Burkina Faso - Artisan and Small and Medium Scale Enterprise Project

Document of The World Bank FOR OMCIL USE ONLY Repoit N. 6977 PROJECT COMPLETION REPORT BURKINA FASO ARTISAN, SMALL- AND MEDIUM-SCALE ENTERPRISE PROJECT (CREDIT 759-BUR) October 15, 1987 Industrial Development Finance Division West Africa Projects Department Tha docmuat b a rericbd dutrboin ad may be mod by recipient =ny in *e peronace i dteik offica du. s lb mutns may ad ihemwws be dioed withou Wodd Bank authbuaton.  LIST OF ABBREVIATIONS ARCOMA Atelier Regional de Construction de Materiel Agricole BCEA, Banque Centrale des Etats de l'Afrique de l'Ouest BICICI Banque Internationale pour le Commerce et l'Industrie - Cote d'Ivoire BICS Banque Industrielle et Commerciale de la Region Sud de Paris BND Banque Nationale de D6veloppement BP Banques Populaires CCCE Caisse Centrale de Coop6ration Economique CENATRIN Central Computing Office CNCA Caisse Nationale de Credit Agricole CNDI Caisse Nationale des Depots et Investissements CNPAR Centre National de Perfectionnement des Artisans Ruraux KfW Kreditanstalt fur Wiederaufbau OPEV Office de Promotion de l'Entreprise Voltalque SACS Service d'Assistance, Conseil et Soutien UNDP United Nations Development Program UNIDO United Nations Industrial Development Organization USAID United States Agency of International Development CURRENCY EQUIVALENTS Name of Currency (Abbreviation) Communaute Financiere Africaine Franc (CFAF) Appraisal Year Average Exchange rate: US$1 = 245 Intervening Years Average US$1 = 315 Completion Year Average US$1 = 300  FOR OMFICIAL USE ONLY THE WORLD BANK Washington, D.C 20433 U.S.A Office of ffetor.-Cefletal Opetatms tvaluaitrN October 15, 1987 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Burkina Faso - Artisan, Small- and Medium-Scale Enterprise Projecr (Credit 759-BUR) Attached, for information, is a copy of a report entitled "Project Completion Report on Burkina Faso - Artisan, Small- and Medium-Scale Enterprise Project (Credit 759-BUR)" prepared by the West Africa Projects Department. Under the modified system for project performance auditing, further evaluation of this project by the Operations Evaluation Department has not been made. Attachment This document has a restricted distribution and may be w:ed by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorizaltion,  9V9 r4~ql  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT BURKINA FASO ARTISAN, SMALL- AND MEDIUM-SCALE ENTERPRISE PROJECT (Credit 759-BUR) TABLE OF CONTENTS Page No. PREFACE ...... o........... ............................i BASIC DATA SHEET .................. ...... ... ......... . ii HIGHLIGHTS ......................*,*.....*.. * * * * * * * * *........ iv I. INTRODUCTION ................. ....o....o. *# 1 TI. THE ENVIRONMENT ....... ...... . ........... ........... ........ 1 A. Background . ................................... 1 B. The Industrial Sector ......................... .. 2 III. THE PROJECT .................. ........... o.... . ,................ 2 A. Institutions . ................. .. . .... * ***..* .. 2 B. Objectives ................................................ 2 C. Project Implementation .......................... 3 D. Utilization of the Credit ..................... 4 E. Institutional Performance ... ............... 5 IV. IMPACT OF IDA-FUNDED TECHNICAL ASSISTANCE ............. . 7 A. BND ... #..#.................... ........................... 7 B. OPEV .... ........... .. *........... 7 C. CNPAR ...................................... *............. 8 D. Technical Assistance to the Government ........ 8 V. CONCLUSIONS AND LESSONS LF.RNED ............. . ........ 9 ANNEXES 1. Allocation of IDA Credit Funds ............... .......... 12 2. Schedule of Estimated vs. Actual Disbursements ......... 13 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.  -11;
s I I -1  PROJECT COMPLETION REPORT BURKINA FASO ARTISAN, SMALL- AND MEDIUM-SCALE ENTERPRISE PROJECT (Credit 759-BUR) PREFACE This Project Completion Report (PCR) relates to IDA credit 759-BUR, Artisan, Small- and Medium-Scale Enterprise Project approved on December 22, 1977. During implementation the project design had to undergo substantive modifications resulting in a reallocation as well as a cancellation of funds. The PCR was prepared by the West Africa Projects Department. It is based on information collected during a mission to Burkina Faso and discussions with officials from all institutions involved as well as Staff Appraisal Report No. 1667b-UV, supervision reports and other documents relevant to the project. The PCR was forwarded to the Borrower in draft form for their comments, but none were received. This project has not been audited by the Operations Evaluation Department.  7s4 eild  - ii - PROJECT COMPLETION REPORT BURKINA FASO ARTISAN, SMALL- AND MEDIUM-SCALE ENTE1PRISE PROJECT (Credit 759-BUR) BASIC DATA SHEET (Amounts in US$ millions) CREDIT STATUS As of 8/31/87 Original Disbursed Cancelled Repaid Outstanding Credit 759-BUR 4.00 3.19 .81 0 3.19 CUMULATIVE CREDIT DISBURSEMENTS FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY85 FY88 FY87 (i) Planned .2 1.0 3.0 3.9 4.0 4.0 4.0 4.0 4.0 4.0 (i i) Actual - .3 .9 1.3 1.8 2.2 2.8 2.8 3.0 3.2 (iii) (i) as % of (l) - 30 30 33 45 55 ES 70 75 80 OTHER PROJECT DATA Original Actual Board Approval - 12/22/77 Credit Agreement - 01/12/78 Effectiveness 04/24/78 07/11/78 Final Subproject Submission 12/31/80 Line of credit was cancelled Closing Date 12131/81 12131/85 Last Disbursement 12/31/81 7/28186 Borrower Republic of Republic of Upper Volta Burkina Faso  - iii - MISSION DATA