Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: RES24743

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING OF

SUPPORT TO COMMUNITY SEED FUNDS PROJECT

January 22, 2013

TO THE

KYRGYZ REPUBLIC

November 28, 2016

AGRICULTURE GLOBAL PRACTICEEUROPE AND CENTRAL ASIA

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

ABBREVIATIONS AND ACRONYMS

ABCC Agribusiness Competitiveness CenterAPAP Agricultural Productivity Assistance ProjectCSF Community Seed FundJSDF Japan Social Development FundNGO Nongovernmental OrganizationPU CSF Public Union of Community Seed Funds SHG Self-Help Group

Regional Vice President: Cyril E Muller Country Director:

Senior Global Practice Director: Lilia Burunciuc Juergen Voegele

Practice Manager/Manager: Julian A. Lampietti Task Team Leader: Talaibek Torokulovich Koshmatov

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kyrgyz republicSupport to Community Seed Funds

CONTENTS

A. SUMMARY 2B. PROJECT STATUS 2C. PROPOSED CHANGES 3ANNEX 1: RESULTS FRAMEWORK AND MONITORING 6ANNEX 2: REVISED ALLOCATION OF FUNDS BETWEEN

THE CATEGORIES 19

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DATA SHEETKyrgyz Republic

Support to Community Seed Funds (P144338)EUROPE AND CENTRAL ASIA

Agriculture.

Report No: RES24743.

Basic InformationProject ID: P144338 Lending Instrument: Specific Investment Loan

Regional Vice President: Cyril E Muller Original EA Category: Partial Assessment (B)Country Director: Lilia Burunciuc Current EA Category: Partial Assessment (B)

Senior Global Practice Director: Juergen Voegele Original Approval Date: 22-Jan-2013

Practice Manager/Manager: Julian A. Lampietti Current Closing Date: 07-Mar-2018

Team Leader(s): Talaibek Torokulovich Koshmatov

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Borrower: Ministry of Finance

Responsible Agency: Agribusiness Competitiveness Center.

Restructuring TypeDecision Authority: CD Decision

Restructuring Level: Level 2.

Financing ( as of 08-Sep-2016 )Key Dates

Project TF Status Approval Date Signing Date Effectiveness

DateOriginal Closing Date

Revised Closing Date

P144338 TF-14029 Effective 22-Jan-2013 07-Mar-2014 13-Aug-2014 07-Mar-2018 07-Mar-2018

Disbursements (in Millions)

Project TF Status Currency Original Revised Cancelled Disbursed Undisbursed

% Disbursed

P144338 TF-14029 Effective USD 2.80 2.80 0.00 1.48 1.32 53.

Policy WaiversDoes the project depart from the CPF in content or in other significant respects? Yes [ ] No [ X ]

Does the project require any policy waiver(s)? Yes [ ] No [ X ]

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.

A. Summary of Proposed ChangesThe proposed restructuring consists in the following changes: (i) reallocation of grant proceeds between components and introduction of disbursement estimates, (ii) adjustments in the Results Framework, and (iii) inclusion of new activity – procurement of seed cleaners and tunnel greenhouses. In addition, changes would be made to the budget allocations within the category of expenditures covering Goods, Non-Consulting services, Consultant’s services, Training and Operating Costs under the Project. The Recipient requested those changes in a letter from the Ministry of Finance dated July 22, 2016, a letter from the Ministry of Agriculture, Food Industry and Melioration dated July 19, 2016, and a letter from the Ministry of Finance dated October 10, 2016.

Change in Implementing Agency Yes [ ] No [ X ]

Change in Project's Development Objectives Yes [ ] No [ X ]

Change in Results Framework Yes [ X ] No [ ]

Change in Safeguard Policies Triggered Yes [ ] No [ X ]

Change of EA category Yes [ ] No [ X ]

Other Changes to Safeguards Yes [ ] No [ X ]

Change in Legal Covenants Yes [ ] No [ X ]

Change in Loan Closing Date(s) Yes [ ] No [ X ]

Cancellations Proposed Yes [ ] No [ X ]

Change to Financing Plan Yes [ ] No [ X ]

Change in Disbursement Arrangements Yes [ ] No [ X ]

Reallocation between Disbursement Categories Yes [ ] No [ X ]

Change in Disbursement Estimates Yes [ X ] No [ ]

Change to Components and Cost Yes [ X ] No [ ]

Change in Institutional Arrangements Yes [ ] No [ X ]

Change in Financial Management Yes [ ] No [ X ]

Change in Procurement Yes [ ] No [ X ]

Change in Implementation Schedule Yes [ ] No [ X ]

Other Change(s) Yes [ X ] No [ ].

