PACE: Promoting Agricultural Commercialization and Enterprises

Transcription

1 PACE: Promoting Agricultural Commercialization and Enterprises Supervision report Main report and appendices Mission Dates: 03-Feb to 15-Feb-2016 Document Date: 22 March 2016 Project No Report No: 4035-BD Asia and the Pacific Division Programme Management Department

2

3 Table of Contents Abbreviations and acronyms iii A. Introduction 1 B. Overall assessment of project implementation 1 C. Outputs and outcomes 2 D. Project implementation progress 9 E. Fiduciary aspects 13 F. Sustainability 19 G. Other 20 H. Conclusion 20 i

4 Appendices Appendix 1: Summary of project status and ratings 22 Appendix 2: Updated logical framework: Progress against objectives, outcomes and outputs 24 Appendix 3: Summary of key actions to be taken within agreed timeframes 30 Appendix 4: Physical progress measured against AWP&B, including RIMS indicators 32 Appendix 5: Financial: Actual financial performance by financier; by component and disbursements by category 37 Appendix 6: Compliance with legal covenants: Status of implementation 38 Appendix 7: Knowledge management: Learning and Innovation 42 Appendix 8: List of People met. 43 Appendix 9: Field visit schedule 45 Appendix 10: Proposed Organigram 46 Appendix 11: Case study: Rasheda Khatun: From a landless to land owner and successful micro entrepreneur 47 ii

5 Abbreviations and acronyms ADP CBO COSOP DAE DLS DoF DPP ERD FEDEC FY GDP GoB Haat HIES IFAD IRRI IT JAKAS ME M&E MFI MIS MoF MoU MSME MTR NGO PACE PCR PDR PMU PO PY QA R&D RIMS RMC SLGA TA UP Upazila VCD Annual Development Plan Community Based Organisation Country Strategic Opportunities Paper (IFAD) Department of Agricultural Extension Department of Livestock Services Department of Fisheries Development project pro forma (of the Government) Economic Relations Division Finance for Enterprise Development and Employment Creation Financial year Gross Domestic Product Government of Bangladesh A Bangladesh word for a rural market or bazaar, which assembles everyday with small of buyers/sellers but meets twice a week in a large-scale where buyers/sellers from wider areas converge to do business Household Income and Expenditure Survey International Fund for Agricultural Development International Rice Research Institute Information Technology A PO of Microenterprise as defined by under its loan program Monitoring and Evaluation Microfinance Institution Management Information System Ministry of Finance Memorandum of Understanding Micro, small and medium enterprise Mid-Term Review Non Governmental Organisation Promoting Agricultural Commercialization and Enterprises Project Completion Report Project Design Report Palli Karma-Sahayak Foundation, Government established apex funding agency for MFIs/NGOs Project management Unit (of PACE) Partner Organization (of ) Project Year Quality Assurance Research and development Results and Impact Management System Rural microcredit (program of ) Subsidiary Loan and Grant Agreement Technical Assistance Union Parishad Sub-district Value chain development iii

6

7 A. Introduction 1 1. The PACE project is a USD million project, including the IFAD highly concessional loan financing in the amount of USD 40 million, Republic of Korea supplementary grant funds of USD 0.36 million, contribution of USD million and Partner Organizations (PO) co-financing in the amount of USD 30 million. The project is implemented nationwide by the Palli Karma Sahayak Foundation (), a leading microfinance apex organization in Bangladesh, and its large network of Partner Organizations (POs). 2. The project goal is to enhance the livelihoods (including higher income from self- employment, business profit and wage employment, and food security) of the moderate and extremely poor people in a sustainable manner; the development objective is to increase sales and incomes of new and existing microenterprises, and to create new wage employment opportunities for extremely and moderately poor people. These objectives are to be achieved through four components: (i) financial services for microenterprises; (ii) value chain development; (iii) technology and product adaptation; and (iv) project management. 3. This first supervision mission took place from 30 August to 11 September 2015, while the second supervision mission was fielded from the 3 rd to the 15 th February. The objectives of the second mission were the following(i) assess progress made in implementation of the project; (ii) provide guidance to the PMU and POs, to manage activities towards achieving objectives, sustainability and impact as part of their normal management responsibilities; (iii) review the fiduciary aspects of the project and whether they comply with Financing Agreement covenants and government regulations; (iv) review the appropriateness of project implementation modalities (staffing, MIS, audit, financial management etc.); and (v) propose solutions, corrective measures or improvements to be undertaken. 4. The mission spent 5 of its effective 12 days in the field 2, covering 3 districts. Intensive discussions with PMU, POs and beneficiaries in the field were held in order to review progress and share ideas for improvement of operations, chart ways to kick start the project and to pave the way to effectiveness and efficiency. The Mission had also two meetings with PMU and POs, specifically on requirements, set up and reporting on M&E and a meeting on value chain development and promotion of new financial products. 5. An initial working session, was held on 3 February with the and PMU team in Dhaka, followed by a meeting on 4 th February, with PMU and 5 POs. Based on the joint review of the project with PMU, key issues were identified and recommendations were agreed upon 6. An initial debriefing was held on the 13th February with the /PMU team in Dhaka, and the final wrap up meeting to discuss the mission s findings and recommendations was held on the 14th February, chaired by BFID (Bank and Financial Institutions Division), Ministry of Finance. 7. The IFAD Mission would like to express its gratitude to the Government of Bangladesh, the PACE Project Management Unit, project beneficiaries, district and upazilas representatives and all other project partners for their cooperation and support during the mission. This Aide-Memoire reflects the main mission findings and recommendations duly endorsed in the wrap-up meeting. B. Overall assessment of project implementation 8. The overall implementation progress is rated moderately satisfactory (4). Despite the initial start-up delay, PACE is gaining momentum. The project has made encouraging improvements in its implementation progress, achieving 20.8% disbursement of its overall financial targets. 9. The four inter related project thematics, financial services, non-financial services, value chain development and technology, require a strong project management leadership and a strong coordination, conducive to efficient project s service delivery to on-farm, off farm and value chain beneficiaries. To face this challenge, The PMU made good progress in the set up of operational PMU, with adequate office accommodations at. The PMU is fully equipped, with financial process in 1 Mission composition: Mr Nicolas Syed. Country Programme Officer and Team Leader; Mr Mohamed Tounessi Mr Mohamed Tounessi (project management and rural finance expert/deputy Mission Leader), Mr Khairul Islam, Value Chain specialist, Ms Wanaporn Yangyuentham, Gender/ M&E/ KM expert and Mr Nodar Mosashvili, Financial Management Specialist. 2 See annex, 1, field visit programme. 1

8 place and PMU is almost fully staffed with 22 officers in different positions. The process of recruiting the M&E and Knowledge Management officer and 2 Value Chain Managers is almost completed. The selected officers will join on first March The project carried out the planned preliminary activities, including: (i) the start up workshop, to share the key information of the project with stakeholders and implementing partners; (ii) a review workshop on ME program management; (iii) The planned procurement plan for equipment (office furniture, IT equipment, vehicles, etc.) was carried out ; (iv) the Baseline survey, prepared by Development Technical Consultants, Ltd, conducted on 1400 direct beneficiaries and 375 indirect beneficiaries of PACE project is completed; (v) the feasibility study for the e-market platform is completed ; (vi) the feasibility study for the crab hatchery is also completed and (vii) guidelines for value chain development with POs is also completed. 11. However, the project needs more efforts and inputs, to streamline the PMU organisation and to enhance strategic planning, coordination process, project reporting and M&E. In particular the mission has noted some critical issues in the project management that need to be addressed. 12. The likelihood of achieving development objectives is rated moderately satisfactory (4). Whilst it is too early to definitively assess the likelihood of achieving development objectives, provided that the recommendations and a more strategic approach are adopted, the project does have good scope to effectively and significantly meet the needs of the core target groups. C. Outputs and outcomes 13. Project performance in terms of achieving outputs and outcomes is rated moderately satisfactory (4). Implementation of the Project was analysed through the approved AWPB, feedback from PMU staff, stakeholders and beneficiaries in the field and documents submitted to the mission. Although a of activities remained unimplemented, for various reasons, a good progress report would have grasped more credit for project s performance. Nonetheless, the implementation period, is rather short to analyse outcomes that benefit the target group. 14. Component 1: Financial services for microenterprises is rated moderately satisfactory (4). Under this Component, sustainable financial services for microenterprises (farm, trading, off-farm and related service sectors) will be expanded through value chain development. The planned outputs include: (i) expansion of ME loans (ii) piloting of new loan products; and (iii) capacity building of the Palli Karma-Sahayak Foundation () and Partner Organizations of the (POs) in designing and developing of new financial products, monitoring, evaluation and impact assessment of the ME loan programme 3. The project has been designed to scale up s existing microenterprise (ME) lending programme, which is implemented by more than 160 POs. The target is to create new ME borrowers, providing an average loan USD with a repayment method that varies depending on the type of business. 15. In line with the loan agreement between GOB and IFAD signed in December 2014 and the subsidiary loan agreement (SLGA) between IFAD and the Ministry of Finance, signed in January 2015, a line of credit facility to finance ME lending has been set-up under with IFAD s contribution for an amount of USD 20 million, with co-financing by for an amount of USD million and POs for an amount of USD million, which bring the total amount to USD million. An amount of USD 2.6 million were transferred to PACE, representing 22% of the total credit line allocated to PACE, to be disbursed within 3 years. 16. From January to December 2015, ME loan outstanding with POs reached a total BDT of million while the amount of loan repayment by POs, for the same period was BDT million. The total loan outstanding on 31 December 2015 was BDT million, compared to BDT million on 31 December Therefore, the net disbursement during this period was BDT million. IFAD finance should be BDT On the other hand, during the same period (January- December 2015) the total POs loan outstanding was BDT 66, million while the total loan repayment was BDT million. The total loan outstanding with borrowers was BDT million, compared to total loan standing which was BDT million on 31 December The net disbursement to borrowers s is BDT million. The cumulative total for of borrowers is 798,589. Therefore, the net increase of borrowers, compared to the base line is 150, PACE, loan agreement BA , schedule 1, para.4. 2

9 17. PACE had a target to disburse ME loan to 55,000 new borrowers during January to December PACE has achieved 239% of the target from January-December The project has already exceeded the total project target of providing financial services to 102,000 new borrowers under this activity. 18. However, the mission observed that an adequate monitoring and evaluation system that would provide analytical information on targeting, sales, productivity, profitability income, employment and impact on borrowers, is not yet in place. The mission had thorough consultation and discussions with and PMU, to address this concern. The mission reviewed the IFAD loan agreement, schedule 1 para. 11, which underlines the implementation arrangements, for the ME programme, as well as the PIM section, on PACE management of microenterprise loan programme 4. Both, spell out the respective responsabilities of Loan Operations Division, which is responsible for disbursing ME loans through POs, selection of POs, Identification of ME clients, (farm, non-farm and services), assessment of ME; savings and loan policies, implementation process, policies, and capacity building. On the other hand, The PMU has the responsibility to set up specific M&E and produce regular reports on ME programme performance and impact on beneficiaries. 19. The mission underlined the need for PMU to give high priority to M&E area, and take steps to address issues of data collection, analysis and reporting in implementing in particular, ME component. As agreed with PMU, the project should strengthen PO s data capture and reporting. POs should generate monthly reports, that would be collated and analysed by the PMU/M&E officer and the PMU/ME officer. The M&E system design for this particular component should be simple to measure first, implementation of activities, which lead to outputs of the project. It should be designed around the project logical framework (logframe). In step 2, the M&E design for ME, should be able to inform on specific outcome and impact indicators. 20. To assess information on the ME outcome, a yearly survey should be undertaken to gather information on the outcomes achieved, particularly on increase in production, sales, employment and ME profitability. The annual outcome surveys should also track, the changes on a of social and gender related indicators. The Mission recommends that the M&E system as well as, the format of the progress report include, gender disaggregated data collection and analysis. 21. In addition, in order to effectively combine financial and non-financial services in a sustainable way, POs should play to the largest extent possible a facilitator role between their client base and non-financial service providers. Only by sourcing such non-financial services from the private sector is it possible to ensure a commercially viable activity. 22. Piloting of new loan products. upgrades its financial services according to the demand of the members. ME program of is providing financial services to the people who has the capability to run comparatively bigger economic activities than the clients of other microfinance programs. In Addition, is exploring new and more micro enterprise-friendly financial products to match the need of micro entrepreneurs under its ME program. PACE has planned to pilot 02 new financial products under its financial services component. 23. Before piloting the new loan products, will conduct feasibility study. If the proposed new products are found feasible, will develop policy in consultation with its POs, entrepreneurs and other stakeholders for piloting these products. After piloting phase, will formally launch the products. So far, PACE has prepared the ToRs for conducting study to pilot two financial products: start-up capital loan and lease financing for MEs. IFAD already gave its no objection on the TORs. According to the plan, the piloting of start-up loan and lease financing will start in March 2016 and will be completed by the end of June The studies for these two products will cost BDT 800,000. The PMU has taken the clearance from IFAD in this regard. Under the piloting of new financial product, PACE will provide financial services to 200 micro entrepreneurs with a total allocation of BDT30.0 million. For this financial year ( ) PACE has set its target to provide financial services of BDT 0.75 million to 50 micro-entrepreneurs. 24. The mission organised a meeting in the field with PMU and POs on promoting new financial products and challenges of value chain development. The process to be developed for financial products was discussed and the mission urged PMU, to initiate the feasibility study no later than March In addition, to the new two loan products, to be promoted, initial observations from field visits showed that the present ME loan terms and conditions may not meet the demand from all MEs. 4 PACE, appraisal report, page 157, Appendix 11, Draft PACE project implementation manual. 3

