Document of

The World Bank

FOR OFFICIAL USE ONLY

REPORT No 20695

IMPLEMENTATION COMPLETION REPORT(IDA-22540)

ON A

CREDIT

IN THE AMOUNT OF US$11.3 MILLION

TO THE

CENTRAL AFRICAN REPUBLIC

FOR AN

ENTERPRISE REHABILITATION AND DEVELOPMENT PROJECT (ERDP)

June 27, 2000

Private Sector Group (AFTPS)Africa Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 2000)

Currency Unit = CFA Franc (CFAF)CFAF 708.2 = US$ I

US$ 1.00 = SDR 0.7518

FISCAL YEARJanuary I December 31

ABBREVIATIONS AND ACRONYMS

ADB African Development BankBEAC Banque des Etats de lAfrique Centrale

(Bank of Central African States)BICA Banque Internationale pour l'Afrique Occidentale et CentrafriqueBPMC Banque Populaire Marocco-CentrafricaineCAADE Caisse Autonome d'Amortissement des Dettes de l'EtatCAPMEA Centre d'Assistance aux Petites et Moyennes Enterprises et a l'ArtisanatCAR Central African RepublicCOBAC Commission Bancaire d'Afrique Centrale

(Regional Banking Supervision Commission)DCA Development Credit AgreementDIAD Directorate of Industrial and Artisanal DevelopmentIDA International Development AssociationILO International Labor OrganizationNGO Non Government OrganizationPPF Project Preparation FacilityPCO Project Coordinating CommitteeQAG Quality Assurance GroupSAL Structural Adjustment ProgramSME Small and Medium-Scale EnterpriseUNDP United Nations Development ProgramVITA Volunteers in Technical Assistance

Vice President: Calisto MadavoCountry Director: Serge Michailof

Sector Manager: Demba BaTask Team Leader: Andre Ryba

FOR OFFICIAL USE ONLY

CONTENTS

Page No.1. Project Data 1

2. Principal Performance Ratings I

3. Assessment of Development Objective and Design, and of Quality at Entry I

4.. Achievement of Objective and Outputs 4

5. Major Factors Affecting Implementation and Outcome 7

6. Sustainability 10

7. Bank and Borrower Performance 10

8. Lessons Learned 12

9. Partner Comments 14

10. Additional Information 14

Annex 1. Key Performance Indicators/Log Frame Matrix 20

Annex 2. Project Costs and Financing 21

Annex 3. Economic Costs and Benefits 24

Annex 4. Bank Inputs 25

Annex 5. Ratings for Achievement of Objectives/Outputs of Components 27

Annex 6. Ratings of Bank and Borrower Performance 28

Annex 7. List of Supporting Documents 29

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not be otherwise disclosed withoutWorld Bank authorization.

Project ID: P000464 Project Name: ENT REHAB & DEVELOPTeam Leader: Andre Ryba TL Unit: AFMCMICR Type: Core ICR Report Dale June 27i 2000

1. Project Data

Name: ENT REHAB & DEVELOP L/C/TF Number: IDA-22540Country/Department: CENTRAL AFRICAN REPUBLIC Region: Africa Regional Office

Sector/subsector: FS - Financial Sector Development

KEY DATESOriginal Revised/Actual

PCD: 04/11/88 Effective: 02/12/92Appraisal: 11/08/90 MTR.Approval: 05/30/91 Closing: 12/31/99

Borrower/lmplementing Agency: GOVT. OF CAR/MCI; BEAC; VITA; CAPMEAOther Partners:

STAFF Current At AppraisalVice President: Callisto E. Madavo Edward V.K. JaycoxCountry Manager: Serge Michailof Ismael SerageldinSector Manager: Demba Ba lain Thornton ChristieTeam Leader at ICR. Andre Ryba Rolf GlaesserICR Primary Author: Faustin-Ange Koyasse and

Oliver Campbell White

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactoiy, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: HU

Sustainability: HUN

Institutional Development Impact: N

Bank Performance: U

Borrower Performance: HU

QAG (if available) ICRQuality at Entry:

Project at Risk at Any Time:

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

Following previous economic programs, the Enterprise Rehabilitation and Development Project (ERDP)was designed to support the Third Structural Adjustment Program (SAL III). SAL III, approved in June

1990, contained a series of structural reforms, following up on measures initiated since 1986 andsupporting a deepening of the adjustment effort, aimed at achieving an average real growth of about 3.5

percent. These measures included helping to promote and develop the private sector.

Following its disengagement from industrial and commercial activity, the Government initiated a series ofmeasures to stimulate the private sector. These measures included the promulgation of a new investmentcode, revised road transport taxes and commissions, a simplified institutional and regulatory framework forbusiness, and the abolition of import licensing and quotas. An agency was put in place to promote thedevelopment of small and medium-size enterprises (SMEs). In addition, prices were liberalized for all but8 essential commodities and it was planned to eliminate all price controls with the exception of sugar.Other measures included the start-up of a one-stop investment window and the reorganization of theChamber of Commerce. With IDA's assistance, the Government undertook a study of the constraints oncredit availability to the private sector with a view to strengthening financial sector intermediation.

Meanwhile, growth prospects for 1991-1992 were limited owing to falling exports. Indeed, given the poorgrowth prospects and the accumulation of internal and external arrears, the country was expected to needsubstantial balance of payments support and substantial debt relief at least for the period 1991-1995.

Against this background, the principal objective of the project, as set out in the MOP, were to promote andfinance viable private enterprises with a view to increasing output, employment and income. In line withthe CAR's development objectives, the project was expected to: (a) support the creation of new andrehabilitation of existing enterprises; (b) help implement the financial sector reform program, emphasizingboth institutional and policy aspects; (c) improve financing terms by emphasizing market responses andprovide business advisory services and training; (d) strengthen investment promotion; and (e) supportmicro-entrepreneurs.

3.2 Revised Objective:Although there were some changes in the component structure and management arrangements, the basicobjectives of the project remained unchanged until early 1996 when the Bank had decided that, unless theGovernment acted promptly on actions agreed during 1995, the project would be cancelled. Any actionswere overtaken by social disturbances in the first half of 1996 and, by mid- 1996, the Bank was consideringrestructuring the project so as to use the available balance under the credit for emergency rehabilitationassistance to private enterprises and the banks. However, discussions with the authorities were halted bythe co-called third army mutiny (see below).

3.3 Original Components:

The project - for a total amount of US$15.2 million of which US] 1.3 million was to be funded under theIDA Credit - was designed to have 5 components:

1. An Apex Line of Credit (US$7.7 million) the largest component (50.7%) of the project - to allowcommercial banks to extend credit for financing fixed assets and working capital to eligible existing andnew enterprises in the productive sectors of the economy.

2. Micro-Enterprise Development Program (US$3.4 million) - to promote and financemicro-projects through a line of credit, institutional support, and technical and management advisoryservices, with emphasis placed on providing assistance to woman entrepreneurs;

3. Technical Assistance (US$2.5 million) - to support the management of projects, and the trainingand strengthening of private sector promotion agencies.

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4. Training Program (US$0.9 million) - to enhance project evaluation and enterprise management

capabilities.