Month/ No. of No. of Date of Year Weeks Persons Manweeks Report Identification 11/75 1.0 2 2.0 01/09/76 Preappraisal 03/76 2.0 2 4.0 03/25/76 Preappraisal 10/76 1.0 1 1.0 11/17/76 Appraisal 02/77 3.0 2 6.0 08/19177 Total 7.0 13.0 Supervision I 04/78 2.4 1 2.4 05/09/78 Supervision II 02/79 .8 1 .8 02/15/79 Supervision III 05/79 .8 1 .8 05/31/79 Supervision IV 10/79 1.8 1 1.8 11/20/79 Supervision V 02180 2.4 1 2.4 03/07/80 Supervision VI 10/80 2.6 2 5.2 02/13/81 Supervision VII 04/81 2.0 1 2.0 05/19/81 Supervision VIII 12/81 1.2 1 1.2 02/01/82 Supervision IX 04/82 2.0 2 4.0 05/04/82 Supervision X 03/83 1.0 1 1.0 04/12/83 Supervision XI 12/83 .8 1 .8 02/08/84 Supervision XII 04/84 .8 1 .8 06/30/84 Supervision XIII 07/85 1.2 1 1.2 08/08/85 Completion 12/86 1.2 1 1.2 12/18/86 Total 21.0 25.6 STAFF INPUT (manweeks) FY78 FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY85 FY88 FY87 Total Preparation 9.5 8.8 - - - - - - - - - - 16.3 Appr isal - 32.9 19.2 - - - - - - - - - 62.1 Negotiations - - 7.7 - - - - - - - - - 7.7 Supervision - - 7.7 10.3 12.2 21.1 30.8 7.0 10.7 4.8 4.8 6.0 115.2 Total 9.6 39.7 34.8 10.3 12.2 21.1 30.8 7.0 10.7 4.8 4.8 8.0 191.3  - iv - PROJECT COMPLETION REPORT BURKINA FASO ARTISAN, SMALL- AND MEDIUM-SCALE ENTERPRISE PROJECT (Credit 759-BUR) HIGHLIGHTS The project as origirally conceived had three objectives: (a) to extend credit to small- and medium-scale enterprises on suitable terms through Banque Nationale de Developpement (BND) and to rural artisans through Centre National de Perfectionnement des Artisans Ruraux (CNPAR); (b) to finance technical assistance including traliing to the above two institutions as well as to the Office de Promotion de l'Entreprise Volta!que (OPEV) to strengthen their activities in promotion and support to local enterprises; and (c) to finance technical assistance to the Government to improve its industrial policies and its monitoring of disbursements related to IDA credits (para 3.02). BND, OPEV and CNPAR were the institutions responsible for carrying out Government programs fostering small- and medium-scale enterprises, and were therefore selected as the most suitable institutions to channel IDA funds. During project implementation, political turmoil in the country, combined with ineffective management of the three institutions involved, and BND's inability to identify bankable subprojects for the line of credit, led to significant changes in the project design. Following a request from the Ministry of Finance, the Development Credit Agreement was amended and the line of credit to BND was cancelled. The IDA credit thus became a purely technical assistance project with the exception of credit-in-kind to rural artisans extended by CNPAR--about 20% of the IDA credit (paras 3.05 - 3.09). The project's achievements fell far short of expectations even in their scaled-down form. Constant interference by politicians during the early stages of the project and the absence of a solid institutional framework made any institutional accountability impossible, and had far reaching consequences on the way the three institutions operated, and on the effectiveness of their management (paras 3.10 - 3.18). Just before the IDA project became effective, a very able and cooperative Director General of BND was replaced by new management which lacked commitment to BND in general and to the project in particular. BND received the bulk of the technical assistance ($999,327), and during early project implementation, achieved some degree of financial stability through credit restraint, a close watch on liquidity and improved loan recovery. However, the remaining technical assistance was not as beneficial. BND was not very cooperative with the Bank, and without prior IDA approval, signed contracts with consulting firms based on fees that exceeded the amount originally earmarked for those tasks. Subsequently, IDA reluctantly approved these contracts. In a number of cases, the consultants never completed their tasks, blaming lack of adequate time in relation to the scope of work required. One consulting firm left behind 14 procedural manuals without adequately training BND staff to use them (paras 3.10 - 3.12, 4.01 - 4.03).  v The BND-OPEV relationship was strained from the beginning. The two institutions were unable to agree on standards for credit applications and appraisal reports and did not keep each other informed of their activities. It became clear early on that the line of credit would not be committed or disbursed on the basis of projects prepared by OPEV. Although I subproject was approved in 1979, it was subsequently withdrawn when the decision was made to cancel the line of credit. Our brief experience with the private sector in Burkina Faso has demonstrated that establishment of viable industries in that country is not easy. Entrepreneurs have to face formidable difficulties which include dependence on imports (which are costly and arrive late), serious technical problems, a very small domestic market, and strong competition from imported finished goods. Furthermore the relevant institutions were not adequately staffed to build up expertise in promoting small, suitably sized manufacturing and service industries (para. 4,02). BND, now operating purely as a commercial bank, has discussed with Banques Populaires (BP) of France a "twinning" arrangement whereby BND would receive technical services and training from BP. The BP/BND relationship appears for the moment quite promising (para. 4.04). OPEV and CNPAR also suffered from ineffective management and lack of Government financial and other