10 Borrowers may prefer weekly, monthly, quarterly, or single instalment system of repayment of loan, as well as receiving loans with different instalments based on business cash flow needs. All ME borrowers met during the field visit were found repaying loans in regular instalments and they suggested to increase loan size and flexibility in loan repayments 25. PACE/ should consider the revision of lending policies to borrowers. Furthermore, the mission observed, the lack of clear strategy to specifically target youth for business development. Therefore, it seems important to launch the piloting of the start-up financial product specifically for youth with viable business plans. 26. Following the feasibility studies, the PMU should keep initiate further consultations with all stakeholders in a workshop to be organised by PACE. Before the workshop, the PMU and the Loan Operation Division of should prepare terms and conditions for new loan products and process for implementating the 2 pilots. The document should be presented during the workshop to stakeholders and finalize with them the road map for launching the pilot. Monitoring and regular reporting on agreed indicators for the pilot would be important for decision making to go full fledge on the pilot. 27. Capacity Building. Based on the progress report, organized training for 25 and POs officials on ME management, design and development of new financial products, M&E and application of information technology. PACE is planning to provide training to more 75 officers of and 100 officers of POs within June In addition, Pace organized a Micro-enterprise program review workshop. The main objective, was to review the ME program of IFAD/ and POs and determine the future direction of ME programme. However, the training plan do not seem to be supported by training need assessment, which would outline the priority training areas on which PACE should be focusing. Therefore, the mission was not able to assess the relevance, effectiveness and efficiency of the training programme implemented so far in Nonetheless, the mission field visit was instrumental to obtain first hand information about awareness on the critical importance of capacity building and training for the POs and the ME borrowers. POs executive, branch managers and loan officers, feel concerned and cautious, about ME scaling up which requires considerable knowledge and skills with regard to analyzing profitability, feasibility of business expansion and associated risks. Moreover, based on discussions with ME borrowers and POs in the field, the mission identified some key skills weaknesses, including : (i) the limited capacity of ME borrowers, with respect to keeping accounts of their business, planning and understanding the cash flow requirements of their business and (ii) POs which have limited capacity to handle the scaling-up approach and graduation of the ME, primarily in their existing skill capacity and staffing. 29. POs are capable of identifying problems at the producer level, however, they tend to have difficulties in analysing the market constraints, and how best to address these constraints. Therefore, there is a strong need for developing POs and borrowers knowledge capacity in business management and understanding the functioning of market, price formation and transfer, profitability and risk analysis. 30. The mission recommends first to establish participatory mechanism for improved understanding of the project objectives, implementation approach and targeting strategy for each component by all Project stakeholders. Thereafter, the Project Coordinator should ensure that all PMU staff is properly oriented and briefed on the project challenges and therefore, the need to hold comprehensive consultations, in view of preparing a strategic enabling framework for capacity building at various levels from ME borrowers, PO s staff, staff and PMU staff. Therefore, PMU should plan for training assessment, identify training priority areas, identify training partners, the planning, costs, budget, of trainees, expected outputs and outcomes and feedback mechanism for annual training evaluation. The PMU should also document efficiency and effectiveness of all training courses (, POs, PMU staff members and borrowers), and a system of annual assessment should be instituted. 31. The mission also recommends that Business awareness for borrowers, needs to be enhanced, through better support and assistance in analyzing potential risks and taking appropriate measures to mitigate risks, product diversification, product quality improvement and adoption of improved technologies. 4

11 32. Considering the success of ME programme, it is foreseeable that the of ME loans will substantially increase during the next three years, with much higher loan portfolio. Therefore, more support services will be demanded by microenterprises (legal, marketing, product promotion, export, access to innovations, staff skill training). POs should play to the largest extent possible, a facilitator role between their client base and non-financial service providers to ensure a sustainable development of their activities. In addition, POs will need to further strengthen their capacity to handle larger loans and value chain development subprojects. 33. The mission recommends that PACE identifies an institution 5 which could prepare an innovative comprehensive training programme introducing models and experience in ME and value chain market-oriented. The training resource persons should be invited from international or national institutions. The training programme should be conducted at the earliest convenience, in particular at the POs levels since capacity building at this level is the prequisite for achieving the project s scaling up strategy. Other training modalities such as the learning routes and exchange visits, utilization of websites, videos and brochures on the training subjects should be added. The IFAD Country Officer may assist in establishing contact to organisations such as the ILO who has training modules for market development and ME management. 34. The mission recommends that key professional staff require basic team building training covering aspects of leadership qualities, influencing, team building and communication. This workshop should be as interactive as possible and not ceremonial and should establish a participatory mechanism for improved understanding of the project objectives, implementation approach and targeting strategy. IFAD has developed a module for this type of training and could be adapted to the PACE. Agreed action Responsibility Agreed date Prepare concept note for the field level workshop on new loan products to PMU April 2016 be organised by PMU. Hold workshop on new loan products PMU May 2016 Train ME borrowers on financial and business management PMU/POs Continuous staff to undertake team building training with selected POs PMU Yearly Undertake training need assessment and develop subsequent training PMU June 2016 plan, including (training priority areas, training partners, budgets, of trainees, expected outputs and outcomes and feedback mechanism for annual training evaluation. Document efficiency and effectiveness of all training courses (, POs, PMU Continuous PMU staff members and borrowers). A system of annual assessment should be instituted. POs should play to the largest extent possible, a facilitator role between their client base and non-financial service providers to ensure a sustainable development of their activities PO Continuous 35. Component 2: Value chain development is rated moderately unsatisfactory (3). The outcome of Component 2 is sustainable inclusion of MEs and businesses in value chains in agriculture, off-farm and service sectors to up-scale business, production technologies, and enhance access to markets. Five outputs will lead to this outcome which are: a) MEs and agri-businesses sustainably included in agricultural value chains in various parts of the country, b) MEs sustainably included in value chain for non-farm manufacturing, processing and service products or group of products, c) capacity of and POs enhanced to formulate and manage large scale value chain subprojects and identify opportunities for partnership with the private business sector for microenterprises, d) capacity of, POs and microenterprises to identify, advocate and strengthen pro- poor business policies, especially sector specific policies enhanced, and d) electronic platform. 36. The project targets 8 farm subprojects and 7 non-farm subprojects to be awarded to its POs during the period January 2015 till July Until now, the PMU has received a total of 94 VCD proposals from its POs. After initial assessment, it rejected 53 proposals and accepted 41 as primary candidates. So far, only 3 VCD sub-projects have been awarded to 3 POs while 1 non-farm subproject to another PO. In addition, 3 farm and 1 non-farm subprojects have been approved by management and 7 other farm sub-projects are under process for final approval. The slow progress of awarding subprojects can be attributed to PMU s efforts to develop the capacity of POs on VCD and 5 A Regional IFAD grant has been approved to support APR Value Chain projects and for which a service provider has already been identified. 5

12 also prepare structured evaluation guidelines for POs proposals. The delay in awarding VCD subprojects, therefore, seems realistic and rationale. However, given the preparatory work is done, the PMU should expedite the process of awarding subprojects to the deserving POs to catch up with the delay. 37. The PMU has developed a transparent selection process and maintains a stringent quality control procedure before awarding a VCD subproject. Following the training on VCD and subsector analysis thereafter, the POs develop their proposals in s prescribed format. After receiving the proposals, the PMU carries out a preliminary evaluation where the PMU staff physically visits the subproject location/s and check if there is any inconsistency. The POs are given another round of opportunity to improve their proposals based on the feedback from field visit by PMU staff. Following the approval of DMD of, the revised and improved proposals are placed at the Value Chain Interventions Evaluation Committee comprised of seven members headed by a senior General Manager of. The Evaluation Committee either forwards the proposals through the DMD for MD s approval or recommends for further improvement of the proposals to be considered further. This is in line, schedule 1 para. 11 of the FA which underlines the implementation arrangements. 38. The PMU has identified 11 broad subsectors under farm sector and 7 broad subsectors under non-farm sectors from which VCD subprojects may be awarded to POs the same VCD can be awarded to multiple POs. This is a good approach as this provides cross-learning opportunities among the POs implementing the same VCD subprojects. However, it is important to note that the subprojects are very much project location specific, and contexts may vary from location to location. Therefore, learnings from one subproject can be implemented in another subproject, if they show similar context. 39. can and should play a coordination and supervision role as the same value chain can be implemented in different locations by different POs which may have the same private sector engaged at the national level (say a national input company). For a particular geographical location, it may be not exciting for a private sector partner to do promotional activities but if several locations and therefore larger outreach can be shown, they will take interest. here can play the overall coordination role. 40. The Mission visited 2 farm and 1 non-farm VCD subprojects in three different locations which are currently being implemented. They are black Bengal goat farming, crab fattening and embroidery products. The title of the subprojects may raise some ambiguity. In both the farm subsectors, the titles refer to a specific activity of the value chain. A value chain refers to the process where a single product or set of products reach the end market through different activities by different actors where production/manufacture is simply one function. It is understood that the target beneficiaries (the poor people) are mostly engaged at the production/manufacture level. But very often, MEs (the project targets also) may belong to other tiers of the value chain and not necessarily at production level. Changing the titles of the subprojects from the very onset may help the implementers visualize the value chains beyond production level though the ultimate benefits are likely to reach the poor people. 41. The subprojects being implemented, as the Mission found, identified the market opportunities and key constraints very well. The strength of a value chain approach is that it does not look at only the production level constraints (which were mostly done in traditional approach) but also at input and output level. In addition, it also looks at the support service market and enabling environment. This approach, therefore, helps implementers identify key constraints to growth of the sector as a whole and design appropriate interventions. With limited resources, it is always expected that the implementers identify the leverage point to intervene from where sustainable and large scale impact is achievable. As observed during the mission, the POs tend to implement activities at all tiers of the value chain which holds the risks of diluting resources and efforts without targeting only the key bottleneck/s to growth. 42. For example, in goat value chain, as the Mission observed, access to market is not a problem for the farmers in the project location as there is high demand and increasing price trend. The key problem seemed to be high mortality rate of goats due to poor disease management at farmer level. Introduction of improved production technology (perch/macha housing), access to better veterinary services and better access to finance for growth were found as the leveraging point to create sustainable impact. Therefore, the project may simply focus on these areas and not extend its limited resources for output market. On the other hand, in embroidery products subsector, access to market 6

13 seemed to be the key problem for the target people. The Mission found, there was a large wholesaler/intermediary in the project location who has very good access to market in major cities of Bangladesh as well as export market. This wholesaler cannot expand her production due to shortage of workers though she has more demand from her buyers. She keeps developing workers through providing skills training in a continuous basis and from a business interest. The subproject used this person as a trainer to train few of its beneficiaries instead of assisting her grow her own worker-base. Therefore, the subproject, instead of arranging trainings by its own, if had supported the intermediary extend her production base, that would have been sustainable and very much market driven. 43. The ongoing subprojects may still have some areas to improve further (value chain projects are flexible and should accommodate market changes) while the upcoming ones may consider identifying the leverage point to intervene to achieve maximum sustainable impact. 44. Access to crablet has been found as the key bottleneck to growth for crab value chain in Sathkhira. Poor knowledge and practice at farm level is also another key constraint. Like in goat, access to market does not seem to be an issue. Therefore, the project may focus on input and production level. Hatchery set-up for crablet is a critical intervention for the growth of the subsector but also requires special attention. As per the current plan, the hatchery is going to be installed on the land owned by PO. It is not clear yet, who would manage the hatchery in a commercial manner. As the PO is not in this business which is very technical, from the very onset a parallel technical management should be considered in place. Besides, a business plan, delineating how the hatchery will run in a viable manner and with a growth plan. 45. Apart from awarding and implementing VCD subprojects through POs, the project s performance in achieving other targets is mixed. Against the target of total 250 /GoB officials trained on VC project design and management throughout the project lifetime, the project targeted 150 during January 2015 till July Until now, 111 have been trained. In case of exposure visit, training on /PO staff on environmental issues, policy issues identification and arranging dialogues, arranging regional VCD workshop the project could not do much against the targets until December However, the project has planned to achieve the targets by end of July In case of the Korean Supplementary funds for e-platform, the project has conducted a feasibility study. However, the feasibility study did not provide sufficient information on the technical and financial requirements, and could not provide a clear picture of how the platform would be developed and operated. Furthermore, the Grant Agreement for the Korean funds sets October 2016 as completion date for the grant, which implies that the platform should be operational by that time. In addition, it is s intention to develop a phased platform which needs more time and resources. Therefore, in consultation with and IFAD, the mission agrees that the said deadline is too ambitious given the complexity of setting up all the mechanisms which will ensure the success and sustainability of the platform. As such, and in agreement with all parties, the mission recommends the cancellation of the Korean Supplementary Funds under Clause 12.01/(a)/(v) of IFAD s General Conditions. Agreed action Responsibility Agreed date Prioritize interventions in the current VCD projects and /PMU Continuous also impart this strategy in the upcoming ones Award the remaining VCD projects planned in the /PMU June AWPB Enhance the capacity of relevant staff (those /PMU Yearly involved in VCD) on value chain approach through periodic formal assessments. staff to undertake team building training with selected POs to enhance comprehension of VCD approach PMU/PO Yearly 47. Component 3: Technology and product adaptation is rated moderately unsatisfactory (3). The outcome of Component 3 is the introduction of proven technologies and products (agricultural and off-farm) from Bangladeshi and international sources to beneficiary micro-entrepreneurs. The outputs include: (i) resolution of technological problems identified under Component 2; (ii) adaptation and dissemination of proven technologies and products; and (iii) provision of technical assistance. 48. The AWPB sets out a of targets for the fiscal year, including amongst others: identifying 2 technological gaps and conducting research to identify and disseminate solutions to 7

