Document of The World Bank FOR OMCIAL USE ONLY Report No. 5392 PROJECT COMPLETION REPORT KINGDOM OF MOROCCO FOURTH AGRICULTURAL CREDIT PROJECT (LOAN 1704-MOR) December 28, 1984 EMENA Regional Office This document has a restricted distribution and may be used by recipients ony in the performance of their oficial duties. Its cotents may not otherwise be disclosed without World Bank authorization. CURRENCY EXCHANGE RATES Currency Unit = Dirhban (DH) Appraisal Year Average US$1.00 = DH 4.00 Intervening Year Average US$1.00 = DH 5.75 Completion Year Average US$1.00 = DH 7.50 WEIGHTS AND MEASURES Metric System ABBREVIATIONS BNDE National Developmerit Bank : Banque Nationale pour le Developpement Economioue CLCA Local Agricultural Credit Bank * Caisse Locale de Credit Agricole CNCA National Agricultural Credit Bank * Caisse Nationale de Credit Agricole CRCA: Regional Agricultural Credit Bank Caisse Regionale de Credit Agricole IFAD International Fund for Agricultural Deveopment - Fonds International pour le Developpe!ment Agriole KfW Kreditanstalt fir Wiederaufbau MARA Ministry of Agriculture and Agrarian Reform - Ministere de l'Agriculture et de la Reforme Agraire GOVERiNMENT OF THE KINGDOM OF MOROCCO FISCAL YEAR Calendar Year FOR OmCIIAL USE ONLY lINGWOK OF NOROCC) FOUlRTH AGRICLTURAL CREDIT PROJECT (IOAN 1704-NOR) PROJECr ODHPLETION REPORT Table of Contents Page PREFACE ....................................... .......... i BASIC DATA SHEET ..ii HIGELIGHTS ..iii 1. INTRODUCTION .. Background . Bank financed agricultural credit projects .I II. PROJECT PREPARATION AND APPRAISAL. 2 Project appraisal, negotiations and effectiveness 2 Project design and objectives. 2 III. PROJECT IMPLEMENTATION .3 Project execution ................._ 3 Project costs. 3 Disbursements. 5 Financial performance. 5 Institutional Development. 6 IV. ECONOMIC RE-EVALUATION. 7 V. CDNCLUSIONS. 7 ANNEX I : Comparison of appraisal and actual cost distribution by category of subborrower ANNEX 2 : Comparison of appraisal and actual cost distribution by investment category ANNEX 3: Comparative balance sheets: 1979-1983 ANNEX 4: Comparative income statements: 1979 - 1983 Table 1: Disbursement Profiles Appendix 1: Comments from CNCA Appendix 2: Comments from KfW J This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - i - MOROCCO FOURTH AGRICWLTURAL CREDIr PROJECT DOAN 1704-M0R PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCa) for the Fourth Agricultural Credit Project for which Loan 1704-NOR was approved in May 1979 for the sum of USt70 million. The Project was cofinanced by KFW (USS50 million) and IFAD (USt25 million). The loan was closed with an eight month delay due in part to the 1980-81 drought which curtailed investment and credit recovery and the fast appreciation of the US dollar which slowed down loan disbursements vis-b-vis C(CA disbursements. This PCR was prepared by the EXENA Projects Department, Agriculture II Division in June 1984. The PCR was prepared on the basis of information available in the Department and made available by Caisse Nationale de Credit Agricole of Morocco. The main sources of information were: Appraisal Report No 2426 MOR dated April 30, 1979, Supervision reports, correspondence with the Borrower and internal Bank memoranda as contained in the EMENA Information Center. The PCR was received by OED on June 11, 1984. The PCR was not selected for audit by OED. The draft completion report was sent to the Borrower and cofinanciers for comments on September 4, 1984. Comments which were received have been taken into account in the report and are reproduced as Appendices 1 and 2. - ii - rr am -EOR BASIC IMa r UY P m jiect DAM A i Aml o A2u1 a Z of Piojet cot5 (MINifl 2.%8. 2,896.0 98 Lain mi (Uv 1i 70.0 70m0o (u$t mua MEW 50.0 50.0 1D0 IFAD 25.0 25.0 0DO Date 3omd apiv.aal 05122/79 Date effDeciese 08/05/79 1205/79 Clksiz d.e 12/31/8! 08/31183 aŁ nrte of rduu(z) 20 16 80 Nmbe of stims 400,OOD 351,373 as Qusllime DiFrents180 FY81 FY82 FYl3 F184 Apprauis1 ataa.te (t5S wilioo) 14.4 35.7 63.1 70.0 &inal (US; ;iaI 2.4 16.0 33.0 65.9 70.0 Actzl as Z of estiate 17 44 52 94 Dae of final diaramat 08/83 misan DM IboAkys Do Rb. of in Specialimiow Pafde l"' of _____c (-/yr) p fied r _d /a /b Tr-d c pcbl /d .,di/PLenracai 08/72 3 63 E FA A Apraiml 06/73 3 63 (2) E FA A Subtotal 6 126 svisim 1 03/80 1 6 FA 1 5.evisim 2 08/ 2 16 E FA 1 Siwvision 3 05/81 3 45 E FA A 2 2 pH Syervsim 4 10/8L 1 15 E 2 2 pi 0 94q,visi. 5 1/82 1 5 E 2 2 H 0 Verwisim 6 08/83 1 5 E 2 2 M 0 Sxotal 9 92 Total 15 218 * Odix Proj a IoCCrOi CisUe National de CrMit Agricole (QW Enwuoing agy Caisse Natimale de Cv6dit Agicole (OQA Fiscal year &eteuier 1 - hAWat 31 Nhe of cwrey (W*reviatica): Dihm (DM) CuQmey e-hmW rate: Apaial ye a ar 1979 US$1.00 - IH 4 Inter-misg ye- aveap 1979-1983 tftl.00 - Di 6 Caleeatigm Wear avge 1M83 US$1.00 -1 B 8 /a E - erwit; FA - fincial amlyst; A - agronomist lb 1 - prcblae-free o mi problem; 2 tmderate prbdis; and 3 - mjor pcoblem 7T I - imprtwizg; 2 - statioumy; and 3 - detericatig 7T F - fi ial; 1f - mgerial; T - tedmial; P - political; ard 0- otie. Follup ptoject: Title: Fifth Agriciltural Ciedit Projwct Ioan Lmber: 2367-KR LOME t (Mit uMilion): 115.4 Date Bad Aprond: 12/13/83 - iii- MOROCCO FOURTH AGRI CULTURAL CREDIT PROJECT IOAN 1704 14OR PROJECT COMPlETION REPORT HIGHLIGHTS 1. The Fourth Agricultural Credit Project objectives were to finance: e (a) livestock and irrigation and agricultural equipment for small farmers; (b) mechanization for Agrarian Reform Cooperatives; (c) mechanization, irrigation equipment and land improvement for medium and large farmers; (d) agroindustry mainly for oil processing, flour milling, milk pasteurization; and Ce) a computerized monitoring and evaluation system. 2. The Bank Agricultural Sector Strategy in Morocco emphasizes faster growth in rainfed areas and increased operational efficiency and financial self-sufficiency of agricultural activities within large irrigation schemes. It also supports structural adjustment policies to broaden the impact of sectoral investment and lending and institution building with special attention to medium term planning and Project preparation. 3. The Pro.ect achieved its main objectives to finance subsistence production at the small farmer level and to increase coummercial crop production. It was less successful in financing agrarian reform cooperatives because of lack of credit worthiness of most cooperatives and a review of agrarian reform policy by the Government which held up investm2nt. It also fell short in reaching its objectives in agroindustrial investment as a consequence of the 1980-82 economic recession and lack of appropriate promotion. These two components,however, involved only 19Z of Project financing and absorbed about 8% of Project's funds. The impact of their partial lack of success was marginal with regard to the Project's main objective. Project investment costs were in line with SAR estimates although the cost distribution percentages differed to some extent. Efforts to establish an efficient monitoring and evaluation system did not meet with success and eventuall, a similar but revised component had to be included under the Fifth Agricultural Credit Project (FY84). - iv - 4. CNCA financial performance was fully satisfactory during Project implementation. From 1979 to 1983 its assets more than doubled with the largest increase taking place in the medium and long-term portfolio on account of increased loans to small farmers. CRCA. operating income increased more rapidly than total assets and long-term borrowings, indicating an increase in the average return on portfolio. CNCA loan recoveries during Project implementation were generally good and interest rates were raised to maintain positive levels. 5. On the institutional side, CNCA has substantially strengthened its credit distribution and saving collection network. Management and staff salaries were increased. Audit and Procurement requirements complied with. 6. The Project financed about 350,000 farmers and substantially increased their income and created a large number of rural jobs. Economic and financial benefits were in line with appraisal estimates. 7. The Project success was primarily due to excellent performance by CNCA staff and continuous Government support and assistance. The major lessons learnt are that: (a) a more careful design might have avoided overlapping of Bank resources for the same purpose; (para. 3.08 and 5.03a) and (b) a more realistic assessment at appraisal of the monitoring and evaluation needs should have been made (para. 3.23 and 5.03b). In all, there has been a highly satisfactory improvement in the agricultural credit system in Morocco since the First Credit Project (Loan 433-MOR) in 1966. MOROCCO PROJECT COOPLETION REPORT FOURTH AGRICULTURAL CREDIT PROJECT - LOAN 1704-MOR I. INTRODUCTION < Background 1.01 The Bank's agricultural sector strategy in Morocco emphasizes faster agricultural growth in the rainfed areas, where a large untapped potential exists and most of the rural poor live, by supporting production and market oriented programs and introducing technological innovation in key fanming systems such as cereal/livestock production systems. The strategy is also aimed at increasing operational efficiency and financial self-sufficiency of existing large irrigation schemes, to increase productivity and reduce sector financing dependency on Government's budget resources. 