Extract of Agreement at Completion Point

Introduction

In July 2010, the Independent Office of Evaluation of IFAD (IOE) undertook an interim evaluation of the IFAD-funded Rural Enterprises Project, Phase II (REP-II) in the Republic of Ghana. This interim evaluation was undertaken in preparation for a possible follow-up phase of the project, in line with IFAD's standard procedures at the time of the evaluation. The main objectives of the evaluation were to: (i) assess the performance and impact of the project; (ii) generate a series of findings and recommendations that will guide the Government of Ghana and IFAD in the design of a possible third phase of the project as well as in future rural development programmes in the country; and (iii) to provide inputs for the Ghana country programme evaluation to be undertaken by IOE in 2010/2011.

To assist in the evaluation process and to maximise the lessons from the evaluation, a Core Learning Partnership (CLP), consisting of IFAD and Government stakeholders, was established. Feedback gained from the CLP during the preparatory mission in May 2010 was incorporated into the evaluation approach paper. The main evaluation mission took place in July 2010 and its findings were presented to the Ministry of Trade and Industry (MOTI) in Accra on 30 July 2010. A draft evaluation report was prepared and shared with the Government and other members of the Core Learning Partnership (CLP) for comments prior to the final learning workshop that was held in Accra on 10 March, 2011 where the CLP and other stakeholders discussed the evaluation findings and recommendations. This workshop informed and set out the understanding between IFAD and the Government of Ghana towards the preparation of the present agreement.

Agreement at completion point. As per practice at the time of this evaluation, upon completion of each independent project evaluation, IFAD Management and the concerned government develop an agreement at completion point (ACP). The ACP illustrates the agreement of IFAD management and the government to the main evaluation findings and their commitment to adopt and implement the evaluation recommendations within specified time frames. This agreement is signed by IFAD Management, represented by the Director of the Western and Central Africa Division, and by the Government of Ghana, represented by the Minister for Trade and Industry. The agreed-upon recommendations will be tracked through the IFAD's President's Report on the Implementation Status of Evaluation Recommendations and Management Actions. The role of IOE is to facilitate the ACP process leading to its conclusion.

Main Evaluation Findings

The Republic of Ghana has achieved positive economic growth in the last ten years, yet the extent of rural poverty in the country is still severe, with high levels of malnutrition and lack of basic services in all areas, particularly in the northern districts of the country. The second Rural Enterprises Project (REP-II) was designed to support micro and small enterprise (MSE) growth in 53 rural districts. REP-II assisted the establishment and operation of Business Advisory Centres (BAC) in each participating local government District Assembly; installation of Rural Technology Facilities (RTFs) in selected districts; facilitation of rural financial services; and support to MSE local trade associations.

The evaluation report concluded that the REP-II was generally a successful undertaking. The project design was highly relevant to the needs of the targeted rural population and corresponded to an area of high priority for the government. The project experienced a slow start with several financial and institutional challenges; however, by the time of the interim evaluation, most project targets were on track or had been exceeded in relation to the implementation time elapsed. ¹  The comprehensive project records and the evaluation process allowed the evaluation mission to independently validate performance and assess impact through tracking of individual beneficiaries and project-supported activities.

The project has exceeded the targets set for beneficiaries and apprentices training (achievements were 115 per cent and 131 per cent of original targets, respectively). The number of SMEs established has reached 71 per cent of target and 94 per cent of the targeted number of beneficiaries have been linked to larger commercial operations. Yet, there were some achievements which were below targets. For example, only 27 per cent of the targeted numbers of MSEs have accessed the available loan funds. It is likely that the bottlenecks in accessing credit have also contributed to lower than expected number of wage jobs created (57 per cent) and adoption rates from training (48 per cent of those trained). However, given the proactive approaches of the Business Advisory Centres, the Rural Technology Facilities and all other implementation partners, it is likely that the full targets will be attained by the end of the project period.

