Document of The World Bank Report No: ICR2870 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-41570 IDA-44160 IDA-45630 IDA-H2110 TF-54222 TF-57273 TF-99549) ON A CREDIT IN THE AMOUNT OF SDR 5.2 MILLION (US$ 7.50 MILLION EQUIVALENT) AND A GRANT IN THE AMOUNT OF SDR 5.2 MILLION (US$ 7.50 MILLION EQUIVALENT) AND AN ADDITIONAL CREDIT IN THE AMOUNT OF SDR 3.7 MILLION (US $ 6.0 MILLION EQUIVALENT) AND AN ADDITIONAL CREDIT IN THE AMOUNT OF SDR 6.8 MILLION (US$ 10.0 MILLION EQUIVALENT) TO THE REPUBLIC OF MOLDOVA FOR THE SECOND RURAL INVESTMENT AND SERVICES PROJECT IN SUPPORT OF THE SECOND PHASE RURAL INVESTMENT SERVICES PROGRAM (ADAPTABLE PROGRAM LENDING) December 20, 2013 Sustainable Development Department Ukraine/Belarus/Moldova Country Unit Europe and Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective December 19, 2013) Currency Unit = Moldovan Leu 1.00 = US$ 0.078 US$ 1.00 = MDL 0.08 RECIPIENT’S FISCAL YEAR January 1 – December 31 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS ACSA Agency for Consultancy and Training in Agriculture AF Additional Financing AIPA Agency for Interventions and Payments in Agriculture APC Adaptable Program Credit CAPMU Consolidated Agricultural Project Management Unit CPS Country Partnership Strategy CLD Credit Line Directorate CNFA Citizen’s Network for Foreign Affairs DA Development Agency (NGO) DFID Department for International Development EIA Environmental Impact Assessment EBRD European Bank for Reconstruction and Development EFSE European Fund for Southeast Europe EGPRSP Economic Growth and Poverty Reduction Strategy Paper ERR Economic Rate of Return EU European Union FAO UN Food and Agriculture Organization FI Financial Intermediary FM Financial Management FY Fiscal Year GDP Gross Domestic Product IA Impact Assessment ICR Implementation Completion and Results Report IDA International Development Association IFAD International Fund for Agricultural Development IFC International Finance Corporation IRR Internal Rate of Return ISR Implementation Status and Results Report JSDF Japan Social Development Fund KfW Kreditanstalt für Wiederaufbau, German Development Bank MAFI Ministry of Agriculture and Food Industry MDL Moldovan Leu M&E Monitoring and Evaluation MOF Ministry of Finance MTR Mid-Term Review NGO Non-governmental Organization NCFM National Commission on Financial Markets NPR Nominal Protection Rate PAD Project Appraisal Document PAR Portfolio at Risk PDO Project Development Objective PFI Participating Financial Institution PNAET National Program on Youth Economic Empowerment RAS Rural Advisory Services RBD Rural Business Development RISP Rural Investment and Services Project SCA Savings and Credit Association SDR Special Drawing Right Sida Swedish International Development Cooperation Agency SMEs Small and Medium-Sized Enterprises SP Service Provider TA Technical Assistance TTL Task Team Leader USAID United States Agency for International Development USD United States Dollar Vice President: Laura Tuck Country Director: Qimiao Fan Sector Manager: Dina Umali-Deininger Project Team Leader: Anatol Gobjila ICR Team Leader: Suzy Yoon-Yildiz ICR Author: Jeren Kabayeva MOLDOVA SECOND RURAL INVESTMENT & SERVICES PROJECT (RISP II) IN SUPPORT OF THE SECOND PHASE RURAL INVESTMENT SERVICES PROGRAM ADAPTABLE PROGRAM LENDING (APL) CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Profile 1. Project Context, Development Objectives and Design ................................................... 1 2. Key Factors Affecting Implementation and Outcomes .................................................. 5 3. Assessment of Outcomes .............................................................................................. 11 4. Assessment of Risk to Development Outcome ............................................................. 20 5. Assessment of Bank and Borrower Performance ......................................................... 21 6. Lessons Learned............................................................................................................ 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners............... 24 Annex 1. Project Costs and Financing .............................................................................. 26 Annex 2. Outputs by Component...................................................................................... 27 Annex 3. Economic and Financial Analysis ..................................................................... 31 Annex 4. Bank Lending and Implementation Support/Supervision Processes................. 38 Annex 5. Beneficiary Survey Results ............................................................................... 40 Annex 6. Stakeholder Workshop Report and Results....................................................... 47 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ......................... 48 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ........................... 60 Annex 9. List of Supporting Documents .......................................................................... 61 Annex 10. Revised Key Indicators: .................................................................................. 62 Annex 11. Core Sector Indicators Results ........................................................................ 65 A. Basic Information Rural Investment & Country: Moldova Project Name: Services Project (APL #2) IDA-41570,IDA- 44160,IDA- Project ID: P090673 L/C/TF Number(s): 45630,IDA-H2110,TF- 54222,TF-57273,TF- 99549 ICR Date: 11/13/2013 ICR Type: Core ICR REPUBLIC OF Lending Instrument: APL Borrower: MOLDOVA Original Total XDR 10.40M Disbursed Amount: XDR 20.80M Commitment: Revised Amount: XDR 20.80M Environmental Category: F Implementing Agencies: Consolidated Agricultural Project Management Unit Cofinanciers and Other External Partners: Swedish International Development Agency (Sida) B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 03/09/2005 Effectiveness: 07/07/2006 07/07/2006 Appraisal: 01/23/2006 Restructuring(s): 10/05/2011 Approval: 03/28/2006 Restructuring 04/10/2012 Mid-term Review: 10/15/2008 09/20/2008 Closing: 06/30/2010 06/30/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Highly Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Highly Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General agriculture, fishing and forestry sector 22 General finance sector 56 General industry and trade sector 15 General public administration sector 5 Other social services 2 Theme Code (as % of total Bank financing) Administrative and civil service reform 23 Legal institutions for a market economy 11 Rural markets 22 Rural non-farm income generation 22 Rural services and infrastructure 22 E. Bank Staff Positions At ICR At Approval Vice President: Laura Tuck Shigeo Katsu Country Director: Qimiao Fan Paul G. Bermingham Sector Manager: Dina Umali-Deininger Benoit Paul Blarel Project Team Leader: Anatol Gobjila Pierre Olivier Colleye ICR Team Leader: Suzy H. Yoon-Yildiz ICR Primary Author: Jeren Kabayeva F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project is the second Phase of a two-phase Rural Investment and Services Program. The Program objective is to provide long-term support to accelerate agricultural recovery and growth so that Moldova's agricultural and rural sectors can play their full role in providing the underpinnings for future income growth and poverty reduction. Under this overarching objective, the project will strive to continue foster the post- privatization growth in the agricultural and rural sectors of Moldova by improving access of farmers and rural entrepreneurs to legal ownership status, know-how, knowledge and financial services, while building the capacity of the private and public institutions to ensure the sustainability of the activities. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Growth in lending to agricultural and rural sectors in the portfolios of financial Indicator 1 : intermediaries Value 2.14 billion Moldovan 2.85 billion 5.9 billion quantitative or 10 % Lei Moldovan Lei Moldovan Lei Qualitative) Date achieved 06/30/2006 06/30/2010 06/30/2013 05/31/2013 Comments (incl. % Target exceeded before project completion. achievement) Indicator 2 : Percentage of beneficiaries whose income has increased Value quantitative or 0% N/A 80% 90.8% Qualitative) Date achieved 09/28/2006 06/30/2013 06/10/2013 Comments (incl. % Target exceeded before project completion. achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Number of beneficiaries of services (including repeat clients) Value (quantitative 300,000 400,000 382,500 or Qualitative) Date achieved 03/28/2006 06/30/2013 12/31/2012 Comments (incl. % 96% of the target has been achieved. achievement) Percentage of revenues of regional and local consultants derived from user fees Indicator 2 : or other sources outside central government's budget Value (quantitative less than 3% 25% 43.5% or Qualitative) Date achieved 03/28/2006 06/30/2013 12/31/2012 Comments (incl. % Target exceeded before project completion. achievement) Indicator 3 : Number of businesses created and registered Value (quantitative 0 350 600 1,038 or Qualitative) Date achieved 03/28/2006 06/30/2010 06/30/2013 12/31/2012 Comments (incl. % Target exceeded before project completion. achievement) Indicator 4 : Number of loans disbursed from the credit facility Value (quantitative 0 350 600 737 or Qualitative) Date achieved 03/28/2006 06/30/2010 06/30/2013 12/31/2012 Comments (incl. % Target exceeded before project completion. achievement) Good portfolio quality in the SCAs as measured by portfolio at risk (PAR) for Indicator 5 : more than 30 days Value (quantitative 5% less than 5% 2.7% or Qualitative) Date achieved 03/28/2006 06/30/2013 12/31/2012 Comments (incl. % Target exceeded before project completion. achievement) Land re-parceling implemented with participation of at least 30% of the Indicator 6 : population Value 40% for pilot 6 (quantitative 0 30% villages, 17% for 40 or Qualitative) villages Date achieved 05/14/2009 07/07/2007 06/30/2010 Comments Target met for pilot, but not for expanded program covering 40 villages. (incl. % achievement) Indicator 7 : The average number of and distance to parcels per household is reduced Value (quantitative 0 30% 31% or Qualitative) Date achieved 03/28/2006 07/07/2008 09/30/2010 Comments (incl. % Target achieved before project completion. achievement) Indicator 8 : Total factor productivity of agriculture has increased Value (quantitative 0 15% Not available or Qualitative) Date achieved 03/28/2006 07/07/2008 06/30/2013 Comments (incl. % Data not available. achievement) Indicator 9 : The number and size of land transactions are increased Value (quantitative 0 30% 10% or Qualitative) Date achieved 03/28/2006 07/07/2008 03/31/2010 Comments (incl. % Target underachieved. 10% for 6 pilot villages; data not collected for 40 villages. achievement) Indicator 10 : Number of rehabilitated hectares irrigated (cumulative) Value (quantitative 0 ha N/A 700 ha 3,000 ha or Qualitative) Date achieved 06/30/2008 06/30/2013 12/31/2012 Comments Target exceeded before project completion. The project provided financing for (incl. % 26 irrigation sub-projects totaling US$2.8 million, and increased rehabilitation of achievement) on-farm irrigated area to 3,000 ha. Indicator 11 : Size of investment in irrigation Value US$1.2 (quantitative US$ 0 N/A US$2.828 million million or Qualitative) Date achieved 06/30/2008 06/30/2013 12/31/2012 Comments (incl. % Target exceeded before project completion. achievement) Indicator 12 : Number of beneficiaries on topics related to irrigation Value (quantitative 0 N/A 35,000 38,000 or Qualitative) Date achieved 06/30/2008 06/30/2013 01/05/2012 Comments Target exceeded before project completion. (incl. % achievement) Adoption rates of drought adaptation agronomics (as % of number of Indicator 13 : beneficiaries) Value (quantitative 0% N/A 30% 30% or Qualitative) Date achieved 06/30/2008 06/30/2013 12/31/2012 Comments (incl. % Target achieved before project completion. achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 10/04/2006 Satisfactory Satisfactory 1.56 2 12/14/2006 Satisfactory Satisfactory 2.42 3 06/24/2007 Satisfactory Satisfactory 5.58 4 12/07/2007 Satisfactory Satisfactory 7.22 5 06/25/2008 Satisfactory Satisfactory 9.62 6 10/31/2008 Satisfactory Satisfactory 13.28 7 06/29/2009 Satisfactory Satisfactory 16.04 8 11/20/2009 Satisfactory Satisfactory 17.29 9 06/20/2010 Satisfactory Satisfactory 20.94 10 05/01/2011 Satisfactory Satisfactory 24.49 11 06/27/2011 Satisfactory Satisfactory 25.07 12 03/11/2012 Satisfactory Satisfactory 27.45 13 06/22/2012 Satisfactory Satisfactory 30.19 14 12/30/2012 Satisfactory Satisfactory 31.97 15 06/25/2013 Satisfactory Satisfactory 31.97 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions 03/17/2009 S S 15.65 I. Disbursement Profile 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. In the early 2000s, the Government of Moldova requested Bank support for a Rural Investment and Services Program (Program) to address a broad range of issues in the country’s agriculture sector and to improve rural livelihoods. The request came in the aftermath of land privatization and restructuring of state-owned and collective farms that resulted in the emergence of a new class of small, independent farms. RISP (FY02-06) successfully supported the first phase of the Program by addressing the most immediate needs of the new class of both private farms and rural businesses—legal ownership, knowledge, know-how, and finance. This entailed inter alia the creation of new institutions, such as savings and credit associations (SCAs) and Agency for Consultancy and Training in Agriculture (ACSA). The rationale for the second phase of the Program was to consolidate these early successes by expanding support to the growing class of private farmer and rural entrepreneur, while continuing to build the sustainability of the newly-created institutions. 2. The Government requested the second phase of the RISP Program in support of its commitment to reviving agriculture through productivity improvements and ensuring rural development by creating income-earning opportunities in rural areas. RISP II would address Government priorities articulated in its Economic Growth and Poverty Reduction Strategy Paper (EGPRSP) and Moldovan Village Program, including: (i) continuing agricultural sector reform; (ii) developing non-agricultural activities in rural areas; and (iii) addressing land fragmentation. 3. By 2005, the country’s economy and political environment had stabilized, creating favorable conditions for preparing RISP II. At the national level, Moldova was enjoying strong remittance-driven economic growth (40 percent real GDP growth between 2000 and 2005) and poverty reduction (fall from 73 to 28.5 percent between 1999 and 2005). Moreover, the Communist Party’s retention of both the Presidency and Parliament in 2005 elections translated into a strong and steady policy dialogue with partners, including the European Commission (EC), resulting in the signing in 2005 of the EU-Moldova Action Plan covering a broad range of political, economic and social areas. However, these positive advances belied the worsening rural poverty, which had increased from 35.5 to 42.5 percent between 2003 and 2005. 4. Rural poverty stemmed from the continued underperformance of agriculture and the underdeveloped non-farm rural economy. Due to the mostly rural population (nearly 60 percent) and the importance of agriculture 1 to the overall economy (30 percent of GDP), improving agriculture would be a prerequisite for reducing rural poverty, and sustaining growth and poverty reduction overall. In the face of the incomplete transition to a market-based economy, particularly to market-based agriculture, land and farm privatization were necessary but insufficient conditions to unleash the potential of Moldova’s agriculture sector. 1 Includes both agricultural production and agro-processing. 1 5. Although agriculture’s steep decline had been reversed by 2000, sector performance continued to be bedeviled by low productivity, prices, and wages, resulting in stagnant sector growth. Among the factors that affected performance were scarce investments, poor access to finance, deteriorated infrastructure, vulnerability to natural disasters, and significantly, administrative interventions distorting market incentives away from producing to Moldova’s comparative advantage in higher-value products. By 2005, 300,000 small, private farmers, while occupying only half of agricultural land, were producing 75 percent of total agricultural output and generating 76 percent of agricultural employment. However, Government continued to direct subsidized inputs and maintain export restrictions to preserve large, corporate farms producing lower-value crops for which Moldova had no comparative advantage. All in all, this translated into farmers paying significantly higher prices for tradable inputs while receiving significantly lower prices compared to the world market, even for crops of greatest comparative advantage. 6. Moldova had made impressive achievements in land reform with the introduction of the National Land Program in 1998-99, but the disappointingly slight growth following reform led to considerations of “administrative” agricultural land consolidation by the Government. This would have effectively halted the progress towards more efficient production and the return to growth observed in the sector. The Bank advocated for the Government to strengthen land markets as the main tool to allow farms to adjust towards greater productivity and efficiency, and consider market-based alternatives to administrative land consolidation such as land re-parceling. 1.2 Original Project Development Objective (PDO) and Key Indicators (as approved) 7. The Program’s development objective was to provide long-term support to accelerate agricultural recovery and growth so that Moldova's agricultural and rural sectors could fulfill their potential in providing the underpinnings for future income growth and poverty reduction. Under this overarching objective, the project sought to foster post-privatization growth in the agricultural and rural sectors of Moldova by improving access of farmers and rural entrepreneurs to legal ownership status, know-how, knowledge and financial services, while building the capacity of private and public institutions to ensure the sustainability of the activities. 8. While RISP (FY02-06) built the foundation for supporting the newly-emerging private farmer and rural entrepreneur, RISP II (FY06-13) would further enhance service provider capacity, diversify rural financial and advisory services, increase investment support, and build the sustainability of the new institutions. 9. The key performance indicator “Relative increase in productivity in project beneficiaries” was to be measured through: • Growth in lending to agricultural and rural sectors in the portfolios of financial intermediaries; • Percentage of beneficiaries whose income has increased. 10. The intermediate outcome indicators (as presented in the Project Appraisal Document were as follows: Rural Advisory Services (RAS) • A small rural development unit established and staffed by Ministry of Agriculture and Food Industry (MAFI), which receives training and Technical Assistance (TA), to take over general technical oversight of the component; 2 • Number of beneficiaries of services (including repeat clients). Rural Business Development (RBD) • Increased entrepreneurial activity in the project areas and business survival rates; Rural Finance • Loans/leases provided by the Participating Financial Institutions (PFIs) from the credit line; • The SCA supervisor restructured and fully functioning; • Sustainability of the SCA system improved; • Law promoting enabling environment for SCA development passed. Land Re-parceling Pilots: • Increased agricultural productivity in six pilot villages compared to the baseline and control cases; • More rapid development of land markets in six pilot villages compared to the baseline and control cases. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 11. In May 2008, as a result of Additional Financing (AF), new intermediate output indicators were added to track the progress under a new Drought Adaptation Component (see paragraph 22, Table 1, Annex 10). On May 2009, as a result of AF to scale up Rural Advisory Services, Rural Business Development, and Rural Finance components, targets were revised for some indicators (see Table 2, Annex 10). And in October 2011, the project was restructured to revise indicators related to dropping the Drought Adaptation Component, Sub-Component 1: Irrigation Finance Services and reallocating financing to the Rural Finance component. 1.4 Main Beneficiaries 12. Primary beneficiaries comprised private farmers and rural entrepreneurs of Moldova that were expected to benefit from rural and business advisory services, training programs, and the voluntary re-parceling of land plots. The above efforts were meant to improve beneficiaries’ access to financing. Secondary beneficiaries included: PFIs, through TA and long-term lending to increase the scope of their lending in rural areas; a supervisory agency for the SCA network through strengthening technical capacity; the national network of RAS through training and technical support; MAFI, the Cadastre Agency, and local administrations through receiving international best practice on land re-parceling. 1.5 Original Components (as approved) 13. The approved project components were: 14. Component 1: Rural Advisory Services (US$4.94m). The component aimed to provide information, knowledge and know-how to newly established private farmers and rural population. The purpose of the component was to: (i) provide support and further strengthen and consolidate the network of private rural advisory service providers established under Phase I, enhance its focus, efficiency, and sustainability; (ii) help the MAFI develop a vision for the future development of the public good aspect of RAS in Moldova and translate it into medium-term 3 policy and initiate the implementation of the emerging policy over the life of the project; and (iii) build the capacity of the MAFI to gradually assume full responsibility for overall oversight, coordination and outsourcing of RAS activities implemented by Service Providers (SPs), ACSA and other entities or donor-funded projects. 15. Component 2: Rural Business Development Component (US$0.85m). The objective of the component sought to strengthen the emerging rural private sector. It was envisaged that component would continue to finance technical assistance to rural entrepreneurs, and provide operational support for local development agencies (DAs), with the aim to create legally registered, self and co-owned sustainable rural businesses, which would potentially become clients of financial institutions. 