14 bridge the gaps; introducing 4 new technologies (3 technologies developed in Bangladesh and 1 from abroad); and adapting and disseminating 8 (6 agricultural and 2 off-farm) readily available technologies and products. The total budget for fiscal year is BDT 17.5 million, or approximately USD 224,000. A staff, with the designation of Assistant Manager Technology Adaptation, has been assigned to oversee the implementation of Component Overall, PACE has identified 1 technological gap and conducted research to identify and disseminate a solution. As such, PACE is also in the process of introducing 1 new technology from abroad as per the AWPB, under outputs 1 and 2. In addition, the mission observed other readily available technologies being promoted under VCD and ME activities. Under VCD, for example, PACE is promoting the adoption of perch method for goat rearing and the setting up of buck stations to facilitate the breeding of goats, while under the ME programme PACE is promoting the use of powerlooms in order to replace the older and less efficient hand-looms. However the PMU has not fully addressed the recommendations made by the previous supervision mission. To date, the financial achievement under Component 3 is approximately 15% of the AWPB and 2% of the overall component costs as of December Introduction of Technology from abroad. Building on past FEDEC experiences and the current Crab VCD sub-project, a major bottleneck was identified in the crab value chain in Bangladesh. In fact, crab is an important export item for Bangladesh due to its increased global demand. However, due to the lack of crab hatcheries, farmers depend on the natural supply of wild crabs. The collection of a vast of crabs from the wild environment is creating an ecological imbalance and can negatively impact bio-diversity. 51. In this context, PACE commissioned a feasibility study to explore the possibility of establishing a crab hatchery. Given the lack of local expertise in this area, and the failure of past crab hatchery ventures, PACE contacted the Center for education and community development (CECD) in Vietnam to undertake a feasibility study. In fact CECD has a vast experience in implementing, monitoring crab culture related projects for farmers in coastal areas of the country. In Do Son province, Hai Phong City of Viet Nam, CECD has implemented crab hatchery production activities since February 2014 with the Hai Phong Provincial Association of aquaculture entrepreneurs and Set up a standard model of crab hatchery production with Sinh Toan Crab hatchery enterprise. 52. The study examined the districts of Satkhira, which in conjunction with its neighbouring districts of Khulna and Bagerhat account for 80% of the crab production in Bangladesh, and the experts have estimated that the annual demand for crablets is 15 million per year. Furthermore, 78.2% of the people surveyed believe that the demand for high quality crabs will increase significantly, and more than 90% of the respondents suggest that the crab hatchery production would be essential to ensure a continuing growth of the sector. In addition, the water temperature, ph and dissolved oxygen (DO) as well as salinity levels in Satkhira are particularly suitable for rearing crabs and crablets. 53. The study examined 5 possible sites in Satkhira, and concluded that the most promising site was a plot of land in Burigoalini Union, Shyamnagar Upazila. The plot is owned by a PO, Nowabenki Gonomukhi Foundation (NGF), who is also implementing the crab VCD. Finally, the study suggests building a medium size hatchery for an approximate cost of USD 64,000, in addition to the running costs. This is a considerable amount of money, for which ME loans are insufficient. Nonetheless, the study does not provide (i) an estimate of the running costs; (ii) the production capacity of a medium sized hatchery; nor (iii) a business plan/cash flow projection for the hatchery. 54. The mission endorses the findings of the study, but highly recommends that (i) an in-depth 5 year business plan for the hatchery be prepared with the support of a private service provider and (ii) a partner from the private sector be identified to co-finance and/or manage the hatchery. The second recommendation is of particular importance as the sustainability of the hatchery rests on the successful management of this risky venture. In fact, according to the CECD study, the hatchery will require high levels of attention in terms of bio-security and hygiene, monitoring of water parameters etc. that will require a full-time and business oriented manager. 55. Readily available technologies promoted under VCD activities include artificial insemination for cows, the adoption of perch method for goat rearing and the setting up of buck stations to facilitate the breeding of goats. In addition, the mission observed how currently the vaccination of the goats is being done by the PO. Readily available technologies promoted under ME activities include the promotion of power-looms, the use of nets to cover crops in order to protect from pests, and the support to farm-machinery providers. 8

15 56. In terms of compliance to previous recommendations, the mission observed that the Strategy paper submitted is of poor quality and does not provide sufficient information and details on the operational plan for the introduction and dissemination of technologies. Furthermore PACE has not yet begun to compile a record of readily available technological solutions. As such the previous recommendations still stand in addition to the recommendations on the hatchery. Agreed action Responsibility Agreed date Develop Strategy for implementation of Component 3, including detailed PMU November 2016 plans for the identification and solution of technological gaps Consult with PO s and beneficiaries to identify and document initial readily PMU June 2016 available technologies (such as the measuring kit) Develop plan for the dissemination of readily available technologies, to be PMU November 2016 included in strategic paper Devise a strategy and position paper to ensure the financial sustainability of the crab hatchery, including an in-depth business plan for the crab Hatchery, PMU/PO September 2016 D. Project implementation progress 57. Component 4: Project Management is rated moderately satisfactory (4). A Project Management Unit (PMU) was established at, to oversee the overall project implementation aspects, dealing with coordination, financial management, procurement, M&E and Contribution to policy dialogue, in relation to ME and VCD challenges. The PMU made good progress in the set up of operational PMU, with adequate office accommodations at. The PMU is fully equipped, with financial process in place and PMU is almost fully staffed with 22 officers in different positions. The process of recruiting the M&E and Knowledge Management officer and 2 Value Chain Managers is almost completed. The selected officers will join on first March The project carried out the planned preliminary activities, including : (i) the start up workshop, to share the key information of the project with stakeholders and implementing partners. Around four hundred officials of different government and private sector organizations including and its Partner Organizations (POs) participated to the workshop; (ii) a review workshop on ME program management. (iii) The planned procurement of equipment (office furniture, IT equipment, vehicles, etc.) was carried out ; (iv) the Baseline survey, prepared by Development Technical Consultants, Ltd, conducted on 1400 direct beneficiaries and 375 indirect beneficiaries of PACE project is completed. The survey was carried following the Log frame indicators of the project to collect the baseline information of project s beneficiaries, to be used as a basis for outcome and impact evaluation at midterm and end of the project; (v) the feasibility study for the e-market platform is completed ; (vi) the feasibility study for the crab hatchery also completed and (vii) guidelines for value chain development with POs also completed. However, the project needs more efforts and inputs, to streamline the PMU organisation and to enhance strategic planning, coordination process, project reporting and M&E. In particular the mission has noted some critical issues in the project management that need to be addressed. 59. The mission notes that with regards to leadership and coordination, there is a lack of clarity on current responsibilities and reporting lines from the PO level to in general and the PMU specifically. The project employ 24 staff with different skills and include : 2 Value Chain Supervisors, 3 Value Chain Specialists, 10 Value Chain project Managers, 01 Procurement Specialist, 1 M&E and KLM specialist 1 Financial analyst, 1 Assistant Manager for piloting new financial products, 1 Assistant Manager for technology and product adaptation, 2 Accounts Officers and 2 Drivers. In addition, assigned an Assistant General Manager as the Chief of ME programme. 60. Taking into consideration the large project staffing, the PMU should further work out the detailed role of each staff with performance indicators, simplify the organigramme and streamline the organisation by cluster which will group value chain officers by sectors such as off-farm and on-farm. In addition, the organizational structure of finance function and staffing should be also streamlined in the organigramme. The mission reviewed with PMU the efficiency factor of the PMU and proposed the attached project s organigramme to the Aide memoire. However, more work needs by the PMU, in detailing the TORs of each position and how they relate to each other. 9

16 61. Project management requires special attention and always need to further improve performance. The success or failure of a project greatly depends on the knowledge, skills and commitment of staff involved in implementation. Based on joint review of PACE 62. In addition, the mission identified a set of prioritized actions that could drive to project s performance quick wins. These are the following : 63. PMU should finalize the PIM, which should include detailed guidelines to drive the implementation of each component. The operational guidelines should describe in detail each step of any process and highlight: (a) the various actors intervening in each step; (b) the roles of each actor; (c) how PMU intend to mobilize and interact with each actor; and (d) a tentative duration for each step. These guidelines should be developed in consultation with the and POs. 64. PMU should ensure strong annual performance evaluation of its staff, which includes defining the objectives, targets and results to be achieved at the beginning of the year, mid-term review year and end-year performance assessment. This will also help in identifying capacity gaps. Based on this information, the PMU should develop a structured capacity development plan to address weaknesses and the measures to be taken. Along the same line, PMU should institute the validation of project staff TORs before any mission in the field or outside the country and also establish rules for mandatory Back To office Report (BTO), which should highlight the proceeding of the mission and the main outcome of the mission. Furthermore, as it is done in many IFAD s projects, PMU should initiate Client Satisfaction Surveys, that could be instrumental in drawing lessons for the way forward. 65. Finally, to complete the picture of project s improvement plan, annual review and planning workshops should be organized in order to provide an opportunity for project staff, POs, key stakeholders, selected project beneficiaries and private sector, to review project performance, to draw lessons and to recommend improvements for the way forward for the next year project implementation. 66. Enhanced coordination between PMU and Loan Operations Division. The Loan Operations Division of implements loan programs, including the IFAD s ME loan program, and makes all lending decisions. The PMU will be coordinating value chain development subprojects with the same POs. The mission recommends a close working relationship between officers of Loan Operations Division and PMU, to ensure synergy between financial and non-financial services. For this to happen, officers of the Loan Operations Divisions should receive solid training on VCD, enterprise development and functioning of private sector in general. This could also help to design with, a strategy for combining financial services and non financial services, for the benefit of ME borrowers. Agreed action Responsibility Agreed date Review and update the PIM if necessary, which should include PMU/IFAD August 2016 detailed guidelines to drive the implementation of each component. Ensure annual performance evaluation of its staff, which includes defining the objectives, targets and results to be achieved at the beginning of the year, mid-term review year and end-year performance assessment. PMU Continuous Initiate Client Satisfaction Surveys, that could be instrumental in drawing lessons for the way forward. PMU Yearly 67. Performance of M&E is rated moderately unsatisfactory (3). After one year of implementation, M&E system is yet to set up properly. The PMU has currently recruited an M&E officer who will take up the position from February 15, 2016 onwards (after the current supervision mission). The mission clarified with PMU on the roles and responsibilities of the M&E officer in putting a focus on data analysis, reflecting critically areas for improvement and reporting results, rather than only gathering information from POs. 68. Involvement with project stakeholder is key for effective M&E system as it would build understanding and create a learning environment. Therefore, in consultation with the PMU and the IFAD Country Office, the mission has requested PMU to arrange a workshop on M&E to POs in order to have a common understanding of the project M&E framework and reporting requirements. The M&E workshop will be arranged in April, and its workshop concept note elaborating its objectives, 10

17 participants (mainly for POs M&E officers), facilitator and expected results will be submitted to IFAD for validation. Furthermore, PMU has designed reporting templates for ME and VCD activities to be used by POs for data collection, these formats will be also shared with POs during the M&E workshop. It is worth to note that PACE has taken into account of beneficiary age groups (by agedisaggregated data) including youth in order to better understand and analyze demand and implementation results. The M&E system is expected to be fully operational by the end of June. 69. The Baseline Survey was carried out in 16 sampled districts during August and October 2015 by Development Technical Consultants Pvt. Ltd. (DTCL) and submitted to IFAD in January The survey respondents comprise of 1400 direct members including ME owners, VCD participants and participants of technology transfer as well as 375 indirect beneficiaries including employees in ME, indirect technology adopters and loan borrowers from other lending windows of to assess the current economic and social situation of project beneficiaries to be a basis of outcome and impact evaluation at midterm and end of the project. PACE needs to select proper RIMS indicators in accordance with the current project monitoring indicators. 70. At PO level, data collection and reporting are undertaken on weekly basis together with monthly coordinating meeting. Based on the discussion with POs and field observation, it shows that some PO has carried out their own baseline surveys since it has started an operation with PACE and in some case GIS is applied for mapping and data collection. 71. To address, the urgent issue of M&E for ME, steps to be carried out, were agreed with the mission and the PMU. The PMU s M&E and the PMU/ME officer in the PMU will take the lead in the following activities: (i) Prepare a concept note for a workshop to be organised by PMU on M&E requirements for ME implementation, process for data collection and analysis by POs and expected outcomes of the workshop; (ii) Undertake a quick assessment on hands on training needs of PO s, to operationalize the reporting system from POs to PMU before june 2016; (iii) Prepare and implement the needed hands on training for POs; (iv) The PMU will design a reporting system to track the ME progress, performance and emerging impact; (v) By the end of may 2016, the POs should be able to generate monthly reports on activities and outputs, which will be collated by the PMU. Reporting will show progress relative to annual and project targets disaggregated by gender, where appropriate. It is suggested to develop an electronic monthly report system.; (vi) By the end of the year, POs should prepare the annual outcome surveys. The yearly survey will gather information on the outcomes achieved through ME interventions, particularly on employment opportunities created through microenterprises. (vii) By the end of the year, PMU should prepare the ME progress report accordingly 72. Coherence between AWPB and implementation is rated moderately satisfactory (4). As of December 2015, half-way through the AWPB, the project has achieved 435% of the target under Component 1, 16.6% for Component 2, 14.9% for Component 3 and 61.5% for Component 4, as per the table below. The figures for Component 1 are skewed due to the continuous re-lending process of PO s and the subsequent multiplier effect. However it is clear from Components 2 and 3 that implementation needs to speed up in order to achieve the targets set-out in the AWPB. 11

18 Total project Budget Budget as of 31-Dec-15 Actual as of 31-Dec-15 % execution of the current budget % execution of the total budget Comp. 1 Comp. 2 Comp. 3 Comp. 4 Unallocated/ Contingencies TOTAL 5,644,750 1,150,675 65, , ,599 7,428, ,333, ,525 8,750 76, ,166, , , , ,530, ,233, % 16.6% 14.9% 61.5% 404.4% 180.1% 1.6% 2.0% 12.9% 137.8% 73. Gender (and youth) focus is rated satisfactory (5). As of February 2016, 60% of the ME beneficiaries and most of the VCD beneficiaries are women. The mission observed that female microenterprises and workers are self confident and economically empowered through as a result of self employment, ability to generate income, access to and control over productive and household assets and capacity strengthened and consequently change their traditional mindset towards the social status and role of women. It has been observed that women prefer to invest mostly in livestock sector as well as embroidery and tailoring followed by horticulture. The limited gender representation of PMU staffing had been indicated in the previous supervision. To date, 12% of PMU staff are women (3 of 25 staff 6 ), and all of whom are Value Chain Project Managers. 74. As per the project design, there is a clear need to involve more youth in the activities of financial services for microenterprises and value chain development. The mission was pleased to note that a of beneficiaries are young and/or women, in accordance with IFAD and PACE priorities. Under capacity building activities a special preference is given to younger entrepreneurs as POs believe that they are more active than other age groups. In addition, POs have expressed their interest on youth inclusion in rural finance through skill development and microcredit provision for the new financial products that will be developed. 75. Poverty focus is considered satisfactory (5). PACE financial and technical services have been clearly directed at the economically active moderate and extreme poor farmers and entrepreneurs through financial services for micro-enterprises and value chain activities as per the project design. Providing ME loans would allow them to expand their business and create self employment and followed by more wage employment to other workers. In addition, linking them to stakeholders along value chains and private sector accounts for more productive and thereby earn increased income, have access to appropriate loans and also grow to a level that creates more wage employment for poorer population. 76. Effectiveness of targeting approach is rated moderately satisfactory (4). Initial observations from field visits confirm that the recipients of the ME loans are indeed limited by the availability of capital and require loans to effectively expand their activities and subsequently to increase their production, incomes and also offer more and better remunerated employment. The mission was please to note that a of beneficiaries were young and/or women, in accordance with IFAD and PACE priorities. 77. Nonetheless, the mission still observed that the vast majority of beneficiaries receiving ME loans had graduated from other loan programs. PACE still needs to develop a strategy to include new ME borrowers as lateral entrants. Furthermore, the Targeting strategy submitted does not provide sufficient detailed information, as per the previous recommendations, on: (i) ensure an exit strategy for graduated borrowers and support their transition to commercial banks instead of the ME programme; (ii) ensure that adequate loan modalities are offered to those ME who need to expand their activities; (iii) ensure that new members are offered regular loans (with increasing amounts) which will enable them to move from start-up to expansion activities. 6 Remaining 3 Officers (1 M&E Specialist and 2 VCD Managers) will be recruited by February

