ansport 547 1,227 1,786 785 227 1,048 581 600 660 620 720 720 720 Storage 5,318 950 228 202 75 29 200 60 72 86 94 103 113 Farm Development 316 4,896 3,199 1130 - 500 - 20 20 20 - - - Livestock 486 1,109 1,612 1,709 2,135 1,338 2,504 820 640 540 450 410 410 Fisheries - 287 328 366 - 144 1,188 950 1,000 1,000 1,000 1,000 1,000 Small Scale Industries - 27 91 51 30 801 38 60 66 73 80 88 97 TOTAL 393 1,045 734 1,154 636 325 244 169 167 168 170 168 168 December 22, 1978  ANNEX 2 Table 4 TANZANIA TANZANIA RURAL DEVELOPMENT BANK Proiected Cash Flows (TSh Million) 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/5 1985/86 CASH INFLOW Loan Collection: - Principal 127 178 229 242 263 300 293 296 - Interest 23 40 47 48 51 50 49 48 Other Income 5 5 5 5 5 5 5 5 External Loans/Credits: - Existing Commitments 88 76 26 26 25 10 - IDA Credit 25 27 24 - New Requirements 1/ 20 43 43 Government Grant 2/ 7 7 6 Total Cash Inflow 243 299 339 355 374 385 390 392 CASH OUTFLOW Loan Disbursement 253 261 278 287 299 313 313 313 Loan Repayment: - Principal 4 8 15 26 26 27 30 30 - Interest 11 14 16 18 20 22 24 26 Proiect Costs 16 18 12 4 4 4 Operating Costs 11 14 19 19 19 19 19 19 Total Cash Outflow 279 297 344 368 376 385 390 392 SURPLUS/ (DEFICIT) (36) 2 (5) (13) (2) - - - Opening Cash Balance 114 78 80 75 62 60 60 60 Closing Cash Balance 78 80 75 62 60 60 60 60 1/ Represents new funds required to maintain a cash balance of TSh 60.0 million. 2/ Represents Government contribution to Project financing in the form of a grant. January 1980  TANZANIA TANZANIA RURAL DEVELOREMENT BANK Project Costs -t. (TSh '000) |A|,> Year 1 Year 2 Year 3 Total Local Foreign Local Foreign Local Foreign Local Foreign GRAND TOTAL Training: TRDB Staf f Salaries + Benefits 556 1,033 757 1,407 772 1,435 2,085 3,875 5,960 Support Facilities 495 969 147 287 642 1,256 1,898 Outside Courses 95 467 121 587 121 587 337 1,641 1,978 Sub-Total 1,146 2,469 1,025 2,281 893 2,022 3,064 6,772 9,836 Village Clients Salaries + Benefits 300 149 542 270 784 391 1,626 810 2,436 Support Facilities 95 220 91 209 91 209 277 638 915 Sub-Total 395 369 633 479 875 600 1,903 1,448 3,351 TOTAL 1,541 2.838 1.658 2.760 1.768 2.622 4.967 8.220 13.187 Organizational Improvements: M.I.C.: Computer Machines 152 445 1,416 4,130 1,568 4,575 6,143 Consultant Support 144 576 256 1,024 240 960 640 2,560 3,200 Staff Support 178 422 600 600 Furniture & Office Equipment 1 2 3 8 34 62 38 72 110 Sub-Total 297 1,023 1,853 5,162 696 1,022 2,846 7,207 10,053 Systems:Consultant Support 166 666 269 1,075 179 717 614 2,458 3,072 Staff Support 113 - 113 - 179 - 405 - 405 Furniture & Office Equipment 3 5 1 1 4 6 10 Sub-Total 282 671 382 1,075 359 718 1,023 2,464 3,487 C, Research:Salaries + Benefits 422 142 455 164 468 173 1,345 479 1,824 i Support Facilities 23 21 23 21 44 Sub-Total 445 163 455 164 468 173 1,368 500 1,868 TOTAL 1.024 1,857 2,690 6,401 1.523 1.913 5.237 10,171 15.408 Infrastructural Improvements Office Accommodation 3,412 3,412 1,150 1,150 1,150 1,150 5,712 5,712 11,424 Furniture & Equipment 13 22 13 22 3 9 29 53 82 Motor Vehicles & Motorcycles 382 1,142 471 1,414 390 1,170 1,243 3,726 4,969 TOTAL 3.807 4.576 1,634 2,586 1,543 2,329 6.984 9,491 16.475 Input Distribution Study 112 448 112 448 560 Credit 9,540 6,360 9,540 6,360 10,800 7,200 29,880 19,920 49,800 Total Base Cost 16,024 16,079 15,522 18,107 15,634 14,064 47,180 48,250 95,430 Contingencies: Physical 648 972 598 1,175 485 686 1,730 2,834 4,564 Price 862 982 1,689 2,336 2,106 2,021 4,657 5,339 9,996 TOTAL CONTINGENCIES 1,510 1.954 2.287 3.511 2.591 2.707 6 387 8.173 14.560 TOTAL PROJECT COSTS 17.534 18.033 17809 21,618 18.225 16,771 53,567 56.423 109,990 January 1980  - 51 - ANNEX 3 Page 1 TANZANIA RURAL DEVELOPMENT BANK Training Program Schedule for TRDB Training Division 1979 1980 1981 1. Basic Program for Credit I X X X Supervisors (6 weeks each) II X X X 2. Basic Program for Project I X X Officers (6 weeks each) II X X 3. Refresher Program for Credit Supervisor (7 to 10 days) X X X 4. Refresher Program for Project Officers (7 to 10 days) X X X 5. Administrative Procedures and Systems for Support Staff (7 days) X X X 6. Technical Course on (i) maize (ii) coffee 4 3 3 (5 to 6 days each) (iii) tobacco (iv) livestock (v) transport & small industry (vi) storage 7. Seminar for Regional Managers (7 days) X X X 8. High Level Seminars on Rural Development ( 3 days) X X X 9. Accounting Systems and Procedures for Regional Ofice (7 days) X 10. Village Training by Mobile Units (7 days) 125 250 375  - 52 - ANNEX 3 Page 2 COURSE CONTENT OF PROGRAMS FOR CREDIT SUPERVISORS AND PROGRAM OFFICERS Basic Program for Credit Supervisors: Part I (288 Hours) Subject Hours Description 1. General 8 Agricultural Production and Rural Economy of Tanzania, Rural Development Plans and Goals, Constraints, Role of Credit, Finan- cial Institutions in Tanzania, their role and activities. 2. TRDB 8 History and background of rural credit and TRDB, objectives of TRDB, Policies and Procedures, Organization. 3. Rural Production 48 Technical aspects in the Production of crops, food crops such as maize, wheat, etc., and cash crops such as coffee, tobacco, tea and others. Beef and Dairy development, poultry and other livestock. Fishing and Small Scale Industry. 4. Market 12 Local and export markets, demand, supply, prices, marketing channels - cooperatives and parastatals, crop authorities, their role and practices. 5. Agricultural 16 Objectives of extension, methods, organi- Extension zational structure in Tanzania. Agricul- tural research, research institutes, findings, coordination of extension with research. 6. Irrigation and 16 Impact on crop production, farming prac- Water Management tice, small scale products and their financing. 7. Fertilizer 12 Crop response, soil types, costs and benefit calculation, optimal input levels incremental value, farmer response, goals and targets.  - 53 - ANNEX 3 Page 3 Subject Hours Description 8. Bookkeeping and 80 Refresher of Commercial Arithmetic, Accounting Interest Calculations, Concepts of Book- keeping and Accounting, Nature of Business transactions, Records. The two and three column cash book, reconciliation, journal vouchers, ledgers and accounts and adjustments. Balance Sheet, Assets and Liabilities, their classification, Profit and Loss Statement. Village money transactions, recommended simple bookkeeping and record system. 9. TRDB loan applica- 40 Criteria on Eligibility, types of proj- tion procedures ect, loan application form, supplementary information, use of information, admin- trative procedures. Introduction to the rationale of project appraisal, loan supervision, follow-up, loan collection system, recovery of arrears. 10. Village 3 Organization and Management, Social and Political Framework; Cooperative laws and structure. Production activities, socio-economic data on villages, methods of obtaining data, uses of the data for project work. 11. Management 16 Principles of organization, work simpli- fication, goals and targets, leadership, communication. It is expected that the course would be practice-oriented and in- volve the participants in the learning experience to the largest possible degree. The topics covered in items 1 to 7 would be most appropriate for lecture type presentation with complementary reading, appropriate field visits with sufficient time for questions and discussion. The topics covered in item 8 must be designed and delivered with a large number of case exer- cises. For the items 9 and 10, the participants should be asked to carry out the specific tasks as well as in the real environment. Item 11 can accommodate some amount of role-playing methods. Basic Program for Credit Supervisors: Part II (288 hours) This would, in general, cover the same topics as in Part I. The main changes should be increased depth in the coverage of certain technical aspects, a greater reliance on practice through exercises, cases and live  - 54 - ANNEX 3 Page 4 situations, and the introduction of some new topics especially in the area of project appraisal. In the description provided below, only the major differences with Part I are noted. Sublect Hours Description 1. General 8 Objectives of the program. An overview of the rural economy. 2. TRDB 8 Future prospects, annual plan medium and long term goals and strategies. Organi- zational problems. 3. Rural Production 48 Same topics as before, but in greater depth, greater attention to problem sectors. 