1.02 The Bank also supports structural adjustment policies to broaden the impact of lending and investment in the sector. Specifically, it supports rationalization of price incentives of marketing and inputs supply policies and land policies aimed at increasing land use and productivity. At the institutional level, the strategy is aimed at strengthening medium term planning and project preparation facilities. 1.03 To date Bank group lending in Morocco has financed 65 projects with an amount equivalent to about US$2.5 billion. Lending for agriculture has been provided under 18 projects, totalling about US$615 million. Four of these projects were for agricultural credit aimed at providing funds for on-farm investment and at strengthening the Moroccan Agricultural Bank's (CNCA) 1/. Bank Financed Agricultural Credit Projects 1.04 Since 1966 the Bank financed, through agricultural credit, aggregate investments of about USl.l billion, gradually extending funds to most sub-sectoral activities. The first and second projects (Loan 433-MOR, and Loan 861-MOR, Credit 338-MOR) financed mechanization and modernization of medium and large farms resulting in a maximum short-term production impact in an effort to meet urgent domestic food requirements. Part of the Third Project (Loan 1361-MOR) was directed to meet rural smallholder needs by financing improved subsistence production. The Fourth Agriculture Credit 1/ The Caisse Nationale de Credit Agricole (CNCA) is the principal institutional source (70%) of credit to agriculture. - 2 - Project enlarged the project scope to include small and medium scale, rurally based agroindustries to promote processing and exports. All four projects had a strong institutional impact by strengthening CNCA's capital structure and its lending appraisal and procedures, improving loan collection performance and transforming it in an efficient credit institution. A summary performance evaluation of the results of the first three projects is included in the PPAR of the Third Agricultural Credit Project (Loan 1361-MOR) 1/ as well as in the SAR of the Fourth Agricultural Credit Project (Loan 1704-NOR) and Fifth Agricultural Credit Project Loan (Loan 2367-MOR). II. PROJECT PREPARATION AND APPRAISAL Project appraisal negotiations and effectiveness. 2.01 The identification and preparation of the Fourth Agricultural Credit Project were undertaken in 1978 by CNCA with Bank assistance. The project was appraised in November 1978, negotiated in April 1979, and presented to the Board and signed in May 1979. The project was cofinanced by KfW and IFAD with a total additional amount equivalent to US$75 million. It became effective on December 5, 1979. The delay of four months in declaring the loan effective was due to extended legal negotiations (para 3.01). Project Design and Objectives 2.02 The project covered 90% of CNCA's mediumr and long-term lending program over a three year period 1980-83 and consisted of financing: (a) small farmers - Part A (47%): including livestock, plantations, draft animals, wells and pumps, land improvements and small implements,; (b) agrarian reform cooperatives and precooperative associations - Part B T10%) including farm mechanization, transport equipment, tractors, harvesters and industrial crop farming in general; (c) medium and large farmers - Part C (33%) including livestock, tractors, combine harvesters, forage, irrigation equipment and land improvement; (d) agroindustry - Part D (9%) labor intensive, small and medium scale industries such as olive oil processing, flour milling, milk pasteurization, animal feed and meat processing plants; and (e) monitoring and evaluation - Part E (1%) including vehicles, equipment, computer consulting services. 1/ OED Report No. 1361, dated October 9, 1980 -3- 2.03 Although the project's fundamental objectives, aimed at increasing production, were similar to those of the three previous credit projects, the Fourth project placed more emphasis on small farmer financing either directly or through agrarian reform cooperatives (57Z). It also included, for the first time, an agroindustrial component, to increase farmers' profitability through value added. 2.04 Another important feature was the provision of an improved Monitoring and Evaluation system (M&E) to assess the impact of CNCA lending on production, input use, employment, and farmers income. f III. PROJECT IMPLEMENTATION Project Execution 3.01 Loan effectiveness was delayed by about four months due to extended negotiations and procedural lags in ratifying the loan document. 