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Implementation Completion Report (ICR) Review - Expanding Microfinance Outreach And Improving Sustainability

1. Project Data:   
ICR Review Date Posted:
Project Name:
Expanding Microfinance Outreach And Improving Sustainability
Project Costs(US $M)
 30  16.33
L/C Number:
Loan/Credit (US $M)
 30  16.33
Sector Board:
Cofinancing (US $M)
Board Approval Date
Closing Date
12/31/2010 06/30/2012
Micro- and SME finance (100%)
Other financial and private sector development (50% - P) Rural markets (25% - S) Gender (25% - S)
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Iradj A. Alikhani
Kristin Hallberg Lourdes N. Pagaran IEGPS2

2. Project Objectives and Components:

a. Objectives:

    The Project Technical Annex (PTA) -- which replaces the Project Appraisal Document (PAD) since the project was processed under emergency procedures defined under OP.8.0 -- defines the project development objective (PDO, p. 9) as follows: to achieve operational sustainability for most microfinance service providers and help them scale up outreach of financial services to meet the needs and demands of many poor Afghans, especially women. The Financing Agreement (FA, p. 4) uses the same definition.

    An important issue concerns whether the project covered four or all microfinance institutions operating in Afghanistan -- project documents are imprecise. The ICR (para. 74) makes the case that the intention was only to support the four participating MFIs, which accounted for 70% of the sector.

b. Were the project objectives/key associated outcome targets revised during implementation?

c. Components:

The project consisted of a line of credit onlent through the Microfinance Investment Support Facility Afghanistan (MISFA) to the eligible microfinance service provider organizations -- original cost US$30 million and final cost US$16.3 million.

d. Comments on Project Cost, Financing, Borrower Contribution, and Dates

The original project cost of US$30 million was financed by an IDA grant in the amount of SDR 19.2 million (equivalent to US$30 million). The grant was approved by the Board on January 8, 2008 and became effective on June 2, 2008. Estimated original project cost of US$30 million excluded contributions to subproject costs by Microfinance Institutions (MFI) and/or subborrowers. Following cancellation on November 1, 2011, of SDR 8.8 million (equivalent to US$13.8 million), total project cost at closing was US$16.3 million. There were two project restructurings. The first on December 20, 2010, extended the closing date by 12 months, to December 31, 2011. The second, involving the aforementioned cancellation of funds, extended the closing date by another 6 months, to June 30, 2012.

This project was complementary to a larger and broader microfinance project financed by Trust Funds (TFs), which closed in June 2010. The ICR for that project has been issued separately.

3. Relevance of Objectives & Design:

a. Relevance of Objectives:

Substantial. The project was part of broader program aimed at meeting a large unmet demand for formal financial services, especially for poor people and microenterprises (PTA, p. 7). This program was supported by donors and the World Bank. The latter’s financing was from a large TF and extended since 2003 through a project (Microfinance for Poverty Reduction Project, MPRP). At the time the operation discussed here was presented to the Board, MPRP had already provided over US$133 million in funding, with about 90% disbursed -- a supplemental financing of US$50 million was under preparation at the time.

The project was relevant to boththe Government, which made microfinance a pillar of its strategy, and the Bank (Interim Strategy Note, ISN, for the period 2009-2011). The 2009-2011 ISN noted the remarkable progress in the area of microfinance (paras. iii and 43) thanks to support provided by the World Bank Group (IDA, IFC and managed TFs, including the aforementioned closely related microfinance project (P091264)). Microfinance was a key component of the third pillar. Increased access to finance, including microfinance (Box 10). The current ISN for Afghanistan covers the 2012-2014 period. This latter ISN presents a more cautious view of the performance of the microfinance sector, which it characterizes as satisfactory -- in part because of difficulties experienced between 2009 and 2012 culminating in the exit of the largest MFI, BRAC (a Bangladesh based NGO). Nevertheless, it recognizes the importance of the sector and envisages its continued funding (paras. 47 and 84) through support to access to financial services -- a project is now under preparation. IFC support will also be maintained (ISN 2012-2014 para. 100).

