The World Bank Report No: ISR11044 Implementation Status & Results Moldova Rural Investment & Services Project (APL #2) (P090673) Public Disclosure Copy Operation Name: Rural Investment & Services Project (APL #2) (P090673) Project Stage: Implementation Seq.No: 15 Status: ARCHIVED Archive Date: 25-Jun-2013 Country: Moldova Approval FY: 2006 Product Line: IBRD/IDA Region: EUROPE AND CENTRAL ASIA Lending Instrument: Adaptable Program Loan Implementing Agency(ies): Key Dates Board Approval Date 28-Mar-2006 Original Closing Date 30-Jun-2010 Planned Mid Term Review Date 15-Oct-2008 Last Archived ISR Date 30-Dec-2012 Effectiveness Date 07-Jul-2006 Revised Closing Date 30-Jun-2013 Actual Mid Term Review Date 20-Sep-2008 Project Development Objectives Project Development Objective (from Project Appraisal Document) The project is the second Phase of a two-phase Rural Investment and Services Program. The Program objective is to provide long-term support to accelerate agricultural recovery and growth so that Moldova's agricultural and rural sectors can play their full role in providing the underpinnings for future income growth and poverty reduction. Under this overarching objective, the project will strive to continue foster the post-privatization growth in the agricultural and rural sectors of Moldova by improving access of farmers and rural entrepreneurs to legal ownership status, know-how, knowledge and financial services, while building the capacity of the private and public institutions to ensure the sustainability of the activities. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Rural Advisory Services 7.50 Rural Business Development 1.10 Rural Finance 21.10 Public Disclosure Copy Land Re-parceling 0.75 Drought Adaptation 5.84 Project Management 0.00 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Low Low Page 1 of 7 The World Bank Report No: ISR11044 Implementation Status Overview The project fully disbursed by the end of 2012 and reached its Project Development Objective. Both PDO indicators were met: growth in lending to the agriculture and food processing sectors increased by 175% since the beginning of the project (vs. the initial target of 30%); and 90.8% of beneficiaries have seen their income increase (vs. the initial target of 80%). Public Disclosure Copy The network of rural advisory consultants supported by the project and managed by ACSA is now providing about 200,000 advisory services per year to approximately 380,000 beneficiaries, i.e., agricultural producers and rural entrepreneurs, helping them on a wide range of issues to enhance their productivity and competitiveness, including technology (53%), business/legal (29%) and marketing (18%). An initial impact study conducted in 2010 had shown considerable impact on the productivity of farmers, their switch to higher value crops and higher yields relative to farmers who did not receive support from ACSA. An update of the impact study is being conducted and its findings will be incorporated into the project's Implementation Completion Report. As importantly, a number of achievements has been reached to ensure the sustainability of the extension services, including: (i) the financing of all costs originally funded by the project which are now covered from the Government budget, ensuring the continuation of all activities, and (ii) the decrease in ACSA's reliance on government funding to 56.5% of its revenues (vs. a target of <75%). The project supported business development agencies that contributed to the creation and operation of rural businesses. These development agencies provided hands-on assistance to (potential) rural entrepreneurs in the formulation of business opportunities, preparation of business plans, facilitation of access to finance from financial institutions and implementation support. This component resulted in the creation of 1,038 businesses and 2,645 jobs in a wide range of sectors, including agriculture and livestock (53%), trade (8.6%), food and beverage production (6%), transport (5.7%) and various manufacturing (10.7%). More than 98% of businesses managed to obtain financing from financial institutions, all of them for the first time ever. As of the end of the implementation of this component (June, 2012), 100% of these businesses had met their loan payment obligations. This low cost approach has had a tremendous impact on the ability to secure financing and the sustainability of these institutions and, for each dollar invested, about $2.5 of taxes were generated in the first two years of business operations. Estimates of sales for these businesses exceeded US$55 million in their first year of operation alone. The impact assessment is expected to update these estimates. The project worked with a group of seven eligible commercial banks that were willing to extend their outreach into the rural and agricultural sectors and had met a strict due diligence screening process, following on the success of the first Rural Investment and Services Project. A credit line, professionally managed by the Credit Line Directorate of the Ministry of Finance, extended 737 sub-loans of approximately US$41 million to rural entrepreneurs from all RISP II sources, including re-flows. All client selection and risk rested with the financial