5. - Project Preparation and Other Studies (US$0.7 million) - to carry out sub-project feasibility,preparation, and sector studies relevant to enterprise development.

The apex line of credit, which was initially supposed to be managed by the Banque des Etats de l'AfriqueCentrale (BEAC), was to be open to eligible participating financial institutions. The exchange risk was tobe borne by the Government. Terms and conditions to financial institutions and to borrowers were to bereviewed annually and revised as necessary in the light of prevailing economic and financial conditions.BEAC, as the apex organization, was to be responsible for the management of the line of credit through aproject unit to be set up, and would channel funds to participating financial institutions which were to meetfinancial and managerial standards. The Directorate of Industrial and Artisanal Development (DIAD)within the Ministry of Finance, Trade, Industry, and Small- and Medium-Scale Enterprises was to be thecoordinating and managing agency for the technical assistance, training, and studies components.Technical assistance would support project implementation through funding of expatriate expertise,incremental operating costs, and equipment and vehicles in implementing agencies. The proposed technicalassistance was considered essential to ensure effective project management and mitigate potential risksidentified in the light of the experience under IDA's Economic Management Project and UNDP/ILO'sassistance to the Centre d'Assistance aux Petites et Moyennes Entreprises et a l'Artisanat (CAPMEA), aunit of I)IAD.

The micro-enterprise component was to be managed by Volunteers in Technical Assistance (VITA), aUS-based NGO.

A Project Coordinating Committee (PCO) headed by the Minister of Economics, Planning, statistics, andInternational Cooperation was to ensure overall project coordination.

3.4 Revised Components:

The project was declared effective on February 12, 1992. Due to difficulties in project start-up, only themicro-enterprise component became active at that time. The other components could not be launched untilAugust 1994, three years after IDA Board approval. By that time, the project, in practical terms,comprised three components:

1. The Apex Line of Credit. BEAC had refused to house the apex line of credit and soresponsibility for accounting and financial management was assigned to Caisse Autonome d'Amortissementdes Dettes de l'Etat (CAADE), which later became the Direction de la Dette after its restructuring andintegration within the Ministry of Finance in 1997. CAADE's responsibility included both the ERDPoverall and the refinancing of investment projects presented through the commercial banks and involved: (i)verifying eligibility criteria of investment projects; (ii) refinancing of investment projects besides thecommercial banks; (iii) follow up of implementation of projects.

2. Capacity Building, which was the responsibility of CAPMEA. Technical assistance was aimedat: (i) the planning and delivery of a training program on the promotion of SMEs and aimed specifically atentrepreneurs, and personnel of CAPMEA and the Ministry; (ii) capacity building to strengthen CAPMEAability to prepare investment projects and to support enterprise managers, SMEs, groups of artisans, smallbusiness promoters, and advisers, and others involved in handling a range of documentation (includingstatutory instruments, internal regulations, market studies, technical and financial feasibility studies, and

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credit applications). A series of studies was also envisaged to support research on private enterprisedevelopment requirements in CAR.

3. Assistance to Micro-Enterprises, responsibility for which was assigned to VITA including arenewable line of credit, technical advisory management services for micro-projects and training activitiesfor promoters. Through a contract signed in March 1992 with the Government, VITA was assignedresponsibility for managing the program for financing micro-enterprises. The principal aim of theagreement was to continue a project which had been designed and piloted by this NGO. Although itsmanagement was autonomous, VITA had to be integrated within the overall PARDEP umbrella.

3.5 Quality at Entry:

Some potential risks were identified at appraisal: (i) the possible reluctance of banks to extend termfinancing that may result in slower than anticipated disbursements; (ii) the government may have difficultyin sustaining the institutional and regulatory changes necessary for effective project implementation; (iii)increased cooperation between the Government and the business community might not materialize asanticipated on investment promotion.

At the time of project appraisal, it was considered that these risks had been minimized through projectdesign, including adequate lending margins for participating financial institutions (PFIs) andinstitution-building measures for project management and training. The project was the culmination ofpreparatory work by the Government, assisted by IDA, extending over a two-year period. The apex line ofcredit derived from experience in other countries and from project preparation focused on financial sectorreforms and on establishing an enabling regulatory environment in the framework of structural adjustment.It was kept deliberately small to avoid tying up funds in the event that the business climate did not evolveas anticipated but IDA would entertain requests for early renewal in the event of fast drawdown.Institutional and financial arrangements were designed with a view to achieving sustainability andreplicability. The micro-enterprise component was based on a pilot program funded under an SPPF andPPF assistance. These were instrumental in testing innovative approaches to reach down to the grassrootslevel, design solutions consistent with demonstrated needs, and ensure high loan recovery rates.

However, the political risks of instability in a period of uncertain transition towards democracy, marked bya succession of governments in the context of a series of social and political claims and accumulating fiscaldeficits, were seriously underestimated.

In the event, although the project objectives were laudable, they were unachievable under the prevailingeconomic and socio-political conditions, and the significant delay in project commencement was indicativeof the capacity and other problems, described elsewhere in this report, which were to beset this project.Hence, the inevitable conclusion that design and quality at entry were poor.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:

Unsatisfactory. Although the Credit Agreement had been signed on July 12, 1991, it was not until August1994, some 5 months after the original date foreseen for the mid-tern review, that all components of theproject became operational. The project was officially launched in Bangui on November 23, 1994. Thedelay in getting started was due to: (i) the time taken to nominate suitable persons who would be

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responsible for the different components; (ii) the refusal of BEAC to house the apex line of credit and the

time needed to take the decision to find an alternative and to make the necessary amendments to the

Development Credit Agreement (DCA) relating to the replacement of BEAC by CAADE as the executing

agency for this component, and (iii) the time taken to recruit and validate consultancy contracts and to

specify the terms of reference for those responsible for managing and administering the project.

The significant delay in start-up reflected the underlying problems which beset the project. Despite

remedial efforts the project failed, even partially, to meet its objective.

4.2 Outputs by components:

1. Apex Line of Credit: After the apex unit (CAADE) was put in place, subsidiary loan agreements were

signed with two of the three commercial banks: Banque Populaire Morocco-Centrafricaine (BPMC) on

October 7, 1994 and Banque Intemationale pour l'Afrique Occidentale et Centrafrique (BICA) onNovember 17, 1994. The third bank, the Union Bancaire en Afrique Centrale withdrew because of concernat the credit risk that it would have had to assume; that bank expressed the desire to see a guarantee facility

established.

Of five investment proposals processed through BPMC and BICA, only one was transmitted to CAADEfor approval. That single application had several informational gaps and was returned for furtherinformation; it did not obtain financing. A World Bank supervision mission in February 1995 noted thatmany of the applications submitted to the banks lacked balance sheets for the past three years, a cash flowprojection, and explanation of the uses of the funds requested. A study, undertaken by an independent firm,

that reviewed 10 files showed that the applications were inconclusive and it recommended the suspension ofthe apex line of credit.

On the other hand, besides the perceived lengthy procedures and complex instructions for the creditapplications, the Government, at the request of economic operators, considered that the prevailing interestrate (16 percent) was too high and recommended a revision to a lower rate (as low as 10%). However, thefailure of the line of credit cannot be attributed entirely to the interest rate which compared favorably withrates for similar loans elsewhere in Africa, particularly in the informal market, and reflected the risk andadministration cost.