3.02 The project was successful in meeting its main objective of increasing production through financing production investments on individual farms. It was less successful in promoting agrarian reform cooperatives and agroindustries and in helping to establish an efficient M&E system in CNCA (paras 3.07 - 3.09). 3.03 The loan was closed on August 31, L983 with an eight month delay. This was in part due to the delays of effectivness. However, two other major reasons were the severe 1980-81 drought which curtailed investment and credit recovery and the fast appreciation of the US$ which slowed down loan disbursements compared with CNCA's own disbursements. On September 1981 the cofinanc:ers (IBRD, KfW, and IFAD) helped ease CNCA's liquidity constraints by increasing their respective disbursement percentages. Project Costs 3.04 Investment costs were in line with appraisal estimates, although the cost distribution percentages by category of subborrowers (Annex 1) and investments financed (Annex 2) differed substantially in some cases. * 3.05 The inv-stment pattern over the three and a half years of project implementation shows that the project's main objectives (a) to finance subsistence production at the small farmers level and (b) to increase commercial crop production were fully met. Small farmer financing amounted to about 57% of the total project costs or 118% of SAR estimates. Medium and large farmers financing (35%) was about the same as projected at appraisal (33%). 3.06 The project fell far short of meeting SAR targets with respect to financing agrarian reform cooperatives (49% of SAR estimates) and agroindustries (32% of estimates). - 4 - 3.07 The shortfall in agricultural reform cooperative financing occurred (a) because some of the existing cooperatives were in arrears with payments and hence were not eligible for additional borrowing and (b) because of MARA's 1980 decision to suspend establishment of new cooperatives pending a full review of Government's policy vis-&-vis the Agrarian Reform Sector. Serious managerial and financial problems had emerged in the land reform sector. With the benefit of hindsight, it appears that the targets set at appraisal were too ambitious. 3.08 Reduced CNCA lending to agrGindustry was in part a consequence of the 1980-82 economic recession. In addition, there was: (a) tough competition from other financial sources; and (b) lack of sufficient promotional efforts by CNCA. At the time of appraising the Fourth Agricultural Credit Project, a Small Scale Industry Project (SSI - Loan 1687-MOR), including a significant percentage (17%) of funds for food processing, was approved by the Bank. The SSI project had more favorable terms, easier procurement requirements and simpler appraisal procedures. It was fully committed well ahead of time. A decisive factor of the rapid uptake was the effective promotion by the National Development Bank (BNDE) and Commercial Banks. Eventually funds from Category 2 (Agrarian Reform Coop) and Category 4 (Agroindustry) and Category 5 (Monitoring and Evaluation) under the Fourth Agriculture Credit Project were reallocated to finance individual farmers. 3.09 Efforts to establish an efficient M&E system were discontinued in October 1980 by CNCA's new general manager on the grounds that the proposed system was too cumbersome and ill-suited to CNCA's management needs. The Bank agreed and eventually recruited a cnnsultant, who visited CNCA in June 1982, and proposed the main lines of a revised system. A revised component established by the unit set up for this purpose within the Directorate-General of the CNCA was included in the Fifth Agricultural Credit Project (FY84). 3.10 The distribution by investment categories (Annex 2) was similar to appraisal estimates with the e-'eption of draft animals, citrus plantations and agroindustry. High investments in draft animals were due to the 1981 drought which had caused the death of a large number of animals and to rainfails in 1981-82 which raised demand substantially. 3.11 Investments in citrus plantations, estimated at appraisal to permit establishment of 1,500 ha to 2,000 ha per year, reached only 20% of estimates, a consequence of sharply declining exports to the EEC. This could have been foreseen at appraisal because overproduction of citrus products in the EEC, and associated countries, was a well-known fact. 3.12 In conclusion, more careful coordination within the Government and the Bank, more exhaustive preparation of the project by CNCA and a more critical appraisal by the Bank, could have led to better design of the agroindustrial component, to more realistic fund allocations for agrarian reform cooperatives, and to a more serviceable monitoring and evaluation component. CNCA has now devised a new strategy under the Fifth Agricultural