The World Bank Report No: ISR9819 Implementation Status & Results Afghanistan AF Rural Enterprise Development Program (P110407) Public Disclosure Copy Operation Name: AF Rural Enterprise Development Program (P110407) Project Stage: Implementation Seq.No: 6 Status: ARCHIVED Archive Date: 12-Jun-2013 Country: Afghanistan Approval FY: 2010 Product Line: IBRD/IDA Region: SOUTH ASIA Lending Instrument: Specific Investment Loan Implementing Agency(ies): Key Dates Board Approval Date 09-Mar-2010 Original Closing Date 01-Jan-2015 Planned Mid Term Review Date 03-Sep-2012 Last Archived ISR Date 16-Dec-2012 Effectiveness Date 14-Jun-2010 Revised Closing Date 01-Jan-2015 Actual Mid Term Review Date 01-Oct-2012 Project Development Objectives Project Development Objective (from Project Appraisal Document) Increased income and sustainable employment opportunities for men and women through supported rural enterprises. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Community-based Enterprise Development 37.35 SME Development 22.30 Project Implementation Support 27.59 Overall Ratings Previous Rating Current Rating Moderately Satisfactory Moderately Unsatisfactory Public Disclosure Copy Progress towards achievement of PDO Overall Implementation Progress (IP) Moderately Satisfactory Unsatisfactory Overall Risk Rating Implementation Status Overview This ISR follows Restructuring Mission (March-April 2013) following decision of MTR for a Level-II restructuring, based on approximately two and a half years of implementation. 2. The main objective of the restructuring mission was to improve the project outcomes by right-sizing it through: (i) reduction in scope and end-of-project targets; (ii) partial cancellation and reallocation of funds amongst existing and new activities; and (iii) adjustments to project implementation arrangements. The mission reviewed various restructuring proposals submitted by the Ministry of Rural Rehabilitation and Development (MRRD)/AREDP team. The Ministry of Finance (MoF) had also submitted a detailed request in this respect. Based on actions agreed during the mission, the task team would finalize the restructuring paper for consideration by the Bank management. Going forward, AREDP implementation arrangements will be changed from the current model, which relies heavily on public sector to private sector-led service delivery system, based on the following strategic thrusts: a) Page 1 of 9 The World Bank Report No: ISR9819 Reliance on service providers; b) Focus on import substitution; and, c) Entrepreneurship based on natural resource endowment of respective areas. COMPONENT A - The financial outlay stands revised from US $37.35 to US $11.4 The original project design focused on Enterprise Groups (EGs) whereas implementation experience reveals that Saving Groups (SGs) are by far the most successful entities. The project also design missed out ‘Graduation’ from one entity to other, or from one state of Public Disclosure Copy entrepreneurship to the other. Thus, project level outcome indicators have been revised to capture ‘graduation’, as well as give flexibility in defining beneficiaries to allow organic growth. The EoP target for the component is revised to 6,500 SGs, 800 EGs and 400 VSLAs. The component has shown impressive progress. Achievements as of February 28, 2013 include: (a) mobilization in 488 villages of 22 districts in five project provinces; (b) formation of 3,474 SGs of which 1,747 (50.3 per cent) are Female Saving Groups (FSG); (c) membership of SGs reaching 41,619 out of which 21,052 (50.6 per cent) are women; (d) number of EGs formed is 322, including 200 (62.1 per cent) are female managed EGs; (e) Out of the 2,181 EG members, 1,379 (62.1 per cent) are women; (f) since inception AREDP SG members have saved AFN 62.7 million, out of which AFN 31 million (49.4 per cent) were saved by women; and (g) of the total AFN 47.7 million inter-loaned, AFN 22.1 million (46.4 per cent) has been disbursed by FSGs, with women constituting 57 per cent of the 6,417 borrowers. In addition, 477 SGs have federated to form 47VSLAs. Overall the mission was satisfied with progress made under this component. Overall savings have surpassed US $ 1.2 million mark and internal lending has found roots with groups demonstrating an excellent recovery rate of over 95 per cent with 0.01 per cent of the amount disbursed in default. It was also noted that there has been very impressive women participation in group membership and active participation. In some cases the achievements exceeded targets, e.g. in case of female EGs established, which are more than 50% of the total established EGS against the target of the 35% . Similarly, in terms of saving groups and amount of savings, female beneficiaries count for 50% of the achievements. COMPONENT B - SME development: Whereas original project design was overambitious in terms of outcomes and outputs, the component has not been able to report data on outputs and outcomes except for 22 SMEs and that too in the month of April 2013. Financial outlay revised from US $ 23.3 m to US $ 6 m. The component was expected to be especially supportive of sector wide