Philippines - Fourth Rural Credit Project

Documnt of The World Bank FOR OFCIL USE ONLY Repor No. 6016 PROJECT COMPLETION REPORT PHILIPPINES - FOURTH RURAL CREDIT PROJECT (LOAr 1399-PH) December 31, 1985 East Asia and Pacific Regional Office I This document h_ a reitd dIuIruilom ad my be _ad by recipents ony in he perfenmee of their oc dudu. lb cbnb may m odbrwbe be dlclad withu Word Bak autborinfton.  ABBREVIATIONS AND ACRONYMS AMDAC - Agricultural Manufacturers'/Distributors' Accreditation Committee AMTEC - Agricultural Machinery Testing and Evaluation Center CB - Central Bank of the Philippines DRBSLA - Department of Rural Banks and Savings and Loan Associations ERR - Economic Rate of Return FRR - Financial Rate of Return MAU - Management Advisory Unit NBFI - Nonbank Financial Intermediary PCR - Project Completion Report PDB - Private Development Bank RB - Rural Bank SAR - Staff Appraisal Report SSLA - Stock Savings and Loan Association TSEU - Technical Support and Evaluation Unit  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT PHILIPPINES - FOURTH RURAL CREDIT PROJECT (LOAN 1399-PH) Table of Contents Page No. Preface *9****O * ..9, *** ********** 0**** 900009900000090090 i Basic Data Sheet .................... ;...................... ii Evaluation Summary iii PROJECT COMPLETION REPORT OVERVIEW A. Project Implementation and Impact ....I1 B. Implementation Issues'and Lessons Learnt ........... 5 Institutional Issues 5 Issue of Project Beneficiaries 9 Other Appraisal Design Issues 10 Annex 1 - Comments Received from the National Economic and Development Authority 13 Annex 2 - Comments Received from the Central Bank of the Philippines . .... .......................... 15 Annex 3 - Comments Received from the Ministry of Finance *.. 17 Map - IBRD 19386 This document has a restricted distribution and may be used by recipients only in the performan-ce of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT COMPLETION REPORT PHILIPPINES - FOURTH RURAL CREDIT PROJECT (LOAN 1399-PH) PREFACE This Project Completion Report (PCR) reviews implementation of the Fourth Rural Credit Project in the Philippines for which Loan 1399-PH in the amount of US$36.5 million was approved on April 5, 1977. The final disburse- ment of the loan was on April 17, 1984 with a small balance of US$3,462.17 cancelled. The completion report was prepared by the Central Bank of the Philippines (CB), the implementing agency for the project. An Overview, pre- pared by the East Asia and Pacific Regional Office, is based on the CB report, the Staff Appraisal Report (SAR) (No. 1415-PH, dated March 7, 1977), President's Report (No. P-2021-PH dated March 24, 1977), Loan Agreement dated April 11, 1977, and Bank supervision mission reports. The Project Perform- ance Audit Report (OED Report No. 2784i dated December 27, 1979) on the pre- ceding project - Philippines, Third Rural Credit Project (Loan 1010-PH), SAR of the follow-on project - Philippines , Agricultural Credit Project (Report No. 5514-PH, dated May 10, 1985) and orld Bank report - Philippines, Agri- cultural Credit Sector Review (Report No. 4117-PH, dated May 12, 1983) were also consulted. The completion report prepared by the Central Bank of the Philippines is not included in this rei ort, but is available in OED files. A copy of the draft report was sent to the Borrower on October 22, 1985. Comments received from the National Economic and Development Author- ity, the Central Bank of the Philippines and the Ministry of Finance are in Annexes 1, 2 and 3, respectively. The East Asia and Pacific Regional Office expresses its apprecia- tion to the Central Bank of the Philippines and project staff for preparing a comprehensive and analytical PCR. This project has not been subjected to an audit by OED.  PROJECr COFPLETION REPORT PHILIPPINES - FOURTH RURAL CREDIT PROJECT (LOAN 1399-PH) BASIC DATA SHEET KEY PROJECT DATA Actual or Actual as 2 Appraisal Estimated of Appraisal Estimate Actual Estimate Project Costs (USS million) 91.3 81.0 89 Loan Amount (US5 illtion) 36.5 36.5/a 100 Date of Board Approval - 04/05/77 Loan Agreement Date - 04/11/77 Date of Project Effectiveness - 06/02/77 Date Physical Components Completed 09/80 12/83 195/b Proportion Then Completed (2) 100 100 Loan Closing Date 12/31/80 12/31/83 182/b Economic Rate of Return (S) 21 30 143 Financial Rate of Return (X)/c from 8 to over 100 from less than I to 58 52 Institutional Performanee - Below appratsal expectation - Number of Direct Beneficiaries 15,940 6,521 41 CUWILATIVE DISBURSEMENTS FY78 FY79 FY80 FYF1l FY82 FY83 FY84 Appraisal Estimate (USS million) 11.3 22.9 34.9 36.5 - - - Actual (USS million) 2.4 11.9 15.4 2(.3 25.0 31.6 36.5 Actual as 2 of Appraisal Estimate 21 52 44 .6 68 87 100 Date of Final Disbursement April 17, 1984 MISSION DATA Date No. of mandays Specializations Performance Types of Mission (mo./yr) Persons in Field Represented /d Rating /e Trend/f Problems/g Identification/ Preparation 11/75 /h 2 5/i Not available Appraisal 05/76 7 1207? Not availabls Subtotal f 125 Supervision 1 09i77 3 30/i Not availabl, 2 2 F Supervision 2 06/7'; 1 14 d 2 2 F,O Supervision 3 11/78 1 21 d 2 2 F,O Supervision 4 06/79 3 30/i d,a,b 2 2 P,O Supervision 5 02/80 2 10 c,a 2 2 F,O Supervision 6 10/SO 2 10 c,d 2 2 F,O Supervision 7 06/81 1 10 d 2 2 F,O Supervision 8 03/82 i 2 d 2 2 F,O Supervision 9 11/82 1 10 d 2 1 F,O Supervision It) 05/83 1 2 d 2 1 F,O Supervision 11 01/84 1 3 d 2 1 F,O Subtotal 17 142 Total 26 Y7 OTNER PROJECT DATA Borrower Central Bank of Philippines Executing Agency Central Bank of Philippines Fiscal Year of Borrower January to December Name of Currency (Abbreviation) Peso (P) Currency Exchange Rate Apprastal Year Average (1977) US$1.00 - P 7.353 Intervening Years Average US$1.00 - P 7.827 Completion Year Average (1983) US51.00 - P11.864 Follow-on Project Name Agricultural Credit Project loan Xnmber 2570-PH Loan Amount (USS m.n) 100.0 Date Board Approval 06/06/85 /a An am-int of US$3,462.17 was cancelled. /b Calculation in terms of months from date of Board approval. 7? From individual subprojects. 7i a - agriculturist; b - agricultural economist; c - financial analyst; d agricultural credit specealist, /e I - problem-free or minor problems; 2 a moderate problems; and 3 = sajor problems. 7? 1 - improving; 2 - stationary; and 3 - deteriorating. T7( F - financtal; 0 - other. 7 The November 1975 mission for Third Rural Credit Project (Loan 1010-PH) helped Initiate preparation by the Central Bank. /If Rc timated.  - iii - PFWJECT COMPLETION REPORT PHILIPPINES - FOURTH RURAL CREDIT PROJECT (LOAN 1399-PH) EVAIUATION SUMMARY Introduction The project was the fourth loan since 1965 through which the World Bank provided support to the medium- and long-term credit program adminis- tered by the Central Bank of the Philippines (CB). Project funds were to be onlent by qualified rural banks (RBs) and stock savik.gs and loan associations (SSLAs). In view of t,-' disappointing progress in lending to smaller farmers under the preceding three credit projects, the Government was to use its best efforts to allocate about 31% of total subloan proceeds to small benefici- aries. Objectives Credit was to be provided for investments in farm mechanization, light transportation, cottage and agro-industries, coastal and inland fish- eries and smalI-scale livestock development. The project also included funds for a farm mechanization study; an Agricultural Machinery Testing, Evaluation and Standardization Project; training for CB and RB staff; and service vehicles for CB field staff. The project was to be implemented from June 1977 to December 1980. Total project cost was estimated at P 684.4 mil- lion (US$91.3 million). A minimum contribution of 10% was required of RBs and SSIAs. The minimum subborrower's contribution was to be 10%. Implementation Experience Loan disbursement under the project was very slow. By the end of 1980, the original loan closing date, loan disbursement was only about 46% of the appraisal estimate. The final disbursement under the loan was made on April 17, 1984. There was thus a delay of over three years in project imple- mentation. The major factors responsible for this delay were: (a) reluct- ance of RBs to participate in the project due to the experience encountered in previous credit projects under which there had been high arrears (mainly on tractor loans), ineligibility of many RBs due to these high arrearages, lack of technical capability of many RBs for term lending, and risk of longer exposure in term financing as compared to that in short-term credit obtained by RBs from special time deposits and rediscounting facilities of the CB; (b) reduced demand for subloans due to increases in subproject investment and operational costs precipitated by the oil price increase; and (c) decline in world sugar prices which adversely affected the demand for tractor subloans.  - iv - The extremely slow progress of the project necessitated changes in project scope and design. The major among these changes were the following: (a) inclusion of private development banks and non-bank financial intermed- iaries in addition to RBs and SSLAs as conduits for lending; (b) increase of individual subloan limit first to P 500,000 and finall, to P 1 million; (c) reduction of the borrowers' equity requirement from 10% to 5% of the total project cost for small beneficiaries who were unable to put up the required 10%; and (d) inclusion of machinery and equipment for some crops and facili- ties which were not eligible at appraisal. The total project cost at completion was P 690.3 million or only 1% higher than the appraisal estimate in peso terms but 11% lower in dollar terms owing to peso devaluation in the intervening years. Results The subloan portfolio at completion was considerably different from that specified at appraisal and reflected the impact of changing market forces which could not be anticipated at appraisal. The assumed allocation of loan funds at appraisal, the basis of which is not entirely clear, turned out to be restrictive during implementation. About 6,500 subloans were made compared to 16,000 expected at appraisal. While the share of tractor and tiller subloans declined drastically (from 46% and 12% at appraisal to 16% and 6%. respectively, at completion), that of rice mills increased remarkably (from 1% to 15%), followed by fishponds (from 16% to 27%), poultry (from 4% to 12%) and piggery (from 4% to 8%). The institutional performance of the project was much below appraisal expectations. As of end-1983, the arrear on subloan repayment under the project was 51%. The arrears of RBs were the highest at 55%. The arrears on farm mechanization and cottage industries subloans were the high- est at 63% and 56%, respectively. Though the project suffered from imple- mentation delays and had a disappointing institutional performance, it can be described as an overall success in terms of its economic impact. The re-estimated economic rate of return (ERR) at completion is about 30%, compared to 21% at appraisal. The main reason for the higher ERR at completion is that rice mills, other cottage and agro-industries, fishing boats and fishponds which account for about 80% of benefits, have high rates of return ranging from 27% to 58%, whereas, at appraisal, tractors and till- ers, which accounted for about 50% of benefits, had low rates of return rang- ing from 8% to 17%. Except for 4-wheel tractors, light trucks and piggery, for which the re-estimated financial rates of return (FRR) at project comple- tion are below 6%, subprojects financed by the project have FRRs above 21%. Sustainability Agricultural investments financed under the project responded to market forces and the outlook, to the extent that these forces continue to be favorable, is positive. The Agricultural Machinery Testing and Evaluation  -v - Center is expected to provide a useful service for the foreseeable future. The less successful institutional aspects affecting the rural financial system are addressed in the follow-on project, approval of which was suffi- ciently delayed to incorporate lessons from this project. Findings and Lessons The main lessons learned from project implementation relate to institutional issues and low realization of benefits by small beneficiaries as defined at appraisal. Of the 732 licensed and active RBs by the end of 1975, only 100 were expected at appraisal to participate in the project dur- ing the first 6 months as a result of the enforcement of arrears criteria of the project, Participation was expected to increase gradually as more RBs reduced arrears to acceptable Levels. However, by end-1980, out of over 1,000 RBs and SSLAs then in operation, only 340 had been accredited by the CB for participation in the project; of the 340, only 127 were actually involved in project lending and of those only 35 could be termed active. The institu- tional base of the project remained depleted in the initial years of imple- mentation and this had an adverse impact on the subloans' disbursement rate. The decentralization objective of the project also met with limited success. Of the 325 financial institutions that participated in the project at various times, only 26 were granted partial authority (to process and evaluate sub- loan applications) and two granted full authority by the CB to approve sub- loans by project completion. However, the project largely achieved its objective of improving the CB's institutional capability in rural credit ope- rations (Overview, para. 18 (iii)). Several factors accounted for the institutional problems of the project. First, there was insufficient understanding of RB arrearage prob- lems at appraisal. The RB arrearages resulted not only from the term loans (particularly tractor loans) under Bank-supported projects, but also from short-term, Government-sponsored, supervised credit programs which often had relaxed subloan collection criteria. The problem was not viewed in relation to the totality of RB operations at appraisal and no concrete plan of action for reducing arrears drawn up. Second, short-term production loans consti- tuted about 90% of RB portfolio. The highest priority of the RBs was, there- fore, short-term credit. The project, which, like the earlier three credit projects, concentrated on medium- and long-term credit, was an inappropriate vehicle to upgrade the capabilities of RBs and, in turn, suffered owing to this inability. Third, the exclusion of financial intermediaries other than RBs and SSLAs at appraisal narrowed the institutional base of the project. Fourth, and perhaps most important, the institutional objectives of the proj- ect were tied to implementation of the project itself. The project's non- intervention in the larger policy and institutional framework militated against the achievement of its limited institutional objectives. Until 1980, RBs were restricted to unit banking and to small farmers cultivating not more than 50 ha, small merchants and cooperatives. Moreover, easy access to the CB's low-cost rediscounting facility discouraged retail banks from mobilizing deposits and the policy of regulated interest spreads offered insufficient  -vi- incentives to many banks which could not provide for their transaction costs, risks of term lending and reasonable profit. This policy and institutional framework inhibited efficient financial intermediation and adversely affected project implementation (Overview, paras. 