16. Component 3: Rural Finance (US$17.77m). The component aimed to: (i) expand the outreach of the formal financial sector to rural areas, to ensure broader access to investment financing for farmers and rural entrepreneurs. It was envisaged to promote rural financial outreach through traditional loans and by expanding the use of leasing, which was a non- traditional instrument in Moldova’s financial sector; and (b) to restructure the SCAs industry, to strengthen the delivery of financial services to a large segment of the population which did not have access to traditional banking services, ensure prudential growth of the industry through proper management and supervision and structure the industry so that it could become sustainable in the long term. 17. Component 4: Land Re-parceling Pilots (US$0.75m). The goal of this component was to respond to the concerns of Government and others about the fragmentation of agricultural land, focusing on small peasant farmers (as opposed to larger corporate farms) as its primary target group. It will do this by facilitating the efficient functioning of land markets in pilot locations through the implementation of village land re-parceling projects based on international best practice. The specific objectives of these pilots were to: (i) test the demand for and feasibility of land re-parceling with small landowners as the primary target group; (ii) use the pilot experience as the basis for designing a potential national-level approach, including techniques, resource requirements and legislative framework; and (iii) assess the impact of re-parceling at the local level, including on land markets, agricultural production, and equity. 18. Component 5: Project Management (US$0.77m). This component sought to provide technical and financial support for project management. 1.6 Revised Components 19. In May 2008, AF in the amount of SDR3.7 million (US$6.0 million equivalent) was approved to include a new Drought Adaptation Component consisting of: (i) Irrigation Finance Services; and (ii) Drought Adaptation Advisory Services. These resources were provided for targeted investments for the rehabilitation of small-scale on-farm irrigation systems, and for the dissemination of knowledge to farmers on techniques for adaptation to drought. Additionally, a small allocation was made for additional project management costs related to the management of the Drought Adaptation Component. The objective of the component was to ensure that farmers have the resources and knowledge necessary to adapt to and minimize losses from severe weather phenomena such as drought, in order to ensure the long-term viability of the country’s agricultural sector. 1.7 Other significant changes 4 20. In response to the 2008 global economic downturn and to dampen its potential negative impact on Moldova’s rural economy, AF of SDR 6.8 million (US$10 million equivalent) was approved to top up the credit line, which was nearly fully exhausted, and extend agricultural advisory services as means to lessen the contraction of rural commercial lending. To allow AF implementation, the closing date was extended from June 30, 2010 to June 30, 2012. 21. In October 2011, the project was restructured to drop the Drought Adaptation Component and reallocate the associated financing as favorable precipitation levels in 2008-11 resulted in low demand for investments in on-farm irrigation equipment. IDA financing of US$3.9 million was reallocated to the Rural Finance Component. In April 2012, a final restructuring was undertaken to extend the closing date to June 30, 2013 to allow full utilization of financing under the Rural Finance Component as well as grant resources provided by the Swedish International Development Cooperation Agency (Sida). 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 22. Significant analytical work by the World Bank and IMF underpinned the design of the project. This included the Country Economic Memorandum, Poverty Reduction Strategy Paper, Financial Sector Assessment, and an extensive series of Agricultural Policy Notes covering inter alia public expenditures and land policy. This analytical work was also part of the preparation of the cross-sectoral Poverty Reduction Strategy Credit, which the team effectively leveraged for RISP II. Thus RISP II benefitted from effective cross-sectoral cooperation, as well as the program-based approach being applied to Moldova’s portfolio, which helped the team to place the project activities in the context of the country’s overall development, enhance the quality of the project design and maximize scarce budgetary resources. 23. Inspired by the success of RISP I, RISP II sought to expand the outreach of rural financial advisory services and commercial lending, and most importantly, to ensure the sustainability of the institutions and service providers. RISP II envisaged transfer of responsibilities to and capacity building of the Ministries in charge of these activities. The Program design confirmed to be highly relevant at the entry of RISP II due to a strong demand for advisory services and long-term financing in the rural sector. The World Bank project turned out to be the only solution available for rural small and medium-sized enterprises (SMEs) at a time that was able to provide bridge financing for the sector to survive until other financial instruments became available and proved to become sustainable. Lastly, the project activities were also complimented by related measures which were of primary concern to the Government. These included (i) strengthening the country’s SCA network by improving its regulatory environment and building supervision capacity as the network continued to experience considerable growth; and (ii) launching a series of land re-parceling pilots whose findings were expected to help the Government in the conceptualization of a strategy or policies on land. 24. The fourth component on land re-parceling was newly introduced based on the Agriculture Notes produced to underpin the Bank’s program in Moldova. While the Bank agreed with the Government that some agricultural land may have been excessively fragmented, it argued for market-based approaches to promote optimal farm size rather than the “administrative” land consolidation contemplated by the Government. The Bank undertook a study of land re-parceling experience internationally, including in other former Soviet republics 5 such as Lithuania, as the basis for designing a land re-parceling pilot. The success of the pilot led to its expansion during project implementation. 25. RISP II was designed to include regular monitoring and evaluation surveys and beneficiary impact assessments to measure outcomes under each component. This focus on results was facilitated by a number of factors, including a strong focus on results by Sida and Bank country management at the time of preparation, and by the strong capacity built under RISP I to implement these activities effectively by the implementing agencies and CAPMU. These assessments, which provided quantitative and qualitative information (such as farmer views on benefits and value-added of various project activities) proved to be instrumental not only for effective and efficient implementation of project activities, but also their efficacy. The information was invaluable for enabling the Bank and implementing agency to take corrective actions to issues/delays that hindered progress as well as to make strategic choices in planning. 26. RISP II incorporated several key lessons in its design from RISP I activities. These were: (i) the need to limit policy conditionality or triggers in investment lending operations; (ii) credit lines, which are likely to make a large number of small sub-loans, need considerable delegation of fiduciary responsibilities; (iii) if the credit line is to contain a grant portion, the project should make sure that there is a general consensus about the constraint that the grant is about to address so that the project can objectively measure its effectiveness; (iv) the lack of consulting services to help small entrepreneurs prepare and implement business plans and the lack of long-term credit on the market were among major constraints to rural finance in the country; (v) Development Agencies should be paid on the principle of a success fee, hence structuring the component in a way that led to payments based on final outputs, and not lump sum contracts; and (vi) the long-term sustainability could be ensured only through transferring responsibilities to the Government Ministries (Ministry of Finance (MOF) and MAFI) as Implementing Agencies to strengthen their ownership, streamline into the Government’s program and generate synergies with other related activities of the Government. Finally, there was a need for ACSA to reduce its reliance on the project funding by applying a sustainable business model through building partnership with the Government, as well as other donors and development agencies operating in the country. 27. Overall, project risks were realistically assessed and mitigated for. Several risks were considered substantial at entry: (i) Government capacity and resources to take charge of project implementation, (ii) lack of regulatory environment with respect to land, agricultural prices, trade policies and expenditures, and (iii) concern over availability of Government’s funding to cover costs of the RAS Component after the end of the project. These risks did not materialize, largely due to the team’s persistent efforts in persuading the Government to take appropriate and timely risk mitigation measures over the project life. 28. Collaboration with Sida, a key partner in Moldova, in project design/preparation was most effective. Sida provided grant funds of US$8 million to co-finance technical assistance, in particular: (i) extension services under the Rural Advisory Service component; (ii) land re- parceling pilot activities; (iii) strengthening MAFI to manage, monitor and evaluate project activities; (iv) the Rural Business Development component; (v) strengthening the SCA industry and its supervision; and (vi) training participating financial intermediaries on environmental safeguards and new financial products such as leasing. In addition, Sida’s focus on results and gender influenced project design positively. 6 2.2 Implementation 29. Overall, the transition from RISP I (closed on December 31, 2005) to RISP II (effective in July 2006) was smooth. However, a few bottlenecks arose at project start-up as described below. 30. Although quickly resolved, the ACSA Network under the RAS Component faced a few issues in the beginning of the project due to a brief gap in financing of the Network during the transition between RISP I and RISP II. The Network was partially able to cover the gap from an on-going 2-month contract with United States Agency for International Development (USAID)/Citizen’s Network for Foreign Affairs (CNFA). However, this gap resulted in a temporary turnover of local and regional consultants in the service providers’ network, with subsequent increased costs for initial and basic training of new recruits. 31. The launch of work on the SCA industry under the Rural Finance Component was delayed for a year pending approval of the new SCA Law. The Law eventually passed Parliament in July 2007 and the National Commission on Financial Markets was assigned responsibility providing guidance and enabling the industry’s development. 32. The launch of the Land Re-Parceling Pilots was delayed for a year and formally started in October 2007 mainly due to a lack of commitment and cooperation on the part of the MAFI in ensuring appropriate arrangements for the component implementation. Moreover, contrary to initially agreed guidelines on the selection of pilot locations, the Communist Administration continued to advocate the creation of large farms. Significant efforts by the Government and Bank were needed to overcome these issues. 33. The project was implemented against a backdrop of natural disaster, global financial crisis, and protracted political instability, which presented both challenges and opportunities. The project weathered these challenges well and implemented according to original plans despite these shocks. Among factors leading to successful implementation were the comprehensiveness of the project design, commitment and flexibility. Both the Government and Bank swiftly responded to changing circumstances and emerging needs through such instruments as AFs and appropriate reallocation of funds for activities within the project’s objectives and scope, as described below. 34. The 2007 drought had a catastrophic effect on agriculture with disastrous losses of up 75 percent for major crops such as wheat, maize and sunflower. A new Drought Adaptation Component was added in response to this unexpected natural calamity. It focused on providing targeted investments for small-scale on-farm irrigation rehabilitation and the provision of technical assistance to farmers. Although a subsequent drought in 2012 cut agricultural production by 22 percent, project funds were already fully committed and almost fully disbursed, thus a new Emergency Agriculture Support Project was approved by the Bank in March 2013 to support farmers affected by this natural disaster. 35. Immediately following the drought of 2007, particularly in 2008, Moldova experienced considerable rainfall that pushed irrigation down the list of priority investments for farmers. Consequently, the Irrigation Finance Services sub-component was not disbursing as originally planned. The Government and the Bank team took a well-timed decision to restructure this component to make financing available for a broader range of investments by reallocating funds to the Rural Finance Component. 7 36. The 2008 global financial crisis negatively affected the PFIs’ balance sheets. With long-term financing for investments quickly drying up around the world, this translated into reduced credit resources for Moldovan commercial banks and their rural lending. While all other project components were being implemented smoothly, the Rural Finance Component was hit hard as the share of non-performing loans tripled between end-2008 and end-2009, reaching 16.3 percent. In addition, the portfolio of SCAs deteriorated due to the rapid fall of remittances into the country, challenging NCFM in its new role to manage the emerging crisis in the SCA industry. There was particular concern that the project’s performance indicator (target of Portfolio at Risk – 30 days:<5%) would not be met. Given that the project’s credit line was already nearly fully disbursed due to quick implementation, it would not be able to provide the PFIs much needed liquidity to respond to the ensuing crisis. The Bank thus quickly responded with swift preparation of AF to scale up the Rural Finance component. This prompt response by the Bank was significant as neither Government nor any other donor were in a position to step in to provide the much needed additional resources. 37. Despite the political turbulence in 2009-12, RISP II continued to implement well, and facilitated policy dialogue with Government. The failed attempts to elect a President in 2009 and the paralyzing threat of early elections until March 2012 slowed the pace of reforms and led to political uncertainty. Government counterparts at the national level changed three times over the project period, and the Bank faced recurrent concerns over hand-over of the project activities to the Government, as well as building institutional sustainability. Despite these hurdles, the various governments remained committed to the project throughout and continued to facilitate successful implementation. In fact, RISP II helped maintain the Bank’s dialogue with every new government on the longer-term reform agenda for agriculture and rural development. 38. Following a Mid-Term Review in 2008, an agreement was reached between the Government and Bank to scale-up activities under the Land Re-parceling Component. Due to good progress achieved on land re-parceling pilot activities in six villages, the Government requested to scale-up the pilot to an additional 40 villages and it was agreed to reallocate Sida funds from the Rural Finance Component to this activity. 39. Japan Social Development Fund (JSDF) Grant: Although not originally included in RISP II, the project ultimately included a JSDF Grant for the Youth Socio-Economic Empowerment Program. The JSDF Grant had been orphaned when the IDA operation to which it was originally attached was dropped mid-stream during preparation. As rules required JSDF grants to be implemented alongside a regular Bank operation, when the IDA operation was dropped, the JSDF was left without means for implementation. Thanks to strong implementation and absorptive capacity of CAPMU and the implementing agencies, and good support by the Bank team, RISP II was able to seamlessly integrate this additional grant to the project and maximize their benefits to RISP II beneficiaries. Ultimately, the grant complemented credit line resources with a 50 percent matching grant for young entrepreneurs, having an unintended but positive impact on an important vulnerable group—Moldovan youth (see paragraph 86). 40. Agency for Interventions and Payments in Agriculture (AIPA): At the request of MAFI, the project supported institutional building measures for AIPA; an activity was not included in the project’s initial design. AIPA was established in February 2010 at the EU Commission recommendation and its main goal was to manage the Agricultural Subsidies Fund. It was financed in the amount of MDL 500 million per year through the state budget resources and covered around 9,800 investment projects of various agricultural and food processing business entities. The amount absorbed to support AIPA was US$320,000 and was directed for staff training and study tours, equipment, furniture, software, field inspection cars, and other 8 necessary equipment. In addition to the institutional support to AIPA, the project provided technical assistance in drafting two important laws: (i) one on Producer Groups; and (ii) one on Principles of Subsidizing in Agriculture. 41. Strong Government ownership and commitment by each implementing agency were vital to project success. Numerous government ministries and non-government agencies were involved in project implementation and their lines of responsibility were clearly drawn and coordinated well. MAFI was in charge of managing activities under the RAS and Land Re- Parceling components. ACSA was to deliver extension services by adapting their training programs and activities to the farmers’ evolving demands. Four DAs--i.e. Alliance for Cooperation in Agriculture, Center for Consultancy in Business, Center for Rural Development, and Mobile Expert Group--were involved in the implementation of the RBD Component through provision of support in formation of viable agribusinesses including business cooperatives, processing and marketing entities, as well as non-farm rural businesses. Activities under the Rural Finance Component were coordinated by the Ministry of Finance through the Credit Line Directorate, and activities under the SCA sub-component were coordinated by the National Commission on Financial Markets. This joint effort and dedicated commitment not only allowed for smooth implementation of the mentioned components, but also ensured institutional sustainability of project activities after closing of the project. 42. CAPMU, the Project Management Unit for RISP I and a fiduciary agent for RISP II, ensured a seamless transition between the two phases and was a key cornerstone for successful project implementation. CAPMU had a well-established track record of implementation support to the Bank-funded projects. In line with its experience, there were no issues with its performance throughout the project life. In addition to procurement and financial management, CAPMU was responsible for coordinating M&E at the project level and two CAPMU specialists were assigned to coordinate activities under the RAS and RBD Components. An Environmental Specialist was recruited to oversee environmental aspects of the project. 43. The successful implementation of RISP II is reflected by the consistent Satisfactory rating assigned to the project performance in Implementation Status and Results reports (ISRs). Task Team Leadership changed once over the project period, but the first Task Team Leader (TTL) remained as part of the project team until the Closing Date. This ensured continuity and institutional memory on the project by a key team member. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 44. The project’s M&E system was well-designed and for the most part, effectively monitored by the Bank team during implementation. The results framework (RF) was comprehensive in its coverage of all project activities, however, there was a minor shortcoming as two intermediate outcome indicators under the Land Re-parceling Component were not monitored, and as a result, end-of-project values were not available at project closing (see datasheet). The RF was in line with the Bank’s corporate requirements by incorporating core indicators, which were not formally integrated in the financing agreements, but were monitored during the project’s life (see Annex 11). There was no need for a baseline survey given the availability of baseline data from RISP I. The Bank team regularly reviewed progress on results and reported them in each mission aide memoire. However, the M&E features that stood out were the impact assessments, conducted mid-term and at the end of the project. They offered key findings on impacts and enhanced the effectiveness of project management and decision-making during implementation. The Bank team also closely reviewed the methodologies applied for 9 surveys and impact assessments, providing recommendations for improvement in mission aide memoires. 45. One of the strongest aspects of M&E was the use of results, interim surveys and impact assessments, prepared by each project agency individually for each component, to make adjustments during implementation. Each implementing agency was in charge of data collection and monitoring of results and provided quarterly progress reports to CAPMU on their respective components. This information was not only utilized to track progress but to identify potential problems/issues as well as success stories. The latter would be used to determine factors of success that could be replicated. The M&E system thus served as an essential tool to proactively manage the project, for example, to monitor the credit line portfolio, revise training materials to better meet beneficiary needs, and track progress in the land re-parceling pilots. 