Credit Project to promote agroindustrial lending. This strategy is based on: (a) promotional campaigns; (b) technical assistance to entrepreneurs; (c) cooperation with other main institutions financing agroindustry; and (d) decentralization of lending activities. A more systematic assesment of land tenure issues has been initiated in connection with a proposed land cadastre operation. Finally, a streamlined monitoring system suited to CNCA management needs has been designed. -5- Disbursements 3.13 Final disbursement took place August 28, 1983. The Loan was closed on August 31, 1983 with an eight month delay on the original closing date of 12/31/82. Up to the original closing date, CNCA medium term mending had been less (68%) than estimated due to: (a) inflated base year lending estimates; (b) lower than expected CNCA medium term lending growth due to the general economic recession in 1980-82; (c) drought affecting Morocco in 1980-81, which induced farmers to curtail investment; (d) appreciation of the US dollar; and (e) lower than expected agrarian reform cooperatives established by the Government and inadequate institutional efforts by CNCA to promote agroindustrial investment. Reallocation of funds from cooperative on-farm investment (Category 2) and agroindustries (Category 4) to individual farmers on-farm investment (Categories 1 and 3) brought about a sharp increase in disbursements during the last eight months of the project (Figure 1). Financial Performance 3.14 CNCA's financial performance (Annex 3) continued to be satisfactory during the implementation of the Fourth Agricultural Credit Project while its role as the principal financial institution to provide development funds to the sector was greatly expanded. From 1979 to 1983, CNCA total assets more than doubled in current terms and increased about 50% in 1979 Dirhams. The largest increase was in the medium and long term portfolio that grew from DH 487 million to DH 1,919 million, especially on account of CLCA's 11 loans to small farmers which experienced an average increase of 27% p.a. 3.15 This impressive growth was initially financed by a rapid increase in long term liabilities, especially borrowings, which grew at an average of 18l p.a. The bulk (90) of long term borrowing was from external sources with the Bank covering about 50% of total. As a result of larger borrowings the long term debt to equity ratio increased from 1.3 to 3.5, though remaining within the limits (4:1) established in the Loan Agreement (Sect. 6.08). 3.16 Short term portfolio increases were financed partly by higher than expected deposit mobilization. The bulk of short-term financial resources, however, was provided by increased rediscounting facilities with the Central Bank and by commercial banks, which, in July 1981, were instructed to invest 3.5% of their deposits in CNCA one year debentures, bearing a 3% interest rate. CNCA total debt to equity ratio increased over the project period from 3.5 to 7.7, remaining well within the standards set for development banks. 3.17 CNCA's total operating income increased at an average annual rate of 34.9Z, noticeably more rapidly than total assets (20.3%) and long term borrowings (18%) indicating an increase.in the average return on the portfolio. In 1982-83 financial expenditures represented 55.9% of total expenditures, slightly higher than at project inception (51.9%) indicating a higher cost of resources and relative improvement in staff productivity. The average cost of borrowed resources was 5.6% while the average cost of total resources 4.7%. Both slightly higher than in 1979. 1/ "Caisses Locales de Credit Agricole", financing small farmers with fiscal income up to DH 3000. - 6 - 3.18 Net profits during the project period increased from DR 3.1 million to DEH 51.2 million resulting in an increase of return on equity, from 1X to about 1OZ, much higher than projected at appraisal. 3.19 CNCA loan recoveries during the project implementation period were generally good. However, there was a decline in recovery performance in 1981/82 due to the 1980181 drought with repayments amounting to DR 458 million being deferred by one year. Overall recovery rates averaging over 80Z are among the best for agricultural credit institutions in developing countries. Overall CNCA capital structure and financial standing vere kept at an adequate level during this period in spite of rapid lending expansion. Financial revenue would have been improved earlier with more frequent adjustments in interest rates during project implementation. This would also have prevented the slippage of the debt: equity and current ratios. Interest rates on loans were eventually raised in October 1980 