19 78. Finally, the previous recommendations to explore the possibility of introducing an age criteria linked to the ME loan programme, and devising an exit strategy to support ME beneficiaries in obtaining commercial loans, still stand. 79. Innovation and learning is rated moderately satisfactory (4). As innovation and learning are key tools for improving the project performance, PACE has developed a Communication and Knowledge Management Strategy to achieved three objectives namely: i) documentation of learning, innovations and best practices, ii) dissemination and sharing of knowledge and iii) coordination among stakeholders to utilize the innovations and learning of the project. The strategy identifies component wise activities to be carried out. More specifically, reporting/publications/studies and workshops will be undertaken throughout all components, whereas internet-based marketing, branding and media will be exclusively applied for the value chain development component. A suggestion worth considering would be further developing an action plan including cost estimate and clear schedules on when these activities should take place in order to implement them in a cost effective and timely manner. 80. The M&E and KM specialist is not yet in the function by the time of the current supervision mission. There is a need to ensure communication and knowledge sharing between PMU and POs as well as among POs themselves in order to harness knowledge for project impact. Although it is too early to draw any key lessons, PACE has gained learning from the past experience of IFAD funded FEDEC project and will take those lessons into consideration. 81. Beneficiaries have applied the perch/macha housing which is mainly made of bamboo, wood to keep goat, sheep, buck above soil (ground). It has been recognized that perch housing decreases mortality rate in goats exposed to Peste des petits ruminants (PPR) and also other diseases. The perch method is comparatively better on biosecurity grounds and management practices compared to mud house as it excludes contamination. This innovation is widely replicated other parts of the country especially in the goat rearing zones as it is initiated and proven successful by Bangladesh Livestock Research Institute (BLRI). 82. Climate and environment focus is considered moderately satisfactory (4). The overall Bangladesh portfolio is highly climate and environment focused. Given the expected synergies and linkages between the POs and other ongoing projects in the portfolio, it can be reasonably assumed that the project will facilitate uptake of improved technologies, including climate adaptation technologies and practices. PACE will also conduct an environmental and hazardous work place study and prepare corresponding mitigating measures. Agreed action Responsibility Agreed date Submit a concept note for the M&E workshop PMU March 2016 Conduct M&E needs assessment PMU March 2016 Hold M&E workshop with PO staff at field level PMU April 2016 Identify RIMS indicators in accordance with the PMU April 2016 current monitoring framework Set out the schedules and cost estimate of KM and communication activities Link M&E system with KM to systematically capture lessons learned on implementation and impact as well as develop good pratices to be widely disseminated to stakeholders. PMU March 2016 PMU Immediate and regular basis E. Fiduciary aspects 83. Financial and administrative management is rated moderately satisfactory (4). The mission s main concerns centre around; (i) weaknesses in financial reporting, including annual audit particularly due to the absence of adequate accounting software; and (ii) weaknesses in procurement. 84. Staffing at PMU level. The role of the PACE financial staff is key, considering the substantial size of resources allocated to PACE (about USD 92 million) and the multiple financing sources (IFAD, Korean grant,, POs). To meet these significant demands, the finance-related unit(s) must be adequately staffed, with the right mix of accounting competencies and IT capability. Currently the 13

20 PACE PMU s FM/accounting staff consists of a Financial Analyst and two Accounts Officer (AO) 7. All of them successfully completed online training course ( recommended by previous supervision mission. In general, PMU FM related staffing is adequate. Since uses its own bank accounts to pre-finance project expenditures, some non PMU staff members are also involved in FM/accounting activities of the project. Since they have other responsibilities as well other than the PACE project implementation it was beyond of the mission scope to analyse efficiency of such staff arrangements. 85. Budgeting. has acceptable planning and budgeting capacity and procedures in place. In the first week of March, starts preparation of the AWPB, which includes a procurement plan. Currently uses the AWPB prepared for the FY One was cleared by IFAD on July 12, 2015, on a conditional basis; IFAD had requested to prepare a revised version of the AWPB to be submitted to the mission by the beginning of September The revised draft AWPB has been prepared for the mission s consideration. However, the mission noticed that the AWPB does not contain total planned figures by disbursement categories. Therefore, previous mission recommended to include in the next edition of the AWPB total planned figures by disbursement categories was not yet implemented. 86. Internal Controls. The internal control system at is strong and can be considered to be satisfactory and acceptable to IFAD. Segregation of duties are on place. follows regular procedures for processing financial/accounting documents. However, the mission s opinion is that too much bureaucracy exists and many processes could be simplified without negative impact. The mission cannot provide any particular recommendation since the mandate is limited to PACE only. The issue is that regular staff members are usually involved in implementation of different projects including PACE. Therefore, such decisions of possible optimization (if any) should be made not a project but entity wise. 87. Financial and Accounting Manual. uses a Financial and Accounting Manual (FAM), which documents in details all procedures relating to segregation of duties, authorization of expenditures, cash management, budgeting, payments, safeguards for assets, etc. The mission checked and made sure that applies controls during implementation of the project. However, the document is too old issued in Following the recommendation of the previous mission the prepared a special attachment to the Manual, which describes PACE specific requirements. 88. Contract Management Arrangements. has adequate contract monitoring arrangements in place. Every contract with suppliers/consultants are signed either by Deputy Managing Director (Administration & Finance). When an invoice is submitted approval process begins. The invoice goes to the project coordinator for comments regarding whether or not deliverables are according to contractual requirements. The project coordinator submits his/her comments to the administration department for approval. If the amount exceeds BDT 10,000 (around USD 120) the administration department submits documents for verification to internal audit department. The latter submits back to the administrative department with their comments. If comments are acceptable than documents goes to either General Manager (administration) or Deputy Managing Director (A&F) or the Managing Director. After getting one of these signatures, the documents go to financial department for financial approval. Assistant General Manager (A&F) or Deputy General Manager or Deputy Managing Director (Administration & Finance). After getting one of these signatures, the documents goes to finance department for processing. Check preparing officer prepares the check 8 and gets signatures from any two of five signatories. When the check is signed check preparing officer submits one to check disbursement officer who informs the vendor. Then the vendor issues an acknowledgement and collects the check. According to the recommendation of the previous mission, in October 2015 s started preparation, regular updating and submission of a contract register to IFAD monthly according to requirements of the LTB. 89. Accounting and financial reporting. in general uses accrual basis of accounting and tried to apply the same to the PACE. uses International Financial Reporting Standards (IFRS) for its regular reporting. utilizes accounting software for all activities including PACE. The software does not consists of modules tailored to respective projects under implementation. Therefore the mission was informed that experiences significant problems in case of modification of the software since any such modification will have impact to accounting of all projects under 7 All three specialist were hired at the beginning of August Earlier all PACE related FM/accounting activities were provided by respective staff. 8 Suppliers/consultants are usually paid using cross-checks. 14

21 implementation. At the beginning of the project, the software was updated to fit IFAD s requirements. Namely, a report-producing module was added which provides automatic generation of PACE applications for withdrawal and some necessary attachments like SOE, Application Summary Sheet, etc. However, IFAD recently updated reporting forms. Therefore needs significant time to update the software the way one to produce necessary reports/forms automatically. Since IFAD has specific reporting requirements which does not necessarily match requirements of other donors or other sources of financing it is advisable to modify the software the way to have the PACE related autonomous module with ability of a) multicurrency accounting/reporting and b) modification of reporting forms quickly and easily. 90. Funds Flow. The mission and agreed on following funds flow arrangements to be implemented immediately: (i) will use program account only for IFAD eligible payments of the PACE project; (ii) will finance necessary taxes from s existing account; (iii) Taking into consideration that at the payment moment it is impossible to determine IFAD s eligible part of a ME loan to be paid to a particular PO will continue to issue ME loans only from the ME loan dedicated account. There is no issue of traceability of funds in this case since the account is used only for ME loans and all ME loan related incoming and outgoing payment flow only through this account. This account will be replenished from time to time from the program account according to the method described in the previous mission report and used for the application for withdrawal # 2.(iv) No other bank accounts should be used for PACE related payments. 91. Internal unaudited Financial Reports (IFR). According to clause 25 of the LTB should submit to IFAD semi-annual IFR as of the end of September and March within 45 days after the period end. Since the project became effective in December 2015, the first IFR was due as of the end of March The IFR was not submitted to IFAD. Following the missions recommendation submitted the IFR as of the end of September 2015 but in November. The mission reviewed the IFR and found some issues as listed below. The mission provided hands-on training regarding IFR preparation. (a) (b) signed four contracts for Value Chain Development (VCD) activities. Four advances were realized under these contracts. Three of them were paid out of the s and the fourth one out of the PACE project account. Since these were advance payments the did not include respective amounts to the IFR which is not an acceptable approach; The mission was not able to reconcile amount shown as a closing cash balance in the IFR with respective bank statements. It emphasizes lake of understanding of IFR reporting from the PACE PMU side. 92. Project expenditures. started project financing in January 2015 (i.e. before getting the first advance to the DA). Amount paid this way for eligible expenditures should have been reimbursed by IFAD based on respective AW. According to previous mission s recommendation, submitted to IFAD AW # 2 to document expenditures occurred under the Category 2 for the period January-April There were some more expenditures pre-financed by before getting an initial advance from the DA. As soon as received the first advance to the DA, one was fully converted to the project account and used without taking into consideration of project limitations. Particularly loans to POs were paid 100% from the account. 93. Transaction Review. does not maintain a list of the PACE project eligible payments. As a result, the mission was unable to review all of them. No WA was approved by IFAD (except # 2 reviewed by the previous mission) for either replenishment of the DA or reimbursement of a s account. Therefore the mission decided to review draft SOEs prepared for the WA # 3 despite the fact that it had been put on hold by IFAD. The mission emphasizes that internal controls work indeed well in the. Therefore, based on the review of limited of transactions the mission did not find any issue regarding payments included to SOEs. All supporting documents were in good order. This demonstrates that issues experiences in fiduciary part of the PACE project implementation relate just to lack of understanding and experience. 94. Internal Audit (IA). has an internal audit unit (IAU). Regarding PACE project IAU s activities may be divided on following parts 9 : 9 It should be indicated that it is not in line with an international practice of IAUs which usually act according to risk based approach 15

22 (a) (b) the IAU unit is significantly involved in the project implementation since one clears all invoices (except of payments to POs) above BDT 10,000 (about USD 120) in advance; IAU monitors/reviews all PO s activities after getting PO s reports. 95. The IAU has not yet monitored advance payments paid to POs for VCD activities. However, the IAU shared following list of general observations regarding POs ME loan activities: in some cases, PO sanctions more than BDT 100,000 as first ME loan to a new client (ME member) which exceeds the first loan ceiling. According to the ME policy the limit of the first ME loan is BDT 100,000 as ME policy. Sometimes ME loans are issued without proper taking into consideration the approval policy. Steps in approval process are not precisely followed in some cases. In some cases, borrowers do not use the loan proceeds as per the investment plan. Sometimes they use a part of the loan funds for household consumption. There is a provision for POs to fill up a profile form of a ME borrower. In some cases, POs do not collect and preserve the information (e.g. estimated income and expenditure, profit and loss, of new employment generation etc.) of borrower properly. Sometimes, POs do not verify some important documents of MEs like trade license, drug license for medicine business, clearance from Department of Environment in sanctioning loan to them. 96. External Audit. According to clause 26 of the LTB should have been appointed an independent auditor acceptable to IFAD within 120 days after entry into force of the Financial Agreement. The previous mission noticed that had already selected an auditor and signed the contract for audit of the entity financial statements. The contract had a provision of audit of PACE project financial statements (PFS) as of 30-Jun-15. According to the recommendation of the previous mission, had developed and got IFAD s No Objection on the TOR of the PACE PFS audit. The auditor is a private company MABS & J Partners that is a member of the international accounting network named NEXIA. The auditor agreed to conduct the PFS audit according to the TOR cleared by IFAD without contract amendment. passed an audit package to a courier service on December 31, 2015 for further delivering to IFAD. The package included: a) the audit report of the entity financial statements for the fiscal year (ending at 30-Jun-15) including the management letter (ML); b) a separate audit report regarding ME loan program (implemented by ) financial statements including respective ML and c) a set of audit reports regarding the PACE project activities including the ML. This set included inter alia a separate audit report on the PACE PFS, separate audit report on DA & program account financial statements, etc. 97. The mission reviewed PACE and ME related audit reports. All of them have unmodified (clean) audit opinions with no recommendation in the management letters. The TOR requested several audit opinions to be issued by the auditor. There were issued several reports instead which contained auditor s opinions as well. The mission reviewed these reports and have following observations particularly regarding Independent Auditor s Report and Project Financial Statements. These examples demonstrate that auditor s performance may not be acknowledged as satisfactory. a) Page 9, clause 3.3: it is indicated that Total amount of initial advance of USD 4,000, was converted on June 14, 2015 from IFAD loan USD denominated Designated Account to BDT and deposited [ ]. On the other hand the table on the page 26 demonstrates that the conversion date in June 29, 2015 which is in conformity with respective bank statement; b) The above mentioned converted amount BDT 311,200,000 reached the project account only on July 7, 2015 but on the page 19, 2015 of the audit report the amount is indicated on the project account as of June 30, The mission acknowledges that this is a misunderstanding from s side since the mission was provided with s reconciliation statement confirming the situation. However the auditor confirmed the balance on the transit account as on June 30, 2015 which c) Page 18, clause 2.1 indicates that The Project Financial Statements has been prepared using the IFRS. However, the financial statements do not contain IFRS standard reports (Balance Sheet, Income Statement, etc.). It was even not required by the TOR the PFS to be presented according to IFRS. The PFS consists of the Statement of Sources and Uses of Funds, Statement of Cumulative Status of IFAD Expenditures by Category, SOE Withdrawal Schedule, Special Account / Grant Account reconciliation Statement, Statement of Disbursed 16