The recent IEG Country Program Evaluation (CPE) for the period 2002-2011 provides additional information on relevance of objectives: It recognizes that substantial output (which from the standpoint of the project may be considered outcomes) has been achieved in the area of microfinance (p. xii) and notes that microfinance was at the core of Bank strategies throughout the review period (p. 86). in view of the prominent role given to the development of the microfinance sector in Bank strategies during the past decade and its continued relevance, a rating of “Substantial” appears justified for this aspect of the project.

b. Relevance of Design:

Modest. The logic of the intervention seems clear from a programmatic point of view, given the context of the overall support provided by the Bank to the microfinance sector -- of which both MPRP and the IDA operation were complementary and overlapping parts. The much larger MPRP covered all aspects of the support needed at the time (technical assistance and capacity building to key institutions and MFIs and resources for microfinance lending). At the time the project was designed technical assistance needs thus appeared fully covered, but it was considered that greater sustainability and outreach to final beneficiaries was constrained by insufficient resources for onlending. The project aimed solely to address this last issue by providing a line of credit to MFIs through MISFA, the already established Apex institution.

Given the project design the choice of lending instrument (Financial Intermediary Lending) appears to have been appropriate. However, it took two years to prepare the project and it is unclear why it was processed under emergency procedures, which allow for a design that is not as extensive as one formulated under normal procedures.

The project in practice aligned its PDO with that of the larger related operation even though it solely financed a line of credit for onlending through MFIs. As a result, the logical link between the PDO and project activities is partial. The project supported continued outreach, but the link to MFI sustainability was limited, as the latter depended on other factors. There was a similar disconnect between activities and results sought, discussed at greater length in the M&E section. Furthermore, the project did not directly influence the registration of MFIs under Afghan laws.

From the standpoint of the project as designed and with the benefit of hindsight, it appears that a major recommendation of the 2006 IEG evaluation of lines of credit would have been applicable to this project with respect to both the size of the line of credit and the original implementation period: “Using conservative estimates of the demand for funds and sizing the LOC to be a modest fraction of that demand can help reduce the probability of poor disbursements and the need for large cancellations;", p. 36. An alternative design, which parallels the phased approach of the MPRP, would have been to start with a smaller line of credit and with clear up-front understanding that further financing would be provided if justified. This validity of such an approach is further reinforced that as the project was being finalized a supplemental financing of US$50 million was under preparation under MPRP, which further increased onlending resources available to MFIs.

More broadly, there is a general issue of whether the project design was too narrow and might have included a technical assistance component to MFIs or lesser extent subborrowers -- which is usually a component of this type of project. There are two ways to consider this issue. First, one could argue that MPRP was already providing the required TA, and that it was expected to continue doing so during the project life (even though the closing date of that project was only extended to 2010). Potential problems with this line of thinking were that the additionally of the IDA grant is not evident and that the closing of MPRP while the project was still ongoing should have been foreseen. In that case, a TA component would have seemed warranted. Either argument point to a weakness in the project design. Finally, the discussion in the PTA (p. 10) of alternatives considered does not include consideration of a community-driven development (CDD) project. Such an alternative would not have helped MFIs, but would have supported the project’s ultimate beneficiaries.

4. Achievement of Objectives (Efficacy) :

Negligible. The PDO and intermediate indicators, including baseline and latest data, are provided in the ICR Annex 1. The present review uses the information most relevant to the analysis below based on the following indicators reported in the ICR:

