00702710 en en uganda poverty alleviation

50 Pages·2008·0.31 MB·English

AFRICAN DEVELOPMENT BANK GROUP

UGANDA

POVERTY ALLEVIATION PROJECT

Project Performance Evaluation Report (PPER)

OPERATIONS EVALUATION DEPARTMENT
(OPEV)

14 June 2001
TABLE OF CONTENTS

Page No.

Abbreviations i
Ratings ii
Preface iii
Basic Project Data iv
Evaluation Summary vi

1. THE PROJECT 1

1.1 Country Context 1
1.2 Project Formulation 2
1.3 Objectives and scope at appraisal (Logical Framework) 3
1.4 Financing Arrangements 4

2. THE EVALUATION 4

2.1 Evaluation Methodology and Approach 4

3. IMPLEMENTATION PERFORMANCE 5

3.1 Loan Effectiveness, Start-up and Implementation
(Compliance with Loan Conditions and Covenants, Procurement,
Changes in Project Scope) 5
3.2 Adherence to Project Costs, Disbursements and Financial Arrangements 6
3.3 Project Management, Reporting, Monitoring and Evaluation Achievements 6

4. PERFORMANCE EVALUATION AND RATINGS 8

4.1 Relevance of Goals and Objectives and Quality-at-Entry Assessment 8
4.2 Achievements of Objectives and outputs (“Efficacy”) 10
4.3 Efficiency 15
4.4 Institutional Development Impact 15
4.5 Sustainability of PAP and the Micro-Projects 16
4.6 Aggregate Performance Indicators 18
4.7 Borrower Performance 18
4.8 Bank Group Performance 19
4.9 Major Factors Affecting Implementation Performance and Outcome 20

5. CONCLUSIONS, LESSONS AND RECOMMENDATIONS 21

5.1 Conclusions 21
5.2 Lessons Learnt 22
5.3 Recommendations 23
5.4 Plan of Action 25
LIST OF ANNEXES

No. of Pages

1. Performance Evaluation Ratings 4

2. Retrospective Logical Framework Matrix 4

3. Factors Affecting Implementation Performance and Outcome 2

4. Recommendations and Follow-up Action Matrix 2

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This Project Performance Evaluation Report has been prepared by Mr N. SANGBE, Agroeconomist
and Mr. A. Latigo, Consultant, following an Evaluation mission to Uganda in July, 2000.
Contributions were received from OCOD, OESU and OCDE. Further information on this Report
may be obtained from N. SANGBE on extension 4554 or Mr. G.M.B KARIISA, Director, OPEV,
extension 4052.
ABBREVIATIONS

ADB : African Development Bank
ADF : African Development Fund
AMFIU : Association of Micro-enterprise Financial Institutions of Uganda
ARMI : Association of Rural Micro-finance Institutions
BOU : Bank of Uganda
CAP : Community action Program
CBO : Community Based Organisation
CCIs : Cross Cutting Issues
DPOs : District Project Officers
CMF : Centre for Micro-finance
EIA : Environmental Impact Assessment
EIRR : economic Internal Rate of Return
EU : European Union
FIRR : Financial Internal rate of Return
GDP : Gross Domestic Product
GOU : Government of Uganda
Ies : Intermediary Entities
IGSU : Income Generating Support Unit
MDIs : Micro-finance Deposit-taking Institutions
MFIs : Micro-finance Institutions
MPP : Micro-projects Program
MSC : Micro-finance Support Centre
MIS : Management Information System
MFPED : Ministry of Finance, Planning and Economic Development
NGO : Non Governmental Organisation
NPSC : National Project Steering Committee
NPEAP : National Poverty Eradication Action Plan
NRM : National Resistance Movement
OPM : Office of the Prime Minister
PAP : Poverty Alleviation Project
PAR : Project appraisal Report
PASPSCAD : Program for Alleviating Poverty and social Adjustment
PCR : Project Completion Report
PDAOs : Project District Area Offices
PPER : Project Performance Evaluation Report
PPF : Project Preparatory Facility
PRESTO : Private Support Training and Organisational Development Project
PSDP : Private Sector Development Program
RMSP : Rural Micro-finance Support Project
RPPA : Rapid Participatory Poverty Assessment
UA : Unit of Account
UCB : Uganda Commercial Bank
USAID : United States Agency for International Development
ii