4. Markets 8 Prospects and changes; forecast of supplies and demands. 5. Agricultural 8 Review of objectives, methods and organ- Extersion ization of extension. Discussion of available extension facilities, problems and solutions. 6, 7rrigation and V?,Ler Management 12 Review 7. Fertilizer 8 Review 8. Bookkeeping and Accounting 40 Review 9. Farm Economy 24 Farm inventory, balance sheet, gross and net outputs, incomes, return to capital, return in lieu of wages, farm plan and budget. Farm model, construction of different farm models. 10. Project Appraisal 100 Project examples, design, technical and Analysis feasibility, conditions such as soil, moisture and water, topography, climate resultant technical coefficients (24 hours) Project Management and organization -- implementation, organization, manpower, training, etc. (16 hours)  -55 - ANNEX 3 Page 5 Financial Aspects -- cost estimates, revenues estimates, capital outlay, sources of funds, debt and equity, costs of finance, cash flows into and out of project, net flows, incremental flows, discounted flows. Paybacks, NPV, B/C ratio, IRR . (52 hours) 11. Management 24 Review. Basic Program for Project Officers: Part I (288 Hours) Sublect Hours Description 1. General 8 Agricultural Production and Rural Economy of Tanzania, Rural Development Plans and Goals, Constraints, Role of Credit, Finan- cial Institutions in Tanzania, their role and activities. 2. TRDB 8 History and background of rural credit and TRDB, objectives of TRDB, Policies and Procedures, Organization. 3. Rural Production 48 Technical aspects in the Production of crops, food crops such as maize, wheat, etc., and cash crops such as coffee, tobacco, tea and others. Beef and Dairy development, poultry and other livestock. Fishing and Small Scale Industry. 4. Market 8 Local and export markets, demand, supply, prices, marketing channels - cooperatives and parastatals, crop authorities, their role and practices. 5. Agricultural 8 Objectives of extension, methods, organi- Extension zational structure in Tanzania. Agricul- tural research, research institutes, findings, coordination of extension with research. 6. Irrigation and 12 Impact on crop production, farming prac- Water Management tice, small scale projects and their financing.  - 56 - ANNEX 3 Page 6 Subject Hours Description 7. Fertilizer 12 Crop response, soil types, costs and benefit calculation, optimal input levels incremental value, farmer response, goals and targets. 8. Bookkeeping and 48 Interest Calculations, Concepts of Book- Accounting keeping and Accounting, Nature of Busi- ness transactions, Records. The two and three column cash book, reconcilia- tion, journal vouchers, ledgers and accounts, trial balance, Final Accounts and adjustments. Balance Sheet, Assets and Liabilities, their classification, Profit and Loss Statement. 9. Village money 8 Recommended simple bookkeeping and record transactions system. 10. TRDB loan applica- 24 Criteria of Eligibility, types of proj- tion procedures ect, loan application form, supplementary information, use of information, admin- trative procedures. 11. Village 20 Organization and Management, Social and Political Framework; Cooperative laws and structure. Production activities, socio-economic data on villages, methods of obtaining data, uses of the data for project work. 11. Management 16 Principles of organization, work simpli- fication, goals and targets, leadership, communication. 13. Project Formulation 68 Project Conception, Identification, and Analysis Preparation, the rationale and objec- tives of Appraisal (12 hours) Financial Costs and Benefits -- product revenues operating costs, capital costs, working capital.  - 57 - ANNEX 3 Page 7 Subject Hours Description Financial Projections and Analysis -- Income Statements, sources of funds, funds flow, application of funds, balance sheet, financial analysis. Time value of money, discounted flows, payback period. B/C ratio, NVP and IRR (24 hours). Technical Design, Commercial Aspects, Managerial, Organizational, Project plans and implementation (8 hours). Preparation of TRDB Appraisal Report and loan memorandum (4 hours). Basic Program for Project Officers: Part II (288 hours) This would consist in part of a brief review of the material in Part I, supplemented by new material and topics. Only the major substantive additional material are described in detail below. Subject Hours Description 1. General 8 Review of Rural Economy 2. TRDB 4 Past performance and plans for the future. 