46. Another factor that contributed to building strong and sustainable M&E was the provision of TA to the implementing agencies and local M&E companies in applying modern tools in the “science” of M&E. The TA enhanced capacity to utilize modern statistical and program evaluation tools. For example, the Agency for Consultancy and Training in Agriculture utilized ACCESS database software to monitor the Rural Advisory Services Component. All in all, these efforts resulted in sustained M&E capacity in each implementing agency beyond the life of the project. 47. Progress reports provided by project implementing agencies were reviewed and consolidated by CAPMU in its annual progress reports. Given the complexity of the project’s M&E, CAPMU would have benefited from having a full-time M&E Specialist. The M&E work was carried out by a Coordinator of the Rural Business Development Component, and these additional responsibilities put some pressure on the Coordinator’s regular work routine. 2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) 48. Environmental Safeguards: RISP II was assigned an environmental category Financial Intermediary (FI). To ensure that the project met the Bank’s environmental safeguard policies (OP4.01), an Environmental Impact Assessment (EIA) was updated for RISP II and disclosed in January 2006, prior to project appraisal. The Bank Environmental Specialist regularly participated in implementation support missions and no major issues were identified. 49. Environmental guidelines for the credit line were developed and included as an integral part of the Rural Investment Guidelines, monitoring sub-project compliance to which was the responsibility of PFIs. To ensure sub-project compliance with national environmental regulations, CAPMU hired an environmental specialist to provide guidance on sub-project screening, develop terms of reference for sub-project review and assessment and review of the environmental management and monitoring plans submitted during sub-project evaluation. A series of training sessions was delivered for PFIs, DAs, the Credit Line Directorate and CAPMU. 50. Social Safeguards: No social safeguards were triggered, but the Bank team included a Social Development Specialist who monitored the project’s social issues (e.g., youth and gender). 51. Financial Management (FM): Financial management performance remained satisfactory throughout project implementation. CAPMU had a well-established track record of implementing World Bank financed projects. FM staff of CAPMU had also received training. 10 CAPMU maintained accurate accounting records of the project, and quarterly IFRs and annual audit reports were timely submitted and acceptable to the Bank. 52. Procurement: Procurement performance was consistently assessed as satisfactory throughout the life of the project. CAPMU’s procurement specialist was highly experienced, having worked for CAPMU for 17 years, and was supported by a procurement assistant recruited for RISP II. Procurement was carried out in compliance with Bank guidelines, in a diligent, professional and timely manner. Procurement filing was also good with documentation related to each procurement procedure duly filed and readily available. No major issues were identified by the Bank in any of the post review missions. 2.5 Post-completion Operation/Next Phase 53. The Bank’s policy dialogue, conducted in parallel with its support of this project, significantly contributed to increase attention of the Government to the agricultural sector. Although no follow-up project has been envisaged for the RISP Program, the Bank continues to support the financing of the country’s agriculture and rural development through two other projects - Agricultural Competitiveness Project and Emergency Agriculture Support Project. The challenges in the sector still exist, and these two new operations would be critical to support this sector. Besides, the current CPS includes a useful framework to discuss with the Government further modalities of Bank support. 54. A number of arrangements were put in place to ensure sustainability of project activities. For instance, ACSA will continue to provide extension services across the country through the Government budget financing for at least next five years. In addition, continuous effective management of the Agricultural Marketing Information System by ACSA will allow provision of market operational information about pricing, potential markets, inputs and marketing of agricultural products, and other useful information necessary for consultants in advisory and beneficiaries from the agri-food sector. The project Credit Line revolving funds will continue to be managed by the CLD established at the MOF. Finally, implementation of pilot re- parceling projects served as a catalyst for the UN Food and Agriculture Organization (FAO) to launch a technical assistance program to help the Government to design a land strategy and further improve the Land Code. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 55. The objective of the RISP Program is still highly relevant to the country’s needs and priorities. Structural reforms over the recent years contributed to the creation of a large private agricultural sector. However, the majority of rural private enterprises had not managed to adjust to a new market environment. In this context, there was a need for sustained and determined effort to create improved conditions to develop business skills, and bring in investments for new businesses in rural areas. In addition, the project proved to be critical in helping the country to weather unexpected external shocks and natural disasters. The PDO was well aligned with both the Government’s priorities and the Bank’s Country Partnership Strategy FY14-17. The project addressed two of three pillars of the CPS – Increased Competitiveness and Promoting a Green, Clean and Resilient Moldova. 11 56. The design of the project was well conceived in terms of logical connections among its components and their expected contribution to achievement of the project’s objective. Each component was designed to address specific problems and the success of each component was dependent on success of another component. While the first three components (also included in the design of RISP I) were closely linked to each other, a newly introduced Land Re-Parceling Component, through facilitating the development of land markets, was expected to increase the attractiveness and creditworthiness of farmers in their attempt to secure credit. 3.2 Achievement of Project Development Objectives 57. The achievement of the PDO is assessed as Satisfactory. The project fully met its PDO indicators and exceeded their target values: (i) relative increase in productivity of project beneficiaries, measured through the growth in lending to agricultural and rural sectors, increased by 175 percent against the initial target of 30 percent, and (ii) 90.8 percent of beneficiaries had increases in income against the initial target of 80 percent. PDO Indicator Baseline Actual End Target Comments - Growth in lending MDL5.9 billion MDL2.85 billion to agricultural and MDL2.14 billion (+175%) (+30%) rural sectors Based on June 2013 -% of beneficiaries aide memoire. whose income has 0% 90.8% 80% increased 58. Directly attributing income increases to the RISP II credit line was complicated by other donors’ credit lines 2 which also benefitted RISP II beneficiaries by providing refinancing for their original RISP II loans. However, the final impact assessment was able to disaggregate the benefits from RISP II and assess its impact apart from the other financing sources. 59. The PDO was achieved through the outcomes described below: Component 1: Rural Advisory Services 60. Outcome #1: A sustainable and effective rural advisory services (RAS) network is created, providing much needed extension services covering over 40 percent of the country. Through the project, MAFI implemented a well formulated extension policy and the project helped to ensure the continuity and sustainability of these extension services. Two month before project closure, ACSA was competitively selected through a public open tender process to provide extension services and a five-year contract was signed between the Government and ACSA on April 30, 2013. Further, during 2006-12, the agency managed to secure external funding in the share of 43.5 percent (excluding RISP II) against a target of 25 percent. Both local government and donor organizations had come to rely on ACSA as it had proven capacity to implement and monitor projects in rural areas. ACSA is likely to be sustained given: (i) its coverage of a vast geographical area with 41 percent of the country’s population; (ii) balanced coverage by types of beneficiaries; (iii) provision of professional training to its advisors at all 2 Credit lines were also provided by International Fund for Agricultural Development (IFAD), Kreditanstalt für Wiederaufbau (KfW,) European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), and European Fund for Southeast Europe (EFSE). 12 levels (national, regional and local); and (iv) good relations with local authorities, specialized state organizations and NGOs, as well strong links with the national sector research institutions. 61. Outcome#2: Competitive and co-financed Rural Advisory Services market exists, capable of addressing the diverse needs of the rural poor. The network of advisory consultants managed by ACSA include about 200,000 advisory services per year to 382,000 beneficiaries, i.e. agricultural producers and rural entrepreneurs, helping them on a wide range of issues to enhance their productivity and competitiveness, including technology (53 percent), business/legal (29 percent) and marketing (18 percent). The number of beneficiaries reached was slightly below (96 percent) the target of 400,000 beneficiaries. ACSA’s activity planning was based on the participatory approach that implied feedback to information requirements and settlement of problems faced by farmers. In addition, ACSA contributed to the development and publication of brochures and manuals of more than 180 titles with a total circulation of 800,000 copies. All information in the materials was based on farmers’ needs identified through ACSA annual studies. Finally, implementation and effective management of the ACSA’s Agricultural Marketing Information System allowed provision market information in high demand, such as pricing, potential markets, inputs and marketing of agricultural products, and other useful data. 62. Outcome#3: High client satisfaction with the new technologies and farm management recommendations provided by RAS (% of positive responses and ratings). The final impact assessment interviewed beneficiaries and non-beneficiaries of RAS representing over 700 entrepreneurs and family households in rural areas, and the following positive feedback on RAS services was provided by interviewed beneficiaries: • 97 percent stated that the RAS providers were important sources of information and consultations for their businesses; • 96.6 percent appreciated the quality of consulting services; • 72.8 percent increased family revenues, 68.2 percent increased crop yields/livestock and 55.5 increased volume of agricultural output; • 32.5 percent invested in and improved crop cultivation technologies and livestock; • 23.2 percent increased their land productivity through consolidating or leasing areas and 20.2 percent invested and acquired new agricultural machinery and equipment. Component 2: Rural Business Development 63. Outcome#4: Improved entrepreneurship in the project areas measured by qualitative and quantitative assessments of entrepreneurial activity and increased business survival rates. The project supported business development agencies that contributed to the creation and operation of rural businesses. These development agencies provided hands-on assistance to rural entrepreneurs in the formulation of business opportunities, preparation of business plans, and facilitation of access to finance from financial institutions and implementation support. The component resulted in the creation of 1,038 (against of 600 targeted) businesses and 2,645 jobs in a wide range of sectors, including agriculture and livestock (53%), trade (8.6%), food and beverage production (6%), transport (5.7%), and various manufacturing (10.7%). More than 98% of businesses managed to obtain financing from financial institutions in the amount of US$32 million, all of them for the first time. Thus, the average investment made by an operational business was about US$30,980. At the end of the implementation of this component (June 2012), 100% of these businesses had met their loan payment obligations. This low cost approach had a tremendous impact on financing and sustainability of these institutions and for each dollar invested about US$2.5 million of taxes was generated in the first two years of business operations. Early estimates of businesses exceeded US$55 million in their first year of 13 operation alone. Notably 1,038 rural businesses have been created with a first-year survival rate of more than 95 percent. 64. Outcome#5: Increased rural incomes of direct project beneficiaries and their employees, measured by incremental increases in rural household incomes compared to their pre-project income. The RBD component was instrumental in the formal establishment and registration of 1,038 new businesses in rural areas, with 2,645 formal jobs. As mentioned earlier, somewhat more than half of these (53%) businesses were in agriculture and livestock, with the remainder spread over a wide range of sectors, including food and beverage production, trade, transport, small-scale manufacturing and various services. More than 98% of them succeeded in obtaining financing from financial institutions (including the RISP II Credit Line), all of them being first-time borrowers, and when this component closed in June 2012 all of these businesses were current with their loan servicing obligations. The final IA for the Rural Finance component measured this indicator in conjunction with overall increase in income under the project, which reported that 90% of beneficiaries increased their income over the project life. Component 3: Rural Finance 65. Outcome#6: Broadened access to financial services in rural areas established through rural and agricultural portfolio growth in commercial banks of at least 10 percent per year during the project period. The project worked with a group of seven eligible commercial banks (instead of five banks envisaged in the PAD) to extend their outreach into rural and agricultural lending. These banks had met a strict due diligence screening process, and undertook all client selection and risk. The credit line was professionally managed by the Credit Line Directorate of the Ministry of Finance and extended 758 sub-loans—470 from RISP II project financing and an additional 288 from the RISP II revolving fund and JSDF Grant. These loans amounted to US$43.12 million of financing to rural entrepreneurs. Combined with contributions leveraged from beneficiaries (largely remittance income) and participating financial institutions, US$100 million of investments were directly generated or leveraged by the project. Coverage was national and loan size averaged US$46,000. The followings sectors that received these investments included: Services (30%), Agriculture (28%), Trade (16%), Food Processing (10%) and Manufacturing (10%). 39.3% of credit line resources were disbursed to first-time borrowers against a target of 30%. As of May 2013, the portfolio at risk (60 days) was around 6%. Commercial banks considered the project as an important catalyst for the banking sector to move into agricultural/rural lending, as indicated by the increase in total commercial lending to agriculture and food processing mentioned above. Although the credit line dedicated to irrigation did not disburse during its first two years of implementation due to heavy precipitation, and disbursement for irrigation picked up during the last year of implementation and eventually reached its initial objective of 3,000 rehabilitated hectares of irrigated land. Growth in lending thus far outpaced original expectations of 10 percent per year, reaching 175 percent overall and resulting in an overall lending volume of MDL 5.9 billion against a baseline of MDL 2.4 billion. 66. Outcome#7: Improved environment for provision of rural financial services. Based on the final impact assessment (76 sample SMEs out of the targeted 470 SMEs), all entrepreneurs stated that their serving banks were fully transparent in disclosing correctly all loan costs and loan process procedures, which is a sign that PFIs offered re-financed loans in a responsible manner. The client satisfaction with PFIs was also high indicating a positive loan impact on business performance. The only complaint expressed by the most interviewed entrepreneurs was strict loan requirements, i.e. almost 200% of collateral value over the loan amount, applied by PFIs. In general, PFIs applied a “good practice” SME lending appraisal technology. The main factors that 14 positively impacted project beneficiaries were the maturity of loans and the beneficiary’s repayment schedule which reduced default risks by rural SMEs. 67. Low demand for leasing: Although the project stressed the value of agricultural leasing as an important financing instrument to overcome the issue of insufficient collateral and specifically envisaged TA for development of leasing products, PFIs did not consider offering leasing products to their clients and, thus, did not request any TA under the project. The project team undertook a few attempts to promote leasing activities, but the review of the leasing institutions in the country showed that (i) for some, there was little interest other than leasing cars; (ii) for others, their balance sheet was not sufficiently solid to meet eligibility criteria. In addition, the team explored the possibility of some institutions behind the leasing companies (such as banks) to provide some type of guarantee to compensate for weak capital, but it was not possible at the time. However, given the underdeveloped leasing market in the country, the project could have supported the Government in developing a leasing regulatory framework and subsequently offer TA to PFIs in leasing product development as originally planned. 68. Outcome#8: New law promoting an enabling environment for SCA development passed, with licensing requirements tailored to the risk profiles of the institutions, and Outcome#9: State Supervisory Body for SCA supervision restructured and fully functioning, with proper staff and enforcement capacity. The SCA Regulator established. The project successfully supported capacity building activities in the National Commission on Financial Markets. The Commission, created in 2007, had the responsibility, among others, to regulate the SCA industry. This sector made up primarily of hundreds of unregulated and unsupervised institutions provided critical basic financial services to small farmers in areas under- served by commercial banks. With assistance from the project, the National Commission was able to modernize the legal and regulatory framework for these institutions and design and implement methodologies for on- and off-site inspections and risk-based monitoring. The assistance was timely. The SCA sector suffered considerably during the 2008 global financial crisis, leading the portfolio-at-risk (30 days) of deposit-taking institutions to increase from its traditional level of 3-4% to an unsustainable level of 18% during the end of 2010 and beginning of 2011. 17 institutions became insolvent. It was unclear by mid of 2012 that this indicator would reach its objective (portfolio at risk (30 days) of less than 5%). The Commission was able to address these problems, conducting rapid supervisions and taking a wide range of measures to decrease the level of risk to the system and purge the bad loans. As of March 2013, the portfolio- at-risk of all institutions had returned to a much more acceptable level of about 2.7 percent. Component 4: Land Re-parceling Pilots 69. Outcome #10: Development of a practical, scalable approach to land re-parceling in Moldova. The land re-parceling component was completed in December 2010, and responded to the Government’s concerns about fragmentation of agricultural land. Although this component fell short in three intermediary indicators, it met its overall main purpose, which was to facilitate efficient land markets by identifying bottlenecks and developing practical, scalable approaches to land re-parceling based on international best practice. The component demonstrated that there was strong demand by small landowners for re-parceling and reducing transaction costs. The pilot worked initially in 6 villages, later expanded to 40 villages, and reached its quantitative targets. Most importantly, the component had drawn a series of lessons feeding into a technical assistance program of the FAO to help the Government design a land strategy, and further improvements to the country’s Land Code. The pilot had also shown that re-parceling can lead to the creation of commercially viable firms of five hectares and more in villages where none existed. 