which brought a gradual improvement of CNCA's profitability and again on September 1, 1983 as a condition of negotiation for the Fifth Credit Project. They presently range from 7Z to llZ on short term credit and from 11% to 13Z for agroindustry and medium and long term credit. They were at best only marginally positive in real terms during the project period when inflation averaged 10.3%. However, following the September 1, 1983 raise, they are now positive against a projected inflation of 9% in 1983-84. Institutional Development 3.20 Since appraisal, CNCA has substantially strengthened its credit distribution and savings collection network. At CNCA headquarters, a department was created to coordinate regional local offices. At the regional level, six regional inspectorates, the function of provincial coordinator (given to directors of regional offices in provincial capitals and major urban centers) were created and seasonal offices (antennae of the CLCAs) were opened. Moreover, seven new CRCAs 1/ regional agencies, four more CLCAs b-ranch offices have been established and six deposit branches opened in major urban centers. CNCA has also established a new agroindustrial department unit, a new training department and has decentralized lending responsibilities and simplified lending procedures. 3.21 Staff has been increased by about 20% and salaries to lower staff were raised to adequate levels in accordance with Loan Agreement requirements (Sect. 5.04). Management salaries were also increased but are still not quite competitive with those of similar financial institutions in Morocco. New CNCA statutes, under preparation, would permit the adoption of a fully competitive management compensation system. 3.22 Audit requirements (Sect. 6.02) were complied with although, for a period, the audit reports did not include separate opinions on statements submitted for IBRD disbursements. On average, audit reports of adequate standards were submitted with only brief delays. 3.23 Like under the Third Agricultural Credit Project, funds earmarked for the establishment of a CNCA M&E (Sect. 5.05) were not used. Changes in CNCA top management in 1980 led to suspension of M&E operations until the end of 1982. The temporary suspension of the M&E system deprived CNCA of valuable information on the performance of credit operations and the adequacy of credit 1/ Caisses Regionales de Credit Agricole - 7 - norms and procedures. The Bank recognized that the proposed MNU system as originally envisaged was overly ambitious in its objectives and rather cumbersome to operate, and agreed to set up a system more directly useful to the management of CNCA's credit operations. The new MUE system is being set up under the Fifth line of credit (Loan 2367-MOR). A sectorwide ME system is also presently being set up in the Ministry of Agriculture. 3.24 Procurement requirements (Schedule 5) were generally complied with. CNCA project reporting, though often late, (4-6 months) was generally in line with Bank requirements. IV. ECONOMIC RE-EVALUATION 4.01 In order to conform, as far as possible, with the methodology adopted at appraisal, the same assumptions were applied to the SAR models, in reevaluating ERRs. 4.02 Economic prices for tradable outputs and inputs were derived from the World Bank's commodity price projections adjusted for transport, handling and processing. Non-tradable outputs and inputs, such as labor and draft animals, were valued at their current market price adjusted by appropriate conversion factors. The project evaluation period, as in the SAR, was 10 years. 4.03 ERR calculations for the nine models reviewed, range between 10% for investments in large farm tractors to 55% for dairy farms with three pure bred cows and are in line with appraisal estimates (10% through 75%). FRRs range from 8% through 21% and are also close to SAR estimates (9% through 27Z). 4.05 Mechanization and livestock ERRs were lower than FRRs because of Government subsidies on meat and milk prices and equipment. Investments in irrigation equipment yielded ERRs higher than FRRs due to price distortions against agriculture. The agricultural investment study being currently carried out by the Government will analyze price distortions and is expected to provide relevant policy recommendations to the Government. 