23 and Received from Special Account and the Statement of Comparison between Expenditures & Budget Estimates. 98. In future the mission recommends to present PACE related PFS in accordance with cash based IPSAS which will be the easiest format for and acceptable way to IFAD. At the same time since already has multiyear practice of separate ME program audit such approach should be continued since the report provides many important details regarding the ME program details. The report may be considered as a kind of disclosure of important details related to the ME loans. However current ME program audit report covers the whole fiscal year which means that one could not be linked to the PACE program only. Therefore, it is advisable to split the report on two parts: up to December 31, 2014 and from the January 01, In such case, the latter would show only PACE related ME loan activities. 99. Administrative management. The project is implemented by 42 staff (24 10 dedicated PMU staff 11 and 18 regular staff with sharing responsibilities providing support to PACE as well). Currently has on place performance evaluation procedure, which is followed every January. Any Employee completes relevant part of performance evaluation report and duly submits to his/her supervisor. A supervisor forwards the same to his/her (supervisor s) higher authority. A higher authority countersigns the report and sends to Human Resources Department (HRD) of. HRD preserves the signed Annual/Special Performance Evaluation Report of each employee. HRD submit combined category-wise Performance Evaluation Report to competent authority of the organisation. Currently the process is ongoing. Therefore, results were unavailable as of the mission period Fixed Assets registry. The fixed assets register is maintained in administration department of. The register contains all assets that has purchased such as cars, computers, etc. including PACE fixed assets. According to the recommendation of the previous mission the PMU developed a PACE related list of fixed assets. The list contains records, which allows to distinguish these assets from other property of. The PMU also developed and attached to all fixed assets special tags Disbursements / Withdrawals. The amount disbursed under the project as of today equals XDR 5,485, (USD 7,655, equivalent) which represents 20.8% of the signed loan amount of XDR 26,350, Designated and other project related accounts. opened two DAs for IFAD loan and Korean grant separately at Bangladesh Bank on April 9, Total amount of the loan initial advance of USD 4,000, was converted on June 14, 2015 from IFAD loan USD denominated DA to BDT and deposited to the Project Account (PA) dedicated to the IFAD loan at Sonali Bank Ltd 12. No funds were withdrawn from the Koren grant account so far. also maintains ME loan related bank account at Southeast Bank Ltd. The account is used solely for the payments and repayments of ME loans The mission reviewed and reconciled with respective bank statements balances on these accounts which were as follows as of 31-Jan-16: for both DAs USD 0.00; for the program bank account -- BDT 141,484, Disbursements are rated satisfactory (5). The following table shows disbursements from IFAD-managed funds (IFAD loan only since no amount was withdrawn from Korean grant account) as of 08-Sep-15 (amounts in SDR): Category DESCRIPTION Allocated Disbursed % disbursed Available balance I Equipment 120, % 120, II Credit Fund 12,100,000 2,641, % 9,458, III Consultancies 9,380, % 9,380, IV V Salaries 1,650, % 1,650, Operating Costs and Maintenance 470, % 470, Unallocated 2,630, % 2,630, Advances to designated account 0 2,844, ,844, TOTAL 26,350,000 5,485, % 20,864, Two driver positions were added to the staff list since the last mission. 11 Out of which three positions are currently vacant. 12 It is Government owned commercial bank nominated by Budget Division of the MOF in the letter # of March 29,

24 105. Without taking into account the advances to the designated accounts, the true disbursement rate stands at 21.8% and relates only to the Credit Funds category. The disbursement rate is low given that almost more than an year have elapsed from entry into force. The nul disbursement rates for the categories excluding the Credit Line reflect the delays in the submission of withdrawal applications. In order to better match expenditure with IFAD disbursements, and to gradually reduce the amount of the advances, the project is requested to fulfill all legal conditions ASAP and begin submission of applications regularly Withdrawal Applications (WAs). No review of sample SOE documentation was performed due to their absence. Transaction review details are given above in respective clause. IFAD has recently rejected AW # 3 due to lack of supporting documents as per IFAD s requirement. One of the issue relates to IFAD s requirement regarding submission of copies of contracts above prior review. There were indicated about 130 such ME loan related contract in the SOE. Each contract is about pages. was confused how to submit such significant of pages The mission proposed following procedure taking into consideration that all ME loan contracts are similar. Each such contract consists of three parts: a) one part is absolutely the same in all contract and contains general clauses; b) second part differs for each contract but relates to repayments only; c) the third part is also specific for each contract and relates to payments (including the cover page and the page with signatures). should translate into English any one ME loan contract and submit to IFAD together with the copy in Bengali. The clarification message should clearly list of pages, which should be considered as parts a) b) and c) above. For all other ME loan contracts should submit to IFAD only c) parts of each contract. Besides since all symbols (both alphabetical and digital) are written in ME loan contracts on Bengali should clearly write in English on c) parts of each contract all contract specific information like name of the PO, date of the contract, amounts, etc. whatever is applicable. The mission discussed with the PMU in details above issue as well as procedure and details of preparation of WAs and all attachments However still considers this to be a cumbersome process and would like to bring this matter directly to the attention of CFS Designated Accounts (DA) reconciliations. Since the total loan DA balance was converted to the project BDT amount there is zero balance on the DA from that date Counterpart funds are considered satisfactory (5). The provided sufficient contribution to the project. The amount is driven from accounting records. One relates mostly to ME loans to POs and should also relate to taxes which are ineligible for IFAD financing. The total contribution provided as of 31-Dec-15 is accounted as BDT 779,096 thousand against planned BDT 688,433 thousand which is 113.2%. In USD equivalent actual amount is about 9,9 mln USD whereas total planned amount for the whole implementation period is USD 22.5 mln according to the Financial agreement which equals 44.1 % Compliance with loan covenants is rated moderately satisfactory (4). Most of the Financing Agreement covenants have been complied with by the project, however there are still a of loan convenants that have not been fully complied with (Annex 6). The mission urges to address these matters a soon as possible Procurement. The project performance in procurement is rated moderately unsatisfactory (3). follows IFAD s and Government procurement rules for all its procurement. It has internal procurement specialists and a procurement committees to process procurements. All PACE procurements is done through the Administration Department s procurement section. PACE dedicated procurement specialist at the PMU was hired in August He successfully completed online training course ( recommended by previous supervision mission. He also attended IFAD s training in Hanoi and currently supports the Department to follow IFAD s rules and guidelines From the beginning of the project used a simplified form for the procurement plan (PP) which was accepted by IFAD temporarily for project procurement process to start. Later IFAD provided a new Procurement Plan (PP) template during the training in Hanoi. prepared and submitted to IFAD updated PP, which was rejected by IFAD since one was not prepared according to IFAD s requirements. The mission provided hands on training and clarified all details of the new form. It is expected to prepare and submit to IFAD an updated PP shortly. 18

25 114. The mission reviewed project procurement files for contracts for goods and services as of 31- Jan-16. in general follows requirements of the current PP. From the beginning of the project following methods were used: three NCB, three LCB, three Quotation and two Direct contracting. 18 contracts for goods were signed for the aggregate amount of BDT 14,498,290. Three selections of consultancy services were carried out using QCBS, SSS and IC and respective contracts were signed. A start-up workshop event was also organised. Total amount of these four contracts is BDT 8,058,902. Currently several more selection processes are ongoing. All of them should follow the new PP (to be accepted by IFAD) requirements The mission noticed that in some subject of IFAD s prior review cases IFAD s no objection was requested only for the contract to be signed. IFAD granted such no objection for smooth implementation of the project. However the mission clarified that in case of prior review contracts IFAD s clearance should be requested at all stages of a procurement/selection process Limited walk through tests shown that mostly uses LTB recommended methods of procurement. However, there was a case when for procurement of cell phones used direct contracting method for the estimated amount BDT 330,000 (contract amount BDT 88,500). According to the LTD sealed quotation method should have been used. The mission recommends always to follow recommendations given in the LTB. Agreed action Responsibility Agreed date Introduce an additional sheet in the AWPB to indicate total amounts by disbursement categories PMU Next AWPB PP should include list of all items to be procured/selected regardless of which disbursement category the particular Upon submission line item should relate To revise accounting software to provide PACE specific actions including: (a) Accounting/reporting project expenditures both per disbursement categories and per project components (b) Module for commitment and budget monitoring (c) Automatic production of both annual (to be audited) and interim/semi-annual (as of the end of September and March) project financial statements (d) Automatic production of all forms indicated in the LDH which are necessary for all four allowed standard disbursement procedures (advance withdrawal, direct payment, special commitment, reimbursement) which should be used. To use only IFAD funded DAs and BDT project accounts only for eligible expenditures (except ME loans which should be financed only from ME loan account) PMU of next revised PP Immediate continuous & Immediate and continuous To prepare and submit to IFAD IFR as of the end of March 2016 PMU 14-Apr-16 To finalize selection of PACE auditor acceptable to IFAD according to the TOR acceptable to IFAD PMU 15-Sep-16 To prepare an Application for Withdrawal with all necessary attachments and copies of documents for replenishment of the DA PMU/ ASAP F. Sustainability 117. Any substantive commentary on issues related to sustainability is limited due to the early stages of project implementation Institution building is rated as moderately satisfactory (4). The project was designed to adopt a sustainable model that leverages the experience and outreach of institutions, notably by means of the POs Recognizing that the capacity of POs to provide services (financial and non-financial) that meet the demands of farmers/ producers and MEs is critical, the project envisages significant capacity 19

26 building activities. Whilst some initial training has already taken place, a solid capacity development plan should be elaborated, based on thorough analysis of needs and gaps Empowerment is rated as moderately satisfactory (4). The project is considered highly relevant. A combination of financial and non-financial services for beneficiaries of micro-credit, ME loans and those implicated in VCD sub-projects offers beneficiaries and clients the opportunity to make more informed decisions regarding their economic activities. In general, access to finance provides the means for asset building, and should as well be utilized in a manner that enhances profitability of MEs, thus stimulating the local economy. From a social perspective, the VCD subprojects also seek to mobilise and build critical mass, for value chain groups to be better positioned to negotiate and commercialize their products Quality of beneficiary participation is rated as moderately satisfactory (4). The demanddriven nature of the project, with the idea to effectively facilitate and support the business/ economic decisions of rural clients and beneficiaries, ensures that beneficiary participation is fully integrated; capacity building and other non-financial services, should respond to the needs of the core target groups Responsiveness of service providers is rated as moderately satisfactory (4). The POs are fully engaged, though should continue to be strategically guided by the PMU as the project rollsout Exit strategy is rated as moderately satisfactory (4). The engagement of POs to provide critical services beyond the project lifetime was conceived as an important element of the exit strategy. There is need however, for the PMU to consider specific sustainability measures by component or activity-type Potential for scaling-up and replication is rated as moderately satisfactory (4). It is too early in the project cycle to identify the best practices and approaches that could be scaled-up and replicated. G. Other 125. Partnerships. Currently, has broad MoUs with different government agencies and research institutions/universities such as DoF, BLRI, BARI, BAU, BCSIR, as well as a few development projects. However, any formal agreement with private sector partners (both input companies and output buyers) are very few in, though crucial for successful implementation of VCD sub-projects. In order for better harmonisation and synergy, the project should also find opportunities to partner/collaborate with ongoing development projects. For example, IFAD funded projects such CCRIP, HILIP/CALIP builds market and road infrastructures in different regions in Bangladesh. Since PACE works nationwide, having a broader understanding on where those infrastructures are being built, what are the major products being produced around and nearby them and taking advantage of those infrastructure, would help identify and select value chains projects. H. Conclusion 126. The four inter related project s thematics, financial services, non-financial services, value chain development and technology, require a strong project management leadership and a strong coordination, conducive to efficient project s service delivery to on-farm, off farm and value chain beneficiaries To face this challenge, the project has made encouraging improvements in its implementation, achieving 20.8% disbursement of its overall financial targets. The PMU made also a good progress in the set up of operational PMU, with adequate office accommodations at. The PMU is fully equipped, with financial process in place and PMU is almost fully staffed with 22 officers in different positions. Furthermore, the project carried out the preliminary activities, including: (i) the start up workshop, to share the key information of the project with stakeholders and implementing partners. The Baseline survey, the feasibility study for the e-market platform, the feasibility study for the crab hatchery and guidelines for value chain development with POs are completed. Concerning ME programme, PACE has achieved 239% of the target from January-December However, an adequate monitoring and evaluation system that would provide analytical information on targeting, sales, productivity, profitability income, employment and impact on borrowers, is not yet in place. With regard to value chain, progress are still modest, only 3 farms and 1 non-farm subprojects have been 20

27 approved by management and 7 other farm sub-projects are under process for final approval. Similarly, with regard to Technology and product adaptation, progress are also weak. Only one technological gap has been identified. Research were conducted to disseminate solutions To lift the project to the expected outputs and outcomes, as per the design, requires enhancing the leadership, efficiency and capacity of the PMU in particular as the key coordination body, and as well as of the POs who are at the forefront of implementing the field activities. Project management requires special attention and always needs to further improve performance. The success or failure of a project greatly depends on the knowledge, skills and commitment of staff involved in implementation. To this effect, PMU should prepare a Project Improvement Plan, reflecting the set of identified prioritized actions that could drive to project s performance quick wins First and upmost action relates to the set up of project s process and system that could provide management decision s tools for decision making. To this effect, it is imperative, to finalize the project implementation manual, that should include the operational guidelines to implement the different components, as well as, human and financial management. In addition, the M&E system which is critical in tracking outputs and outcomes, should be put in place and operational no later than June At the same time, Capacity building of beneficiaries, and frontline POs, represents the major constraints and represent the critical challenge for reaching the cruising altitude of the project. As such, there is a need to strengthen the institutional and human resources capacity of Beneficiaries and POs. Therefore, PACE needs to prepare a comprehensive and strategic enabling framework for capacity building at various levels from ME borrowers, PO s staff, staff and PMU staff, which should be focused, relevant to PACE s objectives and cost effective. Quick wins should be expected from training plan implementation Finally, increased partnership and linkages with the private sector along the value chain is a critical element of the value chain approach. PO s should rely as much as possible on private service providers to ensure the necessary non-financial assistance to beneficiaries, and should focus on creating an enabling environment for the market actors. This is essential to ensure sustainability of the interventions, as there is no financial incentive for the PO s who provide such services. Pro-poor agribusiness policy dialogue is also critical element for strengthening synergies and complementarities and enabling regulatory framework. The IFAD s office, in close consultation with PACE, will initiate within this year the consultation process with the government and concerned major donors, to ensure synergy and complementarities 21