15 70. Outcome#11: Improved efficiency of land markets and agricultural production in the pilot villages. The Impact Assessment of 2011 highlighted positive benefits from the land re- parceling activities. Thus, on the basis of interviews with 60 farms that participated in the component activities (beneficiaries’ group) and 15 farms that were not part of the project (control group), the following conclusions with regard to the improved efficient of land markets and agricultural production in the pilot villages were made: • Beneficiaries’ farms work areas, as well as the number of their livestock were considerably bigger than the areas of the control group’s farms; • The productivity of the farming land expressed in value (gross incomes per hectare) in 2010 was higher against the productivity before re-parceling for all main crops, except potato, ranging from 3.6% to 59.5%. The beneficiaries’ farms also had higher productivity for intensive crop growing (fruits and grapes); • The farms that benefited from re-parceling decreased their costs for the main farming crops by between 16.5% and 31.5% against the period before re-parceling; • As a result of land re-parceling, the beneficiary farms have built upon their commercial skills, so that 76% of them had sales lower than 10,000 lei before re-parceling and in 2010, the most of them (66%) stated that sales between 10,000 and 50,000 lei; • The increase in economic efficiency of land re-parceling was also confirmed by the dynamic of the gross margin per hectare and the gross margin rate, which went up for all basic farming crops; • Better economic results attained by the beneficiary group farms were also confirmed by the fact that they had managed, in a rather short period of time, to increase their production resources—number of equipment, machines and means of transportation, areas of land worked, number of livestock, as well as the number of employed workforce. As a result, the number of farm members which had contributed to family budget had grown from 2.26 to 2.44 or by 8%. Component 4: Drought Adaptation Component 71. Strengthened farmers’ preparedness to climate risks through information on practical techniques for adaptation, i.e., pilot grants/demonstration about adaptation to climate risks. The project supported investments for small-scale on-farm irrigation rehabilitation through PFIs, which charged real interest rates and applied the same prudence standards toward the borrowers. The project financed 26 irrigation sub-projects totaling US$2.8 million, and rehabilitated on-farm irrigated area of 3,000 ha. The component activities also strengthened knowledge and management capacity of small farmers to cope with the challenges posed by drought through the National Rural Development Agency. Training on topics related to irrigation was conducted for 38,000 beneficiaries (against the target of 35,000 beneficiaries) and the adoption rates of drought adaptation agronomics were at 30 percent. 3.3 Efficiency 72. Given the demand-driven nature of the Project and its major components, it was not plausible to determine ex-ante the various investments that would be undertaken by beneficiaries and financed by the Project. No attempt was made at Appraisal, therefore, to calculate aggregate economic or financial rates of return for the Project as a whole or for its individual components. Instead, each component was appraised in terms of either cost-effectiveness of service delivery measures; for the Rural Finance component, this was supplemented by the illustrative identification of a number of different possible business investments and the estimation of their probable internal rates of return. The key assumption was that as long as the Project performed 16 satisfactorily, it would be reasonable to assume that the rate of return for the Project would exceed the opportunity cost of capital. For the ICR, likewise, no attempt was made to calculate a rate of return for the entire Project. Instead separate and methodologically different estimates were undertaken for the two largest components, Rural Advisory Services and Rural Finance, which together accounted for 89 percent of total project expenditures (see Annex 3). No attempt was made to estimate ERRs for the two other components, Rural Business Development and Land Re-parceling. 73. Component 1, Rural Advisory Services, aimed to provide information, knowledge and know-how to newly established private farmers and rural population. The client survey carried out for the Impact Assessment found that 61% of those surveyed reported significantly increased family income as key benefit of their access to RAS, and 58% reported significantly increased productivity. However, while the survey of RAS clients confirmed that they enjoyed significant yield gains on their main crops, no firm comparator data are available to assess a “before-project” or “without-project” scenario. To gauge the economic impact of this component, estimates were developed, therefore, using only maize and wheat, which together occupy about 45% of total agricultural land in Moldova. About half of all Moldovan farmers were RAS clients during the project period, and it is assumed that they farmed half the country’s wheat and half its maize acreage and that by 2012 they used RAS-recommended improved production methods on half of their land under these two crops. Of the average yield gain of 30 percent above traditional production methods, one half is attributed to the impact of RAS, the other half to the use of more productive inputs. The yields achieved by RAS clients in 2011-12 (ignoring the drought impact) are assumed to be sustained thereafter. The aggregate net gain in output value is about US$14.2 million per year. Over the 15-year period, 2012 through 2026, this gives an Economic Rate of Return (ERR) of 53.1 percent and an NPR for the RAS component of US$42.3 million. Sensitivity analysis shows that even substantially lower benefit assumptions—such as a lower yield effect, a substantially lesser area put under improved practices, and/or a gradual decline in yields after five years—still render ERRs well above 20 percent. 74. Component 3, Rural Finance, aimed to support the continued expansion of the formal financial sector into rural areas. Its core element was a commercially driven credit line for rural enterprises, through which the PFIs were to lend only to enterprises with a viable business concept and a sufficient internal rate of return. A total of US$30,588,897 in 470 separate loans (including 53 under the Drought Adaptation component added in 2009) was disbursed by the PFIs. Each RISP-II loan dollar generated an investment of US$3.45, with US$2.45 being mobilized from other credit and equity sources. Put differently, US$29 in Project funds disbursed as loans mobilized US$71 in additional local resources for productive investments in rural enterprises. 75. To assess the economic impact of this component, 54 randomly selected SMEs that had obtained loans under credit line and had also submitted financial reports to the National Bureau of Statistics were surveyed in detail, with their survey responses cross-checked against their financial statements. For these 54 enterprises (11.5 percent of the 470 RISP-II borrowers, accounting for 12.4 percent of total borrowing under the project) the available data were sufficiently reliable to allow the estimation of the financial Internal Rate of Return (IRR) and of other key parameters. The simple, unweighted average of IRRs of these 54 enterprises is 32.4 percent. Two enterprises in this group had negative IRRs. Only three had IRRs of less than 12 percent (the opportunity cost of capital) and only three others had IRRs below 15 percent (the current country risk premium for Moldova). Of the 46 with IRRs above 15 percent, 14 were in the 15-25 percent range, 21 in the 25-40 percent range and 11 had IRRs of better than 40 percent. Considering all 54 enterprises as a whole, the investments made by them during 2006-12, financed by RISP-II and other loans as well as by own resources, generate estimated earnings 17 before tax and depreciation averaging about US$7.5 million annually, with a financial IRR of 27.7 percent and a Financial Net Present Value (FNPV) over the useful life of the US$26.2 million in fixed investments made. Taking into account the additional cash flow generated in the form of wage payments for the 319 new jobs created by these 54 enterprises, the estimated Economic IRR for the group of 54 SMEs is 30.5 percent and the Economic Net Present Value (ENPV) amounts to US$33.4 million. 76. Job Creation and Wage Income. M&E data indicate that the 470 loans issued under the Project helped create 2,995 new permanent jobs, almost equally divided among women and men, in the enterprises obtaining these loans. On average, US$10,213 of credit financing created one new permanent job. From 2006 to 2012, the wages for these newly created jobs increased at an annual average of 10.75 percent for administrative personnel and 16.25 percent for workers, considerably exceeding the rate of domestic inflation. In 2012, the average wage earned in these new jobs was US$208/month, well above the average for all wage-earners (US$140/month in 2010) nationwide. 77. Fiscal Impact. The fiscal impact of this Project component is significant. During the initial period of disbursements from the IDA credit, the Government realized considerable earnings through the sizeable premium of the on-lending rates to PFIs over the cost of IDA funds. The second-round effect continues to be the payment of value-added and income taxes and of social security contributions by the enterprises created or expanded.3 The extent to which this second-round effect is in fact realized depends on compliance and enforcement: when the five- year suspension of the 12 percent business income tax ended in 2012, the SMEs of the current sample reported dramatically lower profits than in prior years, despite a further rise in aggregate earnings. 3.4 Justification of Overall Outcome Rating Rating: Satisfactory 78. Based on the relevance, achievement of development objectives, and efficiency, the project’s overall outcome is rated as Satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 79. Poverty Impacts: The impact assessments provide evidence of reduced poverty through (i) increased agricultural production; (ii) increased employment, welfare and incomes, and (iii) enhanced food security. According to the findings obtained for the RAS Component: • Subsistence farmers were able to accumulate necessary food reserves, their food consumption was diversified and significantly increased; • 15.8 percent of beneficiaries transitioned to higher-value agricultural production and have started to become more commercially oriented; • 72.8 percent of beneficiaries increased their family income; and 3 VAT: 20%, except 8% on bread and milk and their products; business income tax (waived 2007 through 2011: 12% for limited liability companies and joint stock companies, 7% for peasant farms; Social Security insurance contributions by employers: 23%, in agriculture 22%. 18 • 68.2 percent of beneficiaries increased crop yields/livestock and 55.5 percent increased their volume of agricultural output. 80. The Rural Business Development Component resulted in 1,038 new businesses and 2,645 new jobs in a wide range of sectors, including agriculture and livestock, trade, food and beverage production, transport and manufacturing. 81. The findings of the survey conducted under the Rural Finance Component revealed that: • 90 percent of the component beneficiaries have increased their income as a result of project intervention; • 90 percent of the 76 SMEs reported that their business would have grown much slower without RISP II refinanced loan; • Net sales of the SMEs increased by 206 percent and the net profit by 234 percent. 82. Following project interventions under the Land Re-Parceling Component: • The productivity of farm land increased for all main crops; • Costs for producing their main crops decreased from 16.5 to 31.5 percent; and • The number of farm members contributing to the family budget grew from 2.26 to 2.44 persons (8 percent). 83. Women and Youth: An impressive number of women and youth benefited from the project. Although the project did not target these groups, project M&E was gender and age disaggregated, facilitating reporting on impacts on these groups. Under the Rural Finance component, the 2,995 new jobs created benefitted women and men equally, and under the Rural Business Development component, 39 percent of working places created were women. Remarkably, 74 percent of regional consultants under the Rural Advisory Services Component were women. Further, the interim impact assessment revealed that about 40 percent of rural businesses created were managed by youth (18-30 years old). This can be explained by the fact that every second rural business managed by youth received financing from the National Program of Economic Empowerment of Youth funded by the JSDF Grant. (b) Institutional Change/Strengthening 84. RISP II contributed to building long-term capacity in a number of ways. The project provided technical assistance and training to primary beneficiaries, i.e. rural farmers and entrepreneurs, as well as to secondary beneficiaries, which include implementing agencies such as MAFI, ACSA, NCFM, CLD at MOF, and PFIs. The project can be credited for the following achievements in capacity and institutional development: • The project contributed to institutional changes in the design and implementation of extension services; it exposed trainers and trainees to international best practice and provided innovative ways for farmers to access extension advice and marketing information; • DAs provided hands-on assistance to rural entrepreneurs in the formulation of business opportunities, preparation of business plans, and preparation of loan packages; this ultimately improved quality of financed SME projects and their impact on agricultural production and rural livelihoods; • In 12 rounds of training on investment lending, a total of 176 specialists from PFIs, CLD, CAPMU and DAs were trained; 19 • The NCFM capacity to supervise the SCAs sector was strengthened through provision of TA by the project; this was particularly important when the NCFM had to deal with problems in the SCA sector caused by the global financial crisis; • SCA capacity was strengthened through series of TA and training programs provided by the project; • MAFI and local government agencies were exposed to international best practices on land re-parceling; • At the MAFI’s request, the project provided support in strengthening AIPA institutional capacity; and • Important investments were also made in strengthening an M&E capacity of project implementing agencies through provision of various relevant training programs, purchase of useful software and provision of regular advice on M&E aspects. (c) Other Unintended Outcomes and Impacts (positive or negative) 85. A number of positive unintended outcomes need to be highlighted. The project upgraded the capacity of the consulting sector in the country. The SIDA support to the finance TA and training provided by the project was particularly beneficial since it allowed allocating IDA Credit funds for the Credit Line Component. Based on successful piloting of land re-parceling activities, FAO is currently supporting the Government in designing a land strategy, and further refining the country’s Land Code. 86. JSDF Grant and Youth Credit Line: As discussed in paragraph 39, a JSDF grant was added to the project’s credit line. The grant was originally expected to supplement another IDA operation which did not go through as planned. The JSDF activities ultimately led to the launch of a long-term Government’s National Program on Youth Economic Empowerment (PNAET) in 2008. The PNAET currently has the same target group, contains a training and consultancy component, and finances investment projects in the field of production and service, and post- finance monitoring. In addition, IFAD opened a Credit Line for young entrepreneurs in 2011. 87. Agency for Interventions and Payments in Agriculture (AIPA): Lastly, outside the scope of the original project, RISP II successfully provided institution building support to AIPA, resulting in its improved capacity to manage efficiently and transparently the Government’s agriculture support programs. The country’s Agriculture Support Fund is now fully managed by AIPA and other donors are using AIPA as a management and distribution entity for their programs. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 88. The findings of the impact assessments for RAS, Rural Finance and Land Re-Parceling Components are included in Section 3.2 Achievement of PDO and summarized in Annex 5. 4. Assessment of Risk to Development Outcome Rating: Moderate 89. Overall, risk to the development outcome varies by outcome. The risk to institutional sustainability is moderate in spite of high ownership by Government and beneficiary organizations. There is a specific concern with ACSA’s sustainability because of inadequate 20 remuneration and the lack of performance-based incentives for its staff, which could lead to staff turnover and exodus of highly trained experts to the private sector. 90. The credit line’s sustainability risk is low. The CLD is currently diligently managing credit line re-flows, and the sustainability of enterprises supported by refinanced investment loans appears to be high. This is reflected by a number of indicators including annual growth in sales, profits, hiring of additional staff, and gradual growth of business. Moreover, the social risk is also low due to high significance of project activities that focused on such issues as poverty reduction, gender equity and inclusion of youth and various vulnerable groups in rural areas. The environmental risk, however, might pose some concern as climate change and unpredictable natural disasters could continue to affect the agricultural sector and rural livelihoods. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 91. As discussed in section 2.1, strong project design was based on effective program-based approach and underpinned by strong analytical work at entry. All aspects of the project were well thought through, and components were designed to address key challenges in the country’s rural sector. The preparation team included all key experts, and the project incorporated lessons from RISP I, adequately identified risks, and proposed appropriate risk mitigation measures. The CPS and respective Government strategies confirm that the objective continues to remain highly relevant. (b) Quality of Supervision Rating: Satisfactory 92. The Bank team made a significant effort to ensure successful and timely implementation of the project, with some major activities implemented a way before the project closure (eg. disbursement of the Credit Line, as well as completion of the RBD and pilot land re-parceling activities). The implementation support missions were carried out regularly, mostly twice a year, and all mission Aide Memoirs reported clearly and in detail of all problems, as well as provided sound and feasible solutions to resolve those problems. It is also worth highlighting the team’s pro-activeness and persistence in dealing with unexpected waves affecting the project implementation. The Bank team was led by a Moldova-based Senior Operations Officer and supported by the Senior Microfinance Specialist (a former TTL of the project) and Senior Rural Finance Specialist. Supervision was executed by various specialists who focused on review of respective components, as well as fiduciary and safeguards specialists. Several core team members remained engaged throughout the project, and this continuity allowed the team to stay abreast of project’s issues, identify bottlenecks if any at their early stages. Finally, management of the project from the field office ensured a hands-on approach and rapid problem solving. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory Overall Bank performance is rated satisfactory. 5.2 Borrower Performance 21 (a) Government Performance Rating: Satisfactory 93. The Government demonstrated a high level of ownership during the preparation and implementation of the project. It was very active and committed and did everything needed to ensure its success. All resources required from the Government were made available and necessary arrangements were put in place for project teams from various government agencies to participate actively in the project implementation. The project activities were carried out in a professional and sound manner despite periods of temporary political instability arising from several changes of the Government in power. The credit particularly goes to the MAFI and MOF for exercising effective oversight and coordination of their respective components. Although, initial delays by MAFI in launching of the activities under the Land Re-Parceling Component must be noted, following the successful implementation of the land re-parceling pilot projects in 6 villages, the decision was made to scale-up the scope of the component activities to additional 40 villages. Most importantly, highly satisfactory performance by the implementing agencies (as described in the next section) would have not been possible without strong support of the Government and its proactive involvement in the project implementation. (b) Implementing Agency or Agencies Performance Rating: Highly Satisfactory 94. The performance of ACSA, CLD, DAs, and NCFM was evaluated extremely positively. All these institutions were adequately staffed, trained and efficiently carried out day-to-day activities by demonstrating a great deal of commitment in achieving the project development objectives. To this effect, several major achievements by the Implementing Agencies should be specifically acknowledged and they are as follows: - ACSA, through its wide network of rural advisory consultants, provided about 200,000 advisory services per year to 382,000 beneficiaries, i.e., agricultural producers and rural entrepreneurs, helping them on a wide range of issues to enhance their productivity and competitiveness, including technology (53%), business/legal (29%) and marketing (18%). Furthermore, ACSA developed a strategy for extension services in the country and was selected, through the Government competitive tender process, to provide RAS in the next five years. - Four DAs provided hands-on assistance to rural entrepreneurs in the formulation of business opportunities, preparation of business plans, and facilitation of access to finance from financial institutions and implementation support. The DAs’ activities resulted in the creation of 1,038 businesses (against the project target of 600 new businesses) and 2,645 jobs in a wide range of sectors, including agriculture and livestock (53%), trade (8.6%), food and beverage production (6%), transport (5.7%), and various manufacturing (10.7%). More than 98% of businesses managed to obtain financing from financial institutions, all of them for the first time. - CLD professionally managed the project’s Credit Line by extending 758 sub-loans of approximately US$43 million to rural entrepreneurs from all RISP II sources, including re-flows. The RISP II credit line amounted to 19.2% of the overall loan portfolio of the CLD. By the Closing Date of the project, the CLD managed a 160.75% recovery rate of the RISP II credit line while considering the payment of interest to the IDA, however not yet repayment due to the grace period. Such achievement of the CLD is quite remarkable in the light of the difficult overall economic conditions and poor quality of the banks´ loan portfolios. If the CLD succeeds in convincing the Government to continue its professional reflow management of the RISP II credit 22 lines - and, in fact, all the other credit lines- , sustainability of the RISP II credit line can be judged as very high. - NCFM, created in 2007, has been effectively regulating the SCA industry. Prior to 2007, hundreds of SCAs were left unregulated and unsupervised. With project support, the National Commission was able to modernize the legal and regulatory framework for these institutions, and develop methodologies for on- and off-site inspections and risk-based monitoring. Its role was particularly instrumental in managing the negative impacts of the 2008 global financial crisis, which led to a sharp increase in the portfolio-at-risk (30 days) of from 3-4 percent pre-crisis to an unsustainable 18 percent between the end of 2010 and beginning of 2011. Through rapid supervisions and application of a wide range of measures to decrease the level of risk to the system and purge bad loans, the National Commission effectively addressed these issues. As of March 2013, the portfolio-at-risk of all institutions had returned to 2.7 percent. 