4.06 The project financed about 350,000 farmers and substantially increased their income, especially for small farmers. It also created a large number of rural jobs and increased laborers' salaries. V. CONCLUSIONS 5.01 The project achieved its main objectives. Bank supervision missions helped substantially to improve CNCA's institutional standards. Their continued review and recommendations on lending policies and conditions, capitalization, auditing, staffing, training, salary adjustments were a major factor contributing to substantial institutional improvement and betterment of CtCA's financial situation. The Bank's continuous intervention with Government authorities in regard to CNCA's financial and administrative problems helped the institution considerably to mobilize and keep sufficient funds for maintaining minimal levels of investment and, hence, growth in tne sector, while the country was struggling to overcome a major financial crisis. - 8 - 5.02 Government policies, support and assistance were determinant factors of project success. This is especially true for the strong government backing of CNCA's efforts to enforce good financial discipline and achieve high levels of loan recovery. They had a beneficiary impact on the efficiency of credit especially at the small farmer level. Government's decision to leave CNCA a large degree of independence and authority in making credit and management decisions was also an important factor for project success. 5.03 The major lessons learnt were the following: (a) More careful and coordinated review at appraisal of other Bank projects would have avoided overlapping of Bank resources for practically the same purpose, that is financing of agroindustry (para. 3.08); and (b) Monitoring and evaluation components are highly susceptible to managerial changes. In this case, a more realistic assessment of the difficulties of structuring a monitoring and evaluation system (para. 3.23) could have suggested the setting-up of a less comprehensive and ambitious system from the outset. J1 -9- AMIE I MOROCCO PROJECT COMPLETION REPORT FOURTH AGRICULTURAL CREDIT PROJECT Comparison of Appraisal and Actual Cost Distribution by Category of Subborrover (DR Million) Part sAR % of Actual X of Actual as Total Total X of APR A Small Farmers 1,393 47 1,648 57 118 B Agrarian Reform Cooperatives 307 10 147 5 49 C Medium & Large Farmers 970 33 1,012 35 104 D Small Scale Agroindustries 275 10 89 3 32 E Monitoring & Evaluation 4 - Total Cost 2,949 2,896 - 10 - ANNEX 2 MOROCCO PROJECT COMPLETION REPORT FOURTH AGRICULTURAL CREDIT PROJECT Comparison of Appraisal and Actual Cost Distribution by Investment Category (DH Million) Project Component SAR X of Actual Z of Actual as Total Total X of APR Constructions 531 18 498 17 100 Land Improvement 88 3 118 4 133 Irrigation Equipment 265 9 295 10 111 Agricultural Machinery 531 18 511 18 100 Draft Animals 286 9 590 20 223 Livestock 825 28 766 27 95 Plantations 147 5 29 1 20 Agroindustry 275 10 89 3 32 Total 2,949 100 2,896 100 _ 1 - AUI3 R LM eMr -or -19 PM- 002am - wM CIC Ui.1 Onata 1978-M96 (A E ait31) 1979 1980 19Q 1982 1S 1h Caix * -- 117.7 1D7.3 381.3 1I8. 103.3 Bedmazterm & ahS 341.6 415.6 5463 719.7 623. Chu 6.9 13.2 57.5 90.9 91.2 within 1 yw La 310.1 345.2 387.8 285.0 - SuBtotal 658.6 8G. icy -1.6 Other brt-t AmtA /b 84.3 106.4 220.7 306.7 - S9btoA1 Suoct-tem Aset 860.6 1,017.5 1,9. 1,51.2 41,8. Batrter & m 474.1 543.3 67D.4 819.5 1,121.5 ZcxA 322.9 317.4 463.1 575.6 676.5 YA6=tese 100n Pbih r -i4th;n 1 y IC (310.1) (345.2) (387.8) (285.0) Szhtal 486.9 545.5 695.7 L1610.1 LmmatmalAte 86 7.2 7.2 7.2 Fi-.d Aeets 13.8 13.6 13.6 13.8 FirSat Ocly 4.6 16 L4 - rnIL M58M 1,374.5 1,585.4 2,311.9 2.673.5 3,787.5 Deosits Id 270.5 313.3 406.3 45L4 551.2 1-yer ws - - 470.8 564.3 650.5 O Shot-tm Limbilitim Ie 1518 186.3 108.0 113.3 A qity of lOW-tema Bo-roip 28.6 8S.1 115.9 62.7 - r subtotal 453.9 570.9 T,o044.3 1,178.7 lma-rt Jtrxizp 428.7 501.7 703.9 951.8 1,533.0 Special Pun% /f 120.1 120.8 121.2 12.3 Piussimi fo r 1 31.1 34.1 39.5 53.6 81.6 Net wbrth Reserves 38.1 40.9 41.5 46.1 Em&iy 299.7 299.7 299.7 299.8 Net Profit 2.8 0.5 4.6 19.1 Sibtotal 360.7 3412 315.8 3f49 490.9 DYL LIA3ILT1E 1,3$7.5 1,585.4 2,311.9 2.673.5 3,787.5 /a IncIdd in t >' ad CUAn' pective subl at 1982. /b otes uzr collecticn, accud inters a aet u adIjmtzmt r'c Incude in ans -d CA' zesective "blow astr 1982. fi Sigt- ud te-deposits, cunrt unts. .e Acumas payble- rediwAtng with hic of 11 o-, .I bortg fr& otr Moccm bdt. /fFuds s I by QCA after the tir-ove of activities of fumer i---z initutiom amd ShLAP FundL Ax bt audited. - 12- ANNEX 4 XaMK OF MOB :Tjw G3HfzCN REdOiR EW AmcauL cRr= oE CN's Income Statements: 1977/78 to 1982/83 1978/79 1979/80 198D/81 1981/82 1982/83 /a (ID million) Financial Iomue Interest on Short-term Loans 28.2 33.6 38.2 71.4 76.6 Interest on Hedium-term Loans 66.6 74.8 88.0 121.2 174.1 Other Financial Income 13.8 13.4 19.5 26.5 Subtotal 108.6 121.8 145.7 213.5 277.2 Oither Incme 5.7 7.9 10.6 15.0 13.4 ClGA Operatirig Subsidy 8.0 8.8 9.6 - _ lKYAL INCOME 122.3 138.5 165.9 228.5 290.6 