Baseline December 2006TargetActual June 2012
PDO Indicator 1: Percent of loan portfolio outstanding that is accounted for by MFIs with OSS>100%.
PDO Indicator 2: Number/% of MFIs registered as separate legal entities under Afghan law -.
PDO Indicator 3: Number of active clients of MFIs.
PDO Indicator 4: % of active clients who are women
PDO Indicator 5: Increase in amount in and percentage of loan portfolio outstanding relative to base year
US$65 mn
US$175 mn/270%
107.7 mn/165.7%
Intermediate Indicator 1: Number / % of MFIs with an OSS (operational self-sufficiency ratio) of more than 100% that do not require any more grant subsidies for operational deficits.
Intermediate Indicator 2: Number / % of MFIs with PAR 30 (portfolio at risk greater than 30 days) of less than 5%.
Intermediate Indicator 3: Amount of funds on the balance sheets of MFIs from sources other than MISFA
US$14 mn
US$40 mn
US$15.3 mn
Intermediate Indicator 4: Number / % of MFIs with a capital adequacy ratio above 12%.
Intermediate Indicator 5: Number / % of MFIs with Afghan board members / directors in addition to international experts and owner representatives.
Intermediate Indicator 6: % of middle and top management positions held by Afghans
Intermediate Indicator 7: Number of provinces in which MFPs are providing services

Limited progress towards meeting the PDO (also see ICR paras. 76-81) is reflected in a reversal in overall operational sustainability and outreach of the MFIs as a group. Project indicators are significantly affected by the failure of BRAC (an NGO headquartered in Bangladesh), which represented the majority of the sector in terms of clients, active borrowers, percentage of women clients and presence in provinces (ICR Table 1). This increases the risk of non-repayment of resources onlent through BRAC -- which would in turn limit reflows available for further onlending in the future. It should be noted that BRAC's difficulties and exit occurred between 2010 and 2013, at a time where the other project had closed and thus there may be some attribution of this result to the project reviewed herein. Now that BRAC’s exit is confirmed (ICR, para. 37 and reconfirmed in 2013 by MISFA), this represents a regression since the outset of the project, even though one MFI is sustainable and two others are showing improvements in performance,

There is further evidence of limited achievements during project implementation:
    • Operational sustainability of MFIs -- As noted above, the largest MFI supported by the project failed. Remaining MFIs significantly undershot their self-sustainability targets (PDO indicator 1) and there was a regression (from 3 to 1) in terms of MFIs no longer needing subsidies to cover operational deficits (intermediate indicator 1). Furthermore, MFIs were unable to diversify their funding sources and remained highly dependent on MISFA (intermediate outcome 3), as reflected in the stagnation of funds on the balance sheet from other sources, and only 60% of mid-level management jobs were held by Afghans, compared to a starting point of 50% and a target of 85% (intermediate indicator 6). Available evidence points to quite limited improvement in sustainability of MFIs during the project period.
    • Scaling-up outreach -- The number of active clients were supposed to more than double but had not changed significantly at project closing -- PDO indicator 3. Similarly, the loan portfolio increased by about two-thirds of the target value -- PDO indicator 5. Furthermore, MFIs provided services in one new province, as opposed to 11 -- intermediate indicator 7. These reflect limited achievements in terms of outreach.
    • Reaching the poor and women -- The ICR presents limited information concerning the project’s impact on women. The reported figure for outreach to women is 62%. But this is the data for the program as a whole not the subloans from the project’s proceeds granted to women. Further reference to meeting the demands of Afghan women tends to be quite generic or with limited attribution to the project (e.g., reference to a much broader impact assessment or a CGAP note, respectively ICR Annex 8 and para. 33)

Furthermore, the attribution of both sustainability and outreach results to the project are partial at best considering the fact that technical assistance was provided through other projects and concerning cancellation of about 46% of the IDA grant in 2012 -- which resulted in a lower volume of subloans which are part of outreach. Furthermore, the line of credit under MPRP was scaled-up a few months after the IDA project was approved and it could have provided the required resources for outreach. These resources were not all used and about US$15 million was canceled at closing in 2010 -- about the same amount as disbursement of the IDA grant. This puts into question whether ex post the project provided any additionality or whether in its absence the larger operations would have been able to provide the necessary resources through faster draw-down of available funding.