95. CAPMU’s contribution to project success cannot be overstated. The implementing agency was well staffed with competent and proactive experts with minimal turnover, key to project continuity. During the project implementation period, there was no evidence of fiduciary mismanagement. CAPMU was also able to maintain a sound and comprehensive M&E system to track project activities and progress against output and outcome indicators. Besides being a fiduciary agent for the project, CAPMU effectively served a coordinating role between the primary beneficiaries, Government agencies, private sector and the Bank. Further, two coordinators of the RAS and RBD Components at CAPMU effectively fulfilled their duties and, particularly, worked very hard in ensuring completion of all activities in due time. CAPMU was able to disburse all IDA and SIDA funds on time, and close the financial statement before the grace period. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 96. Overall Borrower performance is rated Satisfactory. 6. Lessons Learned 97. Strong analytic work, leveraged through good cross-sectoral cooperation and piggybacking the work used for the development policy credit, the PRSC, were crucial to solid project design. This, in addition to building on lessons learned from RISP I of the APL, was crucial for successful outcomes despite the complex and ultimately “Christmas tree-like” design. The latter was due to RISP II serving as an effective conduit for channeling assistance. First and foremost, in the face of unexpected external shocks (e.g., drought and global financial crisis) but also when donor assistance was in need of an administrative home, such as in the case of the JSDF grant for youth and support for AIPA. Good management, strong Bank support in country and in headquarters, and unwavering Government commitment contributed in no small part to these positive outcomes. 98. A commitment to results-based management by the Bank, the co-financier, and the Government, enhanced positive project outcomes. The application of quantitative and qualitative information from impact assessments to adjust project implementation mid-stream was a particularly noteworthy project achievement that represents “best practice” that should be replicated in other projects. 23 99. Strong Government ownership, supplemented by strong implementation by the implementing agencies and support by an experienced fiduciary agent (CAPMU), were the cornerstones of project success and low sustainability risk. The project approach and the implementation procedures of delegating main responsibilities to the different actors allowed a better ownership of the project, and in particular increased awareness of the Government for appropriate interventions and sustainability of effort. 100. A proactive approach and flexibility by both the Bank and Government to adapt to changing circumstances and arising issues of political, financial and environmental nature were critical for project success. These circumstances occurred outside project control, but early response measures allowed putting the project back on track. Of similar importance, a properly designed M&E system and thorough review of M&E indicators during the implementation were critical to identify any possibilities for failures and provide a platform for their resolution. 101. The RISP program demonstrated that financial support to farmers is optimized when used along with advisory and business development services. While investment decisions to pursue commercial opportunities rest with private farmers and rural entrepreneurs, access to knowledge, information, and customized business advice are important to minimize the risk for failure and to maximize chance for success. Such an approach ensured that the rural businesses supported by the RISP APC, have had a first-year survival rate of more than 95 percent. 102. The RISP experience in piloting projects aimed at increasing resilience to climate variability has also provided a clear lesson that the best stimulant for widespread adoption of new or additional technologies is demonstration of benefits. Demonstration plots or sites were the best way to display these benefits, and grant funding was particularly important to co-finance the investment and advisory costs for the pioneering farmers. 103. Finally, a failure to introduce leasing as an alternative financial instrument, as originally envisaged in the PAD, was a missed opportunity. As discussed in paragraph 67, the project could not overcome the hurdles to compel PFIs to offer leasing products given the high risks involved. Given the importance of leasing to the Borrower (see comments from the Minister of Agriculture and Food Industry, Annex 7) as a means to overcome the persisting problem of insufficient collateral, there is a need to address leasing more comprehensively in a future project where it can be allocated sufficient resources and attention. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The draft ICR was shared with the Government and Implementing Agencies. Feedback on the report received from the Ministry of Agriculture and Food Industry and Ministry of Finance is provided in Annex 7. (b) Cofinanciers The draft ICR was shared with Sida. A response was received from Mr. Henrik Huitfeldt, Counsellor/ Head of Development Cooperation in Embassy of Sweden in Moldova on December 5, 2013 where Mr. Huitfeldt stated that “the report is comprehensive, containing all relevant information such as achieved results against the benchmarks, lessons learnt, sustainability, and ownership.” In addition, he mentioned that Sida has no additional comments to the report. 24 (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 25 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) (a) Rural Advisory Services 4.94 10.17 206 (b) Rural Business Development 0.85 0.96 113 Services (c) Rural Finance 17.77 21.66 122 (d) Land Re-Parceling Pilots 0.75 2.16 288 (e) Drought Adaptation 0 5.48 548 (f) Project Management 0.77 1.60 208 Total Baseline Cost 25.08 42.03 168 Physical and Price Contingencies 0.899 0.00 0.00 Total Project Costs 0.00 0.00 Front-end fee PPF 0.663 0.00 .00 Front-end fee IBRD 0.00 0.00 .00 Total Financing Required 25.98 42.03 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 2.50 2.07 83 International Development 23.50 16.11 69 Association (IDA) IDA Grant 7.50 15.00 200 Local Sources of Borrowing Country 9.07 0.00 0 Bilateral Agencies (unidentified) 5.76 8.00 139 26 Annex 2. Outputs by Component Component 1: Rural Advisory Services Activities Outputs MAFI Rural Development Unit, responsible for management The Project supported the reinforcement the Unit, the of the rural advisory service program, established and staffed implementation of RAS strategy and the contracting out and receiving training under the Project the implementation of RAS activity. The project contributed to increasing the percentage of revenues of regional and local consultants derived from users’ fee or other sources outside central government budget from less than 3% to 43.5%. Number of beneficiaries serviced by the Service Providers The Project supported the implementation of extension (SPs); activities across the country. The project contributed providing advice to 382,500 farmers. Number and type of services provided by SPs/ local The network of advisory consultants managed by ACSA consultants (increase in non-technological services as part of included about 200,000 advisory services per year to the diversification effort); 382,500 beneficiaries, i.e. agricultural producers and rural entrepreneurs, helping them on a wide range of issues to enhance their productivity and competitiveness, including technology (53%), business/legal (29%) and marketing (18%). In addition, ACSA contributed to the development and publication of brochures and manuals of more than 180 titles with a total circulation of 800 thousand copies. Further, implementation and effective management of the ACSA’s Agricultural Marketing Information System allowed provision of highly demanded market information, such as pricing, potential markets, inputs and marketing of agricultural products, and other useful data. Number of farmers groups and local user committees in RAS RAS worked with 634 formal and non-formal farmers clientele groups 4 Component 2: Rural Business Development Minimum 300 new businesses created and registered in rural The Project provided support for the formation of viable areas under the project; agribusinesses through supporting Development Agencies (DAs), which provide pre-registration support, the legal registration process support, and post-creation support to ensure good business operational practices. The project contributed to creation of 1,038 businesses. At least 900 new jobs (full-time and part-time) created in the The Project supported all forms of private ownership new businesses; through DAs assistance. The project contributed creating 2,645 jobs. At least 1/3 of all new businesses created engaged in off-farm 49,52% of 1,036 businesses that started implementing activities their business plans were non-agricultural ones At least three Development Agencies with 9 teams engaged in Four Development Agencies with 7 teams were engaged rural business development in providing assistance to launch services and business development in rural areas. Component 3: Rural finance 4 Data provided according to the Impact Assessment Study on Rural Advisory Services carried out by AID NGO, 2013 27 Credit line for investment loan and leases A Credit Line, professionally managed by the Credit Line Directorate of the Ministry of Finance, extended 737 sub- loans of approximately US$41 million to rural entrepreneurs from all RISP II sources, including re-flows. Coverage was national and loan size averaged US$46 thousand. The sector that received these investments included: Services (30%), Agriculture (28%), Trade (16%), Food Processing (10%) and Manufacturing (10%). 39.3% of credit line resources were disbursed to first-time borrowers against a target of 30%. As of May 2013, the portfolio at risk (60 days) was around 6%. Strengthening the savings and credit associations industry The Project supported improvement of the legal, regulatory and supervisory framework of the Savings and Credit Associations (SCAs) industry and provided them capacity building. The Project also provided capacity building for a new supervisory body for SCAs to be in charge of the regulation and supervision of the whole SCA industry. The Project contributed to decreasing Portfolio- at-Risk 30 days to 2.7 %. The following regulatory documents were developed with the support of the project: 1.Law on SCAs (No. 139-XVIas of 21/06/2007); 2. Regulation on requirements to administrators of savings and credit associations (No.63/6 of December 25, 2007); 3. Regulation on the assessment and approval of business plan for savings and credit associations (no. 5/6 of January 31, 2008); 4. Prudential norms for savings and credit associations (no. 17/8 of April 30, 2008); 5. Regulation on issuing approval for state registration of savings and credit associations (no. 15/11 of April 17, 2008); 6. Statute template for Savings and Credit Associations; 7. Regulation on issuing approval for investments in corporate securities by savings and credit associations (no. 50/13 of October 17, 2008); 8. Decision on approval of the Regulation on the reorganization of savings and credit associations (no.17/8 of April 03, 2009); 9. Decision on approving the Instruction on reporting of savings and credit associations (No. 44/8 of October 08, 2009, Nr.56-57/229 Official Gazette of 20.04.2010); 10. Decision on the approval of the liquidity fund for savings and credit associations (No. 13/11 of April 01, 2010, Nr.110-113/391 Official Gazette of 02.07.2010); 11. Decision on the approval of the stabilization fund for savings and credit associations (No. 24/16 of June 25, 2010, Nr.206-209/720 Official Gazette of 22.10.2010). Some 350 loans and leases made by participating financial 470 loans were extended by PFIs institutions, including At least 200 loans and leases made to first-time borrowers 39.3% of 470 loans were made to first-time borrowers 28 At least 5 PFI participate in the project, of which at least one 7 PFIs were involved within RISP II - PFI is new, i.e., did not participate in Phase I of RISP 1. MoldovaAgroindbank 2. Fincombank 3. Moldindconbank 4. Victoriabank 5. Mobiasbancă 6. Banca Socială 7. Banca de Economii Compared to 6 PFIs active within RISP I – 1. MoldovaAgroindbank 2. Victoriabank 3. Banca Socială 4. Fincombank 5. Moldindconbank 6. Rural Finance Corporation 2 new banks joined RISP II: Mobiasbanca and Banca de Economii. The banks mentioned above are also intermediary banks for the revolving resources, in addition to which Energbank and Eurocreditbank were added. Good project-related portfolio quality in the PFIs, with at least Please see the table below (data as of 31/03/2013 was 95% recovery rate; provided by CLD) SCA loan portfolio quality very good, with PAR30 not 2.7% exceeding 5%; Component 4: Land Re-parceling Pilots Activities Outputs Land re-parceling implemented with participation of at least The Project supported the implementation of the land re- 30% of the population in 6 pilot villages; parceling in pilot localities. The Project provided training of the methodology in training for experienced professionals for them to train new participants. The level of participation of the selected beneficiaries (of total land owners) represented 40%, which was appreciated as remarkable result. The pilot work in 6 initial villages was later expanded to another 40 villages. Irrigation finance services The Project supported the investments for small-scale on- farm irrigation rehabilitation through PFIs which charge real interest rates and apply the same prudence standards towards the borrowers. The Project contributed financing for 26 irrigation sub-projects, totaling US$ 2.8 million, and increasing rehabilitation of on-farm irrigated area to 3,000 ha. Component 5: Drought Adaptation Draft Adaptation advisory services The Project supported the implementation of activities aimed at raising awareness, knowledge and management capacity of small farmers to cope with the challenges posed by drought through the National Rural Development Agency. The Project contributed providing training on topics related to irrigation to 38,000 beneficiaries and increasing of adoption rates of drought adaptation agronomics to 30 %. Component 6: Project Management 29 Project management The Project provided technical and financial support for project management. The Project supported expenses such as audit, the hiring of an environmental specialist, and monitoring and evaluation. The Project contributed consistent performance in highly satisfactory manner by the Consolidated Agriculture Project Management Unit, which provided strong support to the project implementation and fiduciary activities. 30 Annex 3. Economic and Financial Analysis (including assumptions in the analysis) I. Introduction Project design did not establish specific investments to be made, but established instead the mechanisms for service output delivery in its different components. With investments to be implemented depending therefore entirely on the effective demand expressed by clients, it was not plausible to determine ex-ante their types, magnitudes and economic or financial impacts. No attempt was made at Appraisal, therefore, to calculate aggregate economic or financial rates of return for the Project as a whole or for its individual components. Instead, each component was appraised in terms of either cost-effectiveness of service delivery measures (Rural Advisory Services, Rural Business Development, Land Re-parceling) or financial sustainability and sub- project appraisal capacity of the Participating Financial Institutions (Rural Finance). For the Rural Finance component, this was supplemented by the illustrative identification of a number of different possible business investments and the estimation of their probable internal rates of return. The key assumption was that as long as the Project performed satisfactorily, it would be reasonable to assume that the rate of return for the Project would exceed the opportunity cost of capital. For the ICR, likewise, no attempt was made to calculate a rate of return for the entire Project. Instead separate and methodologically different estimates were undertaken for the two largest components, Rural Advisory Services and Rural Finance, which together accounted for 89% of total Project expenditures. No attempt was made to estimate ERRs for the two other components, Rural Business Development and Land Re-parceling. II. Component 1: Rural Advisory Services (RAS) The component aimed to provide information, knowledge and know-how to newly established private farmers and rural population. Project expenditures for this component totalled US$10.76 million, or 25.6% of total project expenditures. For the Impact Assessment undertaken for the Borrower, 600 RAS clients and 100 non- clients, distributed over the entire country, were surveyed by questionnaire and structured interview. Two thirds of the RAS clients had already used RAS before 2006, one third were new clients. The questionnaires and interviews yielded much information, although not necessarily adequate and sufficient for a rigorous quantitative economic analysis of project impact. A key finding of the client survey is that 97% of RAS clients, while they also use other sources of information, consider the RAS network an important source of information and consultations necessary to manage their business, with agronomic technology being the predominant subject area. Between 55 and 60% of clients who noted technologic, economic or marketing issues as having been the subject of their interaction with RAS reported implementing the recommendations provided to them (see Table 3.1). 61% of those surveyed reported significantly increased family income as key benefit, 58% reported significantly increased productivity (see Table 3.2). Also notable is that 32.5% of those surveyed reported having invested in improved crop cultivation technologies and/or livestock and 23% reported having expanded their farming operations by purchasing or renting additional land. 31 Table 3.1: Type of Advice Received and Implemented Beneficiaries who adopted and RAS beneficiaries implemented recommendation Consulting domain % of 600 % of 600 Number beneficiaries Number beneficiaries interviewed interviewed Technologic 523 87.2% 305 58.3% Economic 290 48.3% 176 60.7% Marketing 259 43.2% 146 56.4% Legal 203 33.8% 98 48.3% Social 106 17.7% 40 37.7% Organic 155 25.8% 57 36.8% Table 3.2: Qualitative Impact of Implementing RAS Recommendations Number of Respondents Considerably Medium Somewhat Total high & medium, (over 50%) (49-20%) (19-0%) Persons % of all interviewed Increased family income 124 242 71 437 61% Enhanced productivity of crops/animals 102 245 62 409 58% Diversified crops or services 73 119 43 235 32% Enhanced volume of agricultural output 110 179 44 333 48% More efficient and competitive 73 83 20 176 26% Qualitative production and best trade prices 45 91 41 177 23% Stable annual profits 42 89 31 162 22% The available data do not lend themselves to a robust economic evaluation of this Project component. While the information obtained from the 600 client interviews and questionnaires confirms that RAS clients had significant yield gains on their main crops, no firm comparator data are available to assess a “before-project” or “without-project” scenario. 5 A rough estimation was undertaken, therefore, using only maize and wheat, which occupy about 27% and 18%, respectively, of total agricultural land in Moldova. 6 About half of all Moldovan farmers were RAS clients during the project period 2006-2012, and it is assumed that they farmed half the wheat and half the maize acreage in Moldova and that by 2012 they used RAS-recommended improved production methods on half of their land under these two crops. Production costs per hectare are estimated to be 20% higher than with traditional inputs and agronomic practices. Of the average yield gain of 30% above traditional production methods, one half is attributed to the impact of RAS, the other half to the use of more productive inputs. The yields achieved by RAS clients in 2011/2012 (ignoring the drought impact) are assumed to be sustained thereafter. The aggregate net gain in output value (accounting for the increased production costs) is about US$14.2 million per year. Over the 15-year period 2012 through 2026, this gives an ERR of 53.1% and an NPR for the RAS component of US$42.3 million. Sensitivity 5 In part, the problem is also due to the fact that 2012 data are of very limited utility, since Moldova suffered a very severe drought in 2012, which caused extensive losses to crops such as wheat, sunflower and particularly maize. Maize yields declined by 59% and sunflower yields by 53% compared to the multiannual average. The Southern region was the most affected and suffered the most severe drops in yields and production. 