initiatives through existing suppliers, or where not available, by direct project provision. The project was also to build capacity among existing suppliers of services. Whereas in some cases, services of exiting entrepreneurs have been utilized, no regular data is available for review. The project staff has been busy in direct implementation instead of developing service providers. Keeping in view significance of the component and experience of the AREDP field staff, scope of work of the Component B is revised. The component will not add any more urban SMEs to its current portfolio. However, it may continue working with already identified eligible SMEs. EGs or SG beneficiaries having surpassed US$10,000 sales will graduate to component B. SG borrowers having completed three cycles of loan and desirous of having fourth loan, will graduate to component B. Any entity having four employees and/or assets, including owners equity, of US$ 10,000 or more will be supported by component B. Selected Business Development Services Officers (BDSOs) be designated as Enteprise Coordinators (ECs) and transformed to become private service providers. With regards to progress, a total of 875, including 113 female SMEs have expressed their interest in availing themselves of AREDP services, with 469 (including 74 female-owned) being shortlisted for the Technical Feasibility (TF) and Economic Viability (EV) studies. Of the shortlisted SMEs, TF and EV studies were completed for 421 (including 61 female- owned), out of which Business Plans were developed for 342 SME (including 48 female-owned). AREDP has signed Letters of Understanding (LoU) with 281 SMEs (including 39 female-owned), that they would provide services to other entrepreneurs, after receiving training (including exposure visits) by the project. A total of 388 individuals from 89 SMEs (including 31 women) participated in exposure visits, trainings and exhibitions. The component is rated as moderately unsatisfactory. COMPONENT C: Project Implementation Support (i) Significant progress made by the M&E and MIS teams since the last ISM. The AREDP team has developed a new MIS; data collection mechanisms and forms, including annual Public Disclosure Copy and monthly reporting formats; and completed the transfer of historical data from excel sheets into the newly developed MIS. However the baseline information for the project beneficiaries is yet to be collected and there have been many delays in compiling profiles of SG and EG members and SMEs. (ii) However, despite repeated mention in previous Aide Memoires project has not been able to disburse matching grants to VSLAs. Bulk of the expenditure i.e. 70% appeared to be on project management instead of program, however detailed review reveals that initially, for almost for the first eighteen months of project life, some of the program expenditure was charged to this component, indication of weak managerial practices . Owing to multiple factors, disbursement is extremely slow and data on some of the key outcomes is not available. The component is rated as Unsatisfactory. The financial outlay has been revised from US$ 27.59 m to US $17.7 m, which includes Project Prep as well as studies for a follow-up project. Locations Page 2 of 9 The World Bank Report No: ISR9819 Country First Administrative Division Location Planned Actual Afghanistan Wilayat-e Parwan Wilayat-e Parwan Public Disclosure Copy Afghanistan Wilayat-e Nangarhar Wilayat-e Nangarhar Afghanistan Herat Wilayat-e Herat Afghanistan Wilayat-e Bamyan Wilayat-e Bamyan Afghanistan Wilayat-e Balkh Wilayat-e Balkh Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target 70% of Enterprise Groups (EGs) will have Text Value 0 70% of Enterprise Groups increased their net revenues by over 50%. At Date 14-Jun-2010 31-May-2012 01-May-2015 least 35% female. Comments 4 EGs were found in Parwan Data on net revenues is Data for this indicator will be Province during the pilot currently being collected and collected from the MIS and phase reported on in the EG Annual Impact Evaluation. Reports. Atleast 30% of participating SMEs and EGs will Text Value 0 30% increase in direct have increased direct employment by atleast employment from project 30%. Of these atleast 35% will be women supported EGs and SMEs Date 14-Jun-2010 31-May-2012 01-May-2015 Comments 1734 SMEs identified in the A total of 1,122 rural poor 30% of supported SMEs and 34 Provinces through the directly employed into 53 EGs SME survey male and 74 female EGs 50% of EGs supported by the Project will still Text Value 0 50% of EGs be operating 2 years after start up. At least Date 14-Jun-2010 22-May-2011 01-May-2015 35% will be female Comments Data for this indicator will be EOP Target-at least 50% of Public Disclosure Copy be collected after 2 years of enterprises still operating start of the EG component work. On an average, SMEs will report at least a 50% Text Value 0 50% increase in purchase of increase in purchase of inputs from rural areas. inputs from rural areas Date 14-Jun-2010 22-May-2011 01-May-2015 Comments Data not yet available EOP Target 50% increase buying (Actual achievement ) Page 3 of 9 The