Bangladesh: Microfinance for Marginal and Small Farmers Project

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1 Bangladesh: Microfinance for Marginal and Small Farmers Project Loan No 644-BD Project Id Board Date 02 December 2004 Effectiveness Date 29 June 200 Original Closing Date 31 December 2011 Final Closing Date 31 December 2011 Total Project Cost US$(M) US$29.74 million IFAD loan US$(M) US$20.06 million Cofinanciers (if any) NGO partner organizations: US$1.73 million Implementing Agency Palli Karma-Sahayak Foundation (PKSF) of the Ministry of Finance, a government apex funding agency for non-governmental organizations (NGOs) Principal Components The project objective was to support the creation of new savings and credit groups, and its goal to provide improved livelihoods to poor small and marginal farmers. The project had three components (i) provision of microfinance and technical services, (ii) capacity building and market linkages, and (iii) project coordination and management. The objectives of these components were to: (i) establish viable microfinance institutions to provide opportunities to small and marginal farmer households to invest in on- and off-farm enterprises; (ii) increase agricultural production through access to information, the adoption of new technologies and linkages to markets; and (iii) develop and mainstream PKSF operational procedures for lending to farmers and related agro-enterprises. Besides the creation of savings and credit groups, the project was to provide training to group members in social development, technical skills and business development. Beneficiaries were to participate in savings and credit groups; a field-level training and demonstration programme; farmer field days and farm visits; and a market linkage programme. The impact study referred to in the sections below was conducted at completion by Nielsen Company Bangladesh Ltd., Report on Impact Study of Microfinance for Marginal and Small Farmers Project, January Project Performance Relevance The project design was fully in line with the National Strategy for Economic Growth, Poverty Reduction and Social Development. The project design was in line with the recognition that earlier policies that channelled formal credit for agriculture through the nationalised commercial banks were excluding many small and marginal farmers, and that any barriers to lending for agriculture by micro-finance organisations should be removed. By linking NGO micro-credit groups with extension service provision the project was in line with the new National Agricultural Extension Policy (NAEP) approved in 1998 that called amongst other things for a plurality of extension service provision. The project strategy was built on the channelling of micro-credit funds to beneficiary groups organised by MFIs (micro finance institutions). These NGO-MFIs were selected Partner Organisations (POs) of PKSF, which had a well-established system to provide micro-finance services to the landless poor. The project aimed to extend these services to a new target group small and marginal farmers. This was an appropriate mechanism as this group lacked access to the formal banking system (previous projects supported by both IFAD and other donors had failed to enable such access), while the micro-finance system provided a means of reaching disadvantaged rural people. The project design saw the need for loans and other financial services (savings and insurance) to be tailored to meet the needs of farmers. The design recognized that lending to farmers needed to account for the special risks involved in agriculture. The project design envisaged that the project would enable some landless people to be absorbed into the rural economy through the creation of employment in agriculture and related enterprises. This employment would be both within the households of participating farmers and entrepreneurs and in hired labour. This was an appropriate strategy since the country faces a major challenge in creating sufficient jobs for its expanding labour force. During the course of the project a number of important relevant changes or developments occurred. The first of these was a move from loans with weekly repayments to loans where repayment was in a lump-sum after harvest (or sale of a beef animal). The second change introduced was the concentration of agricultural extension advice and training on five main topics, all of which can lead to substantial savings in production costs and an increase in yields. The uptake of most of these technologies has been impressive, suggesting their promotion was highly relevant. A third important development, at the time of the MTR (midterm review), was the recognition that the participating organisations needed more agricultural expertise. It was therefore agreed to create additional posts of assistant