18-19). Related to the institutional issue was the project's limited suc- cess in reaching small beneficiaries. Only 6% of total subloans went to small beneficiaries compared to 31% expected at appraisal. The appraisal expectations turned out to be over-optimistic owing to the restrictive defi- nition of small beneficiaries, the existing land tz-,ure system leading to collateral problems, and increasing investment cests of machinery. As Borrower comments (Annex 1) emphasize, the majority of small farmers remain outside the formal credit system, The complexities involved in using commer- cially-oriented credit institutions as conduits for expanding the supply of credit to poverty target groups were underestimated at appraisal. These require a much more careful analysis than was done at appraisal (Overview, paras. 21-23). Other findings are that the project's specific commodity and sub- sectoral allocations, low subloan limit and the limitation on financing of tractors in excess of 68 HP turned out to be unduly restrictive and had to be relaxed (Overview, para. 24). Finally, the Agricultural Machinery Testing and Evaluation Center established under the project to set quality standards has made a useful contribution (Overview, para. 10).  PHILIPPINES FOURTH RURAL CREDIT PROJECT (LOAN 1399-PH) PROJECT COMPLETION REPORT Overview 1. This overview is primarily based on the PCR for the Fourth Rural Credit Project (Loan 1399-PH) prepared by the CB, the implementin? agency for the project, and presented to the Bank in April 1985. The PCR presents a detailed and analytical review of the project's performance and impact and the Region has no major disagreement with the fi-idings and conclusions of the PCR. This overview is divided into tWO sections: section A, which is based on the PCR, summarizes the important aspects of project implementation and impact; and section B, which utilizes information from documents (listed in the Preface) other than the PCR, complements and elaborates some ports of the PCR relating to implementation issues and lessons learned. A. Project Implementation and Impact 2. Project Objectives and Components. The Project was the fourth loan since 1965 through which the Bank provided support to the medium and long-term credit program administered by the CB. Project funds were to be onlent by qualified rural banks (REs) and stock savings and loans associations (SSLAS) to about 16,000 farmers and rural entrepreneurs for investment in farm mechan- ization, light transportation, cottage and agroindustries, coastal and inland fisheries and small-scale livestock development. The major subloan items to be financed by the project were: tractors (46%), pover tillers (12%), fish- ponds (16%) and cottage and agroindustries (7%). The project also included funds for: (a) a study to assess the impact of farm mechanization in the Philippines; (b) an Agricultural Machinery Testing, Evaluation and Standardization Project to standardize the quality of farm machinery; (c) a training program to improve the lending capability of CB and RB staff; and (d) service vehicles for CB field staff engaged in the project. 3. The Government was to use its best efforts to ensure that a mininum share of project proceeds (US$11 million equivalent which was about 31% of total subloan proceeds and about 57% of proceeds allocated to subprojects other than tractors) was used to finance subprojects of small beneficiaries (Loan Agreement, Section 3.06). One of the definitions of small beneficiaries given was total self-earned income per year of less than P 7,500. 4. Project Cost and Financing. The project was to be implemented over a 3-1/2 year period from June 1977 to December 1980. Total project cost was escimated at P 684.4 million (US$91.3 million) with a 32% foreign exchange component. IERD and CB/Government were to contribute 40% each of project costs. A minimum contribution of 10% was required of RBs and SSLAs except in the case of recently established RBs with net worth less than P 500,000, in which case the minimum contribution was to be 5%. The minimum subborrower's contribution was to be 10%.  S. Project Implementation. Loan disbursement under the project was very S9T1 By the end of 1980, the original loan closing date, Loan disburse- ment was onty about 46% of the appraised estimate. The loan closing date was extended first by two years to December 1982 and then to December 31, 1983 (fiiial disbursement was made on April 17, 1984). There was thus a delay of over three years in project implementation. The PCR identified the institu- tional and eLonomic factors responsible for this delay as follows: (a) reluctance of RBs to participate in the project due to the experience encountered in previous credit projects which had led to high arrears, ineligibility of many RBs due to these high arrearages, Lack of technical capability of new RBs for term lending, and risk of longer exposure in term financing as compared to that in short-term credit obtained by RBs from special time deposits and rediscounting facilities of the CB; (b) reduced demand for subloans due to increase in subproject investment and operational costs precipitated by the oil price increase; and (c) decline in world sugar price which adversely affected the demand for tractor subloans. The institu- tional issue relating to the RBs is discussed in greater detail in section B. 6. Changes in Project Scope and Design. The extremely slow progress of the project in the initial years necessitated changes in project scope and design. The major among these changes, whici helped accelerate project imple- mentation, were the following: (a) inclusion of private development banks (PDBs) and nonbank financial intermediaries (NBFIs) in addition to RBs and SSLAs as conduits for lending; (b) increase of individual subloan limit first to P 500,000 and finally to P 1 million; (c) reduction of the equity requirement from 10% to 5% of the total project cost for small beneficiaries who were unable to put up the required 10%; (d) inclusion of machinery and equipment for the development of abaca, coffee, cocoa, citrus and ipil-ipil and processing and marketing facilities as eligible projects for financing under the loan; and (e) increase in the horsepower limit for tractors to a maximum of 90 HP (compared to 68 HP at appraisal) in areas where sugarcane was grown extensively and cultivated throughout the year. Significant realloca- tior. of loan funds among differeat categories was made as a result of changed demand for subloans (see para. 8). 