institutions. Combined with the contributions of the beneficiaries, in part financed from remittances, and participating financial institutions, the total investments generated by the project represent approximately US$100 million. Coverage was national and loan size averaged $46 thousand. The sectors that received these investments include: Services (30%), Agriculture and Irrigation (28%), Trade (16%), Food Processing (10%) and Manufacturing (10%). Close to 40% of of the beneficiaries had never received a loan from a financial institution before the project (vs. a target of 30%). As of May 2013, the portfolio at risk (60 days) was around 6.4%. Commercial banks view the project as an important catalyst for the banking sector to move into the agricultural/rural sector, as indicated by the increase in total commercial lending to agriculture and food processing mentioned above. The project completed a small pilot on land re-parceling in 2009-2010. The main purpose of the pilot was to identify the constraints to land consolidation and feed into government policy. A first set of 6 villages showed promising results and was extended to an additional 40 villages. The component met its objectives by providing a number of important lessons deriving from the pilot, feeding into a technical assistance program of the FAO to help the Government design a land strategy, and further work on improvements to the country's Public Disclosure Copy Land Code. The project successfully supported capacity building activities in the National Commission for Financial Markets. The Commission, created in 2007, had the responsibility, among other, to regulate the Savings and Credit Associations (SCA) industry. This sector made up primarily of hundreds of unregulated and unsupervised institutions provided critical basic financial services to small farmers in areas under-served by commercial banks. With assistance from the project, the National Commission was able to modernize the legal and regulatory framework for these institutions and design and imp lement methodologies for on- and off-site inspections and risk-based monitoring. The assistance was timely. The SCA sector suffered considerably during the 2008 crisis, leading the portfolio-at-risk (30 days) of deposit-taking institutions to increase from its traditional level of 3-4% to an unsustainable level of 18% during the end of 2010 and beginning of 2011. Seventeen institutions became insolvent. The Commission was able to address these problems, conducting rapid supervisions and taking a wide range of measures to decrease the level of risk to the system and purge the bad loans. As of May 2013, the Portfolio at risk had returned to a much more acceptable level of about 2.7% (vs a target of <5%). The project has successfully provided institutional building support to the Agency for Interventions and Payments in Agriculture (AIPA), which resulted in improved capacity to Page 2 of 7 The World Bank Report No: ISR11044 manage efficiently and transparently the Government's support programs in the sector. The country's Agriculture Support Fund is now fully managed by AIPA. In addition, more donors, conscious of AIPA's solid capacity are using it as a management and distribution entity for their programs. Public Disclosure Copy Locations No Location data has been entered Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target Growth in lending to agricultural and rural Text Value 2,140,000,000.00 Moldovan 5,900,000,000.00 2,850,000,000.00 Moldovan sectors in the portfolios of financial Lei Lei intermediaries Date 30-Jun-2006 31-Mar-2013 30-Jun-2013 Comments Percentage of beneficiaries whose income has Text Value 0 (as beneficiaries are yet to 90.8% 80% increased be determined) Date 28-Sep-2006 10-Jun-2013 30-Jun-2013 Comments Based on the preliminary findings of the final Impact Assessment. Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Number of beneficiaries of the Rural Advisory Text Value 300,000 (per year) 382,500 350,000 (per year) Services Date 31-Aug-2006 31-Dec-2012 30-Jun-2013 Comments Percentage of revenues of regional and local Text Value <3% 43.5 25% consultants derived from users fees or other Date 31-Aug-2006 31-Dec-2012 30-Jun-2013 sources outside central government budget Public Disclosure Copy Comments Number of businesses created and registered Text Value 0 (zero) 1038 600 Date 31-Aug-2006 10-Dec-2012 30-Jun-2013 Comments Number of loans disbursed from the credit Text Value 0 (zero) 737 450 facility Date 31-Aug-2006 31-Dec-2012 30-Jun-2013 Comments Page 3 of 7 The World Bank Report No: ISR11044 Portfolio quality in the SCA industry maintained Text Value 5% 2.7 <5% at current levels (measured as Portfolio at Risk Date 31-Aug-2006 31-Dec-2013 30-Jun-2013 30 days) Comments Public Disclosure Copy Land re-parceling implemented with Text Value 0 (zero) 40 30% participation of at least 30% of the population in Date 31-Aug-2006 30-Jun-2010 30-Jun-2010 6 villages Comments Average number of and distance to parcels per Text Value 0 31 30% household is reduced as result of land Date 30-Jun-2006 30-Sep-2010 30-Jun-2010 reparceling component Comments Number of land transactions are increased as a Text Value 0 10 15% result of land reparceling component Date 30-Jun-2006 