2 agricultural officers, using unspent resources. At completion it is clear that these officers have in fact undertaken most of the effective training provided by the project. Effectiveness The project has made an important breakthrough in extending micro-finance services to the agricultural sector. The provision of micro-finance services involved PKSF lending project funds to selected POs and then these POs on-lending funds to members of marginal and small farmer groups. The project largely achieved its targets in terms of provision of microfinance services to farmers. Women members accounted for 8% of total borrowers. Over half of all loans have been seasonal loans, an important innovation which fit better with the cash flow from farming than the traditional micro-finance loan that is repaid in weekly instalments. PKSF has developed simple methods of supervising seasonal loans and has succeeded in getting them accepted as an appropriate financial product to meet the needs of farmers. Seasonal loans are very popular with farmers, and POs which provide them have reported good loan repayment rates. The project was successful in recruiting genuine farmers into the groups that were formed. While group members were free to invest the loans in any type of income generating activity, loans have almost exclusively been used for agriculture-related purposes to a much greater degree than had been the case in previous IFAD projects. This shows how successful the project has been in recruiting genuine professional farmers into its groups. The project MTR found that the project was well managed, but that there was considerable scope to improve the effectiveness of the training provided. In fact, during the first half of the project, when farmer training and agricultural extension was provided on a wide range of topics and was undertaken largely by the Department of Agricultural Extension (DAE), there was limited evidence of any significant increase in output and incomes. After the mid-term review (MTR) however when extension activities were undertaken largely by the associate technical officers (ATOs) hired by POs and training was focussed exclusively on the five technologies identified, things improved, and there is no doubt that the project activities have contributed to a substantial increase in the production of agricultural outputs by the project beneficiaries. Overall, the project undertook 66,66 farmer trainings, which corresponds to 8% of the target. The project organised visits by farmers to demonstration sites, and demonstrations and exposure visits. The training resulted both in increased productivity and, mainly, a reduction in production costs which translated in increased income. According to the completion impact study an average beneficiary household saw an increase in their total sales 2% higher than the control group. Efficiency The PCR analyses project efficiency from three viewpoints: i) Time dimension. The average time lapse between loan approval and loan effectiveness was 6.9 months which is significantly lower than the IFAD average of 12.3 months and the average for the Asia and the Pacific Region (9.1 months). ii) Expenditures: Disbursements followed a steady pattern with increasing disbursements during the first four years and slightly lower disbursement for project year and 6. At project closure, the IFAD loan was 97.03% disbursed, PKSF had disbursed 104% and the POs 87.% of their budgeted contributions. Given the high proportion of total project costs allocated for on-lending, and which will be fully repaid to the Ministry of Finance, the actual project implementation cost is US$3.99 million. Therefore, the average cost of project operations (overheads and technical support) is US$14.20 per direct beneficiary, which is lower than the average cost of project operations for MFTSP (US$21.20 per direct beneficiary). Total administrative costs (being the total costs for the project coordination unit) amounted to 2.8% of the IFAD loan, which is well below the IFAD average ratio for management costs of 12%. iii) Financial and economic analysis: A formal economic analysis was not carried out at appraisal. Therefore, the discussion on economic benefits at completion has been based on the revision of some crop budgets and innovative agricultural technologies. Overall, and despite the inability to compute an ERR (economic rate of return), the Completion Mission rated the efficiency of the project as satisfactory, basing its conclusion on the satisfactory rates of return of the individual technologies promoted by the project, the timely availability of funding through microcredit, and on the satisfactory level of administrative costs. Concerning the implementation arrangements with PKSF, it is considered that this set-up was highly efficient given that PKSF built on its existing partnerships with POs. In providing training, the project used locally available training venues and qualified technical expertise. Project Performance Partner Performance IFAD IFAD has provided guidelines and support on organisation management, roles of partners and procedures of project implementation. Since 2008, the project was supervised directly by IFAD which increased the involvement of headquarter staff. The Fund undertook four supervisions and the MTR of the project. The MTR made very relevant recommendations, which helped improve the quality of project delivery. The subsequent availability of the local experts, who constituted the majority of such missions, for further consultation on any