No amount was ever disbursed under this component of the project and, as it could not disburse asdesigned, the apex line of credit was suspended in July 1995 and not reactivated.

2. Capacity Building:

(i) Training Program: CAPMEA, the unit responsible for the training component was slow to develop

and implement the training program. Indeed, the Bank supervision mission in August 1995 reported thatthis component had been a failure. However, when eventually a training program was prepared andadopted, it was considered pragmatic and was expected to provide basic business and management training

for loan beneficiaries, and project analysis and preparation for investment promotion and financialinstitutions. Although rather late in the program, 25 persons from CAPMEA and the commercial banksreceived training in project evaluation.

Senior personnel participated in study tours and seminars: (a) in 1995, several members of the coordinatingcommittee and the project manager attended a seminar in Canada on project planning and control; (b) andVITA staff received training, including attendance at a seminar in the United States in 1993 on

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entrepreneurship, a training of trainers program in Dakar in April 1995, a workshop in Tunis in June 1995on business management, a seminar in Bangladesh in October 1995 on microfinance, a conference in Kigaliin March 1996 on microfinance, a seminar in Bamako in April 1996 on the informal sector, as well asseveral work visits to Chad.

(ii) Studies: Several studies were undertaken that were aimed at developing the business environment butthey did not lead to any conclusive action. These studies covered: (a) the legal constraints to loan recoveryby financial institutions; (b) the setting up of a guarantee fund; (c) the investment code; and (d) marketgaps in CAR.

CAPMEA was restructured in 1993, following which a new director was appointed in January 1994. Itwas hoped that the new structure would enabled CAPMEA to extend the scope of its services to developpromotional activities and advisory for entrepreneurs. Equipped with motorcycles, specialists fromCAPMEA did, for a limited time, display new vigor in their efforts to identify projects, carry out financialanalysis, and provide training on aspects of SME commercial and financial management. A fewapplications were directly financed by the primary banks. However, this momentum was halted when theCAPMEA offices were destroyed during the uprising in May 1996. The relocation of CAPMEA followingthe destruction of its offices did not allow it to continue its activities under this component. The revenuesfrom CAPMEA's operations were insufficient to sustain it and some 80% of its budget had to be met byGovernment subsidy. Proposals to privatize CAPMEA, to create a guarantee fund, and to create acounterpart fund were unconvincing and were abandoned.

All planned studies had been completed by February 1996 and, in March 1996, the Govemment and theBank agreed that CAPMEA's performance had been very weak and its staff were demoralized, and thatsupport for studies and for training under the project would be discontinued with effect from April 1996until the Chamber of Commerce had been restructured and it had established a study/training unit.

3. Assistance to Micro-Enterprises: Credit distribution activity had started with a pilot phase, fromJanuary 1990 to September 1991, managed by VITA. During the pilot phase, 703 loans totaling FCFA 90million (US$130,000) had been distributed. More than 70 percent of the credits were to the agriculturalsector, 473 loans were to groups who guaranteed repayment, and 425 loans were extended to women.Also, up to April 1991, the loan recovery rate was over 98 percent. Given these good results, the firstcontract under this credit was awarded on a sole source basis to VITA. From 1990 through the firstquarter of 1993, over 4,000 loans totaling US$1.6 million were granted, with repayment rates at around 90percent. By early 1995 there were some 6,000 micro-entrepreneurs borrowing for investment and workingcapital needs from a revolving fund of about US$500,000 (interest rates 2-4 percent per month) withrecovery rates still above 90%. By end December 1997, and excluding loans distributed during the pilotphase, the micro-credit component had distributed 6,255 loans totaling FCFA 1,149 million for 4,142micro-enterprise projects. 2,600 (42%) of the loans were to women for an aggregate amount of FCFA 430million (37%). Until the departure of VITA, the loan recovery rate was 90% .

In addition to financing the micro-enterprises, entrepreneurs also received support in terms of managementadvice

However, in 1994, there was a drop in demand instead of the expected continued increase in the number ofloans. This could be attributed to several factors including growing social unrest, the FCFA devaluation,and VITA coming towards the end of its contract with uncertainty about the future. The Government, inaddition to demanding financial management data from VITA, decided to extend VITA's contract for a sixmonth period (January-June 1995) and to use that time to recruit a new NGO through international

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competitive bidding. The bidding process necessarily took time but further delays occurred partly becauseof the different approaches proposed by the various bidders and also because of a misunderstanding overthe award of the contract. Also, the Bank questioned the validity and transparency of the process. Thisdelay adversely affected the distribution of micro-credits and slowed down this component of the project.VITA's contract eventually ended on December 31, 1996 and the balance of funds was transferred toGovernment. The change in management had serious consequences, and malpractices and fraud ensued.

Despite some implementation problems, the sheer number of loans under this component show that, duringthe period 1991-95, it served relatively well the informal micro-entrepreneurs who constitute the majorityof the private sector in the country.

4.3 Net Present Value/lEconomic rate of return:

Not applicable.

4.4 Financial rate of return:

Not applicable.

4.5 Institutional development impact:

Some limited institutional development took place under the project, notably in CAPMEA and with localpersonnel who worked with VITA. Much of this has been lost but the individuals who were trained andthose who gained experience under the project are still available to apply their knowledge. However,overall the project failed to have a measurable impact on institutional development.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

During 1992-94, successive Bank supervision missions reported on the deteriorating socio-economicconditions in the country that severely impacted on the Government's management capacity and projectimplementation during the start-up period of the project. The whole 1991-94 period was marked by strongunion demands and political claims and a chronic budgetary deficit resulting in large domestic and externalarrears. Also, a new Government took office in CAR in late 1993 and associated administrative changesadded to delays. As a result, until late 1994 only the micro-enterprise component was active and even thatsuffered from poor political and economic/financial macro conditions that affected new credit extension andloan recovery that had previously performed encouragingly during its pilot phase.

Armny mutinies occurred during the life of the project, the first in April 1996. They caused physicaldamage to assets and during the second, in May 1996, virtually all PARDEP documents in Bangui weredestroyed. Because of the serious security problems in CAR and the destruction caused by three successivemutinies, Bank supervision of PARDEP was rendered impossible throughout 1997 and 1998 and the auditsrequired under Section 4.01 of the Development Credit Agreement (DCA) were not performed.Disbursements of Credit funds were suspended from April 1997 until June 1998 under the generalsuspension of IDA's disbursements in CAR. In view of lack of progress in restructuring the project,compounded by the supervision and audit difficulties, disbursements under the Credit were formallysuspended on 29 December 1998 until a full audit of the project could be completed, all misused Bankfunds returned, and a final decision taken on the future of the project. The project was closed in December1999.