28 Appendix 1: Summary of project status and ratings Basic Facts Country Bangladesh Project ID Project Date of Update Supervising Inst. No. of Supervisions 1 Last Supervision Promoting Agricultural Commercialization and Enterprises Project 22-Mar-2016 IFAD No. of Implementation Support/Followup missions Last 11- Implementation Sep- Support/Followup 2015 mission Loan/DSF/Grant/ASAP , [ ] FI No Top-up Loan/DSF/Grant/ASAP FI No. Approval 17-Sep-2014 Total financing Agreement 11-Dec-2014 Effectiveness lag 2.8 IFAD Total USD million Disb. rate % Entry into force 11-Dec-2014 PAR value IFAD loan First disbursement 11-Jun-2015 DSF grant MTR Last amendment IFAD grant Original completion 31-Dec-2020 Last audit 31-Dec-2015 ASAP grant Current completion 31-Dec-2020 Domestic Total Current closing 30-Jun-2021 Dom. Fin. Inst No. of extensions External Cofinancing Total 0.36 Korea Project Performance Ratings B.1 Fiduciary Aspects Last Current B.2 Project implementation progress Last Current 1. Quality of financial management Quality of project management Acceptable disbursement rate Performance of M&E Counterpart funds Coherence between AWPB & implementation Compliance with financing covenants Gender focus Compliance with procurement Poverty focus Quality and timeliness of audits Effectiveness of targeting approach Innovation and learning Climate and environment focus 4 4 B.3 Outputs and outcomes Last Current B.4 Sustainability Last Current 1. Financial services for microenterprises Institution building (organizations, etc.) Value chain development Empowerment Technology and product adaptation Quality of beneficiary participation

29 B.5 Justification of ratings 4. Responsiveness of service providers Exit strategy (readiness and quality) Potential for scaling up and replication 4 4 The leadership and the efficiency of the PMU needs to increase significantly in order to accelerate the PACE implementation rate. As of today, the level of results obtained remains at a very initial stage and despite that PACE should have capitalized on FEDEC, no significant PACE IFAD funded activities have started in the field; the tools, methodology and approaches for: (i) value chain development; (ii) transfer of innovation; and (iii) expansion of micro enterprise business are still not finalized at the /PMU level to ensure a smooth implementation and a success of PACE. The financial management is weak mainly due to traceability issues under component 1 and general financial reporting issues. Overall Assessment and Risk Profile C.1 Physical/financial assets 4 4 C.2 Food security 4 4 C.3 Quality of natural asset improvement and climate resilience 4 4 C.4 Overall <b>implementation progress</b> (Sections B1 and B2) 4 4 Last Current Rationale for implementation progress rating After 9 months implementation, the results observed are below expectation, with less than 60% execution of the seven months 2015 AWBP. C.5 Likelihood of achieving the development objectives (section B3 and B4) 4 4 Rationale for development objectives rating Whilst it is too early to definitively assess the likelihood of achieving development objectives, provided that the recommendations and a more strategic approach are adopted, the project does have good scope to effectively and significantly meet the needs of the core target groups. C.6 Risks Short description of major risks for each section and their impact on achievement of development objectives and sustainability Fiduciary aspects Project implementation progress Outputs and outcomes Sustainability The mission s main concerns centre around (i) traceability of funds; (ii) compliance with the financing agreement; (iii) weaknesses in financial reporting, due to the absence of adequate accounting software; and (iv) the preparation of the first audit. Current organizational arrangements, especially at the Project Management Unit (PMU) level, are not at a level to effectively meet the strong coordination and leadership required for effective and timely project implementation, and it s monitoring. Three very important issues stand out as serious constraints: (i) institutional and human resources capacity issues; (ii) institutional processes/ procedures for microenterprise (ME) lending and (iii) fiduciary issues. The engagement of POs to provide critical services beyond the project lifetime was conceived as an important element of the exit strategy. Proposed Follow-up Issue / Problem Recommended Action Timing Status In the mission s estimation, the current procedures to manage the line of credit is complex POs lack the expertise to analyse and fully understand and address market constraints Traceability of funds and weaknesses in financial reporting Set up a separate line of credit facility for the IFAD financing at the PMU Train and assess capacity of and PO staff in identifying and addressing market constraints To revise accounting software to provide PACE specific actions Immediate October/November 2015 Immediate yet to start yet to start yet to start Additional observations 23

30 Appendix 2: Updated logical framework: Progress against objectives, outcomes and outputs Results Hierarchy Indicators Means of Verification Assumptions Name Baseline YR1 Achieved YR1 (Jan to Dec 2015) Mid-term End Target Source Frequency Responsi bility Goal: Enhance livelihoods (higher income from selfemployment, business profit and wage employment, and food security) of the moderate and extreme poor project participants (men and women) in a sustainable manner. Development objective: Improve profitable business opportunities for micro entrepreneurs and create wage employment for extreme and moderate poor people. [Project Target: Overall approximately 452,000 (245,000 women and 207,000 men) persons] Improvements in household asset ownership index Increase in income of 70% participating moderate and extreme poor households from farm, non-farm and service type businesses and wage employment 70% micro entrepreneurs Increased sales Fulltime equivalent wage employment created in microenterprises financed under microenterprise loan program and assisted under value chain development program. Too early Too early By 2017: 20% households By 2020: 40% households Too early Too early By 2017: 20% By 2020: 30% Too early Too early By 2017: 30% By 2020: 20% Too early Too early By 2017: 5000 By 2020: 8000 Impact surveys of households at baseline, mid-term and completion. Qualitative (PRA) assessment of participating HHs and quantitative assessment (profitability analysis) of microenterprises PACE project annual assessment report on business expansion and employment creation using random sampling technique(s). Mid-term and final impact assessment of the project IFAD annual supervision report PRA assessment of business and households At baseline, mid-term and completion. At baseline, mid-term and completion. Annual and periodical Economy maintains or increases growth rates Terms of trade for rural communities shall not deteriorate Price inflation for staple food (rice) remains below 10%. Rural and periurban infrastructure improves Prolonged political unrest does not hinder business and other economic activities Government maintains pro-small business policies. Government continues to support microfinance programs and NGO activities. Prolonged political unrest does not adversely affects business and economic growth. 24

31 Component 1: Financial services for micro enterprises Outcome 1: s portfolio in Sustainable financial microenterprise services for program increases. microenterprises (farm, off-farm, trading and service sectors) expanded. Overall, POs portfolio in ME loan program increases. Taka 800 million Taka 2850 million By 2017: at least by Taka 2400 million By 2017: Taka 2750 million s program and financial reports POs program and financial reports IFAD supervision report PACE project report Monthly, periodically, annually Demand for microenterprise loan grows. POs remain institutionally and financially viable and offer competitive loan products. No major external shocks such as major spread of disease. OUTPUTS: By 2017: By 2020: 1.1 Expansion of ongoing loan program for microenterprises in all sectors (agriculture, offfarm, trading and services) 1.2 Piloting of new loan products, e.g. start-up loan, lease financing, flexible repayment system (match with cash flow) etc a) Increase in of microenterprise borrowers. b) Cumulative loan disbursement to additional project borrowers. a) Number of new product studies microenter prise borrowers Taka 5500 million 2-3 new product microenterprise borrowers Reports from and POs Project MIS Supervision mission report Independent assessment of microenterprise loan program and Taka million performance of pilot products Training assessment report 0 Portfolio quality of ME loan program of POs remains high (PAR <5%) Loan recovery rate of overall MF program and ME loan of POs remains high (>95%) HR capacity of POs for management of microfinance program enhanced maintains its strong supervision of POs 1.3 Capacity building of and POs in design and development of new financial products, monitoring, evaluation and impact assessment of ME program, and application of information technology in management of POs a) officers trained. b) POs officers trained. 75 officers 100 POs officers officers POs officers Component 2: Value Chain Development 25

32 Outcome2: Sustainable inclusion of microenterprises and businesses run by the poor and the ultra-poor in value chains in agriculture, off-farm and service sectors to upscale business, production technologies, and enhance access to markets. By 2020: Increase in cumulative sales of participating businesses (farm and non-farm sectors) in value chains No. of microenterprises operating 3 years after the support received from the project Too early By 2017: Taka 4000 million By 2020: Taka 5000 million Impact assessment of value chains Project reports and MIS Supervision mission reports Mid-term and final impact assessment M&E system Case studies Monthly, periodically, annually OUTPUTS: By 2017: By 2020: and POs remain committed to facilitating nonfinancial services along with providing financial services program to MEs and POs successfully establish collaborative business arrangements between MEs and mainstream businesses. No major external shocks such as disease 2.1 Microenterprises and agri-businesses run by the poor/ultra-poor sustainably included in value chains for agricultural products or group of similar products in various parts of the country a) Additional land brought under production of selected products or group of products, and increase in poultry birds and livestock in case of poultry and livestock sector b) Value chain development activities are implemented in agricultural subsectors involving input suppliers, producers, traders, (in some cases processors, retailers, exporters) and service providers c) Microenterprises are linked with larger firms as suppliers and contract growers Too early 6 in agricultura l subsector s 800 microenter prises 4,000 acres of additional land and 25% increase in poultry birds and livestock 3 7 in agricultural subsectors microenterprises 6,000 acres of additional land and 25% increase in poultry birds and livestock 2 in agricultural subsectors 2,000 microenterprises Impact assessment of value chains Project reports and MIS Supervision mission reports Case studies Monthly, periodically, annually establishes separate nonfinancial services division with competent human resources enhances overall capacity to manage value chain projects, supervise POs in these areas recruits adequate officers POs establishes separate nonfinancial services units and enhances capacity to manage value chain projects Facilitation of nonfinancial services become mainstream services of POs Private business companies are interested in sourcing products from microenterprises and willing to engage in partnership in the selected value chains 26

33 d)micro entrepreneurs trained in management, marketing and market intelligence microentre preneurs ,000 microentrepreneurs 38,000 microentrepreneur s e) Microenterprises adopted project recommended technologies microentre preneurs ,000 microentrepreneurs 38,000 microentrepreneur s 2.2 Microenterprises sustainably included in value chain for non-farm manufacturing, processing and service products or group of products a) Value chain development activities are implemented in non-farm subsectors involving input suppliers, producers, traders, (in some cases processors, retailers, exporters) and service providers 6 in nonfarm subsector s 1 7 in non-farm subsectors 2 in non-farm subsectors b) Micro entrepreneurs are trained in marketing, production and management issues microentre preneurs ,000 microentrepreneurs 17,000 microentrepreneur s c) Microenterprises are linked with larger firms as suppliers and subcontractors 700 microenter prises 200 1,000 microenterprises 800 microenterprises d) Local service providers (farm and non-farm sectors) strengthened in each selected VC to ensure the sustainable support to microenterprises and businesses run by the poor/ultrapoor 1000 Local service providers (farm and non-farm sectors) 51 6,000 Local service providers (farm and non-farm sectors) 3,000 Local service providers (farm and nonfarm sectors) 27

34 2.3 Capacity of and POs enhanced to formulate and manage large scale value chain subprojects and identify opportunities for partnership with the private business sector for microenterprises 2.4 Capacity of, POs and microenterprises to identify, advocate and strengthen pro- poor business policies, especially sector specific policies, enhanced a) /GoB and POs officials trained on VC project design and management b) /PO officials are trained on preventing environmental degradation and improving conditions in work place a) Policy issues identified, policy papers written and submitted to relevant authorities b) Policy dialogue among national stakeholders is promoted (e.g. seminars) 50 /Go B and 100 POs officials 20 /PO s officials 1 policy issues and policy papers 1 policy dialogue POs officials 0 60 /Pos officials 0 2 policy issues and policy papers 2 policy issues and policy papers 0 2 policy dialogue 2 policy dialogue c), GOB and POs officials trained business/sector policy analysis and advocacy 20, GOB and POs officials 0 80, GOB and POs officials 2.5 An electronic platform established to disseminate commodity prices and to transact products of small producers Technologically functional and sustainable electronic platform established 0 1 electronic platform established Component 3: Technology and product adaptation Outcome 3: Proven technologies and products (agricultural and off-farm) from Bangladeshi and international sources introduced to microentrepreneurs. Technologies and products successfully introduced to small producers Too early By 2017: 7 technologies and products By 2020: 3 technologies and products Independent assessment report of technologies and product introduced PACE reports IFAD supervision reports Monthly, periodically, annually and POs successful identify technologies and products for small producers within value chain subprojects and outside 28

35 OUTPUTS: By 2020: By 2017: By 2020: 3.1 Resolution of technological problems identified under Component Adaptation and dissemination of readily available technologies and products 3.3 Technical assistance and studies a) Microentrepreneurs/ farmers are trained on production technologies b) Conduct subsector, technical feasibility, impact assessment and other studies 8,000 microentre preneurs/f armers 11 subsector, technical feasibility, impact assessme nt and other studies 0 30,000 microentrepreneurs/f armers 0 Conduct 9 subsector, technical feasibility, impact assessment and other studies 12,000 microentrepreneur s/farmers Independent assessment report of technologies and product introduced PACE reports IFAD supervision reports Case studies Monthly, periodically, annually Successful identification of capable research stations within the country Optional RIMS indicators: Sanitation condtion imprpved Literacy rate increased Motivated during field visit discussion by Pos officials Motivated during field visit discussion by POs officials Too early Too early 10% increased 15% increased At baseline, midterm and completion. Case studies At baseline, mid-term and completion. Case studies Rural and periurban infrastructure improves Too early Too early 5% increased 10% increased Rural and periurban infrastructure improves 29

36 Appendix 3: Summary of key actions to be taken within agreed timeframes Agreed action Responsibility Agreed date Component 1 Micro-Enterprise Loan Prepare concept note for the field level workshop on new loan products to be organised by PMU. PMU April 2016 Hold workshop on new loan products PMU May 2016 Train ME borrowers on financial and business management PMU/POs Continuous staff to undertake team building training with selected POs PMU Yearly Undertake training need assessment and develop subsequent training plan, including (training priority PMU June 2016 areas, training partners, budgets, of trainees, expected outputs and outcomes and feedback mechanism for annual training evaluation. Document efficiency and effectiveness of all training courses (, POs, PMU staff members and PMU Continuous borrowers). A system of annual assessment should be instituted. POs should play to the largest extent possible, a facilitator role between their client base and nonfinancial PO Continuous service providers to ensure a sustainable development of their activities Component 2 Value Chain Development Prioritize interventions in the current VCD projects and also impart this strategy in the upcoming ones /PMU Continuous Award the remaining VCD projects planned in the AWPB /PMU June 2016 Enhance the capacity of relevant staff (those involved in VCD) on value chain approach through periodic formal assessments. /PMU Yearly staff to undertake team building training with selected POs to enhance comprehension of VCD approach PMU/PO Yearly Component 3 - Technology and product adaptation Develop Strategy for implementation of Component 3, including detailed plans for the identification and solution of technological gaps PMU November 2016 Consult with PO s and beneficiaries to identify and document initial readily available technologies (such as the measuring kit) PMU June 2016 Develop plan for the dissemination of readily available technologies, to be included in strategic paper PMU November 2016 Devise a strategy and position paper to ensure the financial sustainability of the crab hatchery, including an in-depth business plan for the crab Hatchery, PMU/PO September 2016 Component 4 Project Management Responsibility Agreed date Review and update the PIM if necessary, which should include detailed guidelines to drive the implementation of each component. PMU/IFAD August 2016 Ensure annual performance evaluation of its staff, which includes defining the objectives, targets and results to be achieved at the beginning of the year, mid-term review year and end-year performance assessment. PMU Continuous Initiate Client Satisfaction Surveys, that could be instrumental in drawing lessons for the way forward. PMU Yearly 30