World Bank Report No: ISR9819 Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Project management's analysis adn promotion Text Value 0 2 value chains per province Public Disclosure Copy of viable business models leads to at least 2 Date 14-Jun-2010 business models taken up as investment per Comments Value Chain analysis studies year have been completed for four provinces and for one province the final report is yet to be submitted. Project management's development and Text Value 20 standing offers for services accreditation of technical and professional delivered/provinces service providers results in at least 20 project Date supported BDS service providers providing Comments 6 participants from 3 Honey paidfor services Business SME's were taken to Nangarhar province where the AREDP supported SME delivered comprehensive training on Honey bee keeping and processing. 9 participants from 7 poultry SME's of Kandahar and Helmand were taken to Islamabad, Pakistan for a comprehensive training on poultry business. Project management takes and records all Text Value No findings Satisfactory necessary actions related to findings of regular Date 22-May-2011 monitoring, evaluation and learning reports Comments Qualitative monitoring and learning reports are regularly prepared by M&E unit and are presented to management of AREDP and necessary Public Disclosure Copy feedback has been given. Project management's development and Text Value 20 accreditation of technical and professional Sub Type Date service providers results in at least 20 project Breakdown Comments 6 participants from 3 Honey 20 standing offers for services supported BDS service providers providing paidfor services Business SME's were taken delivered/provinces to Nangarhar province where the AREDP supported SME delivered comprehensive training on Honey bee Page 4 of 9 The World Bank Report No: ISR9819 keeping and processing. 9 participants from 7 poultry SME's of Kandahar and Helmand were taken to Public Disclosure Copy Islamabad, Pakistan for a comprehensive training on poultry business. All complaints received by Project and field Text Value No complaints 70% disposed staff are addressed within an established Date 22-May-2011 timeframe adn according to agreed standards Comments Framework for Grievance 70% disposed Redressal system has been developed and action plan is yet to be developed for implementing it. Project management satisfactorily addresses Text Value No issues Findings addressed within 3 the findings of the statutory audit conductd by months the Auditor General for all IDA-fonanced/ Date 22-May-2011 managed projects; and findings from an Comments Not available Findings addressed within 3 additional commercial audit months At least 70% EGs and VSLAs maintain Text Value 0 70% of the 4,578 EGs and accurate and up-to-date records of accounts 70% of the 916 VSLAs formed and have a good governance structure in Date 14-Jun-2010 31-May-2012 01-May-2015 place; and at least 80% VSLAs recieve seed Comments No SGs, EGs or VSLAs capital formed or supported prior to this project 50% of EGs have accessed and repaid loans Text Value 0 50% EGs (of the 3,270 EGs) Date 14-Jun-2010 31-May-2012 01-May-2015 Comments 0 EGs were formed at Project EGs were formed one year Effectiveness ago and are currently received technical support from the project before they Public Disclosure Copy can assess loans 50% of EGs have improved products and Text Value 0 50% or 655 EGs diversified marketing strategies Date 14-Jun-2010 31-May-2010 01-Jun-2015 Comments No EGs were formed at Not available 655 EGs project effectiveness Page 5 of 9 The World Bank Report No: ISR9819 At least 70% of viable SGs federate into VSLAs Text Value 0 70% of SGs federate into 916 VSLAs Date 14-Jun-2010 31-May-2012 01-Jun-2015 Public Disclosure Copy Comments No VSLAs were formed at project effectiveness VSLAs maintain at least 95% repayment rate Text Value 0 95% repayment rate with 60% on loans and at any given time have at least loanable funds for the 916 60% of loanable funds project supported VSLAs to be formed who will lend to SGs Date 14-Jun-2010 31-May-2012 01-Jun-2015 Comments 0 VSLAs were formed at 17 VSLAs formed but inter- project effectiveness lending has not yet begun Atleast 60% of VSLAs have an accumulated Text Value 0 60% of the 917 project loan-able capital of at least $15,000 supported VSLAs Date 14-Jun-2010 31-May-2012 01-Jun-2015 Comments 0 VSLAs formed at Project Data not available; VSLA Effectiveness profiles forms being developed and data collection to be completed by October 2012 At least 50% increase in purchases from rural Text Value 0 50% of 125 SMEs supported areas by supported SMEs by the project Date 14-Jun-2010 31-May-2011 01-Jun-2015 Comments 0 SMEs supported by the Not available 50% increase in purchases project at baseline from rural areas after project support At least 30% increase in direct/and or indirect Text Value 0 5,644 new jobs created employment through the project support Date 14-Jun-2010 31-May-2011 Public Disclosure Copy Comments No baseline data available No indirect employment data EOP target 225 SME and can be collected at this point 