The project has impacted on the entrepreneurial poor. Overall, 69 per cent of project beneficiaries were recorded as poor; the remaining clients were vulnerable middle-income levels but were providing employment and enterprise opportunities for poor people. The business development activities have effectively reached women at 62 per cent of clients supported. There is evidence of improved household income and assets resulting from the establishment and growth of SMEs. The evaluation noted a considerable upward shift in income levels; this has led to the purchasing of assets, including improved buildings and means of transportation. Skills development and participation in associations have contributed to increased business capacity. There was limited impact in relation to food security and on the environment as backward linkages to primary production have not yet been developed.

REP-II has achieved some notable institutional and policy level impact, for instance, contributing to the introduction of two policy initiatives in the local government system through the Ministry of Trade and Industry (MOTI) and Ministry of Local Government and Rural Development (MLGRD). The first policy initiative regarded the establishment of a Sub-Committee on MSE Promotion within the national District Assembly system; the second was the establishment of a new Department of Trade and Industry that will facilitate the development and promotion of small scale industries in the districts. The BACs have acted as a practical model that has been captured in policy change that will strengthen the MSE sector across the country. Both the BAC and the RTF models are innovative and are likely to be sustained, although the RTF operations currently mix training and commercial activities in a manner that could be improved. A major success factor of the project has been the strong working relationships between the different implementing partners at national and district levels.

Agreement at Completion Point

The recommendations from the interim evaluation were discussed during the final learning workshop. Feedback provided by participants showed that the evaluation findings and recommendations were balanced and representative of the project accomplishments. Evaluation recommendations are summarized below and include specific responsibilities and timeframes for implementation.

Recommendation 1: A follow-up phase of REP-II. A follow-up project will be designed as a programme, combining the scaling up of the successful approach developed to date, with innovation to further refine the different elements in view of (i) enhancing complementarity with Agricultural Value Chain development, (ii) increase efficiency to make mainstreaming of BACs and RTFs nation-wide affordable to Government and sustainable, and (iii) enhance clients' access to complementary elements of MSE support. The BACs should be consolidated within the current districts, maintaining the core programs and continuing to assess and support requirements for business growth. The RTFs play an important role in technology transfer to the informal sector.

Actions Agreed: Nationwide expansion of the BAC and RTF models should be pursued within the design of REP-III. A more efficient and sustainable model will be proposed for RTFs, based on a detailed review of their governance and management structure, and cost implications.

Responsibility:  Design responsibility is shared between the Borrower (Ministry of Finance and Economic Planning [MOFEP]/MOTI) and IFAD (West and Central Africa Division [WCA]).

Timeline: The recommendations are to be addressed in the design process. Negotiations are planned to take place in July 2011.

Recommendation 2. Poverty analysis. Target groups include individual entrepreneurs, larger entrepreneurs with the ability to generate employment and stimulate opportunities for other small businesses, the poor who need intensive assistance to start businesses, those that are very poor and have limited access to markets. Project-supported interventions should be diversified in such a way that different activities are relevant to different types of enterprise, - e.g. those that are ready and able to access credit and those that are not. BAC and RTF support needs to be targeted towards different groups in different ways so that positive results in terms of contribution to poverty reduction are achieved at all levels. Some consideration should be given to the contribution required by poorer districts and clients so that they are not marginalized from participating due to the low level of resources available to them.

Actions Agreed: More specific support packages to be developed, to respond to the diverse capacities and assets, particularly regarding training needs and financial instruments to access finance across the varying target groups to be developed during the design of the forthcoming Rural Enterprises Programme.

Responsibility: Design responsibility is shared between the Borrower (MOFEP/MOTI) and IFAD (WCA Division). The Implementing Agency will ensure that implementation partners such as the National Board for Small-Scale Industries (NBSSI) and GRATIS as well as District Assemblies through MSE Sub-committees ensure that the BACs continue to reach the poor.

Timeline. The recommendations are to be addressed in the design process. Negotiations are planned to take place in July 2011.