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The largest component of the project, the apex line of credit, had been designed and prepared on the basisthat BEAC would be the implementing agency. In the event, protracted discussions between theGovernment and BEAC, that had ensued since the signing of this Credit, concluded in September 1993 thatBEAC would not administer the apex line of credit. The Government proposed instead to retain CAADEas the implementing agency. This required an amendment to the legal documents for this project. Inaddition, disbursement conditions for the apex line of credit had to be fulfilled: (i) subsidiary loanagreements between CAADE and each participating financial institution; (ii) approval of the project unit'sstatement of operational policies and procedures by CAADE and IDA; (iii) establishment of the project unitin CAADE; and (iv) signing of a Cooperation Agreement between the Government and CAADE with termsand conditions satisfactory to IDA. These legal and administrative matters necessarily took time to prepareand to process. Also, CAADE had no specific implementation experience and this necessitated: (i) therecruitment of technical assistance to strengthen CAADE's institutional capabilities so as to ensureadequate project execution; and (ii) additional training to CAADE staff under the ERDP trainingcomponent.

In addition to the increasing weakness of the financial sector, demand for credit under the apex line ofcredit was very low. Whilst this is partly attributed to the interest rate (which was considered too high byentrepreneurs and insufficiently attractive to the commercial banks), the impending and then actualdevaluation of the FCFA in 1994 also contributed to investor uncertainty and increased risk aversion.

Comments from Government representatives and the private sector indicate that Bank staff did not listenenough to the commercial banks and potential borrowers. Bank staff resisted the idea of the apex line ofcredit being subsidized which is what the various interested parties in CAR had proposed. Also, the bankshad stated their doubts that the line of credit would work. Of the three commercial banks in CAR, only twoparticipated and one of those was weakened by the liquidation of its main foreign shareholder. During theproject start-up period, 1992-94, successive Bank supervision missions noted the deteriorating condition ofthe financial sector. By May 1995 it was apparent that the deterioration of the banks' situation wasimpacting on the apex line of credit component both in terms of demand and loan processing because of thebanks' reluctance to lend long-term to SMEs and to take on risks under the prevailing uncertain economicconditions. By that time, Bank staff had concluded that the distressed condition of the financial sectormeant that the apex line of credit had very little chance of working. This view was reinforced by anindependent study in early 1996 which found that only 2 of 10 projects thus far processed under thiscomponent of the project were potentially viablc. Typically, there was a lack of financial data or estimateswhich rendered it impossible to assess profitability. Discussions with the commercial banks concluded thatthere were few formal SMEs and that, whilst some bankable projects might exist, they were usually forvery small loan amounts and the promoters of these projects were generally unable to furnish the requisiteaccounts and financial information. A Bank mission in March 1996 was able to convince the authorities torestructure the project, according to the recommendations of the previous mission in December 1995, whichincluded withdrawing the apex line of credit and instead enlarging the micro-enterprise component. Thethird army mutiny, which resulted in longer lasting social unrest than the previous two, prevented thisrestructuring.,

5.2 Factors generally subject to government control:

Generally speaking, many of the delays arose through factors within Government control. For example:(1) Although BEAC eventually decided not to act as implementing agency for the apex line of credit,discussions with the Government extended over three years. Those discussions should have been concludedmuch sooner, especially as BEAC had made it clear in correspondence in November 1991 that it did not

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want to participate in the project.(2) CAPMEA had long-term structural operational and financial problems which persisted throughout1991-94 (only late in 1994 were a new director general and a financial/management expert appointed).(3) There were unexplained complications and delays early in 1995 regarding the extension of VITA'scontract for a 6-month period. Months of indecision resulted in an interruption to credit extension underthe micro-enterprise component and, despite a decision taken in late 1994 to go to international competitivetender for the contract to manage this component from July 1, 1995, terms of reference had still not beenprepared by May 1995. That delay was repeated when the Government decided to extend VITA's contracta second time, to end 1995. The uncertainty created by these delays led to unrest and anxiety among bothmanagement and staff at VITA and to friction and unfortunate reactions from both sides. Thus, followingthe downturn in 1994, there was a further decline in the perfornance of the micro-finance component,hitherto the only successful component. In November 1995 the bid evaluation process for the new contractwas completed but the National Tender Board (NTB) (the Commission Nationale des Appels d'Offres etMarches de l'Etat), responsible for the bidding process, had neither requested a no-objection nor awarded acontract, and it was unclear if the VITA structure would be kept or modified. The authorities in Bangui leda new firm to believe that it had been selected. However, in the opinion of Bank staff, the three bidsreceived were not comparable and the evaluation was not objective. Discussions between the Governmentand the Bank took place and it was agreed that the evaluation process was unsatisfactory and incomplete.Given the limited alternatives that the situation presented at that time, the Bank advised the Government tourgently review the position and consider renegotiating with VITA or close the component. TheGovernment delayed its decision, principally because of differences in views between different ministries.(4) Although an action agenda had been agreed between the Government and the Bank in July 1995 torestructure and revitalize the project, ERDP came to a virtual standstill by the beginning of 1996. Thedeadline of December 31, 1995 had passed without any concrete results to work upon. Despite themicro-enterprise component yielding some results, it became evident at that time that, due to the difficultiesin operating the apex line of credit and insufficient project ownership, capacity, and commitment, theproject would have to be canceled.(5) The delay in the selection and appointment of an auditor for the project.

Project coordination was a major problem, not only because of the various implementing agencies involvedbut also with responsibilities for different components scattered between several Government ministries.Observing this over time, the Bank recommended to the Government in May 1995 that, in order to speed updecision-making and accountability, a project director be appointed to replace the coordinating committee.This was raised again with the Government in March 1996, when this recommendation was accepted.Whilst the new arrangement held hope for improvement, progress was halted by the deteriorating securitysituation. Subsequent events showed that there was insufficient consultation and coordination with theBank and that Bank procedures were not understood.

Not only was the process for selecting a manager for the micro-enterprise component poorly managedthroughout 1995-1996, after it was decided to go to intemational tender, the subsequent managementarrangements proved disastrous, The assistant director under VITA assumed responsibility for managingthe micro-enterprise component after the departure of VITA at the end of 1996. In late 1998, the Bankbecame aware that, in response to complaints from employees of the micro-enterprise component of theproject, the Prime Minister has appointed a control team to investigate the unit. Although the control team,among other actions, performed a mini-audit of the operations of the micro-credit component, the Bank wasnot consulted on the team (neither its composition - all civil servants - nor on its terms of reference) asrequired under section 4.01 of the DCA. The control team's report provided evidence of a serious misuseof funds: funds had been diverted for the personal benefit of employees of the project and others throughthe use of fictitious loans or by fraudulently imputing credit extended to clients of the project. In addition,

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there was evidence that the director of ERPD had ordered the manager of the micro-enterprise componentto transfer funds on a monthly basis to cover salaries and other expenses of ERPD after the Bank hadclosed the project's special account and had asked for the suspension of all operations. As a result, theMinister of Commerce ordered the cessation of all activities under the micro-enterprise component, thedelivery to Government of all its assets (physical and financial), and the appointment of a control team asthe new management with a mandate to develop ways to revive the project.

5.3 Factors generally subject to implementing agency control:

There was an unnecessarily long delay in preparing the training program and preparing terms of referencefor studies. Although this was attributed to the need to restructure CAPMEA, it did not fully explain thelack of effort to get this component under way sooner.

Whilst the management of the micro-enterprise component was generally satisfactory, successive Bankmissions noted the slackness of VITA staff in carrying out training in order to build local capacity to runthis component without external technical assistance. This weakness was only remedied rather late in theday by which time the institutional arrangements were in some disarray.