support. OPEV was inefficient in project promotion and was finally closed down on May 1, 1986. Although CNPAR appears to be the only institution that by and large lived up to IDA expectations, it too has faced problems, including inadequate supervision capability and serious difficulties in loan recovery (paras 3.13 - 3.15, 3.17, 3.18). All the funds put at the disposal of the Government for the industrial policy study, the financial sector study and technical assistance to the External Debt Department of the Treasury, resulted in marginal benefits. The industrial policy review was unfortunately published in July 1981, eight months after a military coup, at a time when senior Government officials were preoccupied by other matters. The study received little attention. The financial sector study, which was expected to make a significant contribution to the definition of the future role of BND and CNDI, was of little value to the Government. Its recommendations were never implemented. The technical assistance to the Treasury started well but progressively deteriorated. It also resulted in marginal benefits to the Treasury (paras 4.08 - 4.12). The following lessons can be drawn from our experience with this project: (a) Projects involving institutions which do not have strong Government commitment and support, and whose management is significantly affected by state interference and political changes, stand little chance of successful implementation. A strong institutional framework with clearly defined accountability usually discourages the type of political  - vi - interference that affected so severely the institutions in Burkina, where such a system did not exist. (b) Projects which provide assistance toward institution building, including the strengthening of the management of project entities, require more intensive supervision involving relevant skills mix. (c) Technical assistance to an institution stands a better chance of success when it finances qualified individuals in line positions for relatively long periods of time, as evidenced by one such case in this project. Thi remaining technical assistance, financing ad hoc short-term advisory or expert services, resulted only in marginal benefits. (d) It is essential that institutions receiving technical assistance have a capability to manage and use technical assistance effectively, including that to internalize it. This was not the case with the institutions involved in the project, as demonstrated repeatedly during project implementation. (e) Greater care should be exercised by Bank staff in the screening and selection of consultants. In cases where the Bank has strong reservations about the borrower's selection of consultants on grounds of appropriate qualifications or fees, the Bank ought to withhold its approval and where Bank's advice is repeatedly disregarded it should seriously consider suspension of disbursements on the relevant component and cancellation of the remaining balance (para. 5.07). Further assistance to BND is not being considered at this time.  I~ v$ad~~~~~~~~'I4.-  PROJECT COMPLETION REPORT BURKINA FASO ARTISAN, SMALL- AND MEDIUM-SCALE ENTERPRISE PROJECT (Credit 759-BUR) I. INTRODUCTION 1.01 The need for a small- and medium-scale enterprises project in Burkina Faso was identified as early as 1975 during an IDA reconnaissance mission's discussions with the Government. Two subsequent missions, the appraisal of the Third Highway Project and the preparation of an urban project reiterated this need and resulted in an IDF/Urban joint identifica- tion mission in February 1976. This SME project was appraised in Febru- ary 1977 and an IDA credit of $4.0 was approved on December 22, 1977. II. THE ENVIRONMENT A. Background 2.01 Similar to other Sahelian countries, Burkina Faso's natural environment does not provide it with rich physical resources. Its most important productive asset is its people. Demography, however, has had a complex effect on the country. Because of tradition and the prevalence of river-blindness in the more fertile areas of the south and southwest, population has been concentrated disproportionately on the central plateau, creating such adverse effects as rapid deforestation and deteriorating soil fertility. The population has recently been moving to the less populated areas, including areas freed of river-blindness. The most striking move- ment, however and the most significant economically has been the emigration of young workers to the coastal countries, primarily the C8te d'Ivoire. Emigration has provided a safety valve for population pressure for many years. The resulting annual inflow of remittances represents about 8 percent of GDP and an important addition to the income of the rural house- holds receiving most of these savings. 2.02 Over the past two decades, the economy has grown by about 3 percent a year, and the Government has managed the economy reasonably well, including the large inflow of foreign capital. Nevertheless, a three percent rate of growth probably cannot be maintained, given the country's deteriorating physical resource base and its ever growing population. In the last few years, economic performance has been unsatisfactory. Twenty- five years after independence, literacy and life expectancy remain almost the lowest in the world, although since 1983 the Government has made major efforts on the social front. The Government has not exercised adequate coordination and supervision in critical areas of the economy, such as public financial management and planning of public investment. If its goals for economic development are to be achieved, the Government will have to strengthen the planning, analysis and execution of its development policies.  -2- B. The Industrial Sector 2.03 The small industrial sector of Burkina Faso can be characterized by two main types of industrial activities: (a) traditional artisans who are usually illiterate, use simple technologies, are widely dispersed, and cater to local markets, and (b) modern enterprises which have formal accounting systems, permanent facilities, use stable marketing channels, and have professionally trained management. The most important activity for both traditional and modern enterprises is food processing, followed by construction. 2.04 The industrial sector has been facing serious bottlenecks that cannot be easily overcome. There is a lack of technical and managerial human resources and serious deficiencies in basic infrastructure. With a lack of basic education, local entrepreneurs need technical assistance in every step of project implementation. For small-scale entrepreneurs and artisans, these problems are compounded by limited access to credit, and, in the case of artisans, by isolation and access to market outlets. III. THE PROJECT A. Institutions 3.01 Three institutions, whose responsibilities included promotion of SME activities, were originally going to benefit from the IDA project. These were: (a) Banque Nationale de Developpement (BND), a majority Government owned, multipurpose bank, which financed industry, agriculture, housing, consumer durables, and managed a credit guarantee scheme for small-scale borrowers; (b) Office de Promotion de l'Entreprise VoltaIque (OPEV), an independent agency under the Ministry of Commerce, Industrial Development and Mining set up to promote local enterprises; and (c) Centre National de Perfectionnement des Artisans Ruraux (CNPAR), an independent agency under the Ministry of Public Service and Labor, which provided basic skill training, follow-up advice and credit-in-kind to rural artisans. BND, OPEV and CNPAR were the institutions that had been carrying out Government programs promoting SMEs. They were therefore selected as the most suitable entities to channel and benefit from the IDA project. B. Objectives 3.02 The main goal of the IDA project was (a) to relieve entrepreneurs from serious financial and technical bottlenecks by providing a line of credit to SMEs through BND and to rural artisans through CNPAR, (b) to provide technical assistance to BND, OPEV, and CNPAR to improve their operations and strengthen their capabilities, and (c) to provide technical assistance to the Government to study its industrial policies and to improve the monitoring system of IDA credits. More specifically the IDA project consisted of the following components:  - 3 - 1. A line of credit to BND to provide financing for new SMEs and expansion of existing ones in manufacturing, construc- tion and agro-industry ($2.45 million); 2. Technical assistance to train BND staff and to improve its financial information systems ($250,000); 3. Assistance to Office de Promotion de l'Entreprise Voltarque (OPEV) to expand its management training program and to strengthen its project promotion and follow-up capabilities ($420,000); 4. Assistance to CNPAR to expand its artisanal training to include urban areas and to strengthen its ability to super- vise urban and rural artisans ($820,000); 5. Establishment of a $400,000 revolving fund for credit-in- kind for rural and urban artisans and cooperatives; and 6. Assistance to the Ministry of Commerce, Industrial Develop- ment and Mines to finance a study of Government industrial policies, and to the Treasury to improve operations of its External Debt Department ($60,000). 3.03 The terms of BND subloans were flexible, with a maximum of fifteen years and a minimum of two, and were expected to average eight years including 2 years of grace period. For small projects that fell within the Central Bank's SSE definition, assurances were obtained that BND would be compensated by a Government interest subsidy. It was expected that the line of credit would finance 30 subloans largely in productive sectors. 3.04 The original project had two other ambitious and important goals in employment generation. It expected to: (a) generate employment in the modern sector at an average cost of $5,000 per job, and (b) create 1,500 jobs in the informal sector at approximately $200 per job. C. Project Implementation 3.05 During project implementation the project had to undergo signifi- cant modifications which changed completely the focus of the project. These modifications, which basically converted the SME project into purely technical assistance, were requested by the Government to respond to (a) the need to strengthen BND's capabilities in its operations, its accounting as well as project preparation and appraisal, and (b) the lack of investment projects eligible for financing under the IDA line of credit. However, despite these changes, the project achieved disappointing results, mainly due to: (a) the political turmoil in Burkina Faso during project implementation period and lack of commitment to the project by the Government of Burkina, and (b) weak and ineffective management and  - 4 - inadequately trained staff within BND and OPEV. The possibility of cancelling the entire project was not considered either by the Government or by IDA. 3.06 Political Turmoil. Political instability had an extremely negative effect on project implementation. Interference by politicians was pervasive as early as October 1980, one month before the end of the Third Republic. The general economic situation, which had been deteriorating since 1979, was aggravated by purges which followed the second coup (November 1982) and political inquiries, demotions and sanctions which followed the third coup (August 1983). Many Government institutions became disorganized, and morale and staff motivation deteriorated further as a result of political promotions and reduction in indemnities and salaries, a trend that continued through 1986. Government policies have not been conducive to investment by the private sector. 