B. Project StatusThe Japan Social Development Fund (JSDF) Grant Agreement for US$2.8 million was signed on March 7, 2014 and became effective on August 13, 2014, more than 18 months after the project approval date of January 22, 2013. The Recipient's lengthy in-country procedures for signing and ratification of the Grant Agreement caused the delay. This was not a project specific problem but an issue affecting the country’s overall portfolio.

The project disbursement currently stands at 53 percent or approximately US$1.48 million. The current ratings for progress towards the achievement of the project development objective (PDO) is Moderately Satisfactory and for implementation progress is Satisfactory. The risk assessment as per the last Implementation Status and Results Report (filed June 24, 2016) is Moderate. Overall, the project is advancing well and it is expected to achieve its development objective by the closing date of March 7, 2018. To date the project has established 99 Community Seed Funds (CSFs) with 2,200 members (16

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percent women) covering 148 villages. They were provided with certified seeds of potato, alfalfa, sainfoin, maize, spring barley, and winter wheat, as well as fertilizer. Average yields in the 20 CSF that received potato seeds in 2015 have increased by 48 percent, from 17.2 tons per ha before the project to 25.4 tons with the project. In addition, 502 self-help groups (SHGs) with 3,474 members (87 percent women) were established in 118 villages across the country. They were provided with certified seeds of tomato, cucumber, carrot, onion, cabbage, red beet, and potato depending on demand from and preference of each SHG. Except for potatoes, yields are reported to be substantially higher than before the project. Overall, the current value for the outcome indicator “Average increase in yields in the participating farms for selected crops” stands at 21.6 percent based on available data of 2015 harvest. Data for crops planted and harvested in 2016 is collected and being processed by the ABCC (project implementing unit) but the preliminary data suggests an increase in yields of 10.18 percent from the baseline against the target of 15 percent. The other two outcome indicators have been achieved. The indicator “At least 30 percent of beneficiaries have moved from subsistence farming to selling surplus of their output” has reached 100% because the practice has shown that every farming household always sells something of surplus. Similarly, the indicator “CSF system (in terms of number of members) enlarged by 15 percent” has reached 19.93 percent, exceeding the target.

Training has been provided through 847 training sessions to 2,005 beneficiaries (1,630 from SHG and 375 from CSFs) in 2015. An additional 1,990 people are undergoing training in 2016. Another 900 participants attended the field days conducted in all seven oblasts, which also promoted the project’s approach and featured the Japanese Government’s role as a donor to this project.

There are no outstanding audits and previous audits were found acceptable to the Bank..

C. Proposed Changes.

Development Objectives/ResultsProject Development Objectives

Original PDO

The objective of the Project is to increase the agricultural productivity of the beneficiaries in the Project areas through providing support for expansion of the Community Seed Fund system.

Change in Project's Development Objectives

Change in Results Framework

Explanation:

The Results Framework needs to be changed for several reasons. First, original indicators were set based on assumptions used for the related Agricultural Productivity Assistance Project (APAP, P118838), which proved to be incorrect for some indicators. Second, some indicators are no longer useful and should be dropped while new indicators need to be added to better reflect project activities and results. Third, the definition or formulation of some indicators need to be clarified or improved. A detailed explanation of changes to each indicator is provided in the attached revised Results Framework..

FinancingDisbursement Estimates

Change in Disbursement Estimates

Explanation:

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There was no estimate of disbursements by fiscal year in the original proposal. The new disbursement estimate is being introduced based on actual spending to date and on projected disbursements.