7. Status of the Project at Completion. The total project cost at com- pletion was P 690.3 million (US$81.0 m equivalent) or only 1% higher than the appraisal estimate in peso terms but 11% lower in dollar terms owing to peso devaluation in the intervening years. Despite the implementation delay (para. 5), the project was an overall success. The re-estimated ERR is satisfactory (para. 15). At full development, the project is estimated to generate 9,644 jobs on a full time basis, which is only about 6% lower than the appraisal estimate. However, the institutional performance of the project was much below appraisal expectations (further discussion in section B). As of end 1983, the arrears of RBs were the highest at 55%, followed by NBFIs at 39%, SSLAs at 32% and PDBs at 26%. The arrears on farm mechanization and cottage industties subloans were the highest at 63% and 56% respectively. The inci- dence of calamities such as typhoon, floods and drought and low profitability, particularly of tractor investments, were the major reasons for these arrears, In addition to the institutional problems, the project also failed to achieve the appraisal target for small beneficiaries (further discussion in section B). The status of individual components of the project at completion is br-efly discussed below.  -3- 8. Subloans. The subtoan portfolio at completion (Table 1) was considerably different from that specified at appraisal and reflected the impact of changing market forces which could not be anticipated at appraisal, About 6,500 subloans were made compared to 16,000 expected at appraisal. While the demand for tractor and tiller subloans declined drastic- ally, that for rice mills increased remarkably, followed by significant increases in demand for fishponds, poultry and piggery. Table 1: PROJECT SUBLOAN PORTFOLIO AT APPRAISAL AND COMPLETION Appraisal Completion Category Amount X Amount % (P mln) (P mln) 4-Wheel tractor 308 46 112 16 Power tiller 80 12 41 6 Fishpond 106 16 182 27 Poultry 27 4 79 12 Piggery 30 4 52 8 Rice mill 8 1 103 15 Others 115 17 112 16 Total 674 100 681 100 9. Farm Mechanization Study. As envisaged at appraisal, the main objective of the study was to provide a basis for long-term Government policy on mechanized farming. The study, conducted in JQRO, provided many useful recommendations, many of which were implemented. However, it recognized the need for further studies of the economic impact of mechanization on the farmers and the industry as a whole to help the evolution of long-term Government policy on farm mechanization. Though further studies have not been carried out, the follow-on Agricultural Credit Project (Loan 2570-PH) provides for review, on a continuing basis of both the implementation and impact of the farm mechanization program supported by the project. 10. Agricultural Machinery Testing. As envisaged at appraisal, an Agricultural Machinery Testing and Evaluation Center (AMTEC) was established to set quality standards for agricultural machinery and to conduct performance testing against such standards. As of December 1983, 49 machines had been tested and 25 draft standards formulated. The Project also established an Agricultural Manufacturers'/Distributors' Accreditation Committee (AMDAC) for accreditation of machinery suppliers and setting of price guidelines for farm machinery to be financed under the project. 11. Training. Training programs emphasized rural credit, project feasibility study preparation, project evaluation and monitoring and the mechanics of implementation of the Fourth Rural Credit Project (Loan 1399-  -4- PH). A total of 1,918 personnel from the CB and RBs and SSLAs were trained under the project. In addition, 34 officers and staff of the CB were sent for further training abroad. As expected at appraisal, a Credit 1andbook was also prepared for the field staff of the CB and on-lending banks.- 12. Logistical Support. As expected at appraisal, 60 service vehicles were purchased for the CB field staff. 13. Financial Viability. The rates of return for major subproject cate- gories at completion compared to those at appraisal (in parentheses) are as follows: 4-wheel tractors for sugarcane, about 6% (17%); 4-wheel tractors for rice farms, less than 1% (13%); power tiller, 32% (8Z); fishponds, 38% (31Z); poultry (broiler), 31% (more than 100%); poultry (layer), 48% (more than 100%); piggery, less than 1% (36); rice mills (100 cavan capacity), 37% (73%); and rice mills (300 cavan capacity), 58% (more than 100%). The variance between appraisal and completion rates of return is due to differential increases in costs of investment and operation on the one hand and revenues on the other for different subproject categories. However, except for 4-wheel tractors, light trucks and piggery, subprojects are estimated to be finan- cially viable. 14. Management and Bank Performance. The project was implemented by the Department of Rural Banks and Savings and Loan Associations (DRBSLA) of the CB until May 1983. Effective May 1983, the DRBSLA was reorganized and split into two departments, one for rural banks and the other for thrift banks. Project management performed its work efficiently and in consultation with Bank super- vision missions, which took an active part in changing project scope and design (para. 6), implemented remedial actions to accelerate project subloan disbursements. From commencement of the Project in mid-1977 to its completion in end 1983, there were 11 Bank supervision missions or approximately 2 mis- sions per year. The frequency was appropriate; however, sometimes the interval between missions was 9 months which could have been reduced. It was helpful to have agricultural credit specialists on all supervision missions except one; however, the skill mix could have been improved further with other specialists, particularly economists, participating in some missions, with conceivable beneficial impact on project implementation. As indicated in the PCR, the supervision missions provided the necessary guidance to Project staff and performed effectively. 15. Economic Impact. The PCR recalculates the economic rate of return (ERR) at completion in 1984 at about 30% compared to the appraisal estimate of 21%. However, some points relating to the recalculation need to be mention- ed: (i) Unlike appraisal where costs and benefits were phased, the PCR cost and benefit streams are not based on actual costs and benefits as they occur- red in each year since project commencement in 1977; they are based merely on a reappraisal of the entire loan portfolio in 1984 prices. (ii) Unlike appraisal where both costs and benefits started from year one, the PCR more 1I/ NEDA points out that no evaluation has yet been made of training provided in connection with previous Bank assistance (Annex 1).  