3 technical matters was highly valued by PKSF. Furthermore, PKSF found the suggestions and recommendations made by the supervision missions helpful. IFAD was considered flexible and responsive to the changing situation and needs at the field level. The treatment of withdrawal applications was within reasonable time limits. Cooperating Institution Until 2008, the United Nations Office for Project Services (UNOPS) was the cooperating institution responsible for supervising MFMSFP. For the period under review, it provided effective supervision of process aspects, but did not follow up sufficiently, particularly on 4 technical issues. The view of the project management is that UNOPS generally did a satisfactory job of identifying problems, particularly relating to process. Government The Government of Bangladesh, through the Ministry of Finance, had overarching responsibility for the project as the borrower of the IFAD loan. It signed a financing agreement with PKSF to channel IFAD loan funds to PKSF in order to implement the project. The major part of these funds were for on-lending and were provided as a loan from the Ministry of Finance to PKSF, with additional funds for training, project management etc. provided as a grant. PKSF played an active role in project implementation and was key to its success.the Ministry of Finance approved annual work plans, organised and chaired coordination meetings, and chaired the wrap-up meetings of supervision missions. It also approved two amendments to the loan agreement. The Ministry of Finance was supportive of the project and was interested to hear of its progress and the lessons being learned.the project coordination unit (PCU) was promptly established by PKSF and has functioned well throughout the project, headed by a senior PKSF staff officer. Following the MTR, an Agricultural Adviser was hired in All project staff, including other support staff associated with the project, performed well. Other units within PKSF also supported the project. The PCU had some difficulty carrying out detailed monitoring and evaluation (M&E) with the staff available. Nevertheless, there is evidence that PCU paid regular field visits to the project area, and developed good relations with POs. The PCU has been responsive to and flexible in incorporating suggestions for changes to the original project design. Fiduciary management has also been good with no qualified accounts, and timely processing of loan requests from IFAD and to POs. Some problems were experienced with a small number of POs, and steps were taken to resolve the issues arising.the Department of Agricultural Extension (DAE) was among the service providers contracted by PKSF through a Memorandum of Understanding to provide agricultural technical support to POs and group members. In particular, DAE was responsible for the organisation of training on new agricultural technologies. During the first years, the POs faced considerable problems for various reasons in getting full participation from DAE for the delivery of training. Hence, the mid-term review (MTR) recommended the development a pool of private trainers and to introduce a cadre of Associate Technical Officers (ATOs), recruited by each PO to provide some of the training while retaining the involvement of DAE. This was promptly done and the quality of training improved. NGO/Other The provision of micro-finance services to the target group was ensured by the POs selected. A total of 2 POs (NGO-MFIs) of PKSF (increased to 3 in the last year of the project) were selected by the PCU (project coordination unit) based on their presence in the project districts, capacity and interest in supporting agriculture. They were responsible for the identification of target group households, the establishment of micro-credit groups, and the delivery of technical, management and social training to members of credit groups. POs received funds for lending to farmers from PKSF. POs responded well to farmers request for seasonal lending, even though it requires a much more sophisticated approach than traditional micro-credit weekly repayment loans and requires much closer monitoring. As recommended by supervision missions prior to the MTR, POs recruited assistant technical officers and the MTR mission was impressed by their understanding of key agricultural issues. The success of the project in reaching its targets and in innovation of new financial products and agricultural technologies approaches is evidence of the good performance of the POs. There was some variation in PO performance, with some not maintaining their initial standard of good performance. Poor performance of some POs can be attributed to issues relating to the overall management of the PO (such as disputes within the POs governing body) rather than any matter relating to MFMSFP. PKSF has been well aware of these PO issues, and monitors the situation carefully, taking action where needed. However overall POs need to be commended for their performance and it is noteworthy that two POs were instrumental in developed models for seasonal lending and livestock insurance before they were up-scaled by MFMSFP. POs have also added value to the project by providing additional support to project groups such as water, sanitation and health programmes, and in developing market linkages, using resources from other donors or their own funds. The project employed or linked up with a number of agencies to provide specific services. PAB (Practical Action Bangladesh), an international NGO, was contracted to implement the

