Extract of Agreement at Completion Point 

Completion evaluation

Core Learning Partnership

In 2006, IFAD's Office of Evaluation conducted a Completion Evaluation of the Agricultural Development Project (ADP) in the Republic of Georgia. An Approach Paper was discussed with partners in Tbilisi in April 2006, and a Core Learning Partnership (CLP) was formed comprising representatives of the Ministry of Finance, the Ministry of Agriculture and Food, the National Bank of Georgia, the National Agency of Public Registry, the World Bank, the Project Coordination Centre (PCC) and IFAD.  The evaluation mission¹ was conducted in May/June 2006, and a wrap-up meeting was held with the Government of Georgia on June 9. This Agreement at Completion Point summarises the main findings of the evaluation and sets out key recommendations to be discussed and agreed upon by the stakeholders, as represented by the CLP, together with proposals as to how and by whom these proposals should be implemented. The process of discussion and agreement was carried out by correspondence.

Main evaluation findings

Implementation progress. The evaluation concentrated on the two components of the ADP that were wholly or partially funded by IFAD, namely the Credit Union and the Land Registration components². The project was implemented from 1997 to 2005.

Under the Credit Union (CU) component, 164 CUs were created in the first two years of the project against a target of 120 over a five year period. This overly rapid and premature expansion was caused by the politicization of the process and resulted in widespread fraudulence and mismanagement. By 2002, loan repayment performance had reached a low of 30%. Auditing was not carried out, the monitoring of loans made by the Credit Union Development Centre (CUDC) of the project was weak, and the performance standards of the credit unions were neglected. There was little emphasis on savings' mobilisation or sustainability. At mid-term, the target of CUs to be sustained was reduced to 55.

These developments took place against a challenging background, which included the Russian economic collapse of 1998, severe droughts and floods in 2000 and 2001, frequent staffing changes in the relevant ministries and allegations of corruption in high government positions. The result was a crisis of confidence within the Government and the country at large, the withdrawal of the Finance Ministry's representative from the credit committee and a two-year hiatus in implementation. Of the 164 CUs, 35 were liquidated or merged and 71 had legal action taken against them. The underlying causes of the collapse of the network were addressed by a new management team in early 2003 through the restructuring of loans and the re-commencement of lending.  The new management team was able to salvage and revitalise the remaining CUs through their robust approach and appropriate decisions, which was fundamental in restoring the confidence of the beneficiaries and the government in the future of the CUs.  At project completion, there were 58 functioning CUs, three more than the mid-term target, but one year later the number had fallen to 39. 

The Land Registration Component set up and modernised land registration offices in two districts close to the capital which have registered around 170 000 land parcels and issued 155 000 land titles, 85% and 119% of appraisal targets, respectively. Aerial photography was carried out on 12 000 square kilometres of land. The ground survey of land parcels was conducted by private survey companies supported by the project in the form of technical assistance. Savings were made by efficient surveying methods, with the average cost for surveys per parcel reduced by almost half, enabling the component to refurbish and computerize 11 regional and 37 district registries countrywide. Registration was implemented originally through the State Department Land Management, which has since been replaced by the self-financing National Agency for Public Registry (NAPR), a transition supported by the ADP.

Strengths. The major achievements of the IFAD-funded components have been to demonstrate that community-managed credit unions are a viable proposition in the country, provided that due emphasis is put on sustainability factors; and make a major contribution to the establishment of an efficient land registration scheme throughout the country. Over 12 000 CU members gained access to retail financial services for the first time, and over 100 000 landowners registered land titles.

Weaknesses. The principal shortcoming of the project was the failure to recognise the problems resulting from the premature expansion of CUs in the early years, which came close to causing the demise of the CU concept in the country. Since there was no initial survey of regional CUs, the CU model was developed through 'learning by experience', placing excessive responsibility on the CUDC, which was set up to manage the component. No exit strategy was put in place.

Project relevance and design. The overall project design addressed the key needs of the rural poor in terms of credit access and land entitlement; however, the four distinct components shared only a management structure. Accordingly, there was no cross-fertilisation in terms of impact, nor an integrated approach. The lack of a focus on poverty in targeting and of relevant impact indicators in monitoring resulted from IFAD's late involvement in a project whose main features had already been determined under the auspices of the World Bank.