appropriately assumes a one-year lag of benefits after investment. (iii) Shadow pricing of inputs and outputs was not done either at appraisal or in the PCR and only investment costs were adjusted for ties and taxes. (iv) Some of the costs and benefits presented ir. Annex of the PCR could not be traced back to Annexes 2 and 3. (v) The incremental production of eggs, poultry meat (broiler) and pork per subproject is significantly higher in the PCR (Annex 3) compared to that at appraisal. The reason for this is not clear in the PCR text. Adjustments for proper phasing, shadow pricing (particularly for the value of benefit from rice) and lower (than that shown in the PCR) incremental production of eggs, poultry meat and pork will reduce the ERR from the 302 recalculated in the PCR. However, owing to the absence of supporting data in the PCR, only a sensitivity analysis could be done by the Region. Merely phasing costs and benefits, consistent with the appraisal methodology, results in an ERR of about 31%. This is about the same ERR as calculated in the PCR. The main reason for the higher ERR at completion is that rice mills, other cottage and agro-industries, fishing boats and fishponds which account for about 80% of benefits have high rates of return ranging from 27% to 58% whereas at appraisal tractors and tillers which accounted for about 50% of benefits had low rates of return ranging from 8% to 17%. A sensitivity analysis done by the Region with phasing of costs and benefits and shadow pricing only the value of benefit from rice (with an economic farmgate price of paddy of about P 1,300/ton for 1979-83 and P 2,250/ton from 1984 onwards) showed that a minimum ERR of about 17% could be expected compared to the esti- mated opportunity cost of capital of 12% in the Philippines. The project, therefore, remains economically viable. B. Implementation Issues and Lessons Learnt 16. The main project implementation issues were the delay of almost three years and limited success in reaching small beneficiaries as defined at appraisal (para 3). Though the slump in international sugar prices and the cons'quent de,line in demand for tractors from sugar cane producers was a major factor in slow loan disbursements, there were significant institutional problems and deficiences of appraisal design that contributed to implemen- tation delays and low realization of benefits by designated small benefi- ciaries. These issues are discussed in greater detail below. Institutional Issues 17. At appraisal 90% of subloans were expected to be disbursed by RBs and the rest 10% by SSLAs. However, the institutional problems of RBs and their high arrearages were well known at appraisal. The arrears criteria for participation of financial institutions in the project were a maximum of 25% of total loan portfolio and a maximum of 30% on term loans, the Latter percen- tage to decline to 20% by July 1, 1978. Of the 732 licensed and active RBs by the end of 1975, only 100 were expected at appraisal to participate in the project during the first six months as a result of the enforcement of arrears criteria. Participation was expected to increase gradually as more RBs reduced arrears to acceptable levels. The initial number of 100 RBs con- trasted significantly with that of 245 RBs which participated in the Third Rural Credit Project (Ln 1010-PH) for a total subloan amount of only P252 mil- lion compared to P542 million projected for the Fourth Rural Credit Project.  -6 - This significant discrepancy between numbers of RBs and loan amounts as between rTird and Fourth Rural Credit Projects was not analysed, evidently on the expectation that the number of eligible RBs will grow. The design of the project was apparently influenced by the good experience under the Third Rural Credit Project (Loan 1010-PH) under which project funds had been committed 18 months ahead of schedule. However, the deteriorating finar:ial and economic situation in the country brought to light the institutional weak- nesses of the project. By end 1980, when the project was expected to be completed, the number of eligible RBs and SSLAs grew to 340 out of over 1,000 then in operation. However, as documented in the supervision report of August 1981, some 90 RBs, though accredited by the CB, did not participate in project lending for reasons such as lack of technical staff, preferences for more remunerative short-term investments, unhappy collection experience under past subloans and CB rediscounting procedures perceived as cumbersome by most banks. Some 129 eligible banks dropped out of the program during the course of project implementation on account of high arrearages under short and medium term loans. As of mid 1981, out of 340 accredited RBs amd SSLAs, only 127 were involved in project lending and only 35 were sufficiently active while 92 were approving, on average, less than one subloan per month. More than 50Z of 423 banks, which obtained CB loans in the past under the Bank-supported projects, were in arrears with CB and, therefore, did not qualify for further CB refinancing. The institutional base of the project remained depleted in the initial years of project implementation and this had an adverse impact on the subloan disbursement rate. Important modifications in project design had to be made (para 6) to remedy this situation. 18. Several points relating to the institutional issue which, in retrospect, could have been better taken care of at appraisal and possibly led to faster project implementation, emerge: 'i) Understanding of the arrearage problem. As of April 30, 1976, arrears avw%unted to 24.6% of total outstanding loans to subborrowers under the Bank-supported First, Second and Third Rural Credit Projects. The major category of arrears was tractor loans, accounting for 67% by amount. The RBs had high arrears on short- term credit as well, particularly on account of Government-sponsored supervised credit programs (see further para 19(c)) under which arrears in 1975 were about 38% compared to 18% on non-supervised credit operations. The arrearage nroblem, as it related to the totality of operations of RBs, was not clearly understood at appraisal. Under the Project, the Government was required to undertake a detailed study of the causes of arrears in RB and SSLA portfolio by December 31, L977 and prepare a plan of action for the reduction of these arrears. The study was completed in November 1978, a year behind schedule, and the plan of action drawn up in early 1979. The study's findings and the plan of action helped implementation of changes in the Project (para. 6). Despite insuf- ficient understanding of the arrearage problem, particularly relating to tractor loans, and lack of any concrete plan of action at appraisal to rehabilitate RBs, the allocation for tractor subloans in the project was still 46% of the total subloans and reliance was placed on RBs (90% of subloans). The arrears problem  continued well past the original project completion date and resulted in several RB8 becoming disqualified for project lending (para 17). This not only slowed down the subloan disbursements under this component (at project completion, subloans for tractors were only 36% of appraisal estimates) but also adversely affected the lending for other subsectors supported by the project. Given lack of adequate knowledge of the arrear problem at appraisal, several alternatives could have been adopted: (a) a detailed study of the arrear problem before appraisal and adjustment of project scope and design according to the study's findings; (b) a much lower