The ICR argues (para. 85) that in the absence of the project MFIs, would have faced an even more severe crisis. While this point may be valid at program level, it is hard to see how such a result can be attributed to the project given that technical assistance and support to MISFA was provided primarily through the other operation and given the excess supply in terms of line of credit that became apparent after 2010.

In the absence of changes in project objectives and leaving aside above-mentioned attribution problems, this action alone implies a significant shortfall in achievement of project objectives, which together with other factors are indicative of negligible progress towards meeting these objectives. This rating is fairly consistent with that provided in the Borrower’s feedback (ICR Annex 10) which states that “intended outcomes were relatively unmet by most standards.”

5. Efficiency:

Modest. Conceptually, the project lent itself to ex post economic and/or cost/benefit analysis through impact assessment at the level of beneficiaries. However, the M&E system was not set-up in a way that would enable this, and the limited assessments planned were not undertaken in part due to deteriorating security -- as discussed in the M&E section.

A key measure of efficiency relates to disbursements and the implementation period, which also reflect significant inefficiencies. Specifically, the project has to be extended by 18 months (50% or the original implementation period of 3 years, which may have been overly optimistic) and even then only 54% of the original grant was disbursed. Furthermore, there was inefficient use of the opportunity provided by the mid-term review to redress some of the shortcomings in project design and implementation issues -- the project restructuring that took place 18 months later only extended the implementation period.

The ICR recognizes many of the above shortcomings (para. 86) and characterizes efficiency as “moderately unsatisfactory” (which is presumably equivalent to “modest”).

a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:

Rate Available?
Point Value
ICR estimate:

* Refers to percent of total project cost for which ERR/FRR was calculated

6. Outcome:

There were major shortcomings in the operation’s achievement of objectives and significant issues in terms of design and efficiency. There were limited results achieved and many are only partially attributable to the project. The most important factor is the failure of the largest MFI, which used about two-thirds of the funds disbursed under the project, some of which may not be repaid. Further undershooting of objectives is reflected in the cancellation of 46% of the IDA grant. Therefore, notwithstanding the project’s strategic relevance, its outcome is rated Unsatisfactory. The Borrower feedback is broadly consistent with this rating.

a. Outcome Rating: Unsatisfactory

7. Rationale for Risk to Development Outcome Rating:

The ICR (para. 94) rates risk to development outcome as high, which is in line with that of this review. The basis for this rating is the deteriorating security situation in the country. However, the exit of BRAC from the market, the fate of its loan portfolio and risk of losses being incurred by MISFA should have also been mentioned as factors that further underpin this rating, as these were in a generic fashion in the PTA (p. 22).

a. Risk to Development Outcome Rating: High

8. Assessment of Bank Performance:

a. Quality at entry:

The project was aligned with Government and Bank priorities. It intended to build on a successful program and key risks were correctly identified at appraisal, the most critical of which were outside the project’s control and could not be mitigated -- and affected project performance when they materialized. Furthermore, as discussed earlier the additionality provided by the project appears limited.

However, there were shortcomings in project concept that affected quality at entry. The PDO was too broad and there was a disconnect between project activities and the ambitious results sought -- this observation differs from that of the ICR (para. 97). The M&E was also weak. Further to the initial due diligence by the Bank (ICR para. 98), a tighter audit requirement for participating MFIs might have allowed for earlier identification of BRAC’s misreporting of results. Specifically, the project should have included a requirement whereby participating MFIs would be audited externally based on internationally acceptable norms. Finally, the implementation period may have been too short

The ICR does not explain the reasons why the project was prepared under emergency procedures, which allow for lighter appraisal, and whether this choice might have affected quality at entry. This issue is alluded to in the ICR (para. 96).

The moderately unsatisfactory rating for quality of entry takes into account the above factors.