31-Mar-2010 30-Jun-2010 Comments Land Reparceling implemented with Percentage Value 0.00 17.00 15.00 participation of at least 15% of the population in Date 30-Jun-2009 05-Jan-2012 05-Jan-2012 the 40 additional villages Comments Total number of parcels owned by participating Percentage Value 0.00 10.00 15.00 villages is reduced in the 40 additional villages Date 31-Dec-2009 05-Jan-2012 05-Jan-2012 Comments Average number of parcels per participating Percentage Value 0.00 10.00 15.00 household is reduced in 40 additional villages Date 30-Jun-2009 05-Jan-2012 05-Jan-2012 Comments Number of rehabilitated hectares of irrigated Text Value 0 3000 700 land (cumulative) Date 30-Jun-2008 31-Dec-2013 30-Jun-2013 Comments Size of investment in irrigation Text Value 0 US$2.828 million US$1.2million Date 30-Jun-2008 31-Dec-2013 30-Jun-2013 Public Disclosure Copy Comments Number of beneficiaries trained on topics Text Value 0 38,000 25,000 related to irrigation Date 30-Jun-2008 05-Jan-2012 30-Jun-2012 Comments Adoption rates of drought adaptation Text Value 0% 30 30% agronomics Date 30-Jun-2008 31-Dec-2010 30-Jun-2012 Comments Page 4 of 7 The World Bank Report No: ISR11044 Volume of Bank Support: Lines of Credit - Amount(USD) Value 1100000.00 Microfinance Date 31-Mar-2013 30-Jun-2013 Comments Indicator for monitoring Public Disclosure Copy purposes only. Volume of Bank Support: Lines of Credit - SME Amount(USD) Value 25400000.00 24600000.00 Date 31-Mar-2013 30-Jun-2013 Comments Indicator for monitoring purposes only. Volume of Bank Support: Enabling Amount(USD) Value 500000.00 410000.00 Environment - Microfinance Date 31-Mar-2013 30-Jun-2013 Comments Indicator for monitoring purposes only. No of active loan accounts -Microfinance Number Value 20000.00 34857.00 40000.00 Date 31-Mar-2013 30-Jun-2013 Comments Indicators for monitoring Indicators for monitoring purpose only. Conventional purpose only. baselines set at 20000. Percentage of project-supported institutions Percentage Value 100.00 100.00 100.00 that are reporting on this indicator Sub Type Supplemental No of active loan accounts -SME Number Value 1038.00 Date 31-Dec-2012 30-Jun-2013 Comments Indicator set for monitoring purposes only. No target for the project. % active loans to women - Microfinance Percentage Value 10.00 37.00 20.00 Date 31-Mar-2012 30-Jun-2013 Comments Indicator for monitoring Indicator for monitoring Public Disclosure Copy purpose only. Conventional purpose only. baseline set at 10. Percentage of project-supported institutions Percentage Value 0.00 100.00 100.00 that are reporting on this indicator Sub Type Supplemental Outstanding SME Loan Portfolio Amount(USD) Value 83200000.00 Date 31-Mar-2012 30-Jun-2013 Page 5 of 7 The World Bank Report No: ISR11044 Comments Indicator for monitoring purpose only. No target set for the project Public Disclosure Copy Percentage of project-supported institutions Percentage Value 100.00 that are reporting on this indicator Sub Type Supplemental Outstanding Microfinance Loan Portfolio Amount(USD) Value 22000000.00 Date 31-Mar-2011 30-Jun-2013 Comments Indicator for monitoring purpose only. No target set for project. Percentage of project-supported institutions Percentage Value 100.00 that are reporting on this indicator Sub Type Supplemental Volume of Bank Support: Institutional Amount(USD) Value 145000.00 50000.00 Development - Microfinance Date 31-Mar-2013 30-Jun-2013 Comments Indicator for monitoring purposes only. Volume of Bank Support: Institutional Amount(USD) Value 300000.00 280000.00 Development - SME Date 31-Mar-2013 30-Jun-2013 Comments Indicator for monitoring purposes only. Data on Financial Performance (as of 04-Jun-2013) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P090673 IDA-41570 Closed 28-Mar-2006 13-Apr-2006 07-Jul-2006 30-Jun-2010 30-Jun-2012 Public Disclosure Copy P090673 IDA-44160 Effective 13-May-2008 02-Jun-2008 19-Aug-2008 30-Jun-2010 30-Jun-2013 P090673 IDA-45630 Effective 14-May-2009 11-Jun-2009 08-Oct-2009 30-Jun-2012 30-Jun-2013 P090673 IDA-H2110 Closed 28-Mar-2006 13-Apr-2006 07-Jul-2006 30-Jun-2010 30-Jun-2012 P090673 TF-54222 Closed 16-Dec-2004 16-Dec-2004 16-Dec-2004 09-Sep-2008 31-Dec-2009 P090673 TF-57273 Closed 10-Oct-2006 10-Oct-2006 10-Oct-2006 30-Jun-2010 31-Dec-2012 P090673 TF-99549 Closed 23-May-2011 02-Jun-2011 02-Jun-2011 30-Apr-2012 31-Dec-2012 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed Page 6 of 7 The World Bank Report No: ISR11044 P090673 IDA-41570 Closed USD 7.50 7.43 0.07 7.92 0.00 107.00 P090673 IDA-44160 Effective USD 6.00 6.00 0.00 5.65 0.00 94.00 P090673 IDA-45630 Effective USD 10.00 10.00 0.00 10.48 0.00 105.00 Public Disclosure Copy P090673 IDA-H2110 Closed USD 7.50 7.42 0.08 7.92 0.00 107.00 P090673 TF-54222 Closed USD 1.73 1.71 0.01 1.71 0.00 100.00 P090673 TF-57273 Closed USD 7.27 7.27 0.00 6.33 0.00 87.00 P090673 TF-99549 Closed USD 1.80 1.80 0.00 1.70 0.00 94.00 Disbursement Graph Key Decisions Regarding Implementation Public Disclosure Copy None. Restructuring History CD Approval on 17-Mar-2009, Level two Approved on 11-Oct-2011, Level two Approved on 13-Apr-2012 Related Projects P110421-Rural Investment & Services Project 2 - Additional Financing, P116321-Rural Investment and Services Project II- Additional Financing Page 7 of 7