allocation for tractor subloans; (c) allocation to specific subsectors and items to be taken only as indicative and letting market demand determine the loan portfolio as eventually happened (see para 8); and (d) allowing participation of other financial intermediaries in addition to RBs and SSLAs which also eventually happened (see further below). (ii) Participation of Financial Intermediaries. At appraisal, the role of commercial banks, which were the most important private institu- tions providing some 55Z of all institutional agricultural credit, and private development banks (PDBs), which lent about a third of their funds to agriculture, was noted. However, it is not c'ear why, given the problems of RBs which were known, participation of other financial intermediaries, particularly for subloans which were not intended for small beneficiaries, was not considered at appraisal in order to broaden the institutional base of the project. The PDBs and some non-bank financial intermediaries (NBFI9) were made eligible in the later stage of project implementation (para 6). (iii) Policy and Institutional Reform. In retrospect, the project had rather limited objectives and did not attempt to establish an appropriate iastitutional and policy framework to support the development of a financially sound and efficient rural credit system. The institutional objectives of the project were tied to implementation of the project itself. These objectives were mainly the strengthening of the CB's rural credit operations through the Technical Support and Evaluation Unit (TSEU); decentralization of the CB's rural credit operations to regional offices to expedite the release and recovery of funds and improve the supervision of finan- cial institutions; decentralization of appraisal and approval authority for subloan proposals to selected RBs; and establishment of a Management Advisory Unit (MAU) to provide technical assistance to RBs for facilitating decentralization. The training component of the project was to complement technical assistance in achieving the above institutional objectives. While the objective with regard to the CB's capabilities was largely achieved, those with regard to the RBs (decentralization) met with little success. Of the 325 finan- cial institutions that participated in the project at various times, only 26 (16 RBs and 10 PDBs) were granted partial authority (to process and evaluate subloan applications) and 2 NFBIs granted full authority to approve subloans. The reason given in the PCR (para  -8- 6.25, p. 66) for this marginal achievement of decentralization is that the relatively low volume of term loans did not warrant the hiring of additional employees by the financial institutions to concentrate on term lending. The financial institutions instead utilized existing employees such as farm technicians, who usually handle short-term lending, to work at the same time on medium and long-term lending with the assistance of CB Agricultural Credit Supervisors. 19. In retrospect, it appears that the project's non-intervention in the larger policy and institutional framework itself militated against the achievement of its limited institutional objectives. -Several aspects of this larger policy and institutional framework deserve to be noted: (a) As noted in the SAR (para 3.03), short-term agricultural production loans constituted about 90% of RB portfolio. Medium and long-term financing was limited almost entirely to that supported by the Bank under the Rural Credit Projects and accounted for less than 10 of RB loan portfolio. The highest priority of the RBs was, therefore, understandably short-term production credit. The unwillingness of these institutions to hire additional staff for term lending was noted in para 18 (iii) above. Moreover, the arrearages on term loans, particularly for tractors, caused illiquidity in the RB term loan portfolio and made them unwilling, if not ineligible, to parti- cipate (paras. 17 and 18 (i)). The Fourth Rural Credit Project, which, like the earlier three credit projects, concentrated on medium and long-term credit, was, therefore, an inappropriate vehicle to upgrade the capabilities of RBs and, in turn, suffered owing to this inability to induce sufficient institutional development. (b) Government policies in the 19709 had resulted in excessive specialization and fragmentation of the financial market. Individual banks and bank groups were legally allowed to lend only for particular types of development activities or to narrowly defined clientele. The RBs, for instance, had their lending restricted to small farmers or farm families, cultivating not more than 50 ha of agricultural lands, small merchants with capital of less than P100,000 and the cooperatives. Also, the unit banking concept applied to RBs so that they were not allowed to undertake group banking or branch banking. Such specialization inhibited efficient financial intermediation and restricted the capabilities and profitablility of the RBs. It was only in 1980 that banking reforms removed the restrictions placed on RBs and allowed them to undertake universal banking. However, the process of financial, structural and operational adjustment of RBs is still continuing. (c) The introduction of Government-sponsored supervised credit programs, particularly for Masagana-99, cattle fattening and fisheries, with its sizeable arrearages, has placed the rural banking system under continuous financial stress since 1975. Part of the reason for arrearages was the low priority given by farmers to repaying  -9- Government-sponsored loans. The adhoc nature-of these programs as well as the rules and procedures governing them tended to undermine the financial discipline of retail banks through often relaxed subloan collection criteria which allowed the banks to carry high arrearages and eventually caused them to be disqualified from new CB financing. This adversely affected bank liquidity. Moreover, these credit-cum-extension programs placed heavy demands on the financial and managerial capabilities of participating banks which were often weakened and, as a result, increasingly reluctant to participate in Government-sponsored programs. Many banks relied excessively on Government's rather weak extension service for both subloan appraisal and collection, rather than building up their own in-house capabilities to undertake these tasks. (d) The Government policy of providing low-cost resources at regulated spreads has not been conducive to viable agricultural lending by rural institutions. While low cost credit increased the demand for farm mechanization in the early 1970s, easy access to CB's low-cost rediscounting facility discouraged retail banks from mobilizing deposits. (Present estimates show that arrearages on subloans extended by RBs from their deposit resources are far lower than under subloans funded by CB). Moreover, the prescribed spreads on subloans (including those under the Fourth Rural Credit Project) either tended to increase interest rates of banks which could afford to lend at lower rates or restricted agricultural lending of those banks which found the spreads insufficient to cover their transaction costs and risks of term lending and allow for a reasonable profit on financial intermediation. 