Quality-at-Entry Rating: Moderately Unsatisfactory

b. Quality of supervision:

According to the ICR (paras. 100-101) the Bank team undertook regular supervision missions, which also covered the fiduciary and safeguards aspects of the project, and produced the required reports. The team undertook this work despite difficult and worsening country circumstances. The ICR also identified a number of shortcomings in quality of supervision (paras. 100-102) some of which were beyond the Bank team’s control (para. 103). Shortcomings under the Bank’s control included:

    • Overly optimistic project ratings which failed to reflect the severity of the problems and possibly delayed a more proactive response by the Bank. Lack of realism is especially apparent in the paper underpinning project restructuring, which despite cancelling about half of the grants and with only seven months of project implementation remaining states (para. 17) that: “the PDO remains achievable.”
    • Not revising the PDO and indicators early-on. The issues noted earlier should have been available from the project’s outset and could have been corrected. Given that emergency procedures were used to prepare the project the need to fine-tune it during the course of implementation should have been considered. The ICR states that by the time the project was restructured, there was no point changing indicators. This is contradicted by the fact that team still expected the project to fully disburse and in that case, the weight of the revised project would have been about 50% and this could have materially affected project outcome.

    The team undertook a mid-term review in May 2009, even though issues being encountered were evident by then, so was the need to revise the PDO. The project was only restructured 18 months later, and this only entailed extending the closing date. On balance, the observed deficiencies are reflected in the Moderately Unsatisfactory rating for quality of supervision.

    The Borrower feedback (ICR Annex 10) covered both microfinance projects. It rated overall Bank performance at entry and during supervision, especially due to issues early on, as moderately unsatisfactory. The text is unclear about whether this appreciation applies equally to both projects. The ICR does not discuss this feedback in its assessment of Bank performance. The overall Moderately Unsatisfactory rating for Bank performance reflects the above subratings.

Quality of Supervision Rating: Moderately Unsatisfactory

Overall Bank Performance Rating: Moderately Unsatisfactory

9. Assessment of Borrower Performance:

a. Government Performance:

The Government played a limited role in the preparation and implementation of the project, but was supportive when needed -- for instance in agreeing to the onlending arrangements. At the programmatic level of the, it collaborated closely and effectively with the Bank and this was a factor in the donors’ willingness to increase funding to the sector. Furthermore, it supported the establishment of an independent MISFA even if this meant overcoming possible vested interests in ministries. Finally, the Government signaled the importance of, and commitment to this sector by including it as a key part of its development strategy. These observations are consistent with Satisfactory Government performance.

Government Performance Rating: Satisfactory

b. Implementing Agency Performance:

There were two types of agencies involved in project implementation: MISFA and MFIs. With respect to MISFA, which is the only agency considered in the ICR under this heading, the agency proactively identified the MFI crisis in 2008 and played a key facilitating role in consolidating the MFIs. However, it failed to identify issues that led to the closure of the largest MFI, which exposes the project to the risk on non-repayment of some of the onlent resources.

The most significant implementation failure was thus related to the rapid collapse of BRAC in 2011/2012 due to misreporting of its financial situation. BRAC was the largest MFI and its highly unsatisfactory performance is reflected in an overall unsatisfactory implementing agency rating -- if BRAC is not considered an implementing agency, then the rating reflects the late identification of the issue by MISFA.

Given that MISFA and MFIs played a more important role in implementing the project than Government, overall Borrower rating, given information available now, is thus Moderately Unsatisfactory. It should be noted that the borrower's feedback acknowledges that such a rating would apply for certain periods of the project (ICR p. 47).

Implementing Agency Performance Rating: Moderately Unsatisfactory

Overall Borrower Performance Rating: Moderately Unsatisfactory

10. M&E Design, Implementation, & Utilization:

a. M&E Design:

The M&E design included five PDO indicators and seven intermediate ones. Some of these indicators were broadly in line with the PDO (which as noted before were too ambitious in scope) and somewhat in line with recommendations of the 2006 IEG assessment of lines of credit (LOC), whereby: “A minimum set of key indicators should be reported on and analyzed for every LOC, including a measure of the quality of the loan portfolio, clear definitions, and other key ratios (such as capital adequacy) established by the prudential norms in the country.”