Fiscal Year Current (US$) Proposed (US$)

2013 0.00 0.00

2014 0.00 0.00

2015 0.00 530,707.47

2016 0.00 773,563.08

2017 0.00 950,000.00

2018 0.00 545,729.45

Total 0.00 2,800,000.00.

ComponentsChange to Components and Cost

Explanation:

The change in component cost consists in a reallocation of US$ 212,000 from Component 1 (Support for Expansion of Community Seed Fund System) to Component 2 (Project Management, Monitoring and Evaluation, and Knowledge Dissemination) to close the shortage of funds for project management. The shortage has arisen because of the late start of this project and earlier closure of the APAP (P118838) that was financing some part of project management, consultancy services and training costs. After the closure of the APAP all costs have to be covered by this project. With regard to component activities, it is proposed to introduce under Component 1 a new activity, the procurement of seed cleaning machinery for CSFs, and plastic covers and seedbed metallic frames ("tunnel greenhouses") for SHGs based on demand. The feedback from project beneficiaries has revealed that CSFs that grow grains face difficulties with cleaning the grain for seeds after the harvest. Because the seed cleaning machinery is not always readily available, cleaning of seeds for the next season and for the next round of seed recipients becomes problematic in terms of cost, time and quality. While the available funds under the project do not allow providing all CSFs with seed cleaning machinery, it is planned to provide at least one seed-cleaning machine for each oblast. Criteria for selection of beneficiaries of such equipment, and terms and conditions of the use and ownership of assets will be developed by the Agribusiness Competitiveness Center (ABCC) jointly with the Public Union of Community Seed Funds (PU CSF) and become part of the Project Operational Manual. The plastic covers and metallic frames will be provided to the SHGs to make seedbed (tunnel greenhouses) to help prevent losses and improve incomes of beneficiaries. The estimated amount needed for these new activities varies from US$190,000 (in case of one seed-cleaner per oblast) to US$281,000 (with two seed-cleaners per oblast). However, the final figures will depend on demand and on available funds after allocating money for seeds and fertilizers for the new CSFs and SHGs that will be formed in 2017.

The original cost of components was as follows: Component 1 US$ 2,511,800 and Component 2 US$ 288,200.

Current Component Name

Proposed Component Name

Current Cost (US$ millions)

Proposed Cost (US$ millions)

Action

Component 1: Support for Expansion of Community Seed Fund System

2,299,800.00 New

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Component 2: Project Management, Monitoring and Evaluation, and Knowledge Dissemination

500,200.00 New

Total: 0.00 2,800,000.00.

Other Change(s)Other Change(s)

Explanation:The other change consists in the re-allocation of grant proceeds within the category of expenditures covering Goods, Non-Consulting services, Consultant’s services, Training and Operating Costs under the Project. This does not affect the Grant Agreement, which contains only that disbursement category. This re-allocation within the existing category is for project management and monitoring purposes. This change to the budget will allow to continue providing the full assistance package - seeds, fertilizers, consultancy and training - to the beneficiaries and to achieve the PDO.

The revised budget will be as follows (in brackets are original amounts):Consultants – US$ 433,300 (US$343,200)Training – US$701,500 (US$298,800)Goods –US$1,585,200 (US$2,078,000)Operating Costs – US$80,000 (US$80,000)Total – US$ 2,800,000 (US$ 2,800,000).

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Annex 1: RESULTS FRAMEWORK AND MONITORING

Project Name: Support to Community Seed Funds (P144338) Project

Stage: Restructuring Status: DRAFT

Team Leader(s):

Talaibek Torokulovich Koshmatov

Requesting Unit: ECCU8 Created by: Jeren Kabayeva on 26-Jul-2016

Product Line: Recipient Executed Activities Responsible

Unit: GFA03 Modified by: Hiromi Yamaguchi on 23-Sep-2016

Country: Kyrgyz Republic Approval FY: 2013

Region: EUROPE AND CENTRAL ASIA

Lending Instrument: Specific Investment Loan

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Project Development Objectives

Original Project Development Objective:The development objective of the Grant is to increase the agricultural productivity of the beneficiaries in the project areas through providing support for expansion of the Community Seed Fund system. The grant aims to support rural people who live in poverty or extreme poverty levels and whose incomes are negatively impacted by rising food and fuel prices and financial crisis.