3.07 Managerial Weaknesses. Management in both OPEV and BND during project implementation was unsatisfactory. The first Director General of OPEV after the credit became effective resigned on January 1981 and left the country in 1983 after serious allegations were made against him and his handling of OPEV's affairs. These included allegations of mismanagement of the Dutch Participation Fund. On account of these, the German and Dutch aid agencies withdrew their financial and technical assistance. The French withdrew a year later. All this effectively ended OPEV's promotional role and hope of identifying and providing BND with tankable projects. 3.08 BND's management at that time manifested a lack of interest and concern for the objectives of the project, and, following numerous unsuccessful attempts by IDA missions to get management to take decisions on substantive matters, the IDA credit component to BND, which was the core of the original project, was cancelled at the request of the Government. The funds freed by this cancellation were reallocated to technical assistance to BND, OPEV and CNPAR as well as to the Government for studies. D. Utilization of the Credit 3.09 There were four reallocations of the IDA credit funds (Annex 1). The first reallocation was made in November 1979. Without consulting IDA, BND signed a contract with a consulting firm, exceeding the amount origi- nally earmarked for technical assistance to that institution. At first, IDA refused to finance the total costs. However, in the absence of alter- native sources and following extensive discussions, IDA agreed to finance the difference by transferring the required amount from the line of credit. It had become evident that BND did not have a pipeline of viable investment projects to be financed under the IDA line of credit. It was also felt that a reallocation was justified on the basis of BND's serious financial difficulties and some earlier positive results of technical assistance. A lack of viable subprojects was the reason for the second reallocation, in April 1982, when the entire line of credit to BND was cancelled and the funds reallocated among other categories of the project. In January 1984, UNIDO agreed to finance an expatriate to OPEV and thus $200,000 were made  - 5 - available to the Government to finance a study of the financial sector which was expected to lead to an improvement of public debt management. The final reallocation was made in December 1985 to permit the Department of External Debt of the Treasury to purchase a small computer. E. Institutional Performance Banque Nationale Je D6veloppement (BND) 3.10 BND continued to be ineffective throughout the duration of the project. Despite an increase in capital in 1982 by the Government, BND moved progressively toward less risky operations in trade and real estate. Arrears remained high and in May 1985 BND was instructed by the Government to change its operations into purely commercial banking and to discontinue all term lending. 3.11 BND's financial difficulties were aggravated by lack of leader- ship. Sustained improvement in its operations was therefore impossible not only because of weak management particularly vis-g-vis personnel policies but also because of inexperienced and inadequately trained staff and weak internal organization and procedures. During IDA project implementation BND had four Directors General. Of the first three, only the second had relevant experience but served for a little more than a year. The third managed BND between March 83 to June 1985 when he was removed crom office on grounds of ineffectiveness and lack of executive experience. Not until 9 months before the project's closing date did BND acquire a well motivated and effective Director General. 3.12 In addition to all the other difficulties, BND was unable to keep reliable accounts of its operations, making it virtually impossible to assess its financial position during project implementation, and most importantly was unable to use effectively the IDA technical assistance to help it improve its financial information system. Office de Promotion de l'Entreprise Voltalque (OPEV) 3.13 During project implementation OPEV management changed three times. By January 1981, when OPEV's first Director General resigned, OPEV was already in a tailspin for various reasons including managerial problems which were mentioned in paragraph 3.07. 3.14 Project promotion in the industrial zone of Kossodo was ineffective, and project promotion outside the zone was nonexistent. Extension services were also ineffective due to lack of experience. Only OPEV training activities, financed largely by the IDA credit, seem to have been beneficial. The German, Dutch and French withdrew their financial and technical assistance, and their withdrawal was soon followed by the depar- ture of the UNIDO team leader in 1981. He was not replaced. The expatri- ate staff who numbered 17 at the end of 1976 had been reduced to 7 by 1981.  -6- 3.15 In contrast with other parastatals, OPEV was never adequately funded by the Government. For example, the Corseil burkinabe des chargeurs (CBC) and the Office for Export Promotion (ONAC) had independent resources in the form of an import surtax. ONAC receives more ia any one year than OPEV has during the entire fifteen years of its existence. Attempts by OPEV to obtain a share of this import surtax were futile. The meager Government allocation which was limited to paying salaries only, meant that most activities of the institution were paralyzed. The last Director General, who took over in 1983, did concentrate on trying to find new resources, but OPEV had already lost its credibility. It closed on May 1, 1986. Centre National de Peifectionnement des Artisans Ruraux (CNPAR) 3.16 CNPAR was founded in 1970 with the assistance of ILO, which also provided CNPAR with technical assistance until 1977 when the IDA credit was approved. The strengths and weaknesses of CNPAR were largely due to the personality of the new project director, who was a former ILO employee. He was a doer, and disliked bureaucracy. He saw his main job as training rural artisans and providing them with materials and tools on credit. As a result, such activities as accounting, record-keeping, and reporting to IDA were given relatively low priority. CNPAR produced only one sketchy progress report, in May 1980, which mentioned that it was too early to evaluate the project since loan recovery would not begin before 1981. Thus, there is no detailed record of CNPAR's activities and almost no information base on which to evaluate the effectiveness of its training and assistance. The CNPAR component was disbursed on time for the categories and for the purpose originally designated. Only assistance to urban artisans was dropped following delays in implementation of the Bank urban project. 3.17 Weaknesses in CNPAR's performance surfaced late and centered on difficulties in the recovery of loans. It appears that a large part of IDA's $400,000 which was intended to become a permanent revolving fund, will not be revolving. About CFAF 120 million out of the CFAF 160 million worth of raw materials and tools that were given to rural artisans on credit terms is still in arrears. Another CFAF 40 million worth of goods is still in storage in CNPAR's own storerooms. (Since funds from the Dutch and IDA were not accounted for separately, CNPAR's Director General could provide only orders of magnitude on the final use of IDA credit funds.) The present Director General intends to recruit four new accountants (hitherto, CNPAR got by with only one) and to step up recovery procedures. He hopes to eventually recover 60 percent of the arrears which may be an optimistic and unrealistic goal. 3.18 The Director General blamed poor loan recovery on the severe droughts of the 1973-83 period. He also felt, that credit may have been granted too liberally, and without the appropriate controls. For example, credit, raw material and equipment were given automatically to all former CNPAR trainees. Some of the trainees apparently resold the raw material and equipment in the local market at a profit or to raise money for  - 7 - travelling to Abidjan or other foreign cities to find work. According to the Director General, however, most of the trainees did use CNPAR's assistance effectively and for the purpose intended. The Director's efforts to intensify loan recovery will probably provide a clearer picture of CNPAR's past efficiency. IV. IMPACT OF IDA-FUNDED TECHNICAL ASSISTANCE A. BND 4.01 BND was the largest beneficiary of IDA technical assistance and training ($999,327 disbursed out of a total of $1,767,000 disbursed for the four entities including the Government). However, our overall experience with BND again confirms that in order to-transfer knowledge tc the staff of an institution and to help build up banking experience on a more permanent basis, requires significantly lor.g periods of time. 4.02 The BND-OPEV relationship was strained from the beginning and the lack of cooperation between the two institutions made it clear to IDA that the line of credit would not be committed or disbursed on the basis of projects prepared by OPEV. Although 1 subproject was approved in 1979, it was subsequently cancelled when the decision was made to cancel the line of credit. Our brief experience with the private sector in Burkina Faso has demonstrated that establishment of viable industries is not easy. Entrepreneurs have to face formidable difficulties which include dependence on imports (which are costly and arrive late), serious technical problems, a domestic market which is very small and strong competition from imported finished goods. Furthermore the relevant institutions were not adequately staffed to build up expertise in promoting small, suitably sized manufacturing and service industries. 4.03 In order to assist BND in improving different aspects of its operations, the IDA credit financed the technical services of several consulting firms. The consultants' performance must be judged in the context of an extremely difficult environment. Although there were some successes earlier in project implementation, our overall experience with consulting firms has not been positive. Most of the services provided by these firms did not lead to significant long-term benefits to the institu- tion, one complaint bei,ig that the time designated for each task was not adequate. 