Nevertheless, it is difficult to relate project activities to most of the outcome indicators such as percentage of loans outstanding with financial viability, and number of active clients of MFIs and increase in portfolio outstanding (both of which were well above direct project contributions). The project alone was insufficient to achieve the objectives, which were more appropriate for the programme as a whole, as opposed to activities that could be associated with the project. In addition to examples cited elsewhere, this is reflected in the indicator on amount of loans outstanding: even though the project only financed US$30 million, the target for incremental loans was set at US$110 million.

An M&E system with less ambitious targets and including indicators closely related to objectives and results more closely related to project activities would have been more appropriate for this project -- e.g., outreach linked the project and the quality of the IDA on-lending portfolio. The M&E system should have been designed to compare outcomes to a counterfactual. Perhaps it was designed this way for MFIs registered under Afghan law, but the impact assessments were not implemented. Finally, keeping track of women who receive subloans may have been more relevant than the indicator on women clients.

An important aspect of the M&E mentioned in the PTA (p. 9) concerns impact assessment where adequate provision was made: “the project will also consider impact measurement at the household level, not just at the microfinance service provider level.”

b. M&E Implementation:

MISFA was responsible for data collection, reporting and M&E implementation -- a task it had successfully undertaken in the context of the other operation. It proactively initiated a MFI portfolio audit (ICR para. 47) which identified significant under-reporting by MFIs of repayment arrears. However, while the baseline study of household level impact was undertaken in 2007, its planned follow-up three years later was not done -- largely due to the deterioration of the security situation. Similarly, planned periodic case studies (PTA p. 13, ICR para. 46) were not undertaken.

The greatest shortcoming in implementation concerns the lack of revision of indicators and targets, and ultimately the PDO, even after it became evident these were not appropriate. This is evidenced in the first restructuring paper of December 2010 which states: “As a result [of deteriorating security], the project failed to meet the original targets for portfolio growth and quality and operational self-sufficiency.” Similarly, the cancelation of about half of the grant in December 2011 should have triggered, even belatedly, a revision of targets, but did not; the restructuring paper (para. 17) states that “the PDO remains achievable.”

Another issue relates to whether the project intended to support all/most MFIs or only the four that participated in the project as financial intermediaries. The ICR adopts the latter interpretation, which would have nonetheless warranted being formalized through one of the project restructurings.

a. M&E Utilization:

The inability to undertake the planned impact assessment limited the utilization of this instrument to improve project outreach and effectiveness. The M&E was unable to identify the problems that led to BRAC’s exit and this constitutes a major shortcoming in its utilization -- the M&E framework relied on utilization of internal audits of MFIs undertaken by MISFA. On the other hand, the 2008 audit of MFIs initiated by MISFA (which even if ad hoc was part of project M&E, broadly defined) identified significant portfolio issues in some MFIs that were ultimately addressed through sector’s consolidation.

The overall Modest rating for M&E reflects deficiencies in all its three dimensions, as discussed above.

M&E Quality Rating: Modest

11. Other Issues:

a. Safeguards:

As noted in the ICR (para. 49) the project included an environmental framework to help classify potentially harmful projects. Project design recognized that micro-projects have minimal environmental impact if any. Furthermore, MFIs received training on environmental and social safeguards organized by MISFA (ICR para. 48). There were not any environmental issues identified during project implementation.

Possible child labor and hygiene issues are mentioned in the ICR (para. 50). It appears that these issues were looked into by the safeguards team, and they concluded that there were not any significant social issues present.

b. Fiduciary Compliance:

The ICR (paras. 51-56) includes a detailed discussion of fiduciary compliance, which appears to have been good. The general context was steady improvement in project financial management under reforms implemented by the Government with Bank support. At the project level, adequate records were maintained by MISFA. All MISFA and entity financial statements audits were submitted on time, except for one which was four months late, and were unqualified. However, the fiduciary system failed to identify misreporting by BRAC, which points to a significant shortcoming in the MFIs' audit requirements. In this respect, it appears that the project failed to incorporate the lessons learnt from problems identified through the 2008 audit of MFIs, and thus to tighten audit requirements. The ICR also noted that a case of alleged misuse of funds by MISFA proved to be unsubstantiated.