6 The main crops by area in 2011 were maize (27%), wheat (18%), sunflower (16%), vineyards (8%) and orchards (7%), together covering two thirds of all agricultural land. 32 analysis suggests that even substantially lower benefit assumptions – such as a lower yield effect, a substantially lesser area put under improved practices, and/or a gradual decline in yields after five years – still render very robust ERRs (see Table 3.3). Table 3.3: Sensitivity Analysis NPV ERR Assumptions (US$ mill) (%) Base Case, 15% yield gain for RAS clients, remaining stable 42.3 53.1 10% yield gain, remaining stable 20.6 38.3 Only half the acreage, 10% yield gain, remaining stable 7.0 23.9 Only half the acreage, 10% yield gain, but yields declining again 6.1 23.1 by 2% annually starting in 2017 (5 years after project closing) III. Component 2: Rural Business Development The objective of this component was to strengthen the emerging rural private business sector by financing technical assistance for rural entrepreneurs and providing operational support for local development agencies (DAs), with the aim of creating legally registered, self or jointly owned sustainable rural businesses, which would potentially become clients of financial institutions. US$962,322, or 2.3% of the Project total, were spent for this component. This Project component was instrumental in the formal establishment and registration of over 1000 new businesses in rural areas, with about 2650 formal jobs. Somewhat more than half of these (53%) businesses were in agriculture and livestock, with the remainder spread over a wide range of sectors, including food and beverage production, trade, transport, small-scale manufacturing and various services. More than 98% of them succeeded in obtaining financing from financial institutions (though not necessarily from the RISP-II credit line), all of them being first-time borrowers, and when this component closed in June 2012 all of these businesses were current with their loan servicing obligations. By assisting these newly developing enterprises the project also helped generate tax revenue for the Government budget7 and new contributions to the social security fund. No attempt was made to estimate an aggregate ERR for this component. IV. Component 3: Rural Finance This component, its resources augmented during Project implementation by the addition of US$6 million provided under the Drought Adaptation Component in 2008 and of a further US$10 million as Additional Financing in 2009, accounted for 63.2% of total Project expenditures. It aimed to support the continued outreach expansion of the formal financial sector into rural areas so as to improve access to investment financing for farmers and rural entrepreneurs. In addition to providing technical assistance for the restructuring and strengthening of the Savings and Credit Associations sector, it was also envisaged to promote the use of leasing, but the core of this component was a credit line for rural enterprises. This credit facility was commercially driven, encouraging the participating financial institutions (PFIs) to lend only to enterprises with a viable business concept and a sufficient internal rate of return. 77 It has been estimated that for each US$ invested about US$2.5 of taxes was generated in the first two years of business operations. 33 A total of US$30,588,897 in 470 separate loans (including 53 under the Drought Adaptation component added in 2009) was disbursed by the PFIs, with RISP-II providing US$23,947,916 and the PFIs financing US$6,640,981 from their own resources. The borrowers themselves contributed an additional US$52,119,687 from their own or other sources to finance aggregate investments of US$82,708,583 (see Table 3.4). Each RISP-II loan dollar thus triggered an investment of US$3.45, with US$2.45 being mobilized from other credit and equity sources. Put differently, US$29 in Project funds disbursed as loans mobilized US$71 in additional local resources for productive investments in rural enterprises. Table 3.4: RISP-II SME Lending by Year No of Aggregate loan Of which RISP- Borrowers own Year loans value (US$) II (US$) contribution (US$) 2006 75 2,876,762 2,301,394 2,014,314 2007 85 4,095,940 3,276,752 7,390,666 2008 104 5,924,083 4,739,267 20,382,156 2009 35 1,936,036 1,512,790 3,380,181 2010 96 6,009,793 4,671,559 11,691,799 2011 29 3,296,264 2,555,187 4,034,933 2012 46 6,450,018 4,890,969 3,225,636 Total 470 30,588,897 23,947,916 52,119,687 Project lending benefitted primarily micro, small and medium-sized rural enterprises, and the average loan size was US$65,000. 27.8% of the total volume of loans issued was for micro- enterprises with no more than 9 employees, and 53.8% for small enterprises with up to 49 employees. 17.7% of total loan value went to medium enterprises with 50-249 employees and less than 1% of the loan portfolio financed large enterprises (see Table 3.5). 92 loans were for amounts of up to US$20,000, representing 4% of the total lending volume, 274 were loans of up to US$100,000, representing 46% of the total loan volume, and 104 were large loans of over US$ 100,000, representing 50% of the total loan volume (see Table 3.6). 39.3% of total lending under the Project went to first-time borrowers. Table 3.5: Loans Disbursed by Size of Enterprise RISP-II % of total No. of Total loans Size of enterprise resources loan volume loans (US$) (US$) disbursed Micro <9 employees 204 8,354,594 6,659,869 27.3% Small <49 employees 215 16,663,155 12,887,172 54.5% Medium <249 employees 49 5,357,473 4,229,936 17.5% Large >249 employees 2 213,674 170,939 0.7% Total 470 30,588,897 23,947,916 100.00% Table 3.6: Loans by Size No. of Total loan RISP resources % of total Loan size loans volume (US$) (US$) loan volume < US$20,000 92 1,082,086 864,057 4% US$20,000 – 100,000 274 13,975,146 11,060,532 46% US$100,000 – 150,000 66 7,742,752 6,008,404 25% > US$150,000 38 7,788,912 6,014,924 25% Total 470 30,588,897 23,947,916 100% 34 As anticipated, loans were spread over a broad range of business sectors and investment types, although with a clear preponderance of agricultural and agro-processing investments (see Tables 3.7 and 3.8). Table 3.7: Loans Disbursed by Sector No. of Total loans RISP resources % of total loan Sector loans (US$) (US$) disbursements Agriculture/agro-processing 153 12,022,786 9,618,218 39% Industry 74 4,598,346 3,678,644 15% Trade/commerce 70 3,680,716 2,936,512 12% Transport 60 3,068,329 2,454,663 10% Irrigation 27 2,798,455 1,794,623 9% Services 45 2,398,563 1,918,834 8% Gastronomy 41 2,021,702 1,546,422 7% Total 470 30,588,897 23,947,916 100% Table 3.8: Loans Disbursed by Investment Good No. of Total loans RISP resources Share in total loan Type of investment loans (US$) (US$) disbursements agricultural machinery 122 9,992,144 7,549,563 33% building/repair of production facility 153 8,995,629 7,188,409 29% production equipment 101 5,553,154 4,371,568 18% transport equipment 62 3,325,757 2,660,606 11% farm assets 21 1,507,036 1,205,629 5% multiannual plantations 11 1,215,177 972,142 4% Total 470 30,588,897 23,947,916 100% To assess the economic impact of this Project component, 76 randomly selected SMEs that had obtained loans under the credit line were surveyed in detail by questionnaire. 8 Of these, 54 had officially submitted annual financial reports to the National Bureau of Statistics, and their survey responses were cross-checked against these financial statements for the period 2006 through 2012. For these 54 enterprises (11.5% of the 470 RISP-II borrowers, accounting for 12.4% of total borrowing under the project) the available data were sufficiently reliable to allow the estimation of the financial IRR and of other key parameters. 9 The simple, unweighted average of IRRs of these 54 individual enterprises is 32.4%. Two enterprises in this group had negative IRRs. Only three had IRRs of less than 12% (the opportunity cost of capital) and only three others had IRRs below 15% (the current country risk premium for Moldova). Of the 46 with IRRs above 15%, 14 were in the 15-25% range, 21 in the 25-40% range and 11 had IRRs of better than 40% (see Table 3.9). 10 8 Eleven of these were subsequently also interviewed in depth. 9 The attribution of the individual borrowers’ income increases was complicated by the fact that the SMEs in the sample obtained financing from other credit lines as well. 10 At Appraisal, the individual investments identified as representative examples of likely subprojects had IRRs ranging from 16% to 26% 35 Table 3.9: Financial IRRs of 54 SMEs RISP loan Capital RISP loan Capital Enterprise amount investment IRR Enterprise amount investment IRR (MDL) (MDL) (MDL) (MDL) A Dodon 125,000 1,484,144 0.1797 Nadejda Grosu 34,663 186,060 0.2644 Agrolibrar Nord 40,306 131,264 0.3701 Navigator-Lux 125,667 562,359 0.2860 Agroplant-Prim 36,276 74,773 0.3574 Nedu-Staer 95,536 120,561 0.3671 Aidin 24,184 1,016,143 0.3045 Nic-Ol 80,613 3,431,822 0.1531 Argon Sigma 54,172 229,348 0.0936 Niverant 96,735 174,075 0.2599 Arsma 64,490 1,196 0.1445 PAT-5 80,613 29,126 -0.1011 Avan Const 150,000 760,454 1.0192 Piscicultura-Orhei 48,368 18,963 0.1403 Balsor Com 145,103 1,205,462 0.0736 Plaiul Birladean 64,490 2,587,664 0.2329 BTA-14 Floresti 74,164 93,135 -0.1342 Plastcon-Flor 9,674 1,077,267 0.3576 Convencon 18,541 87,584 0.3551 Remarcabila 75,292 1,844,004 0.1540 Corpus Petrol 24,184 36,320 0.2099 Revincor 75,000 580,084 0.2206 Cristal Avant 120,919 1,690,709 0.2647 Sitari Ion 50,383 305,516 0.2378 Cutezatorul Agricol 80,613 1,085,755 0.4901 Soclemo 89,000 94,039 0.8846 Devotament 16,123 430,835 0.1586 Soralex-Tur 150,000 468,040 0.2425 Dina-Bessarab 29,000 41,543 0.6266 Stokman-Com 32,245 135,064 0.3266 Econs-I.F. 75,574 900,308 0.0746 Testor 137,042 505,801 0.1371 Fabrica Oloi Pak 80,613 1,065,519 0.2593 Tetracom Agro 84,643 1,604,250 0.5749 Filgrad 90,286 275,358 0.2139 Timbur Maria 20,153 66,589 0.3122 Ghenadie Bogaci 32,245 67,349 0.2812 Trimobil-Desigh 32,666 133,395 0.2303 Gheorghe Halca 20,153 195,398 0.3017 Unserv-Audit 40,306 125,508 0.4184 Gheorghe Taran 80,613 282,303 0.6910 Vardan Agro 10,480 37,204 0.3751 Iunat 96,735 314,197 0.2789 Vastadum 28,928 925,724 0.3756 Iurprodus 114,470 442,592 0.2387 Veronica Barcari 72,551 67,026 1.5650 Lem-IT 12,334 87,644 0.3264 Vilata Agro 80,613 1,148,082 0.4785 Maxipac Grup 200,000 274,144 0.2564 Vimalex-Nord 40,306 88,254 0.2928 Mebella 65,000 95,715 0.4399 Vinuri de Comrat 153,164 320,863 0.4408 Misertais Prim 24,184 377,884 0.1933 Ziteco 96,735 523,814 0.2097 Aggregate all 54 3,801,148 29,908,230 0.2766 Note: These IRRs were calculated based on investment costs and on earnings before interest, taxes, depreciation and amortization. Considering all 54 enterprises as a whole, the investments made by them during the period 2006-2012, financed by RISP-II and other loans as well as by own resources, generate estimated earnings before tax and depreciation averaging about US$7.5 million annually, with a financial IRR of 27.7% and a Financial Net Present Value (FNPV) over the useful life of the fixed investments made of US$26.2 million. These indicators confirm the efficient use of funds. Taking into account the additional cash flow generated in the form of wage payments for the 319 new jobs created by these 54 enterprises, the estimated Economic IRR for the group of 54 SMEs is 30.5% and the Economic Net Present Value (ENPV) amounts to US$33.4 million. Job Creation and Wage Income. M&E data indicate that the 470 loans issued under the Project helped create 2995 new permanent jobs, almost equally divided among women and men, in the enterprises obtaining these loans. On average, US$10,213 of RISP-II credit financing created one new permanent job. Over the period from 2006 to 2012 the wages for these newly created jobs increased at an annual average of 10.75% for administrative personnel and 16.25% for workers, considerably exceeding the rate of domestic inflation. The average wage earned in these 2995 new positions in 2012 amounted to US$208/month, well above the country average for all wage-earners (US$140/month in 2010). 36 Fiscal Impact. The fiscal impact of this Project component is significant. During the initial period of disbursements from the IDA credit, the Government realized considerable earnings through the sizeable premium of the on-lending rates to PFIs over the cost of IDA funds. The second-round effect is, and continues to be, the payment of value-added and income taxes and of social security contributions by the enterprises created or expanded with the help of loans obtained under the Project. 11 The extent to which this second-round effect is not merely hypothetical, but in fact realized depends on compliance and enforcement: when the five-year suspension of the 12% business income tax ended in 2012, the SMEs of the current sample reported dramatically lower profits than in prior years, despite a further rise in aggregate earnings. V. Component 4: Land Re-parceling Pilot This component, implemented as a pilot initially in six villages and after its initial successful phase expanded to 40 villages, sought to respond to concerns about the fragmentation of agricultural land and its negative impact on farm efficiency and incomes among small peasant farmers. US$ 2.16 million, or 5.1% of the Project total, was spent for this component. No economic analysis was undertaken for this component. However, the impact assessment carried out for CAPMU indicated significant efficiency gains for the farmers involved. The number of land parcels of the participating farmers was reduced by one third and the average size of each land parcel increased correspondingly by 50%. The total distance and travel time to farmers’ plots was measurably reduced. The impact on farm productivity was not clearly evident, as the yields reported by the farmers interviewed were strongly affected by climatic variations during the years of component implementation. 11 VAT: 20%, except 8% on bread and milk and their products; business income tax (waived 2007 through 2011: 12% for limited liability companies and joint stock companies, 7% for peasant farms; Social Security insurance contributions by employers: 23%, in agriculture 22%. 37 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Anarkan Akerova Counsel LEGCF John E. Ambrose Consultant ECSEG Stephen M. Bartoletti Consultant ECSSD Sandra Broka Senior Rural Finance Specialist ECSAR Nicholay Chistyakov Senior Finance Officer CTRLN Pierre Olivier Colleye Senior Microfinance Specialist LCSAR Nora Dudwick Consultant AFCE4 Richard Gargrave Sr Procurement Spec. ECSOQ Vitaly Kazakov Financial Management Specialist ECSOQ Bakhrom Irkinovich Consultant ECSF1 Mirkamilov Michael G. Nelson Operations Officer WBIIN William R. Sutton Lead Economist IEGPS Sylvie Tillier Consultant LCSEN Supervision/ICR Irina Babich Financial Management Specialist ECSO3 Sandra Broka Senior Rural Finance Specialist ECSAR Andrei Busuioc Sr Financial Management Specialist ECCAT Arcadii Capcelea Senior Environmental Specialist ECSEN Kashmira Daruwalla Senior Procurement Specialist ECSO2 Oxana Druta Financial Management Analyst ECSO3 Usaid I. El-Hanbali Consultant ECSAR Anatol Gobjila Senior Operations Officer ECSAR Daria Goldstein Senior Counsel LEGLE Sara Gonzalez Flavell Special Assistant IEGDG Aleksandar Nacev Consultant ECSAR Cora Melania Shaw Consultant ECSEN William R. Sutton Lead Economist IEGPS Yingwei Wu Senior Procurement Specialist LCSPT (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY05 120.88 38 FY06 239.21 FY07 0.00 FY08 0.00 Total: 360.09 Supervision/ICR FY05 0.00 FY06 16.10 FY07 215.61 FY08 218.02 Total: 449.73 39 Annex 5. Beneficiary Survey Results RISP II conducted final impact assessments for RAS, Rural Finance and Land Re-Parceling Components. Client feedback indicated general satisfaction with project activities. A summary of the key findings are provided below. Rural Advisory Services Component: Following field visits, review of the narrative and accounting reports, discussions with local and regional administration representatives, beneficiaries, regional and local RAS consultants, processing and systematization of information collected from the beneficiaries, the following conclusions were made: 1. The National Network of RAS (NNRAS) has the necessary legal framework regulating the work of rural advisory service in Republic of Moldova (Government Decision on the approval of the Development strategy for rural advisory services for 2012-2022 years, Government Decision on the approval of the Framework Regulation on organization and operation of rural advisory service); 2. The poorest population is still located in the villages and there is a high demand for them in accessing the RAS. Government should continue to support the provision of RAS under the public co-financing, to help the poor population to ensure the minimum of subsistence, to move gradually from subsistence activities toward more commercial operations, and respectively, to obtain a stable income. The RAS beneficiaries have developed their business based on the provided advices. Subsistence farmers were able to accumulate necessary food reserves needed to ensure their family, their food consumption have diversified and significantly increased; 15.8% of beneficiaries began to practice high value agriculture and have started to become more commercial oriented; 3. Activities implemented under RAS Component had positive effects on beneficiaries namely: 72.8% of beneficiaries have increased their family income, 68.2% increased crop yields / livestock and 55.5% of them increased the volume of agricultural output. 4. NNRAS managed to obtain external financing in the share of 47.1% (excluding the RISP II) during the years 2006-2012 and thus achieved the project objective to recover about half of costs; 5. NNRAS failed to register evident and quantitative results due to farmers association and cooperation during the years the implementation of RISP II. The network activity focused more on association of beneficiaries in informal groups for technological training, later on, being expected for a common effort in the marketing of obtained products; 6. NNRAS became a developed structure, of interest for small and medium farmers in accessing basic knowledge in agribusiness development, but also for local structures and donor organizations in accessing, and respectively, providing consulting services in agriculture and rural development; 7. There is a disproportion in remuneration incentives offered to NNRAS consultants because they are not competitive with existing average wages in the economy. Lack of accreditation of consultants and their remuneration without connection to performances, does not ensure the sustainable competitiveness and a significant progress in network development; staff turnover and exodus of highly trained experts in the private sector, remain one of the basic problems in ensuring a proper operation of the network in future; 40 8. Geographical coverage and the presence of qualified consultants in the immediate approach of the targeted beneficiaries makes the network attractive for transmitting knowledge (advisory essentially) to many organizations, not only from agriculture and agribusiness domain. In addition, NNRAS itself as a structure has the skills and managerial capacities for implementation and monitoring of various projects in rural areas; 9. In NNRAS proved an effective collaboration both vertically and horizontally. Network management has created and developed a direct relationship between SP, regional consultants and local consultants and coordination office. This atmosphere ensures a collaboration and continuous knowledge transfer between the three levels: local consultants - regional consultants - national coordination office; 10. SP and LC have established good relations of cooperation with local authorities at all levels, decentralized services and specialized state organizations, nongovernmental organizations. Many activities are planned and conducted jointly with these institutions, ensuring an outcome and a good impact of the implemented activities. RAS consultants are increasingly requested by consulting organizations in the country to facilitate and organize various advisory activities in the service area; 11. There were instructed and trained more than 150 local and regional consultants who possess knowledge to develop a business plan, perfecting set of documents required for participation in the competition for accessing state subsidies; 12. Rural advisory network is actively involved in working with MAFI and AIPA to implement the Government Decision of Republic of Moldova on the use of the fund resources for subsidizing agricultural producers, by organizing informational campaigns at national, district and local levels. NNRAS along with organization of LPA and agricultural producers, informs, publishes and distributes informative materials (brochures, leaflets and posters, provide support to beneficiaries in developing business plans and prepare applications sets to AIPA for state subsidies; 13. Implementation and effective management of the Agricultural Marketing Information System allows provision of market operational information about pricing, potential markets, inputs and marketing of agricultural products, and other useful information, necessary for consultants in advisory and for beneficiaries from agri-food sector; 14. Consultants attended specialized training courses, which had beneficial effect on their skills and capabilities to transmit knowledge to RAS beneficiaries. Numerous local and regional consultants were involved in the training programs organized by NNRAS, MAFI regional offices and ODIMM; 15. Implementation of demonstration business contributed significantly to the implementation of agricultural consultancy and information dissemination among the beneficiaries. Businesses with demonstration features are implemented, especially in the agricultural value added sector (producing vegetables, fruits, berries, ornamental plants, maintenance and reproduction of livestock, marketing and use of production) and non-farm diversification activities (crafts, handicrafts, renewable energy, etc.). Each consultant has an average of 2-4 local stationary demonstration objects. Based on demonstration plots in previous years, the agreement between the beneficiaries and SP, are subsequently used to train farmers and promoting / replication of new business areas. Increased in investment in business demonstration plots was attained from project sources in combination with the corresponding contributions from beneficiaries and created preconditions for increasing business sustainability and efficiency in their training; 41 16. All ACSA publications (series "Business in gardening, horticulture, apiculture, viticulture, in various livestock sectors", and practical guidelines related to integrated management of plant protection) are required by agricultural producers and rural entrepreneurs, serving as practical advice for potential investors who want to start and develop businesses in rural and agricultural sector. NNRAS reserve fund designed for publications was maintained and developed, that contributed significantly to multiplication of advisory materials for beneficiaries. Rural Finance Component 1. The disbursement of total allocated funds and the implementation of project activities is satisfactory and completed in due time. By the end of project all performance indicators, both outputs and outcomes has registered satisfactory values comparing to its appraisal targets, with exceptions of the targeted number of the first time borrowers (164 achieved against 200 targeted in PAD) and absence of the leasing financing. 