4.04 BND has recently discussed a "twinning" arrangement with Banques Populaires (BP). Under this arrangement BP would provide BND a broad range of technical services and would establish exchange programs for training BND Staff. B. OPEV 4.05 IDA funds were originally earmarked to finance the salary of an expatriate technical adviser. However, since UNIDO subsequently accepted  - 8 - to finance this adviser, IDA funds were used mainly for local staff. Small amounts went to equipment and to an artisan fair sponsored by OPEV. Since the local staff in charge of IDA-financed training were mainly in OPEV braiches, we have little information of their performance, However, training was generally considered by outside observers as the only benefi- cial activity of OPEV, and IDA supervision missions sxpressed no dissatis- faction with its progress. C. CNPAR 4.06 Since ILO had already established CNPAR's general institutional character and orientation, IDA's influence was marginal. Nevertheless, with the help of CNPAR's well motivated staff and a dynamic expatriate director, IDA funds provided CNPAR with the means to pursue useful training considered as a top priority. Without IDA funds CNPAR would have had to reduce the scope of its activity. Instead, through the 1982 reallocation of IDA funds, CNPAR was able to open 2 more branches in Dedougou and Fada N'Gourma. 4.07 IDA also provided CNPAR staff with advice on improving (a) accounting and auditing of the Service d'Assistance, Conseil et Soutien (SACS) which delivers technical and marketing assistance and credit-in-kind to artisans trained by CNPAR; and (b) the Atelier Regional de Construction de Materiel Agricole (ARCOMA) which produces three basic types of agricul- tural implements: small carts, ox-drawn ploughs and harnesses. Although there were several instances of misappropriation of CNPAR's funds, advice by IDA greatly helped in minimizing them. D. Technical Assistance to the Government 4.08 IDA funds financed the following technical assistance to the Government: 4.09 (1) Industrial Policy Study. The IDA credit earmarked $35,000 to the Ministry of Commerce, Industrial Development and Mines to finance a study to review (a) existing investment incentives and their impact, (b) market prospects of SMEs and recommend appropriate incentives; and (c) appraisal procedures in the concerned ministries and agencies including recommendation of appropriate techniques, such as economic analysis, etc. 4.10 (2) Financial Sector Study. In April 1982, when BND's line of credit was cancelled and funds were reallocated, IDA designated $120,000 for a study of Burkina Faso's financial sector. The objectives of the study were to (a) determine the kinds of interventions which could promote growth in the industrial sector, and (b) recommend an appropriate role for BND and Caisse Nationale des Dgp8ts et Investissements (CNDI). BND's traditional foreign sponsors (CCCE, KfW) insisted on completion of this study and an official plan of action before resuming assistance to the organization.  - 9 - 4.11 (3) Technical Assistance to the External Debt Department in the Treasury. According to project objectives, the IDA project included funds for (a) improvement of operations of the External Debt Department which supervises, inter alia, IDA projects, and (b) assistance to the Treasury in the management of its debt. 4.12 Similar to technical assistance to BND, IDA technical assistance to the Government achieved very little. The industrial policy study was published by the Ministry of Commerce, Industrial Development and Mines a few months aiter a military coup, when Government officials were preoccu- pied by other matters. The study therefore received little or no atten- tion. As far as the financial sector review is concerned, it did not address relevant issues and its recommendations were not accepted. The report received no follow-up in Burkina Faso. Finally, the technical assistance to the Treasury provided no more information than was available by Burkina's official debt reporting system and its benefits therefore were marginal. V. CONCLUSIONS & LESSONS LEARNED 5.01 As originally conceived, the bulk of the IDA credit was to be used for term lending to SMEs and artisans through BND and CNPAR, with smaller amounts allocated for technical assistance to BND, CNPAR, OPEV, and to the Government. Following the cancellation of the line of credit to BND, the IDA credit became solely a technical assistance project. BND's institutional difficulties and IDA's preoccupations therewith led to BND's receiving significant amounts of technical assistance. 5.02 The results of the project have overall been very disappointing. BND was unable to use effectively the IDA technical assistance and was ineffective throughout the duration of the project. In May 1985, it was finally converted into a purely commercial bank. BND has entered into an institutional cooperation agreement with the Groupe des Banques Populaires, a relationship that appears promising. Nevertheless, BND's prospects as an effective banking institution remain uncertain. OPEV was closed in May 1986, and CNPAR is facing serious difficulties in the recovery of its loans. The Government used effectively the first $25,000, but subsequently to little effect the $261,000 it paid to three consulting firms for the industrial policies and financial sector studies and for the assistance to the External Debt Department of the Treasury. 