20. Some of the policy and institutional issues discussed above are being addressed in the Agricultural Credit Project (Loan 2570-PH) which is a follow-on to the Fourth Rural Credit Project. Issue of Project Beneficiaries 21. It was noted at appraisal that progress in lending to smaller farmers under the preceding three credit projects had been disappointing. The upper limit of farm size for which RBs were authorized to extend credit was 50 ha. The majority of subloans had gone to borrowers at the upper end of the size spectrum whose business contacts afforded them the best knowledge of credit opportunities and whose financial position enabled them to provide the most attractive collateral. It was recognized at appraisal that the credit needs of small farmers were difficult to serve through private, commercially- oriented credit systems such as the networks of RBs and SSLAs and that due regard must be given to the financial strength and development of the onlending institution (SAR, para 4.08). However, it was felt that there were financially viable investments which could be tailored to the needs of small entrepreneurs and accordingly, the nature and size of most components of the project were determined with that objective in mind (SAR, para 4.08) and a minimum share of project proceeds was expected to go to small beneficiaries (para. 3).  - 10 - 22. By project completion, only 6% of total subloans had gone to small beneficiaries compared to 31% expected at appraisal. The PCR gives the following reasons for non-achievement of the target (PCR, para 3.12, pp. 28- 30): (i) The definition of small beneficiaries was unrealistic; even though the borrowers of RBs were small, they had income much higher than that speci- fied at appraisal; (ii) most participating RBs and SSLAs were attracted to the financing of big and medium-sized entrepreneurs and avoided small time borrowers due to risk and administrative costs involved; loan repayments on non-supervised and highly collateralized loans showed a better performance compared to non-collateralized but supervised short term loans granted to small borrowers (para 18(i)); (iii) increasing production costs made it difficult for small farmers to put up the required 10% equity; (iv) lukewarm attitude of most RBs and SSLAs in accepting Certificates of Land Transfer as collaterals; (v) presence of other lending institutions granting similar loans. to the same clientele; and (vi) increasing cost of machinery, particularly power tillers, which made viability of thp investment questionable and led to reduction in demand from small borrowers.- 23. The credit quota laid down at appraisal for small beneficiaries turned out to be overly optimistic owing to the restrictive definition of small beneficiaries, existing land tenure system leading to collateral problems and increasing investment costs. The majority of small farmers remain outside the formal credit system. The complexities involved in attempting poverty alleviation through a commercially-oriented credit system were underestimated at appraisal. The issue of whether the Government should use credit institutions as conduits for expanding the supply of credit to poverty target groups, if such programs tend to jeopardize the system's viability and eventually even exclude the poor for whose benefit the programs were originally designed, requires careful analysis. The Philippines Agricultural Credit Sector Review, which was undertaken to analyze the issues emerging from implementation of the Fourth Rural Credit Project, concluded: "....In the long-term interest of the credit system as well as the clientele it is supposed to serve, credit programs should be kept distinct from the Government subsidy....By and large, credit should serve the borrowers who, on the basis of their skills, equity and the technoeconomic feasibility of the project, qualify for a commercial loan while Government subsidies could be directed to eligible clients on the basis of well-defined poverty norms" (World Bank, Report No. 4117-PH, May 12, 1983, para. 4.32). The Agricultural Credit Project (Loan 2570-PH), which incorporates lessons learnt from the implementation of the Fourth Rural Credit Project and does not allocate funds by borrowers, includes a study to provide guidelines to identify target groups and define ways of assisting such groups directly by means other than credit subsidies. Other Appraisal Design lssules 24. Other elements of appraisal design which slowed loan disbursements included: (i! specific commodity and subsectoral allocations; (ii) low 2/ Comments by NEDA pertaining to small beneficiaries are in Annex 1.  - 11 - subloan limits; and (iii) exclusion of financing of tractors in excess of 68 hp after a period of 18 months from the date of the Loan Agreement. As regards specific allocations, it is not clear whether at appraisal there were significant distortions in the economy to warrant this restrictive approach. If it were not so, as appears to be the case, particularly evidenced in the economic analysis section of the SAR, it would have provided flexibility to the implemen,iine institutions to let market forces determine the loan portfolio and regard the allocations as merely indicative. The loan portfolio was eventually market-determined (para 8). The low subloan limit (P 350,000) was evidently designed to ensure enough loan funds remaining available for small beneficiaries. However, this slowed sbursements and the loan limit had to be raised considerably (para. 6(ii)). The limitation on tractors hp also turned out to be restrictive (as documented in the Supervision Report of August 1981) and had to be relaxed for sugar cane areas (para. 6(v)).  K \1 'I) (N 'k i  -13- Annex I 4%, REPUBLIC OF THE PHILIPPINES Page 1 NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY NEDA sa Pasig, Amber Avenue Pasig, Metro Manila Comments Received from the National CableAddres: NEDAPHIL Economic and Development Authoritv P.O. Box 419, Grgenhills Teds. 673-50-31 to 50 November 7, 1985 \1r. Yukinori Watanabe Director, Operations Evaluation Department The World Bar" 1818 1I Street, NW Washington, D.C., USA 20433 Dear MIr. Watanabe: RE: Project Completion Report on PhilippinesFourth Rural Lredit Project (Loan 1399-PtI) Thank you for furnishing the NE\A a copy of the abovementioned report and for allowing us to give our views on its findings. while the observations and findings of the report are found to be aenerally objective and constructive, w:e would like to add a few points on the following aspects with reference to the relevant para- graphs as indicated. Results (p. iv) The subloan nortfolio at completion was considerably different from that specified at appraisal. T e think, as per para. 24 of the PCR Overview, that the basis for snecific commoditv and subsectoral allo- cations for the proceeds of the loan at appraisal is unclear. For that matter, sub-sectoral demand for credit as a basis for allocation has yet to be established. Findings andl Lessons (p. v) The project excluded financial intermed.aries other than RBs and SSL&s which contributed to the narrowed institutional base of the project. Wie would like to note that majority of small farmers avail of their credit requirements from informal sources. Therefore, although the disqualification of a nunber of RBs and SSLAs due to their arrearages reduced the number participating institutions, still a large number of farmers remain outside the formal credit system, and need to be reached through more creative means adaptable to their attitudes and behaviour. Relatedly, majority of subloans had gone to borrowers at the upper end of the size spectrum (para. 21-22, PCR Overview). This further  -14- Annex I Page 2 manifests that private, comnercially-oriented credit systems do not represent suitable conduits for the real "small beneficiaries". We agree that the definition of small beneficiaries (paras. 