5.4 Costs andfinancing:

There were no problems related to project costs and financing.

6. Sustainability

6.1 Rationale for sustainability rating.

None of the project components has sustained its activities. Whilst the micro-enterprise componentrecorded some success in terms of the number of loans, outreach to women, and high recovery rate, thecosts of administering the component were relatively high, with revenues only covering about 60% ofoverheads. Even before the management change which led to the eventual collapse of this component, itwas recognized that, for the foreseeable future, there would be a persisting inability to become financiallyself-sufficient and that external support would be needed.

6.2 Transition arrangement to regular operations:

Due to the project's unsatisfactory perfornance, the transition to a without-project situation was neverreached.

7. Bank and Borrower Performance

Bank7. 1 Lending:

This project was the first of its kind in CAR. Whilst the MOP stated that lessons had been derived fromsimilar operations elsewhere, the risk assessment appeared not to have been done well enough duringappraisal: (i) there was no mention of the economic and political risks and it appears that the risks thatsocio-political tensions, which were already evident before the project was approved, would inhibit privatesector development and could undermine implementation were not recognized; (ii) Government commitmentto the project was weak throughout; (iii) capacity was a serious constraint and, although training andinstitution building were included in the project, this limitation was underestimated, particularly in view ofthe number of implementing agencies and Government ministries involved; (iv) successful implementation

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of the apex line of credit depended on a sound financial sector. The commercial banks were neithercommercially nor technically ready to support the apex line of credit component. In fact, the financialsector was weak with several banks having been liquidated and the remaining commercial banksunenthusiastic about the project; (v) the institutional arrangements for the apex line of credit were definedbut were not finalized before credit effectiveness; and (vi) this was the first operation of this type in CAR.Experience of apex lines of credit elsewhere in Africa was limited but had indicated the likely difficulties ofimplementation.

In addition to the apex line of credit, project preparation left too much to be dealt with later. Work ondeveloping the training program and determining the studies that would be required, as well as specifyingthe operating procedures and terms of reference that would be needed to be developed, should have beenidentified during project preparation.

In hindsight, it appears that the Bank did not take sufficient account of the views of the financialinstitutions and the private sector who had urged the Bank to consider a subsidized interest rate for theapex line of credit. Potential borrowers had expressed their view that the proposed rate was too high, whilethe margin for the commercial banks was unattractive given their already excess liquidity position.

7.2 Supervision:

During the period before the various project components were operationalized, there was undue allowancefor the causes of delay and over-optimism about the outcome of the project. From 1995 onwards, Bankmissions were critical of the Government's commitment to the project and recommended projectcancellation but action to restructure or cancel the project was slow. There are indications that there wasslowness in delivering no-objections which would also have contributed to the delays in project execution.This may be partly explained by the several changes in Country Director and Task Manager that occurredafter the project was approved. Nevertheless, Bank personnel did carry out an adequate series ofsupervision missions and made strenuous efforts to try to make the project work. The Bank assisted inarranging training and in organizing a round-table event on private sector development in CAR. At thelocal level, the Bank's Resident Mission organized regular monthly meetings with those responsible for thevarious project components and, on several occasions, made proposals to the Government for restructuringand salvaging the project.

The number of changes of country director and task manager (there were three task managers during thecourse of the project) should be noted as a contributory factor affecting the Bank's responsiveness indealing with this unsatisfactory project, as was the slow recognition of weak Government ownership of theproject.

7.3 Overall Bank performance:

The fundamental weaknesses in design and preparation (evidenced by: (i) lack of recognition of the risk ofsocio-political instability; (ii) insufficient attention to the views of the commercial banks and economicoperators; (iii) the absence of agreement with BEAC to implement the apex line of credit; (iv) the length oftime it took to declare the project as launched; and (v) the slow response to the Borrowers' perceivedinertia) lead to the inevitable conclusion that, overall, the Bank's performance was unsatisfactory. Theconsiderable efforts made during supervision to place the project on track, which were thwarted by themutinies, do not alter this conclusion.

-11 -

Borrower7.4 Preparation:

The Government did not participate sufficiently in project preparation. Hence, arrangements for managingthe apex line of credit were unresolved for several years after the credit approval, and work on training forcapacity building and on studies to support private sector development only began several years into theproject. The Government could - and should - have done more to organize these components.

7.5 Governmnent implementationpeiformance.

The Government did not pay sufficient regard to overall project management and coordination, thetimeliness of project execution, and the regular production of reports on the progress of the variouscomponents.

Under section 5.2 above, several examples are provided of delays due to Government inaction andindecision. In fact, the records show that, throughout the project, there was a very slow response fromGovernment to - and decisions - on the recommendations of successive Bank missions and that the Bankhad repeatedly to take the initiative to prompt Government to deal with delays and the attendant issues.

Annual audits of the project were required under the DCA. Audits reports were only undertaken for 1995and 1996. Audit reports for 1997 and 1998 have not been provided to IDA.

7.6 Implementing Agency:

Given the prevailing conditions under which it had to operate, VITA managed the micro-entrepreneurcomponent fairy well. The post-VITA management of this component was a disaster, marked byincompetence and fraud which occurred in the context of a lack of interest from the authorities (until thecontrol team was set up).

The other components of the project were never satisfactorily managed.

7.7 Overall Borrower performance:

Ownership of and commitment to the project were weak throughout the project. The complex nature of theproject demanded a high level of determination and coordination that was not forthcoming. Overallborrower performance is thus rated as highly unsatisfactory.

8. Lessons Learned

(a) Private sector development will take place only if the socio-political and macroeconomicenvironment and sector arrangements are conducive. Hence, this type of project should not be launchedwhen there is uncertainty about the necessary conditions for investment and business.

(b) (i) Critical stakeholders (in this case the Government ministries, banks, business associations,leading entrepreneurs) should be involved in designing and setting up well thought through projectimplementation arrangements. (ii) The arrangements for managing the credit should be discussed, agreedand finalized before the submission for project approval so that satisfactory arrangements are in place foroverall project coordination. (iii) For this type of project, the commercial banks should participate fully in

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the design and preparation, including contributing to the assessment of credit demand, and drawing up and

agreeing the operating policies and procedures to be adopted. The latter should include interest rate policy,agreed evaluation criteria, and the source(s) of economic and other data to be used for the evaluation of

loan applications.

(c) (i) The Bank should not assume that necessary implementation capacity will be developed and putin place after credit effectiveness. (ii) Adequate capacity should be identified and, if necessary, projectpreparation should include training on Bank procurement and disbursement procedures and other projectrequirements. (iii) A project management information system, with indicators to measure the impact of theproject on poverty (including social and gender aspects), should be included at appraisal and functioning in

a manner satisfactory to the Bank and Borrower by credit effectiveness.

(d) (i) For a training component to contribute to sustainable capacity building, it should be deliveredearly on in the project. (ii) This means that a training program should be developed as part of projectpreparation and not be left to the implementation stage.

(e) The experience of the micro-entrepreneur component showed that a micro-credit project can workand can contribute significantly towards gender equality but that achievement of long-term financialsustainability takes time and required close management and supervision.