3. Technical Aspects 40 Special attention should be given to of Rural Production problem sectors. 4. Market 8 Discussion of marketing aspects, insti- tutional arrangements and problems. 5. Agricultural 8 Evaluation of good and bad practices Extension and cases of methods which have been successful in improving extension services. 6. Irrigation and 8 Case study of project. Water Management 7. Fertilizer 8 Review, targets, constraints. 8. Bookkeeping and Accounting 32 Review. 9. Village Accounts 8 Examination of existing problems and their removal.  - 58 - ANNEX 3 Page 8 Subject Hours Description 10. TRDB loan 16 Processing, delays, causes, methods procedures for improvement. 11. Village Information 16 Problems in information collection, its use and improvements. 12. Management principles 20 Setting of goals and objectives, plan- ning, communication, management infor- mation system, report design, key factor analysis, human behavior, leadership. 13. Project Formulation 112 Review of Financial Costs and Benefits, and Analysis Financial Projections and Analysis using past projects (24). Economic costs and benefits -- external effects, shadow wage rate of labor, sha- dow foreign exchange cost, border price concept, social factors, ERR, NPW and B/C ratio in economic (40) Breakeven and sen- sitivity analysis, project scale and timing (16). Technical, Commercial Management, Organi- zational and other factors (16). Supervision procedures, reasons of return of funds, problem solving and feedback; Information and Reports; major causes of project problems (16). Certain basic considerations should be kept in mind in the design of all programs. They must not be paced too lightly so that the participants are bored and lose interest. At the same time, they should not be so tightly scheduled and heavy with information that the participants suffer from an information overload and do not assimilate very much. This is always a delicate balance and can only be achieved through practice. Also, practice and evaluation, and feedback will indicate the right degree of emphasis on the different topics suggested for the courses. It is not expected that the Training Division will follow rigidly the outline provided but will use it as a guide. In the conduct of the courses, it will be preferable that the train- ing programs are provided in four sessions of approximately one and half hours per day. The training participants should not spend part of the day in routine operational duties as in such combinations the training usually suffers. The programs should use an adequate mix of teaching methods such as case studies, exercises, group work, role playing and learning through work experience.  - 59 - ANNEX 3 Page 9 The hours indicated have been calculated on the basis during training the participants will be involved in 8 hours of work per day, including both organized instructions and individual study. Village Training by the Mobile Units Day 1: General Introduction and Orientation. The important members of the village management, namely the Chairman, the Secretary, the Village Manager, and the Bookkeeper are all expected to attent on the first day. This should consist of an introduction to TRDB, its policies, projects financed by it in the area, procedures for application of loans, eligibility, use of funds, records, repayment. This part of the seminar could be complemented by arranging presentations by the regional development officers, the extension officers and representatives of marketing agencies. These other organizations can supplement by providing information on their plans for the area and the services which they provide, so that the villages can make effective demands for inputs which should be available. Days 2-7. Review of Commercial Arithmetic (8 hours) This part on bookkeeping and accounts would be attended by the Village book- keeper only. The Village Manager may also attend if he lacks the necessary background. Basic calculations, Fractions, Decimals, Percentages, Interest calculation. Bookkeeping (40 hours) Concepts and purpose of bookkeeping and accounts, type of documents and their purpose, filling of documents, the two column cash book and its use, ledges and types of accounts, trial balance, final accounts balance sheet, credit transactions, interest calculation, the village bookkeeping system. Description of the Functions of the Training Division and of Internationally Recruited Staff 1. Plan, develop and deliver the necessary in-house programs for TRDB staff. 