2. In regard to the first time borrowers the PIU/CDL reports mentions that one of the Project objectives is that no less than 30% of the credit line funding would go for first time borrowers and according to their monitoring data 39.3% of credit line resources were disbursed to the first-time borrowers but nevertheless there is a shortage of 36 disbursed loans to the first time borrowers. 3. Project Development Objective 1: Share of beneficiaries (in %) whose income has increased as a result of project intervention. This impact assessment study has confirmed that 90% of the Rural Finance component’s beneficiaries have increased their income as a result of project intervention. Moreover, according to 90% of the 76 sample SMEs out of the targeted 470 SMEs reported that their business would have grown much slower without the RISP refinanced loan, as they would have most probably not taken out a loan from the bank with between 2 to 5% higher interest rates and a tenor of maximum 2 to 3 years. According to surveyed SMEs financial statements and direct interview, over the period of project implementation, their net sales increase by 206% and the net profit 234%. As for fixed assets SMEs responded an increase of 354%. 4. Project Development Objective 2: Increased growth in lending to agricultural and rural sectors. The CLD could not cross-check own lending reporting by the PFIs, nor does it have the information on the average loan conditions offered by the PFIs in terms of interest rates and loan tenor. What was possible to assess, in terms of a more specific indicator (compared to the next NBM indicator) represents SMEs capacity to access new loans after the RISP II financing, disclaiming that during interviews of the PFIs managers, they mentioned that a company which already have accessed a RISP II loans are more likely in terms of “probability” to be granted with new/additional PFIs loans.Thus the surveyed SMEs have reported access to USD 24.4 million loans of which 35% where loans accessed before RISP II and 47% of total were PFIs loans accessed after RISP II. As for NBM indicator (he only loan sector classifications available on the NBM statistics), AID consultants tracked the overall bank portfolio lending to agricultural sector from 2.7 billion MDL in 2006 to 5.8 billion MDL in 2012. 5. The business key performance indicators of the surveyed SMEs prove the efficient use of capital, exceeding the opportunity cost of capital which has been set at 12%, exceeds total Moldova’s country risk premium of 15%, as well as the annual GDP (6.1% average p.a. over 42 2009-2012) indicating a strong contribution to the economic growth. Thus based on the in depth analyses of the surveyed SMEs financed by RISP it was assessed, that their investments generates a yearly average financial earning before tax and depreciation of circa USD 7.5 million, with an Financial Internal Rate of Return (FIRR) equal to 27.66% and an Financial Net Present Value (FNPV) through the invested fixed assets useful life equal to USD 26.2 million. These indicators underpin the efficient use of funds. 6. Sustainable source of leaving to rural population. During the project implementation the 2995 new jobs created experienced an annual average increase in wages of 10.75% for administrative personnel and 16.25% for workers; this exceeded both inflation and GDP rates. The jobs created by the project were equally divided between women and men. These indicators stress the effectiveness of the project in delivering sustainable works place for both men and women. In average 11 916 USD of RISP II financing (only capital, no TA) was needed to create 1 new job. 7. The maturity of RISP II loans are most appreciated by rural businesses. Based on the PFIs survey, the average maturity of a loan accessed from PFIs own resources is 24 months. As for RISP II portfolio, the maturity of 24 months consists only 3% of total disbursed loans, which again proves the direct positive impact on businesses which invested in long term capital investments. 8. It may be considered as a deficiency that the project did not make a clear objective on the number and total value of leasing loans in the total portfolio disbursed. Nevertheless the PAD of the RISP II Rural Finance Component has stressed the importance of agricultural leasing as an efficient financing instrument to help overcome the persistent lack of sufficient assets to pledge and acceptable for the PFI collateral for investment loans to agricultural and rural SMEs. It was foreseen to offer the PFIs dedicated technical assistance to develop leasing products that would allow them to finance investment of good agricultural and rural SMEs that do not possess sufficient acceptable collateral. However, no PFI considered offering leasing products to their clients and thus did not request any technical assistance under the RISP II Rural Finance Component. 9. The reason for the still today prevailing disinterest of all six PFIs interviewed is that the pre- dominant financial leasing (combining a lease with a purchase arrangement) is impeded by being subject to the full 20% value added tax regime and the underdeveloped regulatory framework. The leasing market is heavily concentrated on consumer leases for limousine cars and other vehicles. Financial leasing is pre-dominant in Moldova whereas operational leasing is almost non-existing. Nevertheless RISP II could have undertaken more efforts - in collaboration with other donors - to help improve the leasing regulatory framework and to offer subsequently TA to the PFIs in leasing product development as originally planned by RISP II in the PAD. 10. The assessment confirmed the conclusions that financing to agricultural SMEs in Moldova, in general, and particularly for larger investments with longer maturity compared to PFIs resources is one of the main constraints of the sector. The average PFI’s loan maturity do not exceed 24 months, with exception for “best clients” when such loan could be extended to 36 month, which still is unsatisfactory for long term investments, especially in agriculture. The main causes of this constraint were: (i) lack of finance for long term investments in agriculture; (ii) low institutional and administrative absorption capacity (iii) banks and financial intermediaries lending practices. 43 11. Appropriateness of lending conditions: The SMEs owners were asked whether they experienced any deviations from requested loan conditions in terms of loan amount, loan tenor, and loan repayment schedule, including requested grace periods. All entrepreneurs were completely satisfied, as they received the loan conditions they requested for. This can largely be explained by the professional business plan support under the RISP II Rural Business Development Component. The PFIs confirmed the importance of the business consultants in preparing good business plans, though one PFI mentioned that some business plans were overoptimistic. 12. Most interviewed entrepreneurs complained about the strict loan collateral requirements and the pressure exercised by their banks to accept a mortgage on their house. Thus the PFIs are rather conservative in their loan collateral requirements by accepting only about 50% of the market value (in real terms) of the financed equipment, machinery or vehicle. In addition, they request such collateral that amounts to at least 150% and in some cases well beyond 200% of the loan amount. The AID consultants observed that the PFIs insisted in most cases on a mortgage on the client´s house. This is not a client-friendly practice, as it creates unnecessary social pressure from less business knowledgeable and entrepreneurial family members, having them to co-sign the loan agreement, plus it binds the entrepreneur to the bank and strongly restricts his/her capacity to obtain further loans from other banks. It should be mentioned that - in the still delicate economic situation - the National Bank of Moldova closely supervises the bank´s loan provisioning which much depends on the quality and scope of loan collateral taken. 13. The PFIs claim that RISP II refinanced loans require three more days until the first loan disbursement compared to their loans refinanced by their own resources due to the submission and approval procedures of the CLD. The PFIs are currently very constrained in waiting for reflow resources to become available and had to promise some clients their disbursements only in a few months from now, providing bridge loans until CLD would disburse the reflow funds. 14. In terms of the loan portfolio quality the CLD also looks at the portfolio-at-risk ration of 60 days (thereafter referred to “PAR60days”) of the PFIs as a secondary indicator of portfolio quality of their overall loan portfolio and the RISP II refinanced loans. The loan recovery ratio is a less adequate indicator for portfolio quality so that the CLD is not using it as a key monitoring indicator for the RISP II loans although the RISP II Project Appraisal Document (thereafter referred to “PAD”) indicates a minimum 95% loan recovery rate as target indicator for the RISP II portfolio quality. However, no loan default has been reported by PFIs to date. 15. Market-based interest rates. Market-based interest rates provide for the financial sustainability of intermediating institutions. Even thou RISP II loans provided lower interest rates compared to the banking system, is had minor effects on the rural business welfare. It is clear that incrementally analyzing the loan terms, a shorter PFI loan of 24 month would generate less interest costs to the business compared to a RISP II loan with an average 60 month principal repayment and respectively with a higher interest costs, even if the RISP II interest rate was less averagely by 4.7%. The main accent which impacted project beneficiaries was the maturity of loans and the beneficial repayment schedule, which at the end of the day were the main factors which reduced rural SMEs default risks. Thus subsidized interest rate is not the answer. As proof there was almost no difference in payback period (including discount payback period) at the analyzed businesses, comparing RISP loans to PFIs loans, i.e. the interest expenses nearly had no sizable impact on SMEs profits. 44 16. The major effect of the rural finance component was on the small and medium companies, which largely/entirely relied on RISP II resources, or as assessed in this document companies with a larger RISP share in their total loan portfolio experience a greater impact of the RISP project. SMEs with less than 30% RISP II share in total loan portfolio proved to be the more indebt companies, thus RISP source had minor effect on their development/expansion. The other groups of companies tend to invest more of own equity and coped with larger RISP II share, experience a greater effect out of RISP II lending program. As sample SMEs with more than 50% RISP II loan share in total loan portfolio, have increased their revenues due to RISP II investment by additional 0.72 - 1.00 dollars per each invested RISP II dollar. Thus large companies which attracted various loans outside RISP II had little effect from the RISP II financing, and vice versa, small companies which predominantly/entirely relied on RISP II loans have the greatest effect from RISP II loans by almost doubling their revenues for each invested RISP II dollar, compared to 0.43 cents for entire group of SMEs. Also it should be taken into account that without a clear client targeting, appointed Service Providers tend to intermediate larger number of loans rather than looking for qualitative clients which would be better suitable for RISP II objective “the project’s second phase objective is to continue to foster post-privatization growth in the agricultural sector by improving access of new private farmers and rural businesses to what they need to succeed – legal ownership status, knowledge, know- how and finance. ” Companies with large PFI loan portfolio and lower RISP II share as overall, more likely that won’t seek RISP II loans for their business extension but rather finance small portion of their assets with no accountable effect on the business as a whole. Land Re-parceling Component Although a final IA was prepared for the Land Re-parceling component in June 2013, a more comprehensive IA analysis was prepared in May 2011 after the pilot re-parceling activities had been completed in 6 villages in 2009. This report, hence, presents a summary of findings of the IA that was prepared in May 2011. 1. The survey conducted on the basis of interviews with 60 farms that participated to the re- parceling component of the RISP II project (beneficiaries‟ group) and 15 farms which were not part of the said project (control group) has highlighted an increase in economic efficiency of the beneficiary group farms. 2. The farms which benefited from land re-parceling worked, in 2010, average areas that were larger than before re-parceling, especially with regard to growing intensive crops. RISP II beneficiary farms work areas that are considerably larger than the areas worked by the control group farms. Similar trends are confirmed for the number of livestock that is bred, which means that the beneficiary farms increased the number of livestock they breed, being, at the same time, higher than that in the control group. 3. The productivity of the farming land expressed in value (gross incomes per hectare) in 2010 is higher against the productivity before re-parceling for all main farming crops, except for potato, ranging from 3.6% to 59.5%. In comparison to the control group, the beneficiary farms have higher productivity for intensive crop growing (fruits and grapes), however lower for growing cereals. 4. The farms which benefited from re-parceling have considerably decreased their costs for the main farming crops by between 16.5% and 31.5% against the period before re-parceling. In 2010, in spite of having, as a rule, higher variable costs per hectare, the beneficiary farms have had lower costs for all basic farming crops then the control group farms, except for wheat. 45 5. As a result of the re-parceling project, the beneficiary farms have built upon their commercial skills, so that 76% of them had sales lower than 10 thousand lei before re-parceling and in 2010, the most of them (66%) stated sales between 10 thousand and 50 thousand lei. 6. During the period following land re-parceling, the structure of gross incomes obtained by the beneficiary farms changed, becoming more balanced (18% of incomes were from growing wheat, fruits and grapes each, 17% from growing cucurbitaceous crops, 12% from growing sunflower, 11% from growing maize and only 5% from growing leguminous plants). At the same time, one can ascertain that in the structure of gross incomes obtained by the farms which participated to land re-parceling, intensive crops (perennial plantations) prevail, while in the gross incomes obtained by the control group farms, extensive crops (cereals) prevail. 7. The increase in economic efficiency of the RISP land re-parceling beneficiary farms is confirmed by the dynamic of the gross margin per hectare and the gross margin rate, which have gone up for all basic farming crops without exception. As a result of agricultural land re- parceling, the mean gross margin per farm has gone up from 780 lei/ha to 1770 lei/ha, which is a 2.3 times increase. In comparison with the control group, the RISP II beneficiaries registered a much higher gross margin, except for the gross margin obtained from growing wheat. 8. Better economic results attained by the beneficiary group farms are also confirmed by the fact that they have managed, in a rather short period of time, to increase their production resources – number of equipment, machines and means of transportation, areas of lands worked, number of livestock, as well as the number of employed workforce. As a result, the number of farm members which have contributed to family budget has grown from 2.26 to 2.44 or by 8.0%. 46 Annex 6. Stakeholder Workshop Report and Results (if any) On 28 June, the final conference dedicated to the completion of the Second Rural Investment and Services Project (RISP II) was held. The event was attended by 70 participants: representatives of ministries, donors, project implementing partners and beneficiaries. The conference presented the results obtained during the project implementation, the findings of the impact assessment studies, and few success stories of beneficiaries of RISP II. The Minister of Agriculture, Mr. Vasile Bumacov offered Diplomas of Excellence for the most active project beneficiaries, donors, service providers and partners. Also, during the final conference dedicated to RISP II a new World Bank Project on Agriculture Competitiveness in Moldova (MAC-P) was presented. MAC-P is also co-funded by the Swedish Government, the Global Environment Facility and the Government of Moldova. The project is being implemented by the Ministry of Agriculture and Food Industry and the Ministry of Environment. 47 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 48 The following section was prepared by the Ministry of Agriculture and Food Industry of the Republic of Moldova. Overall Conclusion On behalf of the Government, the Ministry of Agriculture and Food Industry fully agrees with the assessment of the Project Implementation presented in the present ICR and expresses its deep interest in continuing a fruitful cooperation with the Bank in implementation of other two strategic projects: Moldova Agriculture Competitiveness Project (MAC-P) and Agriculture Emergency Support Project. Project Objectives and Design The project’s second phase objective was to continue to foster post-privatization growth in the agricultural sector by improving access of new private farmers and rural businesses to what they need to succeed – legal ownership status, knowledge, know-how and finance, while building capacity of public and private institutions to ensure sustainability of activities. The Second Rural Advisory Service Project (RISP2) was built on success achieved under the RISP I, by: • strengthening and expanding the rural advisory services; • improving business skills of the to-be entrepreneurs and assisting with the legal registration of the new businesses; • upgrading the financial sector environment through a range of risk management measures, such as supervision capacity building, and introduction of new lending instruments such as leasing; • increase the commercial banking sector outreach into rural areas; and • developing a practical approach to reducing transaction costs in land markets. The Ministry notes also that the design and conceptual content of the RISP2 fully met farmers’ needs and market demands and proved its efficiency and effectiveness. Finally, analysis of the experience accrued during RISP2 implementation has created premises to foster Government support to enhance the competitiveness of agro-industrial products by supporting the modernization of the food safety management system; facilitating market access for farmers; and mainstreaming agro-environmental and sustainable land management practices. All these objectives have been set in a new investment project: Agriculture Competitiveness in Moldova. Project Implementation Project Coordination and Management The Consolidated Agricultural Projects Management Unit (CAPMU) is managing all WB/IDA projects in the agriculture and rural sectors and has been the key agency responsible for coordinating preparation of the projects. Since 1999, CAPMU has been successfully implementing over 10 projects in: agriculture, know-how, business development support, rural finance, rural development, youth socio-economic empowerment, avian influenza control, emergency response, etc. CAPMU has managed to perform high quality fiduciary coordination of the implementation of all project components. Following the set up responsibilities in line with the Government Decision 878, as of September 29, 1999, CAPMU has been assisting MAFI with the procurement of goods, works and services in line with World Bank procurement guidelines. The Unit also managed to ensure knowledge transfer to Component Coordinators designated by MAFI, thus, has built the 49 capacity of the Implementing Agencies to ensure sustainability of activities after the closing of RISP2. The designated accounts, control of disbursements and payments according to eligible project activities have been provided in time with no project delays. Annual audits of project accounts are proof on correctness of procurement and disbursements made. CAPMU staff has a wide experience in implementation of the World Bank financed projects and experience in assisting to other international donor financed projects. CAPMU is equipped with the all necessary office spaces, logistic equipment, transportation means to be able to implement and monitor every project. Rural Advisory Service Component The National Network of RAS (NNRAS) component has been a fundamental and integral part of the Second Rural Investment and Services Project. The objective of the program, consisted of providing long-term support to accelerate agricultural regeneration and growth, so that Moldova's agricultural and rural sectors can play their full role, supporting future revenue growth and poverty reduction. NNRAS provided information, advice and training services during RISP2 through its network of 35 local service providers (SP) with a total of 425 consultants of which: 350 consultants - located within the mayor’s offices in the villages and 75 at regional level (including 5 agricultural marketing consultants). The Ministry of Agriculture and Food Industry acknowledges that NNRAS is directly present in 386 communities of the Republic of Moldova, which constitutes over 26% of all villages in the country (41% of the villages which have own mayoralties). NNRAS succeed an impressive geographical coverage of 41.1% of the population (or 40.9 of households) and 32% of total agricultural land of the country. These are very important indicators regarding the access of potential beneficiaries to consulting services and absorption of provided information. Moreover, RAS network has a 52% coverage rate of the total processed land by peasant farms. RAS Network has produced positive changes among beneficiaries, and namely: at the end of the RISP2 there were 