(f) When a project is repeatedly performing unsatisfactorily, as was this project, the Bank should actsooner to cancel it, and not hold on in anticipation that the credit available might be used to supportfinancing needs in the same sectors.

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9. Partner Comments

(a) Borrower/implementing agency:The following is the unabridged text of the Borrower's comments on the project:

MINISTERE DE L'ECONOMIE ,DES FINANCES, REPUBLIQUECENTRAFRICAINEDU PLAN ET DE LA COOPERATION Unite - DignitN - Travail

INTERNATIONALE

MINISTERE DELEGUE A L'ECONOMIE, AU PLANET A LA COOPERATION INTERNATIONALE

CABIN ET

COORDINATION

DIVISION DES PROGRAMMES ET PROJETS

RAPPORT D'ACHEVEMENT DU PARDEPCONTRIBUTION DU GOUVERNEMENT

PRESENTATION

Introduction

1/ Rappel des objectifs et structures du PARDEP

2/ Degre de realisation des objectifs

3/ Forces et faiblesses de l'execution du projet

4/ Performance des Experts de la Banque Mondiale, des autorites et responsables locauxdu projet.

5/ Perspectives pour les op6rations futures

Conclusion

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Introduction

Dans la perspective de la preparation du rapport d'achevement du PARDEP par la Banque Mondialesuite a la decision de cloture du projet, le Gouvemement Centrafricain est amene a faire part de sonpoint de vue. Cette contribution s'articule autour des points ci-apres souleves dans la lettren°306/2000/RRlFAK/bdn de la Banque adressee au Gouvernement le 17 Avril 2000.

1 - Rappel des objectifs et structures du PARDEP

Le Projet d'Assistance a la Rehabilitation et au Developpement des Entreprises Privees a ete concu parle Gouvemement suite i la Table Ronde des bailleurs sur la promotion du secteur prive en RepubliqueCentrafricaine. Ce projet a ete mis en place grace a I'accord de credit signe le 12 Juillet 1991 avec 1'Association Intemationale de Developpement pour un montant de DTS 9.400.000 soit environ 7milliards de FCFA.

Conformement aux dispositions de l'accord de credit (annexe 2), le PARDEP avait pour objectif depromouvoir la croissance economique en vue de reduire le chomage en accordant des moyens financierspour d6velopper les entreprises privees et faciliter l'acces au credit aux micro-entreprises.

Pour atteindre cet objectif, quatre grandes composantes ont ete envisagees 'a savoir:

- La realisation des etudes de faisabilite, des etudes sectorielles et preparatoires,

- L'assistance technique pour la gestion du projet, la formation et le renforcement desorganismes de promotion du secteur prive,

- Le programme de promotion de micro-entreprises,- La ligne de credit APEX logee dans les banques commerciales pour financer les

immobilisations et les fonds de roulement des entreprises eligibles.

De toutes ces composantes du PARDEP, seul le programme de promotion de micro-entreprises et laligne APEX ont connu un debut d'execution.

A propos de structures du projet, il y a lieu de rappeler que la composante micro-entreprises qui afonctionne de maniere autonome a et confiee a l'ONG Vita sur la base d'un contrat d'operateur tandisque pour la ligne APEX, aucune disposition expresse et serieuse n'a e prise pour assurer la gestion duprojet. Cette ligne a ete geree par tatonnement dans un premier temps par un comite de coordinationsans mandat precis et dans un second temps par une direction nommee pour assurer la gestion duprojet.

2 - Degre de r6alisation des objectifs

Comme nous I'avons souligne ci-dessus, deux composantes seulement ont ete amorcees avec un niveaude realisation qui laisse a desirer compte tenu des difficultes dont certaines seront evoquees dans lepoint suivant. Mais l'on doit retenir que les activites du projet n'ont pas couvert toute la periode d'execution du projet tel que defini dans l'accord de credit. En effet, I'accord qui a ete conclu le 12 Juillet1991 devait normalement expirer en juin 1998, soit sept ans pour permettre de mesurer l'impact reel duprojet. Malheureusement le projet n'a connu qu'une duree de vie limitee parce qu'il n'a fonctionne que

- 15-

pendant quatre ans, de 1992 A 1996.

3 - Forces et faiblesses du projet

a) Les forces

La dynamique du projet PARDEP provient des objectifs qui lui sont assignes et qui, pour leGouvernement, devaient en principe jeter les bases de la promotion du secteur prive avec comme effetinduit, la relance de 1'economie et la lutte contre la pauvrete.

A 1'epoque de la mise en place du PARDEP, le tissu economique de la Republique Centrafricaine avaitbesoin d'etre renforce pour un nouveau decollage. Le PARDEP etait donc tout indique pour ce soutientant souhaite pour appuyer non seulement les entreprises existantes mais aussi celles en creation.

En effet, le volet Micro-entreprise, seul volet ayant reellement fonctionne, a permis A un certain nombrede beneficiaires constitues majoritairement de femmes, de developper des activites generatrices derevenus.

Dans 1'ensemble, les beneficiaires sont globalement satisfaits comme le confirme le rapport d'evaluation du Bureau d'Etude BERETEC.

b) Lesfaiblesses

Le PARDEP des sa conception, portait en elle les germes de son echec. En effet, ce projet a et elaboreunilateralement par les Experts de la Banque Mondiale et mis en oeuvre sans prise en compte reelle ducontexte socio-politico-economique particulierement difficile de la Republique Centrafricaine entre1991 et 1993.

L'article 3 de l'accord de credit consacre A 1'execution du projet indique dans sa section 3.01 que 1'emprunteur execute le projet sous la coordination generale d'un comite de coordination.Cette disposition reste pourtant muette sur la structure du comite de coordination et ne definit pas plusses modalites de fonctionnement. Cette situation a donne lieu A des improvisations prejudiciables a 1'execution du projet.

Le Comite de coordination comme la Direction du projet etaient composes d'agents non prepares Agerer un tel projet. Ces deux structures ne disposaient d'ailleurs pas de mandat precis. Pour un projet d'une telle importance, on aurait souhaite que les structures de gestion et les modalites de recrutementsoient definies A l'avance. Cela aurait permis d'eviter la cooptation systematique des fonctionnairespour gerer un projet et laisser ainsi place au systeme de recrutement base sur appel A candidaturesrepondant aux criteres de profil et competence requis.

La troisieme insuffisance est liWe A la legerete de l'etude sur I'adhesion des Institutions FinancieresParticipantes (IFP) au projet et I'adaptation du projet au contexte economique centrafricain. Tout porteaujourd'hui A croire d'une part que les banques primaires n'avaient pas e suffisamment sensibiliseespour donner leur appui et accepter de prendre des risques pour soutenir les entreprises centrafricainesqui ne manqueront pas de contribuer A leur essor. D'autre part la non objection prealable deWASHINGTON sur un dossier A financer, ou encore la centralisation des procedures de decaissementau niveau du siege de la Banque ont constitue autant d'entraves A l'execution du projet. La ligne APEXn'a pas marche A cause de ces facteurs qui ne sont pas limitatifs.