37 Monitoring and Evaluation Submit a concept note for the M&E workshop PMU March 2016 Conduct M&E needs assessment PMU March 2016 Hold M&E workshop with PO staff at field level PMU April 2016 Identify RIMS indicators in accordance with the current monitoring framework PMU April 2016 Set out the schedules and cost estimate of KM and communication activities PMU March 2016 Link M&E system with KM to systematically capture lessons learned on implementation and impact as well as develop good pratices to be widely disseminated to stakeholders. PMU Immediate and regular basis Fiduciary Aspects Introduce an additional sheet in the AWPB to indicate total amounts by disbursement categories PMU Next AWPB PP should include list of all items to be procured/selected regardless of which disbursement category the particular line item should relate PMU Upon submission of next revised PP To revise accounting software to provide PACE specific actions including: (a) Accounting/reporting project expenditures both per disbursement categories and per project components (b) Module for commitment and budget monitoring (c) Automatic production of both annual (to be audited) and interim/semi-annual (as of the end of September and March) project financial statements (d) Automatic production of all forms indicated in the LDH which are necessary for all four allowed standard disbursement procedures (advance withdrawal, direct payment, special commitment, reimbursement) which should be used. Immediate & continuous To use only IFAD funded DAs and BDT project accounts only for eligible expenditures (except ME loans which should be financed only from ME loan account) Immediate and continuous To prepare and submit to IFAD IFR as of the end of March 2016 PMU 14-Apr-16 To finalize selection of PACE auditor acceptable to IFAD according to the TOR acceptable to IFAD PMU 15-Sep-16 To prepare an Application for Withdrawal with all necessary attachments and copies of documents for replenishment of the DA PMU/ ASAP 31

38 Appendix 4: Physical progress measured against AWP&B, including RIMS indicators Palli Karma-Sahayak Foundation () Promoting Agricultural Comercialization and Enterprises (PACE) Project Physical target & achievements Description of activities Physical targets & achievements Remarks Unit Project Target ( ) Target for July'15 to June'16 Achievement from July to Decmber'15 Cumulative achievement until December 15 % of the achievement against July to Dec' 15 target % of the achievement against project total Component 1: Financial services for micro enterprises Incremental ME borrower and loan outstanding. member 102,000 50,000 71, , % 148% Piloting of new product studies % 0% IFAD has provided no objection on ToR. Study will be completed within June16 Capital funds for new loan products member % 0% Rest target for the fiscal year will be done within June16 officers trained in design and development of new financial products etc member % 20% Rest target for the fiscal year will be done within June16 32

39 POs officers trained in design and development of new financial products etc member % 10% All necessary preparations have been taken to organize training of remaining two batches by June ME program review workshops member % 17% Rest target for the fiscal year will be done within June16 Sub-total of Component-1 102,583 50,228 71, ,764 40% 32% Component 2: Value Chain Development 0% 0% Value chain development activities in farm sectors % 20% has already approved more 05 subprojects which will be started by June 16. Value chain development activities in non-farm sectors % 7% Another off farm VCD proposal has been approved by. It will be started soon. Two proposals are being assessed by the PMU at present. /GoB and POs officials trained on VC project design and management % 44% The target for the year will be achieved by June 16 /GOB/POs officials are given overseas exposure visits on value chain development % 3% The target for the year will be achieved by June 16 /PO officials are trained on preventing environmental degradation % 0% The target for the year will be achieved by June 16 Policy issues identified, policy papers written and submitted to relevant authorities % 0% Policy issues have been identified, A paper will be prepared by June 16 33

40 Policy dialogue among national stakeholders is promoted (e.g. seminars) % 0% After preparing the paper, PMU will arrange a dialogue on the paper by June 16., GOB and POs officials trained business/sector policy analysis and advocacy % 0% It will be done in by June as per plan Technologically functional and sustainable electronic platform established % 0% Regional VCD workshops % 10% PMU will organize remaining 8 workshops within June'16 Annual review workshops of VCD projects % 0% It will be done in due time Sub-total of Component-2 Component 3: Technology and product adaptation % 8% 0% 0% Problems identified, research conducted and solutions disseminated % 0% The target for the year will be achieved by June 16 Technology transfer and products adaptation within Bangladesh % 0% The target for the year will be achieved by June 16 Technology transfer and products adaptation outside Bangladesh % 20% Subsector studies (agri, nonfarm, services) % 0% The target for the year will be achieved by June 16 Technical feasibility studies % 0% The target for the year will be achieved by June 16 34

41 Consulting/advisory services for VCD projects (national & foreign) % 0% The target for the year will be achieved by June 16 Overall sectorial VCD project impact studies % 0% Physical environment (waste management) % 0% The target for the year will be achieved by June 16 Sub-total of Component-3 Component 4: Project Management % 3% 0% 0% A. Equipment 0% 0% Laptop with modem Scanner Audio recorder High resolution camera Computer printer Cell phones % 100% % 100% % 100% % 100% - 2 0% 100% % 77% The target for the year will be achieved by June 16 Office furniture % 100% 22 B. Vehicles 0% 0% Vehicles (Jeep-1, Microbus-1) C. Monitoring, evaluation and impact assessment % 100% 0% 0% Project start-up workshop % 100% 1 Baseline survey % 100% 35

42 1 1 Mid-term impact study Final impact assessment KM and advocacy products % 0% - 1-0% 0% - - 0% 0% A KM product will be produced by June'16 External audit - 1 0% 17% Completed by December16 6 PCR preparation by - - 0% 0% 1 D. PMU: 0% 0% Salary 0% 0% E. TA/DA 0% 0% PMU (IFAD contribution) 0% 0% G. Rent and utilities ( contribution) 0% 0% H. Vehicle O&M (IFAD) 0% 0% I. Meetings costs (IFAD) 0% 0% J. Cellphone operations/ Internet (IFAD) K. Stationaries/ Printing/ Communication/ Misc. (IFAD) Sub-Total of Component-4 Total for the project ,300 50,502 0% 0% 0% 0% % 66% 71, ,955 24% 27% 36

43 Appendix 5: Financial: Actual financial performance by financier; by component and disbursements by category Table 5A: Financial performance by financier Appraisal (USD Disbursements Per cent Financier 000) (USD 000) disbursed IFAD loan 40,002 7, % Korean grant % 22,449 9, % PO 30, , % Total 92,800 Table 5B: Financial performance by financier by component (USD 000) IFAD loan Korean grant PO s Total Component Appraisal Actual % Appraisal Actual % Appraisal Actual % Appraisal Actual % Appraisal Actual % C1 20,528 9, % ,025 9, % 30, , % 70, , % C2 14, % % , % C % % C4 3, % , % , % Table 5C: IFAD loan disbursements (SDR, as at ) Category DESCRIPTION Allocated Disbursed % disbursed Available balance I Equipment 120, % 120,000 II Credit Fund 12,100,000 2,641, % 12,100,000 III Consultancies 9,380, % 9,380,000 IV V Salaries 1,650, % 1,650,000 Operating Costs and Maintenance 470, % 470,000 Unallocated 2,630, % 2,630,000 Advances to designated account 0 2,844, ,844, TOTAL 26,350,000 5,485, % 23,505, This data was provided by the MIS and could not be independently verified by the mission 14 This data was provided by the MIS and could not be independently verified by the mission 37

44 Appendix 6: Compliance with legal covenants: Status of implementation Article/Sectio n of Financing Agreement Covenant Status Section B -6 Section B - 7 Section B - 8 Section E- 1 Schedule 1, Section II. Clause 5. Schedule 1, Section II. Clause 6. There shall be two (2) designated accounts, for the Loan and Grant respectively and for the exclusive use of the Project, in Bangladesh Bank (the Central Bank of the Borrower/Recipient ). There shall be one (1) Project Account, denominated in Bangladesh Taka, for the Loan and for the exclusive use of the Project, in a bank acceptable to the Fund. The proceeds of the Financing shall not be used to finance taxes that may be due in connection with the Project. The Borrower/Recipient shall cause the Project Implementing Agency as defined in Section C of the Financing Agreement to make available to the Project counterpart funds from its own resources in an aggregate amount of twenty-two million four hundred fifty thousand United States Dollars (USD million) or its equivalent in accordance with this Agreement. The following are designated as additional general conditions precedent to withdrawal: a) The Designated Accounts and the Project Account referred to respectively in Sections B.6 and B.7 of the Financing Agreement shall have been duly opened; b) The Fund s no-objection shall have been obtained to the Subsidiary Loan and Grant Agreement between the and the Ministry of Finance of the Borrower/Recipient The, in its capacity of the Project Implementing Agency, shall take the overall responsibility of the project implementation as accorded to a Loan Project Agency in accordance with the General Conditions (a) The Project Implementing Agency shall prepare a draft AWPB for each Project Year. Each draft AWPB shall include, inter alia, a detailed description of planned Project activities during the coming Project Year and a Procurement plan and the sources and uses of funds. The first Procurement plan shall cover the initial eighteen (18) month period of Project implementation, while the subsequent plans shall cover succeeding twelve (12) month periods. Each draft AWPB shall be submitted to the Project Executing Agency for approval. If the Project Executing agency does not comment on the draft AWPB within thirty (30) days of receipt, the AWPB shall be deemed so approved by the Borrower/Recipient. (b) Once approved in accordance with paragraph (a) above, the Project Implementing Agency shall submit the draft AWPB no later than sixty (60) days prior to the beginning of the relevant Complied Complied Complied. From the beginning of the project implementation the proceeds of Financing were used to finance Project related taxes. Following the recommendation of previous mission refunded the project account for this amount. The amount is subject of further verification by the project auditor. provides sufficient counterpart funds for the Project. As of December 31, 2015 around USD million counterpart funds were utilized for Project-related activities as per Financing Agreement which represents 44.2% of the total intended amount. Complied Complied Complied partially. failed to submit to IFAD updated procurement plan in a format acceptable to IFAD. 38

45 Project Year to the Fund for its comments and approval. If the Fund does not comment on the draft AWPB within thirty (30) days of receipt, the AWPB shall be deemed acceptable to the Fund Schedule 1, Section II. Clause 7. The shall enter into an SLGA with the MOF to receive the Financing in the form of loan and grant for the implementation of the Project Complied Schedule 1, Section II. Clause 8. Schedule 1, Section II. Clause 10. The shall, inter alia, (i) Ensure a VC Unit in the with adequate personnel, resources and authority to manage and oversee the development of sustainable VCs within the Project; (ii) Organize and find capacity building of its own staff as well as the POs and VC actors; (iii) Provide and supervise the funding of the ME loan programme and other financial products to the POs; (iv) Identify potential VCs and contract out sector and marketing studies; (v) Provide guidance to the POs in the preparation and management of VC promotion; (vi) Contribute to the preparation of VC proposals by the POs by providing general guidance and relevant sector and marketing studies; (vii) Share experience with other VC development agencies/projects and rationalize common activities; (viii) Engage in the introduction of necessary and appropriate changes in relevant laws, rules and standards; (ix) Identify suitable technical assistance organizations or individual experts to provide capacity building to the staff, to the POs, VC actors and actors associations; (x) Supervise and monitor VC sub-projects; and (xi) Conduct Project assessment and impact studies POs shall, inter alia, (i) Carry out by themselves or outsource to a qualified service provider an initial mapping of key actors in each selected VC (including, inter alia, providers, service providers, input suppliers and traders), marketing channels as well as actors associations; (ii) Prepare proposal(s) for individual VC development and their scaling up; (iii) Provide and manage ME loan programme and other financial products for producers and entrepreneurs; (iv) Assume responsibility for guiding the sustainable development of the specific VCs (particularly in the pilot phase) with special attention to addressing the major VC constraints identified in the VC proposal; (v) Ensure the availability of competent service providers to other actors in the VC and link them to such actors; (vi) Advise producers regarding, inter alia, access to the market and input suppliers; Not fully complied and not yet due. have not set up a VC unit to date, but PACE project has now recruited a of VC project managers to support and provide guidance to PO s for the implementation of VCD activities Not fully complied as VC field activities are yet to start. 39

46 Schedule 1, Section II. Clause 11. Schedule 1, Section II. Clause 12. Schedule 1, Section II. Clause 13. GC Section 7.07 GC Section 7.08 (a) (vii) Facilitate services to producers from the private sector to be paid for in full by the producers (if private services are not available, the POs shall promote and develop private services; if that is legally impossible, the POs shall facilitate services from the government agencies); (viii) Disseminate farm and non-farm technologies; and (ix) Monitoring and evaluation and reporting, including identification of lessons learnt. An appropriately staffed PMU to implement the Project shall be established. The PMU shall work through officers of the s Loan Operations Division (the LOD ) to implement the ME loan programme. The LOD shall implement the ME loan programme as per established processes and norms through the POs. The PMU shall take the lead role in organizing, implementing, supervising and monitoring all activities under Components 2 and 3. The PMU shall help the POs develop VC development proposals, review and negotiate with the POs and obtain approvals for proposals by the VC Project Approval Committee of the which is composed of senior officers. The process shall serve to ensure transparency, bring additional expertise, establish linkage with the LOD and support consistency among all projects. The authority on relevant financial approvals shall rest with the Managing Director of. The PMU shall determine the needs for external technical support and technology and product for promotion, and shall engage with appropriate external partners for implementing activities under Component 3. The PMU shall further take the lead on the organization of all training and studies and other incidental work of the Project. The PMU shall have four (4) categories of professional staff: (i) A Project Coordinator who shall be s senior permanent official deputed to the Project; (ii) Directly recruited professionals as Assistant Managers/Deputy Managers to be trained to manage and supervise all BC development and other activities of the Project; (iii) Senior professionals for farm and non-farm sectors as VX development specialists who shall advise the Project Coordinator and other professionals in VC development, technology and product adaptation activities and private sector partnership; and (iv) Mid-level professionals in areas such as monitoring and evaluation, procurement, financial analysis and accounting. The professional staff of category (ii) are expected to become regular staff of the that would enhance the s capacity to implement programmes of non-financial services. The shall prepare a draft Project Implementation Manual (PIM) for the Fund s consideration and approval. Once approved, the PIM shall be followed in the implementation of the Project. The PIM may be amended from time to time, subject to approval by the Fund. The Borrower/Recipient shall ensure that all facilities and civil works used in connection with the Project shall at all times be properly operated and maintained and that all necessary repairs of such facilities shall be made promptly as needed. The Borrower/Recipient or the Lead Project Agency shall insure all goods and buildings used in the Project against such risks and in such amounts as shall be consistent with sound commercial practices. Mostly Complied. The PMU has been established and the most of the staff was hired. Complied partly. The PMU has been established and consists of 24 position our of which only three were vacant for the mission period. Complied Complied Not Complied. Currently is not practicing to insure any goods (except vehicles) and buildings. 40