Procurement under the project was under procedures applicable to financial intermediary lending. Average for subloans was a few hundred dollars and no issues arose during project implementation.

c. Unintended Impacts (positive or negative):

d. Other:

12. Ratings:

IEG Review
Reason for Disagreement/Comments
Moderately Unsatisfactory
Additional information has become available since the ICR was prepared concerning BRAC's exit and its substantial impact on various PDO indicators. The weak results framework and difficulty in attributing limited results achieved to the project contributes to weak outcomes. Furthermore, other aspects of the project are rated as being weaker than the ICR assessment. Finally, the efficiency of the project was modest.  
Risk to Development Outcome:
Bank Performance:
Moderately Satisfactory
Moderately Unsatisfactory
Issues with quality at entry lead to this moderately unsatisfactory rating. The ICR lists shortcomings in project supervision, which taken together with insufficient proactive actions to restructure the project after the MTR result in a Moderately Unsatisfactory rating for the supervision and Bank performance as whole.  
Borrower Performance:
Moderately Satisfactory
Moderately Unsatisfactory
BRAC's performance was highly unsatisfactory and this was not identified earliy enough by MISFA and affects overall Borrower performance. 
Quality of ICR:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate.

13. Lessons:

As noted in the Borrower feedback, the failures of the project provides valuable lessons. The ICR highlights a number of useful and well considered lessons with broader application to fragile states, including: (i) avoiding over-reliance on a single institution and stricter assessment of eligibility, with periodic reassessments; (ii) using caution when rolling-out programs in less secure areas; (iii) providing the Apex institution with sufficient means to perform its oversight functions, including through outsourced independent experts; (iv) being careful about assuming that a model that works in one country will be full portable elsewhere; and (v) MFIs need a strong governance structure.

Four additional complementary lessons are associated with the present review: (a) a different more cautious project design may help identify emerging problems sooner -- for instance by tranching the line of credit to the Apex institution, with each replenishment triggered by a reassessment of the premise upon which the project initially proceeded; (b) attention should be paid to the project logic and relationship between objectives, activities and results sought; the M&E framework and PDO should be candidly reassessed throughout project implementation, especially at mid-term review and formally revised as needed; (c) all participating financial intermediaries should be subject to an annual external audit undertaken on the basis of prevailing international standards; and (d) the use of emergency procedures imply trade-offs in terms of project readiness and documentation, and consideration should be given not to use such procedures for a project that takes almost two years to prepare.

Further lessons may be learnt through an assessment of both microfinance projects overseen by the Bank. Such an exercise is not recommended at this time because of its significant overlap with the recently completed IEG CPE.

14. Assessment Recommended?


15. Comments on Quality of ICR:

The overall ICR quality is adequate as is the evidence presented. The lessons presented are well thought through and seem applicable to future operations in Afghanistan and fragile states.

The analysis is at times weakened by insufficiently candid analysis of performance and optimistic ratings -- notably concerning the Bank and implementing agencies' performance. Also some ratings mentioned are not standard (e.g., the Relevance of Objectives as Highly Satisfactory instead of High and Moderately Unsatisfactory rating for efficiency instead of Modest). Another factor affecting ICR conclusions was the fairly sudden steep deterioration in the BRAC’s situation, which was not fully known at the time the document was prepared.

The ICR suffers from other minor deficiencies. For example, it contains repetitive text that could have been avoided through better editing of the text. Furthermore, in certain instances Borrower feedback is not sufficiently reflected and/or discussed in the analysis. These shortcomings notwithstanding, the narrative provides an adequate basis for understanding key events and assessing the project.

a. Quality of ICR Rating: Satisfactory

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