4 marketing services sub-component that aimed to improve farmers linkages to markets. The PCU and POs reported some problems in working with PAB at the field level, and it seems that PAB and its designated partner POs did not always work as closely as desired. Research agencies also provided the project with valuable services. The Dhaka office of the International Rice Research Institute (IRRI) was instrumental in assisting the project to procure 2,000 LCC, and also provided technical data and guidance on rice production which was useful in producing training materials. The Bangladesh Rice Research Institute (BRRI) also gave support regarding interventions in paddy and, in particular, provided residential training at the BRRI training centre for eight batches of TO and ATO, with the cost of five of these batches being covered by BRRI. Other agencies providing technical training for TO and ATO included: Rural Development Academy (RDA) Bogra (practical and very useful training on seed selection and storage for 3 batches), Bangladesh Agricultural Research Institute (BARI - 3 batches), Bangladesh Fisheries Research Institute (BFR 3 batches), Bangladesh Agriculture University (BAU) Germplasm Centre (3 batches on fruit tree propagation), and Department of Youth (3 batches on livestock and aquaculture). Cofinancier(s) Combined Partner Performance Rural Poverty Impact Household Income and Net Assets Natural Resources and Environment Overall, partners appear to have worked together well. Some problems were encountered in relation to the services to be provided by DAE, but these were overcome by enhancing cooperation with other partners. The project had an impact on beneficiaries assets both in terms of increased income and reduction in production costs. During implementation, farmers with access to seasonal loans noted significant yield increases for paddy and wheat, which contributed to increased net incomes. The net income increase realized for wheat is 101% higher than the actual net income forecasted at appraisal. Positive net incomes have also been realised for rice, both for boro and aman. However, a decrease in the net income has been noted for the production of potato and onion due to falling market prices. The main project contribution as far as livestock is concerned was the linkage of agricultural loans for the purchase of beef animals for fattening with basic veterinary prophylactic measures and insurance. This has improved the returns from beef fattening with many farmers securing an increase in value over the initial purchase price of animals of Bangladesh Taka (Tk) to Tk (US$ ) on final sale.overall, the aggregate benefit of the technologies has resulted in an increase in output and farm incomes. All five technologies promoted by MFMSFP were financially viable, with increases in net income from 21.4% up to 4.0%. This increase has been generated by the savings made on inputs (N-fertilizer, pesticides or diesel), increased yields and therefore, increased gross incomes.all members of farmer groups have contributed savings. However, these savings are mostly compulsory and act to partially fund PO lending operations and provide a degree of security for loans to members. However in a number of male and female groups most members said that they had fixed deposit savings accounts with commercial banks and had saved between Tk1,000 and Tk20,000 (US$14 and US$290) in these accounts. The Nielsen impact survey reported a 8% increase in savings per household, with average savings rising from Tk7,672 to Tk12,128 (US$112 to US$176) suggesting that the bulk of savings are not held by POs.The study on seasonal credit concludes that households taking seasonal loans have more crop income, non-crop income and salary income than other households. Moreover, they have managed to increase their area of cultivable land. According to the Nielsen impact survey, project beneficiaries increased since the start of the project the amount of land owned by 2% - although there was no specific project intervention to enable beneficiaries to purchase land. On average, project beneficiaries were found to have increased their land holdings by 9% more than non-beneficiaries, or control households. If true, this would suggest that beneficiary incomes have increased substantially as a result of access to credit. The survey also indicates a significant increase in improved sanitation facilities, with a decrease of nearly 80% of households depending on open pit latrines. There were also modest increases in the number of houses with cement floors (%) and solid house walls and tin roofs. Information from the Nielsen impact study suggests that the project may only have had limited effectiveness in terms of establishment of new enterprises, new sources of income and employment creation. The project had an environmental rating of B at appraisal reflecting the fact that it was only expected to have limited direct disturbance on the physical setting or resources. In practice the project has had a number of positive environmental effects. The two fertilizer technologies promoted have reduced the use of urea fertilizer used by farmers reducing the risk of ground water and water course nitrification. The AWD technology when used effectively reduces the amount of groundwater pumped during the boro rice season. Excess pumping results in depletion of groundwater and a fall in the level of groundwater tables. The use of pheromone traps has the potential to substantially reduce the amount of 4