15.6% increased of the number of beneficiaries applying semi-intensive cultivation technologies, with increase of 3.7% farmers applying intensive technologies and with 19.4% reduction of those who use ordinary technology. It should also be noted that there was a positive trend under RISP2 in provision of economic advisory services, which enjoyed a greater interest and constituted over 30% of the total compared to RISP I. Technological consultations decreased from over 75% in RISP I to only 55.9% in RISP2. This is explained by the fact that the beneficiaries have difficulty in accessing economic information, thus accessing this type of information helps them to manage their business more effectively. The final Impact Assessment Study on RISP2 in 2013 revealed significant improvements in farms’ operation efficiency: 54% of adoption rates of technical recommendations of NNRAS consultants, 73% of beneficiaries reported increase in incomes, 69% of beneficiaries reported increase in productivity. Every MDL invested by the project in NNRAS brought 3.38lei in beneficiaries’ productivity. MAFI believes that the NNRAS launched under RISP2 and developed under RISP2 is the most representative structure that provides agricultural consulting and is recognized by both beneficiaries and donors, as a network with a high potential for implementation. As a result of 50 completion of RISP2, Moldova has a national well-organized and functional network, composed of trained and experienced consultants, who have the skills to implement agricultural advisory services based on specific requests from beneficiaries. The Government has fully picked up the financing of the NNRAS starting with 2013 and a 4 years contract has been competitively awarded to the National Agency for Rural Development (ACSA), which successfully administrated all previous NNRAS contracts. Rural Business Development Component Four business development agencies contributed to the creation and operation of rural businesses in Moldova. These development agencies provided technical assistance to (potential) rural entrepreneurs in the formulation of business opportunities, preparation of business plans, facilitation of access to finance from financial institutions and post financing support. MAFI reiterates the impact of this component on the first time borrowers from rural areas, given that 98% of businesses managed to obtain financing from financial institutions. Therefore, as a result of Development Agencies support 1,038 businesses received first time financing support from participating institutions and created 2,645 jobs in a wide range of sectors, including agriculture and livestock (53%), trade (8.6%), food and beverage production (6%), transport (5.7%), and various manufacturing (10.7%). The average age of RB owners is 37 years, of women managers – 38 years, of men – 36.5 years. The share of employment of women and men is 35% and 65% respectively. About 40% of the RBs created with the project support are managed by youth (18-30 years old). This result can be explained by the fact that every second RB managed by youth got financing through the National Program of Economic Empowerment of Youth (PNAET). Almost 60% of the RBs have been financed from direct RISP sources and another 22% from banks’ own resources. The Ministry appreciates highly the close link established between the PFIs and DAs as well as RISP2 approach in providing business development support to all first time borrowers regardless the financing source. Also, a low cost approach applied within this component, to support the services provided by these 4 Development Agencies had a tremendous impact on the financing and sustainability of these institutions. For each dollar invested, about $2.5 of taxes were generated in the first two years of business operations. Moreover, these NGOs have managed to create a solid base of clientele and are operational at regional level. Taxes collected from businesses monitored within a period of 12 months amounted to 11, 758 million lei. Rural Finance Component From the Project’s launching, a total of 470 of loans have been disbursed to 191 rural localities, of which, 135 disbursed to rural villages, 41 to rural towns and 15 to villages surrounding capital Chisinau that have been selected for financing according to the targeting procedure of the project. During the entire period of the RISP2 activity, the total value of loans disbursed reached USD 30 588 897, out which USD 23 947 916 represented RISP2 funds and USD 6 640 981 PFIs co- financing. An important statement related to investments refers to beneficiaries’ contribution, which represented around 65% of the investment reaching up 82 708 583 USD. These investments contributed directly to business growth and led to rural economic development. Considering the 51 scope of investment, the Ministry highly appreciates that RISP2 has managed to maintain a diversified portfolio, financing being evenly disbursed among a series of investment types. In this regard 40% were disbursed to agriculture/agro-processing scope of businesses, 15% to industrial sector, 12% to commercial sector, 10% for transportation sector and 21% to other activities. Seven selected PFIs participated in the financing of rural SMEs, which resulted in financing of 470 SMEs and boosted the creation of more than 2700 working places. Banks’ participation in the project proved their willingness to extend their outreach into the rural and agricultural sectors and the boost. Also, market-based interest rates applied within the project provided for the financial sustainability of intermediating institutions. Another important aspect related to RISP2 credit lines refers to WB ability to respond to emergency situations in agriculture caused by weather conditions, like draught from 2007 and the additional financing provided by the WB to adapt draught consequences by financing investments in small scale irrigation systems with 20% grant. Even though the special credit line dedicated to irrigation equipment which failed to disburse during its first two years of implementation, due to heavy precipitations, and had to be restructured according to MAFI objectives, by creating incentives for minimum till agriculture in Moldova, it eventually reached its initial objective of 3,000 rehabilitated hectares or irrigated land. Also, part of the Rural Finance Component the strengthening of the SCA sector and National Commission for Financial Market capacity is to be mentioned. With project assistance, the NCFM managed to upgrade the legal and regulatory framework for SCAs functionality as well as design and implement methodologies for on- and off-site inspections and risk-based monitoring. This support was provided in time, taken into account the financial crisis from 2008 that severely affected the SCA industry. RISP2 interventions at regulatory and SCA supervisory and risk assessment support. Land Re-parceling Pilot Project The land fragmentation of agricultural land, has become, one of the main problems of agriculture sector in Moldova in the period after privatization. The land re-parceling was first piloted in 6 selected villages (2007-2009) with a later on spread on 40 villages (2009-2010). The target group was the owners of agricultural land with surfaces between 3-30 hectares. All costs related to land transactions were fully paid by the project. MAFI appreciated WB openness to extend the pilot project from 6 to 40 villages. As a result of the implementation of the pilot project, the number of plots in the six localities was reduced from 7220 to 5515. The average number of plots belonging to an owner reduced from 3.74 to 3.32 plots. An area of 1776 ha changed owners as a result of 3612 transactions, based on different methods such as: sale and purchase, exchange and inheritance. The level of participation of the selected beneficiaries (of total land owners) represented 40%, which was appreciated as remarkable result. The Ministry appreciated the economic impact of land re-parceling, as farms which benefited from agricultural land re-parceling project within RISP2 reported to have obtained higher gross incomes and had higher per hectare returns compared to farms which were not covered by the pilot project. Also, it is noticeable that the cost of re-parceling/consolidation of one transaction within the project constituted 115 MDL compared to 500-700 lei per one transaction with existing market price outside the project conditions. 52 Assessment of Project Effectiveness and Sustainability The Ministry of Agriculture rates the project’s effectiveness as satisfactory. The most tangible project achievements to date represent a proof of their further sustainability: 1) General analysis of the economic impact to NNRAS beneficiaries resulted in 371.3 million lei extra production value obtained. This effect is substantial and important to rural income growth and poverty reduction. NNRAS helped to increase farmers' income and welfare. During RISP2 implementation for each MDL spent for NNRAS support additional 3.82lei in extra value was generated. This additional revenue contributed to improving of the living standards of the rural population of the country. 2) The National Network of Rural Advisory Services (NNRAS) has the necessary legal framework regulating the work of rural advisory service in the Republic of Moldova (Government Decision on the approval of the Development strategy for rural advisory services for 2012-2022 years) that ensure its functionality; 3) The Government has managed to continue to support the provision of Rural Advisory Services under public financing, to help the poor population to ensure the minimum of subsistence, to move gradually from subsistence activities toward more commercial operations, and respectively, to obtain a stable income; 4) NNRAS has managed to establish good relations of cooperation with local authorities at all levels, decentralized services and specialized state organizations, non-governmental organizations. For instance, Rural advisory network is actively involved in working with MAFI and AIPA for subsidizing agricultural producers and namely by organizing informational campaigns at national, district and local levels and provision of support to beneficiaries in developing business plans and preparation of applications packages for state subsidies; 5) Over the project life about 2645 new jobs have been opened within 1038 Rural Business (RB) established with the Rural Business Development Component support, while every 5th staff has been unemployed. The average number of employees per RB is 3, while at the same time 1/3 of the new jobs are occupied by women. So, it can be mentioned that every RB created within and with the support of the project generates, on average, one job which is taken by a woman. Besides the financing from the financial institutions, every 3rd RB used remittances from their close relatives for starting the business. 6) 90% of the Rural Finance component’s beneficiaries have increased their income as a result of project intervention. The RISP2’s Rural Finance Component has been quite effective in contributing significantly to the income and employment generation. 7) The RISP2 Rural Finance Component has significantly contributed to the growth in lending to the agricultural and rural sectors. RISP2 credit line has contributed to the enhancement of the overall bank portfolio lending to the agricultural sector from 2.7 billion MDL in 2006 to 5.8 billion MDL in 2012. 8) Moreover, rural SME’s beneficiaries of the RISP2 have affirmed an increase in sales after accessing project loans, totaling to almost USD 13 million or USD 0.43 per every disbursed RISP2I dollar (due RISP loan). 9) The results of the implementation of the re-parceling pilot project led to the development of a national Farm Land Consolidation Program. Thus the MAIA with the RISP2 support and FAO have developed the Land Consolidation Strategy for the years 2012-2027, which is expected to be approved in 2013 as part of a general strategy for agriculture and rural development. World Bank Performance 53 The Ministry of Agriculture and Food Industry is satisfied with Bank's ongoing supervision over the implementation of the RISP2 and its openness towards all requests related to Moldovan agricultural needs. Also, the Ministry highly appreciates the project support in strengthening AIPA institutional capacity over the last years. The former Project Task Team Leader, Mr. Piere Olivier Colleye and the newly appointed Project Task Team Leader, Mr. Anatol Gobjila and the support team demonstrated high professionalism, flexibility and openness towards solving all project related issues, which contributed to the fact that the results achieved during project implementation are noticeable. Main Lessons Learned The problem of insufficient collateral still remains the main obstacle in access to credit for agricultural producers, especially for small ones. The Ministry believed that different leasing schemes would be an effective solving of this problem. However, PFIs did not consider offering leasing products to their clients and thus didn’t request any technical assistance under the RISP2 Rural Finance Component. RISP2 could have undertaken more efforts - in collaboration with other donors - to help improve the leasing regulatory framework and to offer subsequently TA to the PFIs in leasing product development as originally planned by RISP2. Even though RISP2 loans provided lower interest rates compared to the banking system, it had minor effects on the rural business welfare. The main accent which impacted project beneficiaries was the maturity of loans and the beneficial repayment schedule, which at the end of the day were the main factors which reduced rural SMEs default risks. The instrument of land re-parceling which was used during the project implementation proved to be enough flexible and suitable to be in line with the integrated approach towards the development of rural areas and is in line with the present EU rural development policy. Nevertheless, land re-parceling/land consolidation in Europe, is seen as the instrument to facilitate (not substitute) the land market development thus creating attractiveness for investment. There would be needed to take into consideration the possibilities to use land consolidation as a tool for accelerating land market development in Moldova. 54 55 56 57 58 59 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders The draft ICR was shared with Sida. A response was received from Mr. Henrik Huitfeldt, Counsellor/ Head of Development Cooperation in Embassy of Sweden in Moldova on December 5, 2013 where Mr. Huitfeldt stated that “the report is comprehensive, containing all relevant information such as achieved results against the benchmarks, lessons learnt, sustainability, and ownership.” In addition, he mentioned that Sida has no additional comments to the report. 60 Annex 9. List of Supporting Documents Project Appraisal Document, Moldova Second Rural Investment and Services Project In Support of the Second Phase Rural Investment Services Program (Adaptable Program Lending, February 2, 2006); Report No.: 35377-MD; AF & Restructuring Project Papers (AF Project Paper dated April 17, 2008 No.:4315-MD; AF Project Paper dated April 17, 2009 No.:4784-MD; Restructuring Paper dated October 5, 2011 No.: 62687-MD; Restructuring Paper dated April 10, 2012 No.: 67714-MD); Project Aide Memoirs and ISRs; CAPMU Annual Project Progress Reports; Project Mid-Term and Final Impact Assessments; Economic Growth and Poverty Reduction Strategy Paper (2004-2006) of the Government of Moldova, May 2004; Moldovan Village Program of the Government of Moldova, March 2005; Agricultural Policy Notes, World Bank, June 2006; Moldova: Opportunities for Accelerated Growth, Country Economic Memorandum, World Bank, September 2005 Country Assistance Strategy (FY05-FY08), World Bank, December 2004; Country Assistance Strategy (FY09-FY12), World Bank, December 2008; Country Assistance Strategy (FY14-FY17), World Bank, August 2013; Implementation Completion Report for RISP I, World Bank, April 2005; Financial Sector Assessment, World Bank, March 2005; Moldova Poverty Update 2006, World Bank, June 2006; Poverty Reduction Strategy Paper, Joint IDA/IMF Staff Advisory Note, April 2006 61 Annex 10. Revised Key Indicators: Table 1 Data Collection and Reporting Intermediate Target value Responsibility Outcome Baseline value Frequency and Data Collection (YR4) for Data Indicators Reports Instruments Collection Drought Adaptation Component Irrigation Finance Services Sub-Component Number of rehabilitated Reports from DA CAPMU and 0 3,000 Semi-Annually hectares irrigated and PFIs CLD (cumulative) Size of investments in Reports from DA CAPMU and 0 US$6 million Semi-Annually irrigation and PFIs CLD (cumulative) Drought Adaptation Advisory Services Sub-Component Number of beneficiaries on Reports from ACSA and - 35,000 Quarterly topics related to ACSA CAPMU irrigation Adoption rates of drought Reports from adaptation ACSA and ACSA and 0 30% Annually agronomics Impact CAPMU (as % of number Assessment of beneficiaries) Table 2 Data Collection and Reporting Outcome Target value Responsibility Baseline value Frequency and Data Collection Indicators (YR6) for Data Reports Instruments Collection Relative increase in productivity in project beneficiaries -Growth in lending to agricultural and 10% Quarterly Portfolio reports Credit Line rural sectors in progress reports by PFIs Directorate the portfolios of financial intermediaries -Percentage of beneficiaries 80% whose income has increased Component 1: Rural Advisory Services -Number of beneficiaries of Quarterly Reporting data services 300,000 400,000 progress reports from ACSA (including repeat MAFI clients) -Percentage of Reporting data revenues of <3% 25% Annual reports from ACSA, regional and impact 62 local consultants assessment derived from report, special users or other studies sources outside central government’s budget Component 2: Rural Business Development -Number of Report from businesses Quarterly 0 600 Development CAPMU created and progress reports Agencies registered Component 3: Rural Finance -Number of loans disbursed 0 450 PFI reports from the credit facility Quarterly Credit Line -Good portfolio progress reports Directorate quality in the SSB and RFC SCAs as 5% <5% reports measured by PAR 30 Component 4: Land Re-Parceling Pilots -Land re- parceling implemented with Quarterly Assessment 0 n/a MAFI participation of progress reports reports at least 30% of the population in 40 villages -The average number of Household Baseline and distance to surveys in pilot MAFI and 0 n/a evaluation parcels per and control CAPMU reports household is villages reduced -Total factor Household Baseline and productivity of surveys in pilot MAFI and 0 n/a evaluation agriculture has and control CAPMU reports increased villages -The number and Baseline and MAFI, CAPMU size of land 0 n/a evaluation Cadastral data and Cadastral transactions are reports Agency increased Component 5: Drought Adaptation Component Irrigation Finance Services Sub-Component Number of Reports from rehabilitated Development CAPMU and 0 3,000 Semi annually hectares irrigated Agencies and CLD (cumulative) PFIs Size of Reports from investments in Development CAPMU and 0 US$6 million Semi annually irrigation Agencies and CLD (cumulative) PFIs Drought Adaptation Advisory Services Sub-Component Number of beneficiaries on Reports from ACSA and - 35,000 Quarterly topics related to ACSA CAPMU irrigation Adoption rates of 0 30% Annually Reports from ACSA and 63 drought ACSA and CAPMU adaptation Impact agronomics Assessment (as % of number of beneficiaries) Table 3 Data Collection and Reporting Outcome Responsibility Original Target Revised Target Frequency and Data Collection Indicators for Data Reports Instruments Collection Component 3: Rural Finance -Number of loans disbursed 0 600 PFI reports from the credit facility Component 5: Drought Adaptation Component Number of Reports from CAPMU and rehabilitated Development CLD 3,000 700 Semi annually hectares irrigated Agencies and (cumulative) PFIs Size of Reports from CAPMU and investments in Development CLD US$6 million US$1.2 million Semi annually irrigation Agencies and (cumulative) PFIs 64 Annex 11. Core Sector Indicators Results: Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or documents) Target Years Indicator 1 : Volume of Bank Support: Lines of Credit - Microfinance Value 1,100,000 Date achieved 03/31/2013 Comments This indicator is monitoring purpose only. Indicator 2 : Volume of Bank Support: Lines of Credit - SME Value 24,600,000 25,400,000 Date achieved 06/30/2013 03/31/2013 Comments This indicator is monitoring purpose only. Indicator 3 : Volume of Bank Support: Enabling Environment - Microfinance Value 410,000 500,000 Date achieved 06/30/2013 03/31/2013 Comments This indicator is monitoring purpose only. Indicator 4 : No of active loan accounts -Microfinance Value 20,000 40,000 34,857 Date achieved 06/30/2013 03/31/2013 Comments This indicator is monitoring purpose only. Indicator 5 : Percentage of project-supported institutions that are reporting on this indicator Value 100 % 100 % 100 % Date achieved Comments This indicator is monitoring purpose only. Indicator 6 : No of active loan accounts -SME Value 1,038 Date achieved 12/31/2012 Comments This indicator is monitoring purpose only. Indicator 7 : % active loans to women - Microfinance Value 10 20 37 Date achieved 06/30/2013 03/31/2012 Comments This indicator is monitoring purpose only. Indicator 8 : Percentage of project-supported institutions that are reporting on this indicator Value 0% 100 % 100 % Date achieved Comments This indicator is monitoring purpose only. Indicator 9 : Outstanding SME Loan Portfolio Value 83,200,000 Date achieved 03/31/2012 Comments This indicator is monitoring purpose only. Indicator 10 : Percentage of project-supported institutions that are reporting on this indicator Value 100 % Date achieved Comments This indicator is monitoring purpose only. 65 Indicator 11 : Outstanding Microfinance Loan Portfolio Value 22,000,000 Date achieved 03/31/2011 Comments This indicator is monitoring purpose only. Indicator 12 : Percentage of project-supported institutions that are reporting on this indicator Value 100 % Date achieved Comments This indicator is monitoring purpose only. Indicator 13 : Volume of Bank Support: Institutional Development - Microfinance Value 50,000 145,000 Date achieved 06/30/2013 03/31/2013 Comments This indicator is monitoring purpose only. Indicator 14 : Volume of Bank Support: Institutional Development - SME Value 280,000 300,000 Date achieved 06/30/2013 03/31/2013 Comments This indicator is monitoring purpose only. 66