3, 22) was unrealistic since even those groups earning above P7,500 per year are still considered small and majority in the banking system are apprehensive in lending to these groups. An annual income slightly above P7,500 still does not guarantee a borrower's bankability espe- cially if the project to be financed is agriculture-related, which is considered to have a high risk. It was pointed out at appraisal (ShA, para. 4.08) that it was felt that there were financially viable investments which could be tailored to the needs of small entrepreneurs and accordingly, the nature and size of most components of the project were detemined with that objective in mind, and a minimum share of project pro- ceeds was expected to go to small beneficiaries. Again, this may be related to the lack of specific demand estimate by subsector and farm size. And although that presumption may be valid, those target groups may be very small relative to the larger market which prefer non-fonmal sources. Training (para. 11, PCR Overview) We would like to note that training has been a component of previous Bank assistance to the Central Bank. However, no evaluation has yet been made or mentioned of their benefits or effectiveness as regards strengthening of institutional capability especially those inter- mediaries serving the rural areas. Since most of the retail banks in the project relied on "government's weak extension services" (para. 19(c)) for subloan appraisal and collection, there also appears to be a need for training government extension workers who play a vital role in project implementation. Similar projects in the future could consider the participation of government extension workers and field technicians in the training component of the project. Overall, the Fourth Rural Credit Project, as a continuation of the CB's medium-and long-term credit program and as designed, does not represent a significant departure from previous credit assistance to the rural sector. Major and critical issues raised regarding the Project and the rural credit sector as a viiole have been extensively discussed in the Bank's Agricultural Credit Sector Review (t'y 1985). Accordingly, measures that would address such issues have been packaged with the succeeding Agricultural Credit Project. We hope that our comments will be useful to the final evaluation of the project. Best regards. Very truly yours, Minister of Economic Planndng 6 Director -General  -15-- ~~~~Annex 2 0AI Sy/;& SntwL' fly L1Rpirzai (CENTRAL BANK OF THE PHILIPPINES) MAYNILA, PILIPINAS Comments Received from the Central Bank of the Philippines OFFICE CF THE SPECIAL ASSISTANT TO THE GOVENOR SUPERVISION AND E:XAMZ ATION SECTOR November 11, 1985 Mr. YUkiinori Watanabe Director Opexations Evaluation Department International Bank for Recons- truction and Development 1818 H. Street, N.W. Washington, D.C. 20433 Sir : This refers to your letter dated October 22, 1985, asking for our camments on your draft report on the performance audit to determine the extent of achievement of project objectives, reasons for shortfalls, outstanding achievements and the general effectiveness of the World Bank support for lending operation, using as primary focus the Project Completion Report on the Philippines Fourth Rural Credit Project (loan No. 1399 PH), We have gone over the text of the said draft report and we found it to be very comprehensive and reflects an unbiased and objective evaluation on the implementation of the recently concluded 4th CB:IBRD Rural Credit Project. We concur in the findings and observations stated therein and we hope that both the World Bank Mission and the Central Bank of the Philippines can learn from these past experiences in order to minimize, if not totally avoid,pitfalls in the appraisal and imple- mentation of similar projects in the future. Thank you. Very truly yours, ' .' f . CONSOIACION V. ODRA Special Assistant to the Governor & Head, SES Department III IPAGPATULOY ANG KAUNLARAN MAG-IMPOK SA BANGKO  V 'KI \ K -N l ol n \ rs " 'N4  - 17 - 3 ZC. C."DICT748( RV:A1AV R F -I I.P P.Rt eceive frm the mnl.ty of IFInnee ReAA :t92 2411423 WOIlRLIAHK ZCEZC DE1 2/4? THI WORLD BRANK u I N.l Ar ATT. MR* YVUKINORI WAIANAE.* DIRECIOR OP(IUVI ONS 'I (At.t.A'(X I ON DP. R REUII. El rE E ri 22 OCIORR (ON PROJEC l ltO Ci M (:ONPI. (ION REPORI ON Or'JRTH CkoO Itr PltROJlt:IC (lOAN I99-PH) * PtL.*:AM; * IM. W(RN*C rlAT WC. FOUtND THE REPORT ;AMrAA:CIORY i x:c.EPTr FOR PARA ;. !;SEmilEM I s1. WE 'MOROGEBT DFL.rxTO OF Rt(:I;FR(WCN r rol P"RF9101! ruiRC PRU:C:CrV; RO:HARD9;. MINF XN VIRAIA ALl RID rkO:Fk OFJJM NWWN  IBRD 1938 41b' 4IASSII,IVAItUl 0IPRUVINXtS 120 124 UN ULOGRAPUICAL. Rf.t;lUNS N(>i" r'. StlO)\5.CsPl'*fI 0 \ PHILIPPINES Il.O(EOS V4I tS1, R N VIS4'AS ' ll~ooNhiQ te 8 Aktae 3 o.'.r 39 Ca6'i 20' 4 Wr.n,Su 40 Iloilque 8 FOURTH RURAL CREDIT PROJECT 20- ' V0U,ni14 Negros 0,e,,eta, 'd'~ Iaiet \ t t \I R 1 t8 VI S iYAS 43 CWb * P4nqasnan, 44 NegrosD,ental O M4JQP C'T'FS .'A, N A\\. 5At Ll 45 oloht t blRPORTS 8 46tr 46 Squo - IRORTS -90 C,J, , VltI .5S,418'. ViS-'t AS -.----ROADL ~S 10 Ke4q3Al,aTaiyo 47 1 en54re a.ae V RAILWAYS 1t Irwbelv ~~49 We,,letn Samat PR..- tOVINCE 8OONDARIE73 I? s.qa, 49 East_n SantA RE9IGN BOUNDARIGS !3 N,ffa V4s9 ra 50 L eyt e P |1o". - - INTJNAT0T,05A,A BOUNDARIES 14 Q.,r,n 51 SouTher, Leyte Looog .<5: 9; tIN\RX -LLLt ZO\ 1X w Slt RN MINOA).NAtOT 15 N-vaEco 52 Zaaeboangacel None 1. '6 TaeJac 53 7&.sboa,nqadel Sur 2 1 17 te'aeees 54 Basfan 7 10 , 18 P"oanqa 5 Sulu '9 B3utIaA 56 Ta4-T.at '. : 4 20 8ataan X R I IttER'\. m1ANAO *i U 4M IHI FN tAt.ALCti b7 Agsan det Nte So. 23 58 Ag.jsan del Sur reinndo s," 5 22 Ot,ezon b9 BUkIdnon 3, 23 RZeal 6 lagu4n 14 a KlOME t ES ' I50 200 250 300 -16' 24 Cavta 61 Misams Oom-na 4 / LMFI(ES 25 LSagna 62 Misamis Oriental ' MIlES 0 I00 150 200l. 26 Bmenqas 63 Su.igao del Norte Son10Y2126 27 Mar-nduclue XI LASTERN MINDANAO ' 3oe2 28 Mindoro Oriental 64 Davao del Note Taktoc b 29 M.nooro Ocodentat 65 Davao Oriental 17 t 4 OfluO 30 Rom,blon 66 Dgvao del Sur Angel l 19 t 3' Paleea-, 67 South Cotabato 9BtOL 68 Surio,0 del Sur Olongopo 20 S 22 32 Canarmes Norte Xit SOLTHERN MINDANAO NCR rIB ILA 33 Camar;nes Sur 69 Lango det Nore 34 Catanduanee 70 Lanao del Sur 3SAlbee 71 Laguindanao N - ' Pogbl1ao b ^ 36lSrsogon 72 North Cotabto 37 Masbate 73 Sultin Kudarat 3 " 34 - Sarl \ ' ,, Atlenos N ~~~~~~~~~~~~~~47 _ >xJose a 30 37 O 7- rs 42' 'K 48~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1 49 ,8/ | \ * 27t ' | { t-tisS;3<lobon 31 /1 41 /~~~' Boo'4/ k So 7 Pr pve sa Coooyon 0 762 ", 63 P,,nceso ga. - S6-oo 70' 40 00~~~~~C I Cogovonlde ) -/. 68 58 . -qotobatoIO 7 2