1950 Egs will be increasing employment At least 50% of SMEs meet the partial Text Value 0 50% of SMEs or 63 guarantee scheme criteria, apply for a loan, Date 14-Jun-2010 22-May-2011 01-Jun-2015 and receive it Comments Contract the PRG 50% or 63 SMEs administrator is currently being negotiated, before criteria, assessments and PRG facility can begin Page 6 of 9 The World Bank Report No: ISR9819 At least 5 SMEs per province per year apply for Text Value 0 5 prizes the innovation grant and 1 SME per province Date 14-Jun-2010 31-May-2012 01-Jun-2015 introduces business innovation Comments 0 The innovation grant 5 Prizes Public Disclosure Copy mechanism has not yet been established Dissemination of improved database of local Text Value 0 25% local businesses businesses by project management leads to contacted for trade progressive increase in trading transactions Date 14-Jun-2010 31-May-2012 01-Jun-2015 reported by provincial office Comments Data on Financial Performance (as of 15-May-2013) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P110407 IDA-H5310 Effective 09-Mar-2010 11-Apr-2010 14-Jun-2010 01-Jan-2015 01-Jan-2015 P110407 TF-98045 Effective 27-Oct-2010 27-Oct-2010 27-Oct-2010 01-Jan-2015 01-Jan-2015 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P110407 IDA-H5310 Effective USD 30.00 30.00 0.00 11.64 17.49 39.00 P110407 TF-98045 Effective USD 16.00 16.00 0.00 4.81 11.19 30.00 Disbursement Graph Public Disclosure Copy Page 7 of 9 The World Bank Report No: ISR9819 Public Disclosure Copy Key Decisions Regarding Implementation The main objective of the restructuring mission was to improve the project outcomes by right-sizing it through: (i) reduction in scope and end-of-project targets; (ii) partial cancellation and reallocation of funds amongst existing and new activities; and (iii) adjustments to project implementation arrangements. The mission reviewed various restructuring proposals submitted by the Ministry of Rural Rehabilitation and Development (MRRD)/AREDP team. The Ministry of Finance (MoF) had also submitted a detailed request in this respect. Based on actions agreed during the mission, the task team would finalize the restructuring paper for consideration by the Bank management. Out of US$46.0 million committed (IDA = US$30 million and ARTF = US$16 million), US$15.74 million has been disbursed, leaving a total balance of US$29.39 million. Of this, it is projected that US$19.93 million would be needed to finance the revised project activities. Therefore, an ARTF grant balance of US$10.56 m will be canceled immediately. Given that it is a level II restructuring, the PDO remains unchanged. However, the project outcome and intermediate level indicators are revised based on implementation experience and current economic trends. Thus, project level outcome indicators have been revised to capture ‘graduation’, as well as give flexibility in defining beneficiaries to allow organic growth. For example, when more enterprising members are leaving SGs to focus on their individual businesses. Keeping in view pyramidal growth in entrepreneurship development, it is imperative that flexibility is used in categorizing and defining beneficiaries. Therefore, beneficiaries have been re-defined as ‘enterprises’, which encompasses the current individual beneficiaries from within the SGs, EGs and Small and Medium Enterprises (SMEs). Going forward, AREDP implementation arrangements will be changed from the current model, which relies heavily on public sector to private sector-led service delivery system. One Public Disclosure Copy of the major impediments to efficient and effective service delivery has been public sector approach adopted for executing a private sector mandate. Therefore, it was agreed that in the remaining project life, service providers will be used to deliver AREDP interventions. To develop micro-level service providers to serve rural entrepreneurs, special initiatives will be undertaken, including transforming the current AREDP staff into service providers. Under this arrangement, the service providers will move from fixed monthly salaries to be paid on deliverables at a rate agreed with the SGs, EGs and SMEs. Additional training to build the capacity of service providers would be required under the project. Because of location disadvantage and lack of processing industry, there is heavy reliance on imports. Whereas in the absence of processing industry, import of some of the finished goods and intermediate raw materials is understandable, import of items, such as fruits and vegetables cannot be justified. Therefore, it was agreed that AREDP will work on import substitution for such items, to start with. In line with the preceding, microenterprises based on natural resource endowment of their respective areas are likely to be more profitable. For example, carpet making using local raw material and skills are more viable than the those based on imported raw material. Restructuring History There has been no restructuring to date. Page 8 of 9 The World Bank Report No: ISR9819 Related Projects There are no related projects. Public Disclosure Copy Public Disclosure Copy Page 9 of 9