5.03 The main reasons for the project's disappointing results are (a) political turmoil and the interference of politicians into the management of these institutions, which started early in the life of the project, and (b) managerial weaknesses in the institutions involved. Both had far-reaching consequences for all these institutions, including a severe loss of staff morale in BND. Managerial weaknesses in OPEV seriously undermined it and the cancellation of the project's credit component was largely prompted by the lack of commitment of BND management to the project's objectives. In 1985 a former BOAD Director and CNDI  - 10 - Director General was appointed as the new Director General of BND. He appears to be aware of BND's overall situation including its serious training needs and has formulated for BND a medium-term training program which is expected to go some way in upgrading that institution. 5.04 The above mentioned factors, political or institutional, were largely outside the control of the Bank. When the project became a techni- cal assistance project, Bank staff endeavored to make such assistance effective and relevant. However, the Burkina institutions receiving this technical assistance lacked the necessary motivation and interest. Fur- thermore, the magnitude of technical assistance tasks and the time required to implement them were underestimated. It is possible that the amount of time allotted to each task was inadequate compared to the scope of the assistance required, and the difficult environment in which the consulting firms had to operate. It is also likely that the long-term nature of institution-building was insufficiently taken into account in designing the technical assistance. In any event, while there were some successes, overall, the technical assistance resulted in very little. 5.05 It is clear from the above that greater care should have been exercised in the screening and selection of consultants. In areas affect- ing the overall economy, only consulting firms with the requisite prestige and expertise could have had the authority to influence Government's policies. In retrospect, the Bank, in the face of repeated unilateral decisions by the Burkina institutions to sign expensive contracts with consultants and to select consultants who were not adequately qualified for the job required, would have been perfectly justified not to endorse these decisions, and instead to suspend disbursements for these components. 5.06 Further Ba&k assistance to BND in the SME sector is not being considered at this time. The closing of OPEV has left a vacuum in the delivery of technical assistance to entrepreneurs, and existing institu- tions promoting SMEs in Burkina lack the necessary motivation and Govern- ment commitment and support to be of effective assistance to SME development. Despite cooperation by the Groupe des Banques Populaires, BND's accounts are still not in order. 5.07 To summarize, the following major lessons can be drawn from our experience with this project: (a) Projects involving institutions which do not have strong Government commitment and support, and whose management is significantly affected by political interference and changes, stand little chance of successful implementation. A strong institutional framework with clearly defined accountability usually discourages the type of political interference that affected so severely the institutions in Burkina, where such a system did not exist. (b) Projects which provide assistance toward institution building, including the strengthening of the management of  - 11 - project entities, require more intensive supervision involving an appropriate skills mix. (c) Technical assistance to an institution stands a better chance of success when it finances qualified individuals in line positions for relatively long periods of time, as evidenced in one such case in this project. The remaining technical assistance, financing ad hoc short-term advisory or expert services, resulted only in marginal benefits. (d) It is essential that institutions receiving technical assistance have a capability to manage and internalize technical assistance effectively. This was not the case with the institutions involved in the project, as demonstrated repeatedly during project implementation. (e) Greater care should be exercised by Bank staff in the screening and selection of consultants. In cases where the Bank has strong reservations about the borrower's selection of consultants on grounds of appropriate qualifications or fees, the Bank ought to withhold its approval and where Bank's advice is repeatedly disregarded it should seriously consider suspension of disbursements on the relevant component and cancellation of the remaining balance. West Africa Projects Department May 8, 1987  - 12 - AN'EX I B3URKINA FASO /( AARTISAN, SMALL AND M.tEDIUM.4 SCALE ENTERPRISE PROJECT Credit 759-BUR Allocation or Credit Funds (000 s) Tech. Ass. Local Operat. Credit Train Equipm. Personnel Costs Total BND Initial 2450 230 + 20 2700 Nov. 1979 2050 630 + 20 2700 Apr. 1982 0 865 + 65 930 Jan. 1984 0 1013 + 65 1078 Disbursed 0 960 + 39 999 CNPAR Initial 400 262 61 44 53 820 Apr. 1982 555 412 306 44 53 1470 Jan. 1984 663 444 214 22 131 1474 Disbursed 653 444 214 22 137 1470 OPEV Initial 200 22 151 47 420 Apr. 1982 277 57 256 80 670 Jan. 1984 71 SO 257 78 456 Disbursed 63 51 244 74 432 GOVERNMENT Initial 35 25 60 Apr. 1982 155 25 180 Jan. 1984 217 25 242 Dec. 1985 187 30 25 242 Disbursed 261 0 25 286 TOTAL Initial 2850 747 83 220 100 4000 Apr. 1982 555 1774 363 325 233 3250 Jan. 1984 663 1810 264 304 209 3250 Dec. 1985 663 1780 294 304 409 3250 Disbursed 653 1767 265 291 211 3187 WAPID Dec. 1986  - 13 81JSK1UA FAOm 'iPQAT.SR'I t. MAL ANI ViILP :CLE EURPM!EE PRUE: ^R;ECT 3^ tE73:Y 10R121 Sz=ie-dal 3f Estie:e vs kct"al Dishursexv%ts ;11S $ oo00 A?anim: Estisut A c a a ::S,. PER OER :O :F YtEM : IJARTER "MUARME CMm'ILATVE AP.TER CU WLA'i E