2. Prepare suitable teaching material for use during the training programs and which can be a guide to the staff in their operations. 3. Ensure that the TRDB staff used for teaching have adequate know- ledge of teaching methods.  - 60 - ANNEX 3 Page 10 4. Monitor the project appraisals carried out, and the supervision work. Develop the training to specifically meet and correct observed weak- nesses. 5. Monitor and evaluate the in-house training provided and modify programs and contents based on the evaluation and changing requirements. 6. Plan and coordinate the entire manpower development plan for TRDB staff, including training at outside institutions. Monitor the programs of outside institutions and evaluate their usefulness to TRDB. 7. Help plan the functions of the Monitoring, Evaluation, Research and Statistics Division during the project year. Coordinate research plans with training and feed these inputs into the training. 8. Develop an information base for TRDB operations, includiang books, journals, data sources and statistics. 9. Develop and deliver the necessary training programs to the client villages. Examine the type of inputs which can provide for parastatal bor- rowers. 10. Liaise with institutions providing training to village staff in accounting and bookkeeping for mutual benefit. 11. Liaise with teaching and research institutions in Tanzania related to TRDB's activities and provide them with suitable inputs to increase the effectiveness of their teaching and research. Internationally Recruited Training Staff 1. Chief Training Expert -- Qualifications - Masters degree in the fields of Economics, Agricultural Economics or in Agriculture and Finance. Ph.D is preferred. - At least 10 years of work experience in institutions dealing with agricultural credit operations in developing countries, of which at least 5 years must be in designing and conducting training pro- grams of rural finance institutions particularly in Economics and Financial Appraisal. q - Some work experience in Tanzania or in Africa preferable. - Some previous responsibilities in building up a department essential.  - 61 - ANNEX 3 Page 11 Other Characteristics - Must be adaptable - Must be able to provide sufficient guidance and develop an adequately coordinated team in the development department. - Candidate must have good knowledge of English. - Knowledge of Swahili desirable, otherwise some facility with lan- guages should be demonstrated. - Must be capable of coping with certain ambiguities in roles and relationships. Duties and Responsibilities - Coordinate the activities of the Trainng and the Research, Statistics and Evaluations divisions in the Manpower Division and establish them on a sound footing. - Design and deliver the training programs for TRDB staff. 2. Agricultural Economist Qualifications - Required a Masters degree in Economics or Agricultural Economics, with sufficient emphasis on Economic evaluation of agricultural projects, or having further relevant training. - Experience of a minimum of 10 years in the preparation of appraisal reports of agricultural projects, of which at least 5 years exper- ience must be in developing countries, preferably in Africa. Some operational experience in project design, implementation, supervi- sion would be required. - Experience of research in rural economics and production in devel- oping countries would be an asset. Other Characteristcs Same as number 2.  - 62 - ANNEX 3 Page 12 Duties and Responsibilities - Prepare and develop teaching material, cases, exercises in the area of project appraisal, including models and guidelines for different sectoral projects. - Assist in the overall training of TRDB staff. - Develop research programs at TRDB. - Involve other institutions and individuals in the training and research needs of TRDB. - Contribute appropriately to fulfill all the tasks specified for the Training Division. - Prepare the necessary teaching materials for the training programs. - Guide the preparation of teaching material and training inputs by other staff. - Prepare a long term manpower development program. - Liaise with the educational institutions providing training in rural development and help to develop their teaching and research capabilities in the subject area. - Contribute fully to fulfill all the requirements specified for the Training Division. 3. Agriculture and Farm Management Specialist Qualifications - Required Masters degree in Agriculture. Further training in Agriculture, Agricultural Extension or Agricultural Economics will be an asset. - Experience of Agricultural Operations in developing countries for at least 15 years of which at least 10 must be in Africa. Of the above experience, approximately half must be in operations at the farm level and the balance must be in teaching and developing materials for agricultural extension staff. Other Characteristics - Same as for number 1, except has no overall coordination role.  - 63 - ANNEX 3 Page 13 Duties and Responsibilities - Assemble and develop adequate manuals on the technical aspects of agricultural projects being financed by TRDB for use by TRDB staff in project appraisal, supervision and trouble shooting. - Liaising with Ministry of Agriculture research and training centers and organizing flow of information to TRDB. - Assist in the training of TRDB staff and help provide knowledge inputs in agricultural practices. - Contribute appropriately towards fulfilling the tasks set for the Training Division. p  - 64 - ANNEX 4 TANZANIA TANZANIA RURAL DEVELOPMENT BANK Selected Documents and Data Available in the Project File A. Selected Reports on Tanzania Rural Development Bank Al Annual Reports for 1971-77 A2 Agreements and Schedule of Conditions of Building Contract (with Quantities between Participants of the Office Accommodation Scheme and Builders (V. M. Chavda Limited). A3 A Manual of Operational Policies and Procedures - TRDB A4 The Tanzania Rural Development Bank Act, 1971. A5 Monthly Income Tax Tables - The United Republic of Tanzania A6 TRDB - Investigation of Loan Arrears and Control Procedures - March 1977, Coopers & Lybrand Associates, Limited. A7 TRDB - Development Credit Agreement No. 217-TA, 287-TA, 382-TA and 508-TA (undef), 580-TA, Reports to June 30, 1977, September 30, 1977, December 31, 1977 and March 31, 1978. B. Selected Reports on the Project B1 Proposal for a General line of Credit for the Tanzania Rural Development Bank from the International Development Association - TRDB - Dar-Es-Salaam. C. Selected Working Papers Cl Project Costs Table I - Trainng - TRDB Staff Training Table 2 - Training - Training of TRDB Village Clients Table 3 - Management Information Centers Table 4 - Systems and Methods; Routine Specifications and Procedures Manual Table 5 - Office Improvements and Transportation Table 6 - Monitoring, Evaluation, Research and Statistics Appendix 1 - Guidelines for Preparation of Cost Estimates and Contingencies. C2 TRDB Training, by A. Rath, Consultant. C3 Rural Credit and Villages, by S. D. Mueller, Consultant.  TANZANIA RURAL DEVELOPMENT BANK ORGANIZATION CHART Board of Directors Chairman & Managing Director internal Auditor Corporation | t g ~~~~~~~~~~~~~~~~~Secretary | General \Aanager | Public Relations Unit Administration Operations Development Finance Regional Department Department Department Department Directorate General Services Crop and Area Credit Plnig D Financial Adminis- Loan Division l _I Programs Division l Plannmng Division l 1 tration Division l Collection Division Legal Division Livestock Division Trainingand Manpower Data Processing Zonal Managers Development Division Collection Division Personnel Division Transport & Storage Organization & Loans Division egional Offices Division l ffi Methods Division Small-Scale Industry Monitoring, Evaluation Financial Analysis strict Offices g Division l 1 & Research Division Division Fisheries Division | Management & | Fisheries Division Information Center _ Procurement Division B World Bank -21017