5 insecticide used on vegetable crops. This not only helps maintain the population of beneficial predator insects, but it also reduces the amount of pesticide residue on products sold reducing the risk of pesticide contaminated food entering the human food chain. Human, Social Capital and Empowerment The project has impacted on the human capital of participating households though improved nutrition and capacity building, and by helping communities make linkages with external actors. The formation of farmer groups by the project has generated social assets. This may be particularly useful for women, who otherwise may have little contact with people outside of their families. Project groups have also made contacts and linkages with the wider community, including people and organisations outside of the village. These include public agencies, such as DAE (Department of Agricultural Extension), that provided training and other support for project groups. Under the market linkage sub-component, some groups built linkages with marketing and other value chain actors and agencies, such as seed companies and food processors. The linkage built between the farmer group and the project POs is also a social asset which can lead to benefits beyond the scope of MFMSFP. The project provided a considerable amount of technical training which has built human assets in terms of skills, knowledge and awareness. Beneficiary training has been provided by the POs under three categories: (i) crop training, (ii) non-crop training, and (iii) social issue training. Non-crop training included training on livestock rearing, fisheries, etc., whilst social issues covered matters such as family planning, education, and gender issues. A total of 66,66 farmer trainings were carried out, which corresponds to 8% of the target. In particular, about 41,947 farmers received training - as part of the crop training - on seed production and preservation technology. In addition to direct training of groups in their area, the project has provided learning experiences by arranging a number of visits by farmers to demonstration sites, where the key technologies of the project were being shown. During the project implementation period POs have organised 8,113 demonstrations (against a target of 10,000), 20 block demonstrations and 974 field days (against 1,200 targeted at MTR). Moreover, a total of 0 exposure visits were organised. The Nielsen impact survey indicates that overall the project training provided to beneficiaries has been comprehensive in so far as all the promoted technologies are known to almost all growers. Beneficiaries expressed the importance of the training delivered in using improved agricultural technologies. The technologies promoted were felt as simple and realistic, but with clear advantages for the farmer applying them. The quality of the training provided therefore appears to have been good, but it is considered not fully satisfactory because it did not reach the expected number of beneficiaries. Ag. Productivity MFMSFP has focused the use of loans on agriculture to a much greater degree than had been possible in previous IFAD projects lending to this same target group. With access to credit, farmers were able to provide for timely crop husbandry which in itself contributed to increased yields and better prices by allowing sales of vegetables to be made before the glut, after harvest.the Nielsen impact survey indicates that the average area cropped by project beneficiaries increased as a result of the project by over 20%, and that there was also a modest 2%, increase in cropping intensity. The situation with regard to livestock is more positive with just below a 20% increase in the number of cattle kept, and sales income 4 from cattle has more than doubled. The survey also indicates an increase in the number of poultry raised by beneficiaries.members of farmers groups that the completion mission met talked of a significant increase in overall agricultural production, especially for rice, where a number of new technologies have been adopted. The project s impact survey shows an overall 16% per household increase in rice production, with a larger increase in maize and high value crops as farmers have moved to more commercial production. This had an impact on beneficiaries food security (see below). Food Security The increase in staple food production, along with more fruit and vegetables, has had the impact of reducing the proportion of households reporting food shortages from over one third at baseline to only just over 10% at completion. Over three-quarters of households report improvement in the quality and variety of the food that they consume. Given that agricultural productivity is a proxy indicator of food security and incomes, these increases indicate that overall beneficiary farmers have benefitted from the project. The RIMS anchor indicators for child malnutrition were measured at baseline (in 2006) and completion (in 2011) and all three of these indicators show an improvement, with girls being marginally less malnourished than boys. Agricultural Productivity and Food Security Inst. & Policies The major institutional change brought about by the project, has been the idea that microfinance institutions have a mainstream role in providing credit and other financial services to small farmers which in Bangladesh very largely means all farmers as the numbers of medium and large farmer are dwindling away. This, together with the provision 4