Recommendation 3: Value chain development. Value chain links should be considered as part of the initial local economic planning process. The idea of targeting the growth-oriented MSEs to enable them become growth poles for income and job creation would bring about economies of scale in the sourcing of raw materials and markets for the MSEs. This would also help generating employment. A stronger link between agriculture and MSE development can occur through support to local economic development planning. There is a need to create a stronger link between the BACs and the national standard agencies so that growing enterprises can comply with national and international trade standards.

Actions Agreed: NBSSI should be supported to develop the capacity for playing a more important role in providing effective services to the BACs and in facilitating the linkages between BACs and the Ghana Standards Board. A greater collaboration between the Ministry of Trade and Industry (MOTI) and the Ministry of Food and Agriculture (MOFA) will be promoted through institutional reform and support from REP at the District level.

Responsibility: Design responsibility is shared between the Borrower (MOFEP/MOTI) and IFAD (WCA Division). MOTI/MLGRD/MOFA, supported by the implementation team of REP, will create a conducive institutional environment for district-level collaboration between MOTI and MOFA to ensure that the clients can access the support they require to be successful.

Timeline:  Institutional reform at district level has already started and is ongoing. Liaison with the Ghana Standards Board would commence in 2011/2012. The restructuring of NBSSI to allow the institution to become more effective will commence in 2012 and results will be reviewed 3 years after effectiveness of REP-III.

Recommendation 4. Rural finance. The IFAD country programme in Ghana invests substantially in rural finance sector development, particularly rural bank strengthening. There is still a need to effectively address bottlenecks in the rural finance system to benefit the entrepreneurial poor. The Rural Enterprises Programme should intensify its support on the demand side, through information and referral services to clients to direct them to appropriate rural financial institutions. BACs should support the clients to intensify savings, information and referral services. There is a need to link strategically with other IFAD interventions in rural finance particularly to improve credit supply.

Actions Agreed: The Project Coordination and Monitoring Unit will continue to coach BACs on how to link clients most effectively to the rural banks and other RFIs. The REP-III design will include recommendations to address bottlenecks in accessing finance and ensuring clear roles for implementation.

Responsibility:  Design responsibility is shared between the Borrower (MOFEP/MOTI) and IFAD (WCA Division).

Timeline: The recommendations are to be addressed in the design process. Negotiations are planned to take place in July 2011.

Recommendation 5. Sector development. Sector development initiatives need to occur at different levels The District Assemblies are already actively involved in BAC and RTF management. Greater involvement of the district planning and coordinating unit (DPCU) should be built into the REP-III design. Inclusion of the District Agriculture Development Unit (DADU) in the district MSE sub-committee would assist with linking agricultural and MSE development. National trade organizations and apexes, as well as local trade associations, need to be strengthened in the context of REP-III. The local economic development process could be supported to ensure MSEs are included in the district level development agenda and plans. There is potential to strengthen both the MSE sector and operations by integrating project monitoring and strategic regional MSE development at the regional level. At national level, the expansion of REP-III as a country-wide model holds promise. Another opportunity to be pursued is the development of a Ghana MSE policy based on learning and knowledge from the implementation of previous REP interventions.  

Actions Agreed: The design should review the institutional mechanisms developed under REP II and build on lessons to provide a framework allowing the successive mainstreaming of REP into existing institutions and evolving structures. The Programme should incorporate specific activities aiming at strengthening institutions and building an enabling environment for MSE sector development at national, regional and district level.

Responsibility:  Design responsibility is shared between the Borrower (MOFEP/MOTI) and IFAD (WCA Division).

Timeline: The recommendations are to be addressed in the design process. Negotiations are planned to take place in July 2011. However, it is understood that effective institutional development and capacity strengthening are long term activities. The programme needs to support these processes effectively during its implementation period.

Signed by:

The Hon. Hanna S. Tetteh
Minister for Trade and Industry
of the Republic of Ghana
Date: 22/07/11

Mr Mohammed Beavogui
Director, West and Central Africa Division
Programme Management Department
IFAD
Date: 29/06/11

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