Results

Core sector indicators are considered: Yes Results reporting level: Project Level.

Project Development Objective Indicators

Status Indicator Name Core Unit of Measure Baseline Actual(Current) End TargetRevised Average increase in yields in Percentage Value 0.00 21.60 15.00

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the participating farms for selected key crops

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment The wording has been slightly revised with no change in substance. Only the word "average" has been added and the target value has been removed from the text of the indicator.

Increase in yields in the participating farms for selected key crops of 15%

Percentage Value 0.00 21.60 15.00

Date 12-Nov-2014 16-Jun-2015 07-Mar-2018

CommentMarked for Deletion

At least 30% of beneficiaries have moved from subsistence farming to selling surplus of their output

Percentage Value 0.00 100.00 30.00

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment Dropped. The baseline survey has shown that there are almost no households fitting into definition of subsistence farmers. Almost 100% of rural households sell surplus of

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something to buy other goods and services. In addition, they may have some, albeit small, source of non-farm income like remittances, pensions, or waged employment. Therefore, this indicator has been dropped but there is another indicator on increased sales, which has been retained.

Marked for Deletion

CSF system (in terms of number of members) enlarged

Percentage Value 0.00 19.93 15.00

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment Dropped. This is not an outcome indicator but rather output indicator. Besides there is already an output indicator showing increase in number of members in absolute terms.

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Intermediate Results Indicators

Status Indicator Name Core Unit of Measure Baseline Actual(Current) End TargetMarked for Deletion

Additional NGOs have been trained and have started CSF and self-help group formation

Number Value 0.00 3.00 3.00

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment Training of other NGOs for CSF and SHG formation was envisioned originally as a back up to the PU CSF that was getting to the limits of its capacity due to involvement in several projects. But the PU CSF is now involved only under this project and it may not be necessary to hire other NGOs to form the new CSFs although the initial target of training three NGOs has been achieved. Therefore, no need for this indicator.

Marked for Gross output increase of at Percentage Value 0.00 10.80 15.00

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Deletion least 15 % achieved on the beneficiary farms

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment Dropped. The objective of the project is to increase productivity, for which the yield is used as the best proxy. Although many factors influence yields, the project activities have direct relations to the yields and there is an outcome indicator measuring it. The gross output is almost the same thing expressed in monetary terms. However, it has a price factor, which is beyond the projects control and therefore it is proposed to retain the indicator on yields and drop the indicator on gross

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output.

Revised CSF and SHG membership expanded by mobilizing new members

Number Value 0.00 5681.00 6000.00

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment Original indicator read: CSF and women groups system expanded at least by 4,000 new members.

(a) For accuracy of the meaning, the term “system” has been replaced by “membership.” (b) The term “women groups” changed to SHG to be consistent with the term used in the project and in practice. In addition, SHG consist not only of women but include some men as well. (c) The target has been increased by 50% (to 6,000) because more SHGs are planned to be formed to cover larger membership.

CSF and women groups system expanded by mobilizing at least

Number Value 5681.00 4000.00

Date 12-Nov-2014 16-Jun-2015 07-Mar-2018

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4,000 new membersComment

Revised Volume of seeds distributed through the CSFs and SHGs in accordance with the planting schedule

Metric ton Value 0.00 740.00 1200.00

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment 1) The wording has been tightened, including the change of term “women groups” to “SHGs” for consistency. 2) The target is reduced to 1,200. Original target was set based on assumption used under the APAP. However, the experience of the APAP has shown that the assumptions were not correct and the targets were overestimated. The erroneous assumption used in the APAP, and subsequently in this project, was that more potato

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seeds, which are heavy, will be demanded. It proved not to be the case. Besides, in this project more SHGs are supported. They grow mostly vegetables, seeds of which are very light.