6 of seasonal loans that meet the needs of farm cash flow, at last provides farmers with a viable alternative to rural bank branches (which remain largely inaccessible to farmers) and moneylenders. It is understood that PKSF has now mainstreamed seasonal lending into its portfolio of loans. There is also evidence that government agencies are recognising the role that NGO-MFIs have in agriculture. The project has contributed substantially to the development of the private sector. Thus whilst PKSF itself is a government owned company, all the participating NGO-MFIs are private sector not-for-profit organisations. Furthermore, all the farmer beneficiaries are in essence private sector producers. The project has also stimulated private sector activity amongst input dealers by increasing demand for USG and new products such as pheromone trap lures. In a small but important way, it has also stimulated an expansion of manufacturing through the making of over 40 USG application machines. It was envisaged at appraisal that the project would provide a considerable amount of training for PO and PKSF staff in subjects related to financial management and agriculture. As of June 2011, a total of 632 PO staff (TOs, ATOs, field organisers, mid-level officers and branch managers) had received training and PO Executive Directors and Credit Coordinators had participated in 21 international study tours. Furthermore, 129 PKSF staff members had received training on project orientation. Interest charges on loans to group members enable POs to recover the full costs of their operations, including staff, overheads, cost of capital and loan loss provision. POs reported to the completion mission that seasonal lending had improved their financial performance as it had increased the amount that they were able to lend. PKSF collects detailed data on PO operating costs and these data shows that 307 out of 34 branch offices (89%) involved in implementing the project are financially sustainable. The majority of POs report that they are likely to retain the staff hired under the project as Assistant Technical Officers (ATOs). In the first place all POs have been encouraged to hire agricultural experts as Assistant Technical Officers. At the start of the project all salary costs of these ATOs were met by the project on the understanding that over the life of the project the POs would increasingly meet these costs from its own resources until at the end of the project the PO would be paying all salary and associated costs. The majority of POs report that they now meet the salary costs in full. At completion, POs had 23 technical officers and 63 ATOs (fully funded by the POs). Markets The project did not include any measures to improve physical access to markets. However support for production via access to credit and technology increased production that was available for sale, while the marketing linkages sub-component concentrated on developing the soft side of market access through a value chain approach. The sub-component was implemented by Practical Action Bangladesh (PAB), which was contracted to work for a three year period with six project POs improve farmers linkages to markets. PAB and the six POs identified sub-sectors with local development potential and implemented mutually agreed activities to strengthen linkages between small-scale producers and various market actors. The initiative covered 17 sub-sectors (taking up a new one each year with each PO) such as maize, bitter gourd and beef fattening. A total of over 3,600 farmers in 180 groups were supported with training, workshops and visits. Training included modern production technologies and product quality improvement. Linkages were made with local and national input suppliers and buyers of farm products. Four embryonic products were demonstrated (sweet corn, strawberry, artificial insemination and tuberose). The PAB final impact study estimated that an additional 21,000 producers also benefited from receiving messages, directly or indirectly, on interventions in the selected sub-sectors.the impact report on market linkages reported that better quality products reaching the market at the right time, along with direct links with buyers, increased the producer prices for nine of the 17 products by between 20% and 100%. In other sub-sectors market access had improved, but it was difficult to quantify actual increases in prices.data from the Nielsen impact survey show that an average household increased their total sales of farm products by 2% over the before project situation, and had sales 2% higher than the control group.this sub-component was the first time an IFAD project in Bangladesh used a value chain approach. Project Impact Overarching Factors Innovation The project design was innovative in two distinct ways. In the first place it was aimed at small and marginal farmers who previously had not been able to access micro-credit. In the second place it provided resources for the POs to hire in house agricultural expertise rather than rely exclusively on the DAE. During project implementation a number of additional innovative features were adopted. One of the most important was the spread of longer term seasonal lending in response to demand from farmers, which proved very successful and became very popular among