Financial Expenses 57.7 69.1 87.5 105.6 116.2 Mu.nistrative E es Staff Expenses 45.5 52.6 56.2 64.8 75.4 Depreciation 2.7 2.6 2.4 2.8 2.9 Other 10.5 9.3 10.1 11.6 16.8 Subtotal 58.7 64.5 68.7 79.2 95.1 Provision for Bad Loans 3.0 2.9 5.4 14.1 28.0 lUrAL EXPENSES 119.4 136.5 161.6 198.9 219.6 Net Operatii,, Inaome 2.9 2.0 4.3 29.6 51.3 /a NDt audited MOROCCO, FOURTH AGRICULTURAL CREDIT PROJECT (LOAN 1704) DISBURSEMENT PROFILES 98 MC PROJECTS 70 FGJRfl ASRZCtLTUR~AL CREDIT PROECT /It~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 50 4 S 7 8 2 |D APPENDWIX 1 -14 - Page 1 December 18, 1984 COMMTS FROM CNCA Kingdom of Morocco Caisse Nationale de Credit Agricole Office of the Director General No. 151/8t1DG Rabat, October 1, 1984 Mr. Yukinori Watanabe Director, OED Subject: Project Completion Report: Morocco - Fourth Agricultural Credit Project (Loan 1704-MOR) Dear Sir: In response to your letter of September 4 asking me for comments on the first version of this report, I am pleased to offer the following observations, basically involving details only: - - Page 1, paragraph 1.04, line 5: For "Loan 961-MOR" substitut- "Loan 861-MOR." - Page 2, paragraph 2.02(a), l-.e 3: Omit "fruits, vegetables, cereals and pulses." - Page 6, paragraph 3.16, line 5: Replace "to invest 3.5Z of their portfolio" with "to invest 3.5Z of their deposits." - Page 6, paragraph 3.19, lines 17 and 18: For "8Z to lOZ for short-term credit and from 111 to 13Z for agroindustry and medium-term credit" read "7Z to 11% for short-term credit and ... for medium and long-term credit." APP-ENDI 2 Page 2 - Page 7. paragraph 3.20: Reference should also be made to the establishment at headquarters of a department to coordinate the activities of local offices, and at the regional level of six regional inspectorates. of the function of provincial coordinator (given to directors of regional offices in provincial capitals and prefectures), and of seasonal offices (antennae of the CLCA). - Page 4. paragraph 3.09. lines 6 and 7: It is proposed that the text should read "... in June 1982 and defined the main lines of a revised ,ystem. A revised component established by the unit set up for this purpos-e within the Directorate-General of the CNCA was included in the Fifth Agricultural Credit Project (FY84)." Yours, etc. /s/ Mohamed Bouarfa APPENDIX 2, Pg. 1 -16- Kreditansaff - 1 fMr w-deru KlgdJtewHijrWndmaua POeWNch tt tl 41 Pabnuguestrl 4 60000 Friik.tam Mb tt The World Bank Attn: Mr. Yukinori Watanabe, Director Pam nstraB 59 Operations Evaluation Department Ptah11 141 1818 H Street, N.W. 600 Fra*kuram Man 1t Telefon (0611) 7431-0 Washington, D.C. 20433 Telex:411352 U.S.A. Tloegrammadresse: Kreditanstalt Fnikfurtnain Mv. Nacbm brZdf.W Uma1Zmc"a Durchw.N Dui, your blif YolW Saicgn @Iiw eurtgn ehluno d.a votm w ui. rUbmm f'01,rUwamcu eatmuenow daim sucada so 'atnaa fIm aon wgade nusata refic mutafl ai von Erffa E/Or 2B10 23 Oct.84 L, IV b/2 - Financial Co-operation with MOROCCO Caisse National de Cr6dit Agricole (CNCA) Your Project Completion Report: Morocco Fourth Agricultural Credit Project (Loan 1704-MOR) Dear Mr. Watanabe, thank you very much for inviting our comments on your project completion report of the above mentioned project which was co- financed by KfW. The only comments we have to make concern the delays of effectiveness. Having gone through our files we do not find any indication for "extended negotiations or procedural lags in rati- fying the loan document" as indicated in your para 3.01. On the contrary, negotiations, signing of the loan agreement and com- pletion of legal procedures were comparatively quick. The delays of effectiveness of your loan were actually caused by the fact that KfW was approached for co-financing only after the World Bank appraisal had reached a rather advanced stage. Therefore, we propose to change para 3.01 as follows, "Loan effectiveness was delayed by about four months owing to the fact that.need of funds was greater than expected, which in turn necessitated the finding of co-financiers (KfW and IFAD) at rather an advanced stage of appraisal". APPNMIX 2 -17 - Page 2 Referring to para 3.03 we should like to emphasize that we do not see any connection between the closing date of the loan and the delays of effectiveness, as all co-financiers (IBRD, KfW and IFAD) had agreed to retroactive financing from 1 September 1979 onwards. The only effect could have been increased disbursements after effectiveness, to keep up with CNCA's lending from 1 September 1979 until effectiveness. We hope that you agree with our comments and are looking forward to receivino a final copy of the report in due course. Yours faithfully, KREDITANSTALT FUR WIEDERAUFBAU I~~,