At least 4,500 tons of seeds have been timely distributed through CSFs and women groups

Metric ton Value 0.00 740.00 4500.00

Date 12-Nov-2014 16-Jun-2015 07-Mar-2018

CommentNew Volume of fertilizer distributed

to the CSFs and SHGsTones/year Value 0.00 1200.00

Date 07-Mar-2018

Comment New indicator. About half of the funds used for provision of inputs to the beneficiary CSFs and SHGs is spent on fertilizers. Therefore, the Recipient has requested to introduce this new

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indicator.

New Farmers reached with agricultural assets or services

Number Value 0.00 6000.00

Date 12-Dec-2014 07-Mar-2018

Comment This indicator has been added to replace the old indicator called "At least 3,800 new CSF and women group members have received seed and/or fertilizer support". The new indicator is taken from the list of newly proposed corporate results indicators and captures also the services provided to farmers. The target has been increased from 3,800 to 6,000.

Revised Number of farmers trained on subjects promoted by the project

Number Value 0.00 4365.00 5500.00

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment No change in substance; only rephrasing. The

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target has been increased from 3,000 to 5,500

Household farmer capacity improved by training at least 3,000 farmers on various subjects

Number Value 0.00 4365.00 3000.00

Date 12-Nov-2014 16-Jun-2015 07-Mar-2018

CommentNew Client-days of training

providedNumber Value 30000.00

Date 07-Mar-2018

Comment New indicator. It was not in the original results framework but it is applicable for the project to show the extent of training provided.

Revised Share of women in the total number of beneficiaries

Percentage Value 0.00 56.00 45.00

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment No change in substance; only rephrasing. The target has been increased from 35% to 45%.

Women represent at least 35% of the beneficiaries

Percentage Value 0.00 56.00 35.00

Date 12-Nov-2014 16-Jun-2015 07-Mar-2018

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CommentRevised Increase in average volume of

sales of a beneficiary household

Percentage Value 0.00 17.50 15.00

Date 12-Nov-2014 16-Jun-2016 07-Mar-2018

Comment No change in substance; only rephrasing.

Increase in sales of at least 15% achieved on beneficiary farms

Percentage Value 0.00 17.50 15.00

Date 12-Nov-2014 16-Apr-2015 07-Mar-2018

CommentNew Technologies demonstrated in

the project areas Number Value 0.00 10.00

Date 07-Mar-2018

Comment New indicator. It was not in the original Results Framework but it is in line with project activities aimed at demonstrating new agronomic technologies to project beneficiaries to improve their agriculture productivity.

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New Farmers adopting improved agricultural technology

Number Value 2000.00

Date 07-Mar-2018

Comment This new indicator has been added from the list of proposed new corporate indicators.

New Targeted clients satisfied with agricultural services provided under the project

Percentage Value 80.00

Date 07-Mar-2018

Comment.

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Revised Results Framework

1 Outcome Indicator Unit of measure

Target Note

1.1 Average increase in yields in the participating farms for selected key crops

percentage 15%

2 Output Indicators2.1 CSF and SHG membership

expanded by mobilizing new members

number 6,000

2.2 Volume of seeds distributed through the CSFs and SHGs in accordance with the planting schedule

tons 1,200

2.3 Volume of fertilizers distributed to the CSFs and SHGs

tons 1,200

2.4 Farmers reached with agricultural assets or services

number 6,000 Core Indicator

2.5 Number of farmers trained on subjects promoted by the project

number 5,500

2.6 Client-days of training provided number 30,0002.7 Share of women in the total number

of beneficiaries percentage 45%

2.8 Increase in average volume of sales of a beneficiary household

percentage 15%

2.9 Technologies demonstrated in the project areas

number 10

2.10 Farmers adopting improved agricultural technology

number 2,000 Core Indicator

2.11 Targeted clients satisfied with agricultural services provided under the project

percentage 80%

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Annex 2Revised allocation of funds between the categories

(US$)

Categories of Expenditure Original RevisedConsultants 343,200 433,300Training 298,800 701,500Goods 2,078,000 1,585,200Operating Costs 80,000 80,000Total US$ 2,800,000 US$ 2,800,000

Revised allocation of funds between the components (US$):

Components Original RevisedComponent 1 2,511,800 2,299,800Component 2 288,200 500,200Total US$ 2,800,000 US$ 2,800,000

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