7 farmers. Seasonal lending had been previously tried by a number of NGOs but, with a few exceptions, it had proved to be difficult to get farmers to reliably repay large sums at the time of harvest. The project succeeded in successfully implementing this innovation in micro-finance extending the scope of these services from the landless poor to farmers, and in providing seasonal loans that better suit the requirements of this group. As far as agriculture is concerned there were also two important innovatory developments. At the time of the MTR it was recognised that the TO (technical officer) alone could not handle all the work and it was decided that they should be assisted by ATOs. These had diplomas rather than degrees in agriculture, but were better at providing hands on field training to beneficiaries. The second agricultural development innovation was the decision to focus technology promotion on a limited number of technologies that were aimed at reducing farmer costs. The design of MFMSFP proposed a pilot initiative to establish 10 crop stores operated by POs for use by farmers, preferably to group members of MFMSFP. Not only were fewer stores built, but they have generally not been used to capacity. This under-use of storage (and lack of interest from POs in establishing further stores), can be attributed to instability in the market price for paddy and other cereals. Since the sudden hike in world grain prices in 2007, domestic prices have often not followed a predicable path of being low at the time of harvest and then steadily increasing until the following harvest. Another important innovation was the incorporation of livestock insurance into PO lending portfolios. This had been tried before in Bangladesh, so was not entirely new, but it was new to PKSF and the POs, and the scheme had to be developed virtually from scratch. The scheme was designed as an insurance-cum-health care service, the idea being that providing animal health care, especially prophylactic (preventive) health care alongside insurance would reduce the risk of death, and hence cost of providing insurance, while also making the scheme more attractive to farmers, as healthier animals would grow faster and be more profitable. The main element of prophylactic health care is vaccination against communicable diseases. Up to June 2011, a total of 12,08 animals belonging to 11,860 farmers had been covered by the scheme, and compensation for death had been paid for 8 animals. The PCR commended the PCU for introducing this scheme as a financial product for PKSF POs. The latest supervision mission found that the current approach to the scheme was not sustainable and provides suggestions on how to overcome this; nevertheless the mission considers that overall the scheme has been a success. Replicability and Scalingup There are indications that already some of these activities are being replicated and upscaled. Almost all POs report that they have now mainstreamed seasonal lending and many have budgeted 0% of their lending for seasonal loans. This means that a substantial number of new borrowers will have access to micro-credit for the first time in addition to beneficiaries who continue to access loans. To support this PKSF has also increased its budget allocation for seasonal lending. The majority of POs have also retained on their staff some of the technical officers and ATOs hired under the project. This means that they have recognised the need for in house agricultural expertise if they are to lend successfully to farmers on a large scale. There are also clear indications that most of the technologies promoted will continue to be used by beneficiaries, and that the use of these technologies is 4 already spreading. As indicated, many more Pheromone traps are being used by beneficiaries than were originally distributed, and there are signs that farmers are increasingly using Urea Super Granules (USG). Some dealers report anticipated sales of USG in 2012 to be twice what they were in MFMSFP has demonstrated that microfinance is a useful and appropriate way of providing finance for farmers. This lesson is being adopted and scaled-up by PKSF and its POs, and also by other NGO-MFIs in Bangladesh (such as BRAC) and beyond (a Jamaican MFI is proposing to adopt the idea). However the lesson has not yet been taken up by most other donors and development agencies. Innovation, Replicability and Scaling-up Sustainability and Ownership The prospects for sustainability appear good. At the national level concerns about possible restrictions on micro-finance that were evident in 2011 have lifted. The Government has imposed a ceiling on the interest rates that NGO-MFIs can charge borrowers, but the ceiling is not prohibitive unless lenders rely on finance from commercial banks. The 2010 annual report of PKSF lists Agriculture Sector Microcredit and Seasonal Loans as two out of six mainstream programmes. This confirms that this initiative has become institutionally sustainable. Furthermore it refers to the experience gained from MFSMFP as a key factor in its decision to mainstream such lending. At the stakeholder workshops held in late 2011, and in subsequent consultations almost all participating organisations have indicated that they intend to continue with such lending in future, as there is good demand from farmers for such loans. A number of organisations are budgeting 0% or more of their