Recommendations

The two most recent IFAD-funded projects in Georgia have incorporated certain lessons from the ADP. In particular, the Rural Development Programme for Mountainous and Highland Areas (RDPMHA)³ integrated the need for direct measures to assist poor farmers in remote areas, and the Rural Development Project (RDP)⁴ included a more sustainable strategy for the support of credit unions. The recommendations that follow are designed to reinforce these initiatives and to make specific suggestions within the broader strategic approaches adopted by the two new projects and future interventions.

Clarify priorities for co-financing

This project would have benefited from clearer priorities and conditions for IFAD's involvement in co-financed projects. The Fund should determine the comparative advantages that it has in the region, define the main elements of its targeting strategy and decide which components and sub-components are most appropriate for IFAD investment. Impact indicators relevant to the Fund's concern for marginalized groups should be included in the design of programmes and a regular presence of the Fund's staff in supervision missions should be stipulated.

Partners involved: IFAD-Division of Near East and North Africa (PN), Co-financing Institutions

Timeframe: Prior to engaging in future co-financing of new projects/programmes in Georgia.

Raise the issue of very poor households in project design and policy dialogue

Specific measures are required for those households (poor and very poor) which may otherwise be unable to take advantage of operations aimed at agricultural commercialisation. The Government's concern with providing employment and credit access for active farmers should be buttressed by a workable and affordable specific agenda for the poor and the very poor in rural areas.  At the project design phase, IFAD should clearly identify the target groups that can realistically be assisted, and the strategies and project components to be adopted to reach them, in line with IFAD's targeting policy and government priorities. In the case of households unable to take advantage of interventions aimed at agricultural commercialisation, IFAD should draw the Government's attention to the risks of marginalising poor households and communities in rural areas so that specific plans and measures to support them could be jointly developed within its overall growth-oriented strategies and policies.

A system to strengthen the economic tissue of rural areas and increase the number of potential borrowers under credit schemes is necessary. This approach may include: (i) a process focused on improving the marketing of agricultural products, including the post-production phase; and (ii) assisting in the development of market-oriented smallholder agriculture supported by access to rural financial services and agricultural support services (mechanisation, etc.).   These measures require consideration during the project design phase and at the policy dialogue level.

In order to protect rural households from land speculation, the priority given to village residents in the original distribution of land should be continued. This measure was aimed at guaranteeing the livelihoods of those depending on the land for their survival and should be maintained. 

Partners involved: IFAD-PN, Co-financing Institutions, Ministry of Agriculture and Food, Ministry of Finance, Ministry of Justice/National Agency of Public Registry

Timeframe: Immediately, by all partners 

Emphasise sustainability for CUs

Future microfinance projects in Georgia and the region should learn from the principal error made under ADP, which was to allow the numerical target for CUs to become the predominant indicator. There should be no haste in developing the CU network and short-term targets should be avoided.  Below are best international practices to be adopted for ensuring sustainability:

Greater focus on building management capacities rather than on the injection of fresh loans and grants; initial funding to the apex organisation and to credit unions should be restricted, with incentives for its eventual increase;

Support for savings mobilization activities and the linkage of overall support to the volume and quality of savings; and

Setting of high performance standards for supported credit unions including quantitative indicators such as financial ratios and efficiency measures, and qualitative indicators such as management commitment and the degree of community participation.

Partners involved: PCC, IFAD-PN, UNOPS

Timeframe: During the initial implementation phases of the RDP.

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1/ The mission consisted of: Mr Roger Norman (Team Leader), Ms Margarita Lalayan (Microfinance Specialist) and Mr Giorgi Badrishvili (Agriculturalist).

2/ The project also included two World Bank-funded components, the Credit to Enterprises and the Agricultural Services studies.

3/ The RDPMHA was approved in September 2000.

4/ The RDP, co-funded with the World Bank-International Development Association and other partners, was approved in April 2005 and is now in the implementation phase.