47 GC Section 7.08 (b) GC Section 7.11 GC Section 9.01 GC Section 9.02 GC Section 9.03 LTB Clause 23. The Borrower/Recipient or the Lead Project Agency shall insure the goods imported for the Project which are financed by the Financing against hazards incident to the acquisition, transportation, and delivery thereof to the place of use or installation in accordance with sound commercial practice. The Borrower/Recipient or the Lead Project Agency shall insure key Project personnel against health and accident risks to the extend consistent with sound commercial practice or its customary practice in respect of its national civil service, whichever is appropriate. The Project Parties shall maintain separate accounts and records in accordance with consistently maintained appropriate accounting practices adequate to reflect the operations, resources and expenditures related to the Project until the Financing Closing Date, and shall retain such accounts and records for at least ten (10) years thereafter. The Borrower/Recipient shall deliver to the Fund detailed financial statements of the operations, resources and expenditures related to the Project for each Fiscal Year prepared in accordance with standards and procedures acceptable to the Fund and deliver such financial statements to the Fund within four (4) months of the end of each Fiscal year The Borrower/Recipient shall: (a) Each Fiscal Year, have the accounts relating to the Project audited in accordance with auditing standards acceptable to the Fund and the IFAD Guidelines on Project Audits by independent auditors acceptable to the Fund; (b) Within six (6) months of the end of each Fiscal Year, furnish to the Fund a certified copy of the audit report. The Borrower/Recipient shall submit to the Fund the reply to the management letter of the auditors within one month of receipt thereof. All contracts must be listed in the Register of Contracts, which should be updated and submitted to the IFAD Country Programme Manager on a monthly basis The project has no provision for importing goods from aboard. Therefore, the said section is not applicable for the project. Not Complied. Currently is not practicing to insure personnel against health and accident risks. Complied Not Complied a) Complied. However, quality of the auditor s performance is low. b) The audit reports were passed to a courier on December 31, Complied LTB Clause 25. LTB Clause 26. Summary interim financial reports (IFR) must be submitted to IFAD at half yearly intervals (September and March) within 45 days after the period-end. Formats for these reports will be specified in the Project Implementation Manual. The Project s accounting software must be upgraded to include the automation of the submission of Was and SOEs and a model for commitment and budgetary monitoring, prior to the replenishment of the initial advance of the Designated Account. As soon as practicable, but no later than 120 days after entry into force of the Agreement, the Borrower/Recipient must appoint independent auditors acceptable to IFAD, selected in accordance with the procedures and criteria set forth in the IFAD Guidelines on Project Audits, to audit the financial statements related relating to the Project, for the first fiscal period in accordance with agreed Terms of Reference. Thereafter, as soon as practicable, but not later than 120 days after the beginning of each succeeding fiscal year, the Borrower/Recipient will either confirm the appointment of the same independent auditor, subject to satisfactory performance, or will follow the same procedure to appoint new independent auditors for the successive fiscal year. Not Complied. IFRs as of March 31, 2015 were not submitted to IFAD. IFR as of September 30, 2015 was submitted on November 19, 2015 i.e. four days overdue. The report was not acceptable and needs to be revised. Not complied. The has appointed the auditor for the first fiscal year ended on June 30, However, the auditor s performance was not satisfactory. An auditor for the second fiscal year has not yet been appointed nor the TOR was submitted to IFAD for clearance. 41

48 Appendix 7: Knowledge management: Learning and Innovation PACE has developed a Communication and Knowledge Management Strategy to achieved three objectives namely: i) documentation of learning, innovations and best practices, ii) dissemination and sharing of knowledge and iii) coordination among stakeholders to u tilize the innovations and learning of the project. The strategy identifies component wise KM activities to be carried out as below. 1. Financial services for Microenterprises: 1.1 Reporting and publications relating to successful cases of microenterprises, member enrollment, growth of ME activities, trend of expansion of financial services for ME, sector wise ME lending activities and the prospects and challenges of the ME sector of the country. 1.2 Workshops to address different issues relating to micro enterprise lending including need assessment for new financial products and financial services. 2. Value Chain Development 2.1 Reports and Publication on the experience of its VCD activities for increasing awareness regarding technologies and best practices under different VCD projects. 2.2 Workshops and Seminars on Value Chain Development in order to identify potential subsectors of the country and share its experience and disseminate innovations, technological issues and policy constraints in different potential subsectors. 2.3 Exposure and study visit to learn about the successful value chain interventions in other countries of the Asian region. 2.4 Marketing and Advertising to create awareness among and help ME build their own brand images. 2.5 TV Shows and Documentaries on some successful interventions to disseminate information and learning to the concerned stakeholders including entrepreneurs. 3 Technology and Product Adaptation 3.1 Studies to identify technological problems and solutions of the respective subsectors. 3.2 Workshops/seminars on different issues relating to technology and product adaptation. Learning It is too early to draw any key lessons learned from PACE as the project life is only one out of six years of implementation period. However, PACE is the fourth IFAD-funded project implemented by and its POs network. The project has gained learning from the past experience in particular in recently closed FEDEC project and will take those lessons into consideration. Furthermore, the project will disseminate useful lessons learned both positive and negative on microenterprise implementation and impacts as well as develop good practices. The project M&E system will be linked with knowledge management to systematically capture these and ensure that they are not only well documented, but widely disseminated within the project as well as outside of the project through publication, and electronic media, workshop/seminar, brochures, POs discussion, trade fairs etc. In addition, good practices and lessons learned from outside the project will be channeled into the project to be adapted and tested through studies and exchange visit. Innovation Beneficiaries have applied the perch/macha housing which is mainly made of bamboo, wood to keep goat, sheep, buck above soil (ground). It has been recognized that perch housing decreases mortality rate in goats exposed to Peste des petits ruminants (PPR) and also other diseases. The perch method is comparatively better on biosecurity grounds and management practices compared to mud house as it excludes contamination. This technology is widely replicated other parts of the country especially in the goat rearing zones as it is initiated and proven successful by Bangladesh Livestock Research Institute (BLRI) 42

49 Appendix 8: List of People met. Name Meeting at on 3 rd Organisation Designation February at AM Mr Fazlul Kader Deputy Managing Director, Operations Dr. S.M. Faruk-Ul-Alam Value Chain Specialist, PACE PMU Mr. A. K. M. Nuruzzaman Deputy General Manager (Operations) Mr. A. Q. M. Golam Mawla General Manager (Operations) Mr. Abu Saleh Md. Rajib Accounts Officer, PACE PMU Mr. Akond Md. Rafiqul Islam General Manager (Operations) & Project Coordinator, PACE Project Mr. Al Jaber Hirok Procurement Specialist, PACE PMU Mr. Alamgir Hossain Assistant Manager (Operations) Mr. Ashraful Haque Manager (Operations) Mr. Gokul Chandra Biswas Head of ME Loan, PACE PMU Mr. H.M. Anwarul Islam Accounts Officer, PACE PMU Mr. Manir Hussain Manager (Operations) & Value Chain Project Manager, PACE PMU Mr. Md. Habibur Rahman Manager (Operations) & Value Chain Supervisor, PACE PMU Mr. Md. Masum Sarker Value Chain Project Manager, PACE PMU Mr. Mehedi Hassan Value Chain Specialist, PACE PMU Mr. Mohidul Islam Financial Analyst, PACE PMU Mr. Motiur Rahman Value Chain Project Manager, PACE PMU Mr. Moznu Sarkar Assistant Manager (Operations) & Value Chain Project Manager, PACE PMU Mr. Musharraf Hossain Manager (Operations) & Value Chain Supervisor, PACE PMU Mr. Rafizul Islam Mondal Value Chain Specialist, PACE PMU Mr. Sheikh Nazrul Islam Value Chain Project Manager, PACE PMU Mr. Sheikh Zahed Al Nayon Assistant Manager (New Product), PACE PMU Mrs Afrin Sultana Manager (Operations) & Value Chain Project Manager, PACE PMU Mrs Mahmuda Morshed Deputy Manager (Operations) & Value Chain Project Manager, PACE PMU Mrs Sanchita Islam Value Chain Project Manager, PACE PMU Mr. Shahidul Kabir PADAKHEP PO Mr. Golam Mustafiz SOJAG PO Mr. Anwar Hassan WAVE PO Mr. Saiful Islam Robin BEES PO Mr. Tarik Sayed COAST PO Mr Fazlul Hoque ADDIN PO Mr Jahangir Alam SNF PO Mr Rafiqul Islam SNF PO Mr M.A Milan RRF PO Mr Shahnaz RRF PO Mr Philip Biswas RRF PO 43

50 Mr Pankaj Sarkar RRF PO Mr Bikash Roy JCF PO 44

51 Appendix 9: Field visit schedule Program schedule of Supervision Mission Date Time Activities 03/02/ am Meeting with ME Division and non-financing Division. Wednesday 04/02/ :00am-5:00pm Meeting with PMU, and POs on M&E Thursday 05/02/2016 7:00am 1:00pm Travel to Rajshahi Friday 2:30pm -6:00pm Visit ME and VCD activities of ASHRAI Night stay in Rajshahi 06/02/2016 Saturday 07/02/2016 Sunday 7:30am-2:00pm 3:00pm -5:00pm 7:30am-10:00am 10:00am-4:00pm 4:00pm 6:30pm Site:-Rajshahi Town, Hujuri para, Upazila-poba, Rajsahi Deo para, Godagari, Rajsahi Travel to Jessore Visit ME activities of RRF Night stay in Jessore Site:- Jessore Town and Jhikar Gacha (Upazila), Adjacent to main road Travel to Meherpur Visit VCD and ME activities of WAVE Foundation Site: Meherpur Sadar upazila.meherpur Travel to Jessore and Night stay in Jessore 08/02/2016 Monday 09/02/2016 Tuesday 10/02/2016 Wednesday 11-12/02/2016 Thursday& Friday 7:00am-12:00pm 2:30pm-5:30pm 8:00am-05:00pm AM writing AM writing Travel to Satkhira Visit VCD and ME activities of NGF, Satkhira Site:- Kultali, Munshiganj, Shyam nagar, Satkhira. Meeting with NGF and PMU and return to Dhaka in evening 13/02/2016 Saturday 14/02/2016 Sunday 15/02/2016 Monday PMU debrief and AM finalisation** Wrap- up meeting Submit final Report & departure of the mission 45

52 Appendix 10: Proposed Organigram 46

53 Appendix 11: Case study: Rasheda Khatun: From a landless to land owner and successful micro-entrepreneur Rasheda Khatun is one of microenterprise beneficiaries under IFAD funded PACE project. She came from Akimuddin s family of Singhortoli village of Shymnagor Upazilla. She is the youngest of among the six siblings. Rasheda completed her study up to class v. She could not pursue higher education because of their poverty, social stigma and religious superstition. She was married with a day-labourer, Abdullah Gazi at the age of 17 in She could not get rid of poverty at her husband s house. Rasheda became a mother of two boys after three years of marriage. Sometimes her husband went fishing in the river, but earned a little amount. With the limited income of her husband, it was very difficult to afford the basic needs for her family. In 2004, she was informed about the microcredit programme of Nowabenky Gonomukhi Foundation (NGF), a partner organization of. She joined NGF as a member of `Kultoli Mohila Samitee and received a loan of BDT 3,000. Rashida learnt some tailoring works at her father s house; with this experience she bought a sewing machine and some fabric. She made some dresses and clothes for display and sell. In year 3, she opened a grocery shop for her husband by taking Tk.20, 000 loans. Tailoring, goat rearing, poultry and grocery business were growing day by day and she was taking more and more loans for expansion of enterprises. At present, two female workers are hired on full time basis in her tailor shop with monthly salary of Tk.8,000. Now she has 55 goats and 30 poultries. In addition to grocery business, her husband has expanded rice-husk, fertilizer, pesticide, brick, sands and cement business. Her elder son, Farid is going to Malaysia for employment this February 2016 which costs to Rasheda Tk.300,000. Her second son, Ashraful could not continue his education after completing his SSC due to facial paralysis. In 2013, she started a Computer cum-studio shop by purchasing computer, camera, scanner, photocopier with an investment of Tk.170,000. The average daily income of the shop is Tk and it is managed by a full time employment of her son. Rasheda has been receiving micro-enterprise loan since Her current loan amount is Tk.300,000. In total she has received an amount of Tk.918,000 and has been able to eradicate poverty of her family by utilizing that money in various income generating activities. Last year she spent Tk.1,072,000 for taking lease of 67 Bighas Gher with the support from her husband. She also spent Tk.600,000 for fish cultivation in that Gher for two years and employed 2 persons for a full-time employment with a monthly salary of Tk The expected revenue from this Gher is Tk.2,948,000 with net income of Tk.1,132,000 in two years. The Kure Ghar (bamboo and straw made house) of her husband is no longer prevails in his 12 decimal living land. Instead 2-storied Pacca house with store has been made. Seven Bighas cultivating lands including two Bighas owned by Rasheda has already been purchased. In 2015, she expanded her husband s business of pesticide, fertiliser, brick, sands and cement by opening a shop in Harinagar Bazar with an investment of approximately Tk.700,000. She spends Tk.10,000 as a monthly salary to her brother-in-law named Yabar and receives Tk.5000 as net income from that shop. Her current yearly income from all ventures is Tk.1,754,500. She has not been able to provide an education to two elder sons out of her four sons. But her 3 rd son, Almoon is now studying at class vi. She has a dream that Almoon will become Mowlana and her 4 th son will become a prominent doctor. Not only her family has become self-reliant through comprehensive initiatives but also employment has been created for 5 and 25 workers on full-time and part-time basis respectively, whose an average monthly income of Tk.6,000-8,000. Nowadays, she is known as a successful and prominent entrepreneur in society. She has an important role in 47