8 lending for such loans in PKSF has also budgeted that 40% of expenditure in the current financial year would be for seasonal loans. It is also probable that the project has contributed to the decision by PKSF and POs to retain the services of in house agricultural expertise, as an adjunct to lending for agriculture. There are also good prospects for most of the specific technologies promoted by the project and for the livestock insurance scheme. Targeting MFMSFP is specifically targeted at marginal and small farmers, owning between 0. and 2. acres of land (or up to twice this amount if rented land is included). These are the socalled missing middle that were excluded from NGO programmes for the landless but did not get access to bank loans that went to medium and large farmers. Although the project is not designed to directly target the poorest households, who lack significant areas of agricultural land, an impact survey shows that almost half of all group member households reported suffering from periods of food shortage a good indicator of poverty and reflecting the seasonal nature of agricultural income. It is safe to conclude that the vast majority of households fell within the target group, but inclusion of some non-target households was sometimes necessary to form viable groups. 4 In particular, in the poorer farming areas, where often only a single crop can be grown on some land, even farmers with a significant amount of land can be quite poor and suffer from seasonal food shortages. In addition, some POs reported that, at least initially, farmers were reluctant to join micro-finance groups, seeing such groups as being for the landless poor and beneath their status. Enquiries in the field suggest that larger land owners and group officials may have benefitted more than the smallest farmers. In particular they have been the main first beneficiaries of technology such as the distribution of USG applicators. Over time, as ways of sharing these applicators evolves, smaller farmers will also benefit. Gender The project provided funds for training of group members on social issues, including gender relations and legal rights, primarily targeted at women group members. This was appropriate considering the disadvantaged position of women in Bangladesh, and seems to have been, at least to some degree, effective. However it could have been more effective if a more comprehensive approach were adopted, incorporating men and local leaders as well as women.the project empowered group members, and in particular women, to make contacts and linkages with the wider community. These include public agencies but also marketing and other value chain actors and agencies. The project design document expected that women would form 80 to 90% of members of project groups. At completion it was found that over 80% of group members are women, and the project has, to a degree, empowered them, both at the household and community levels. Even though many loans, especially for crop production, are used by men, being a member of a micro-credit group can still empower women. Women feel particularly empowered and report having increases in personal income, more visits to markets and towns and a more important role in household expenditure decisions.the Nielsen impact survey reported that the following percentages of women group members reported increases in: personal income (70%), more visits to markets and towns (40%), role in household expenditure (6%), role in household decisions (72%), and own decisions honoured by men (64%). However when these and other indicators were compared with a control group, the position of women project members was not that much different from other women, with the exception of participation in a group, organisation or discussion, where 2% of the project groups said they could decide on this themselves compared with only 23% of the control group. The Nielsen impact survey also reported a decline in the amount of land owned or lead by women in their own name, although there was a 9% increase in the number of livestock owned by women.the last project supervision found that the provision of micro-credit together with technical and social training has an important impact on household level gender relations and helps expand the role of women inside and outside. 4 Overall Performance Estimated number of beneficiaries PCR Quality Scope The project target at appraisal was to organise small and marginal farmers (80% women) into approximately groups. By June 2011, total group membership stood at (99% of the target, with 84% being women) in groups. The PCR covers fully all the elements foreseen in the PCR Guidelines, including all the Annexes. It also includes several working papers which provide deeper analysis of particular aspects of the project. Quality The PCR is well written, overall clear in its assessments. Lessons The PCR derives relevant lessons from the project various aspects, and in particular from the innovations introduced by the project. The working papers also include useful conclusions and lessons on specific project issues/aspects.

9 Candour Overall the PCR is quite honest in describing what has worked and what has not.