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Implementation Completion Report (ICR) Review - Agricultural Development Project

1. Project Data:   
Project ID:
Project Name:
Agricultural Development Project
Annual Crops, Agriculture
L/C Number:
Partners Involved:
Prepared By:
Laurie Effron, OEDCR
Reviewed By:
Keith Pitman
Group Manager:
Ruben Lamdany
Date Posted:

2. Project Objectives, Financing, Costs, and Components:

The Agricultural Development Project (ADP), approved in June 1994, was to improve access of the private sector to medium and long-term credit for investments in agriculture and agri-business and to strengthen the capacity of the banking sector to appraise and supervise projects in these sectors. It consisted of a line of credit for US$47 million to be on-lent through participating financial intermediaries (PFIs) and a technical assistance component of US$3 million to strengthen the PFIs. At the time of loan cancellation in April 1997, no disbursements had been made.

3. Achievement of Relevant Objectives:


4. Significant Outcomes/Impacts:


5. Significant Shortcomings (include non-compliance with safeguard features):

The loan was put in place in a context of poor macroeconomic and state enterprise performance, which in turn undermined the financial sector. In addition, the frequent changes in agricultural export regulations and prices as well as the unclear policies on land restitution resulted in a poor climate for investments in agriculture and agro-industry. Of the three PFI that eventually were declared eligible to participate in the two lines of credit (the ADP and a concurrent investment and export loan), only one ever submitted sub-loans for approval, and that was not under the ADP. No sub-loans were ever approved under ADP. In 1996, one year after loan effectiveness, the Bank continued to try ways to use the loan funds, including supporting emergency measures to stimulate grain production and providing severance payments to workers affected by adjustment. Senior Bank management did not agree with these proposals and the loan was canceled, undisbursed in April 1997.
6. Ratings:ICROED ReviewReason for Disagreement/Comments
Highly UnsatisfactoryHighly Unsatisfactory
Institutional Dev.:
Bank Performance:
DeficientHighly Unsatisfactory
    The ICR does not contain an option of "highly unsatisfactory". But this line of credit should have never been put in place; once it became clear that the financial sector was extremely weak and the agricultural sector continued to suffer from a poor environment for investments, the loan should have been closed. Instead, the Bank tried to amend the legal agreements to make sub-loans more attractive.
Borrower Perf.:
DeficientHighly Unsatisfactory
    The ICR does not contain an option of "highly unsatisfactory". But the Government wanted to intervene in the credit allocation decision, which the Bank did not agree with, and failed to take sector policy reforms that would have improved the climate for investments in agriculture.
Quality of ICR:

7. Lessons of Broad Applicablity:

The lessons are identical to those of the Private Investment and Export Finance Project (Loan 3631-BUL) and have been learned in other countries, perhaps in less dramatic ways. The macroeconomic and agricultural sector conditions were not conducive to good financial intermediation; and the banks were financially weak, poorly managed, and poorly supervised. In this context, a line of credit does not make sense. Once this becomes clear, the best course of action is to close the loan rather than try to make on-lending more attractive.

8. Audit Recommended?  No


9. Comments on Quality of ICR:

The ICR is satisfactory; it gives a frank account of an unfortunate experience.

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