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Par ailleurs, le mecanisme de suivi prevu par le projet n'a pas ete efficace. Dans l'accord de credit, ilest prevu un systeme d'evaluation du projet base sur le principe d'audit (art.4 clauses financieres) A lafin de chaque exercice. Normalement, les premieres evaluations des activites du projet devaient decelertres t6t des indicateurs d'une mauvaise gestion et des difficultes liees au contexte de l'epoque etproposer des solutions. La suspension intervenue en 1997 c'est-A-dire, apres quatre ans d'exercice, n'aretenu pour cause essentielle que les troubles socio-politiques que le pays a connu en 1996.

II a donc fallu attendre le resultat de l'audit realise en 1999 pour mettre en evidence la mauvaise gestioncomme cause de clbture du projet.

II convient de rappeler que l'audit effectue par le Cabinet Calan Ramolino & Associes fait suite A lamission de contr6le decide par le Gouvemement et dirigee par l'Inspection Generale des Financesaupres de la Direction du projet. Le resultat de cet audit devrait permettre de disposer des informationsfiables sur la gestion des comptes du PARDEP et d'envisager la poursuite ou non des activites. On notepar ailleurs que le rapport d'audit n'a pas precise le niveau des responsabilites, conformement auxobjectifs definis dans ses termes de references.

Malheureusement, sans une concertation approfondie prealable des deux parties sur les conclusions del'auditeur, la Banque annon,ait dejA l'intention de cloturer le projet. S'il est vrai que la section 6.03 del'accord de credit prevoit des cas d'interdiction pour l'emprunteur d'effectuer des retraits, la decisionde suspension etait beaucoup plus justifiee par les troubles de 1996-1997 connus par notre pays,circonstance exceptionnelle qui avait tout le merite d'une attention particuliere de la Banque Mondiale.Non seulement la mise en oeuvre tout comme l'elaboration du projet n'a pas tenu compte du contexteinstitutionnel et politique A l'epoque de la Republique Centrafricaine, on constate que la decision decl6ture a ete prise hors contexte en frappant un pays en situation de post conflit.

Enfin, le Gouvemement Centrafricain continue de s'interroger sur la competence reelle et l'efficacite del'appui de l'Assistance Technique, dont la presence n'a pas permis d'eviter les derapages constates toutle long de l'execution du projet.

Aujourd'hui, la Republique Centrafricaine doit compter dans son encours de dettes le credit PARDEPqui n'a pas servi aux objectifs poursuivis. La Banque, en decidant d'annuler le reliquat du projet, et enreclamant le remboursement des montants dont l'utilisation n'a pas et conforme ainsi que le reglementdes creances echues, rentrera totalement dans ses droits, augmentant les charges du budget centrafricainen l'absence de contrepartie reelle.

4 - Performance des Experts de la Banque Mondiale et des Responsables locaux du projet

Les Experts de la Banque Mondiale ont con,u et elabore le PARDEP, en s'appuyant sur des modelesqui ne sont pas forcement adaptables A tous les pays et certainement pas au n6tre.

Au sujet des Experts de la Banque Mondiale responsables du projet, on peut penser au vu du resultatobtenu et des conclusions de l'audit, qu'ils n'ont pas ete attentifs et ont manque de vigilance pourdonner I'alerte A temps devant certaines derives constatees dans la gestion du projet et certainement pasau notre.

Les autorites centrafricaines, quoique n'ayant pas ete associees au processus d'elaboration du

- 17 -

PARDEP l'ont malgre tout accepte, car de prime abord il semblait prendre en compte les besoins dumoment. II etait necessaire de proceder a une verification prealable de l'adaptabilite de ce modele deprojet aux realites centrafricaines.

Concemant les autorites et responsables locaux du projet, il y a lieu de repenser les structures degestion de projets finances par la Banque par la definition d'un cahier des charges et la determinationdes criteres de recrutement des agents d'execution et de gestion des projets.

5 - Perspectives pour les operations futures

Fort des lecons tirees de l'echec des programmes passes, le Gouvemement souhaite une necessaireevolution des attitudes dans le sens d'une meilleure prise en compte du contexte national. Les mesuressuivantes listees ci-dessous sans &re exhaustives devraient utilement participer A la realisation de cetobjectif.

* L'ensemble des programmes et projets devront etre menes dans un esprit de partenariatveritable, qui suppose le dialogue et la concertation et une plus grande implication des cadresnationaux, maitrisant mieux les realites socio-economiques locales, dans le processus d'elaboration et de la mise en oeuvre de ces programmes, or le PARDEP, comme beaucoup d'autres projets de la Banque Mondiale ont ete con,us par ses Experts au mepris des realites despays. La modelisation a constitue un facteur de risque important dans l'elaboration et 1'execution de ces projets. Chaque pays a ses realites socio-politico-economiques differentes quidoivent etre pris en compte pour limiter les risques endogenes.

La conception des projets futurs doit s'accompagner de la mise en place d'un dispositif decontr6le, faisant intervenir les deux parties en presence, A savoir le GouvernementCentrafricain et la Banque Mondiale. Cela permettra de prendre A temps les mesuresnecessaires.

* Le Gouvemement devra etre implique dans la verification des decaissements, qui serontfonction des resultats.

* Les gestionnaires des differents projets devront desormais rendre compte au gouvernement, parle biais respectif du Ministere de Tutelle, et du Ministere de l'Economie, du Plan et de laCooperation Intemationale.

Les modalites de recrutement de l'Assistance Technique devront etre revues dans leur ensemblepour que les resultats soient A la hauteur des couits y relatifs.

Conclusion

La prise en compte de ces idees va certainement assurer le renforcement de la viabilite et l'efficacite desprojets finances par la Banque Mondiale en Republique Centrafricaine. Cela doit s'operer dans unesprit de participation active du pays et une confiance mutuelle.

(b) Cofinanciers:

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Not applicable

(c) Other partners (NGOs/private sector):

No written comments from the private sector but oral comments are reflected in sections 3-7.

10. Additional Information

Project Documentation

CAR suffered from a succession of civil disturbances in 1996 and 1997 which resulted in severe physicaldamage and loss of life. Most of the project files were destroyed and, as a result, this ICR has beenprepared on the basis of incomplete information. The lack of several audits is also attributable to thissituation.

Background Information to this ICR

This is the implementation completion report for the Private Enterprises Rehabilitation and TechnicalAssistance Project (PARDEP) financed by IDA Credit No 2254-CA in the amount of SDR 9,400 million(US$ 11.3 million). The credit was approved by the Board of IDA in May 1991 and the DevelopmentCredit Agreement was signed on 12 July 1992. Disbursement under the Credit were suspended betweenApril and June 1990 and finally suspended on 29 December 1998. The project was formally closed on 31December 1999.

This ICR was prepared under the supervision of the Task Team Leader, Andre Ryba, by Faustin-AngeKoyasse and Oliver Campbell White, with support from Andrea Vasquez.

To prepare this report, Faustin-Ange Koyasse undertook a mission to Bangui between 23-30 April 2000.During his visit to Bangui, he met the principal policy makers involved in the management of PARDEP,notably Messrs Jacob Mbaitadjim, Minister for Economy, Planning and Intemational Cooperation,Theodore Dabanga, Minister of Finance and Budget, and Jean-Baptiste Koyassambia, called Ziayoro,Minister of Commerce, Industry et Private Sector Development. He also had useful meetings with personsresponsible for various components of the project, employers' representatives, the Chamber of Commerceand Industry, the managing directors of the banks, businessmen, and with Deputy Desire Kolingba,

This report takes account of the main conclusions from the discussions held with the above officials andbusinessmen during the mission. Certain important features relevant to the history of the project makereference to various aide-memoires, some audit reports, and project supervision missions. However,despite the availability and willingness of the authorities and experts, the mission could not obtain otherinformation (such as financial statements) necessary for a full assessment of the project as the documentshad mostly been destroyed during the mutinies.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome I Impact Indicators::i Indi ca00ton lMatix 1 i0 : Proted in last PSR 'Atual/Latest Estimate

Output Indicators:

in4: 0 i ctr t rXlndd*j0ix i Procted in last PSR Actual/LatEstimateNumber of micro-enterprise loans 6,255Number of projects to which facility was 4,142extendedTotal value of micro-enterprise loans FCFA 1,149 millionNumber of women to whom loans were 2,600extended

see Note

Note: A logframe matrix was not prepared for this project; nor were performance indicators establishedand monitored. The above data are all that could be readily gleaned from the project files

End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent) App___isal__ ___u_lfLatest Percentage__ofAppraisal ActuaUlLatest Percentage ofEstimate Estimate Appraisal

Project Cost By Component US$ million US$ million _

1. Subproject financing (Investments) 7.702. ME promotion program 3.403. Technical assistance 2.504. Training 0.905. Studies 0.70

Total Baseline Cost 15.20 0.00

Total Project Costs 15.20 0.00

Total Financing Required 15.20 0.00

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Procurement MethodExpenditure Category ICB NC8 Other N.B.F. Total Cost

1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

2. Goods 0.00 0.40 0.20 0.00 0.60

(0.00) (0.40) (0.20) (0.00) (0.60)3. Services 0.00 0.00 12.50 0.00 12.50

Apex subloans (0.00) (0.00) (9.10) (0.00) (9. 1 0)Micro-enterprise (ME)

subloansManagement services for

the ME programConsultant services,

technical assistance,and training

4. Incremental operating 0.00 0.00 1.00 0.00 1.00costs

(0.00) (0.00) (0.50) (0.00) (0.50)

5. SPPFIPPF refinancing 0.00 0.00 1.10 0.00 1.10(0.00) (0.00) (I. I 0) (0.00) (1. I 0)

6. Miscellaneous 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

Total 0.00 0.40 14.80 0.00 15.20

(0.00) (0.40) (10.90) (0.00) (11.30)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

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1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

2. Goods 0.00 0.00 0.29 0.00 0.29(0.00) (0.00) (0.00) (0.00) (0.00)

3. Services 0.00 3.83 0.00 0.00 3.83Apex subloans (0.00) (0.00) (0.00) (0.00) (0.00)

Micro-enterprise (ME)subloans

Management services forthe ME program

Consultant services,technical assistance,and training

4. Incremental operating 0.00 0.00 0.36 0.00 0.36costs

(0.00) (0.00) (0.00) (0.00) (0.00)5. SPPFIPPF refinancing 0.00 0.00 0.90 0.00 0.90

(0.00) (0.00) (0.00) (0.00) (0.00)6. Miscellaneous 0.00 0.00 0.06 0.00 0.06

(0.00) (0.00) (0.00) (0.00) (0.00)Total 0.00 3.83 1.61 0.00 5.44

_________________________ (0.00) (0.00) (0.00) (0.00) (0.00)

Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.

2I Includes civil works and goods to be procured through national shopping, consulting services, services of contractedstaff of the project management office, training, technical assistance services, and incremental operating costs related to(i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing Plan at Appraisal:

Local Foreign Total

IDA 1.4 9.9 11.3

Subborrowers 2.4 2.4

Participating financial 0.9 0.9institutions

Government 0.6 0.6

Total 5.3 9.9 15.2

Actual/Latest Estimate Project Financing:

-22 -

IDA 5.45

Subborrowers

Participating financial institutions

Government

Total

Source: Project files.

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Annex 3: Economic Costs and Benefits

N/A

- 24 -

Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performance Rating

(e.g. 2 Economists, I FMS, etc.) Implementation DevelopmentMonth/Year Count Specialty Progress Objective

Identification/PreparationIdentification mission 2 Sr. Ind. Operations Officer,(June 1989); Consultant (sociologist),

resident representativePreparation mission 3 Sr. Ind. Operations Officer,(November 1989) Consultant, resident

representativePreparation/Pre-appraisal 4 Sr. Ind. Operations Officer,mission (April-May 1990 consultants, resident

representative

Appraisal/NegotiationAppraisal (November 6 Sr. Operations Officer,19390) Legal Advisor,

Disbursement Officer,Financial Sector Specialist,Consultant

Negotiations (April 91)

SupervisionNovember 91 3 Fin. Sect. Spec. S S

(Consultant), ME Spec.(Consultant), Sr. Economist

May 92 2 Sr. Economist, Division Chief, S SApril 93 3 Financial Sector Specialist U U

(Consultant), Economist(Consultant), Sr.Economist/Industrial Specialist

November 93 2 Financial Analyst Consultant, S SSr. Economist

August 94 2 Financial Analyst Consultant, S SSr. Economist

February- March 95 2 Consultant, Operations Analyst U UJuly 95 3 Consultant, Operations Analyst, U U

Division ChiefDecember 95 2 Operations Analyst U U

I Team Leader U U

February 99 1 Team Leader U U

ICRApril 2000 1 Program Officer

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(b) Staff

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ (,000)

Identification/Preparation 98.8 172.7AppraisaVNegotiation 27.6 57.0Supervision 134.8 246.0ICR 12.0 33.9Total 273.2 510.2

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)Rating

IMacro policies O H OSUOM O N * NAOSector Policies O H OSUOM O N O NAO Physical O H OSUOM * N O NAM Financial OH OSUOM *N ONAZ Institutional Development 0 H O SU O M 0 N 0 NAN Environmental O H OSUOM O N * NA

SocialI Poverty Reduction O H OSUOM * N O NA

O Gender O H OSU*M O N O NAF Other (Please specify)

O Private sector development 0 H O SU O M 0 N 0 NAZ Public sector management 0 H O SU O M 0 N * NAO Other (Please specify)

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

61 Bank performance Rating

M Lending OHS OS OU *HUN Supervision O HS OS Ou OHUZ Overall OHS OS * U O HU

6.2 Borrower performance Rating

X Preparation OHS OS O U * HU

Z Government implementation performance O HS O S 0 U 0 HUI lmplementation agency performance O HS O S 0 U 0 HU

M Overall OHS OS O U * HU

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Annex 7. List of Supporting Documents

1. Enterprise Rehabilitation and Development (ERDP), Staff Appraisal Report, May 8, 19912. Enterprise Rehabilitation and Development Project, Memorandum and Recommendation of thePresident of the International Development Association to the Executive Directors, May 8, 1991.3. Aide-Memoires and Back-to-Office Reports of Supervisions Missions.4. Aide-memoire of ICR mission (April 2000).5. Correspondence on file.

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