WEIGHTS AND MEASUREMENTS
Metric System

RATINGS

Evaluation Criteria PCR PPER

Relevance 3 Satisfactory 3 Satisfactory
“Efficacy” 3 Satisfactory 3 Satisfactory
Efficiency 3 Satisfactory 3 Satisfactory
Institutional Development Impact 3 Satisfactory 3 Satisfactory
Sustainability 3 Satisfactory 3 Satisfactory
Aggregate Performance Indicator Not Available 3 Satisfactory
Borrower Performance 3 Satisfactory 3 Satisfactory
Bank Performance 3 Satisfactory 3 Satisfactory
iii

PREFACE

1. Poverty reduction has been for several years the overarching goal of the Bank Group and
its Regional Member Countries (RMCs), which are now actively involved in promoting
micro-finance as an important tool for poverty reduction. The Uganda Poverty
Alleviation Project (PAP) was the first of its kind to be financed by the African
Development Fund (ADF) in Uganda and also the first of its nature in Bank Group
operations. The unique feature of the project is that it was the first ADF-financed
project, which heavily relied on NGOs in delivering micro-finance services to the poor in
project target areas, and it used a participatory approach, which relied on involvement of
beneficiaries in all stages of micro-project development. This Project Performance
Evaluation Report (PPER) also represents the first post-evaluation of poverty alleviation
project of this nature. The Project Completion Report (PCR) was prepared in October
1999 by the Bank's experts. However, the PCR did not give an independent assessment
of the efficiency of the Bank's activities and development effectiveness of the project,
and its impact on the beneficiaries, with a view to assessing their sustainability. Hence,
this PPER represents an independent review that supplements the findings of the PCR
and through such a review draws lessons from the experience, for the purpose of
improving future Bank operations in micro-financing.

2. The project goal was to assist in poverty reduction, while the project objective was to
improve access of the poor, especially women to productive assets (land and credit). This
goal and objective were to be achieved through credit schemes to finance micro-projects;
training and extension services to local communities; and institutional support (provision
of long-term technical advisor, short-term consultants and training). To finance these
activities, the Government of Uganda (GOU) received a total UA 9.21 million from the
Bank Group. The project achieved both its goal and objective. It expanded micro-finance
services to the poor people in Uganda, and of these, most are women, greatly reducing
disparity in gender in terms of access to credit and non-financial services. It also
increased savings by households, increased income and consumption, better education for
children, and social exclusion, and greater security. Accompanying these achievements
were the establishment of an autonomous operations oriented micro-finance institution in
Uganda, and the development of a Micro-finance Policy and Regulatory Framework,
which is being drafted into a law to regulate administration and delivery of micro-finance
services by MFIs in Uganda.

3. While documenting the achievements the project has made, the report also tries to point
to the areas where extra efforts are now needed. Both the Bank Group and the
Government will need to pay special attention to improving quality-at-entry, institutional
analysis, financial management, strengthening the NGOs (intermediary entities) and
project supervision of future projects. In a sense, the Bank Group as a financial
development institution is entering yet another reform in its economic development
strategy through empowering the poor, especially, women in rural areas by improving
their access to micro-finance services.
iv
BASIC PROJECT DATA SHEET

Preliminary Data

Country : Uganda
Project : Poverty Alleviation Project (PAP)
Loan Number : F/UGA/PVA/93/94
Borrower : Government of Uganda
Beneficiary and : Office of the Prime Minister
Executing Agency

A. Basic Loan Data

Request for Loan (01 March 1993)
Amount (UA million) 9.21
Interest rate 0.00
Statutory Commission
Commitment Charge 0.75%
(on un-disbursed portion of the Loan)
Repayment Period 40 Years
Grace Period 10 Years
Loan Negotiations date July 22-24, 1993
Loan Approval Date August 31, 1993
Loan Signature Date October 8, 1993
Loan Effectiveness Date June 20, 1994

B. Project Data
Appraisal Estimate Actual

Total Cost 10.22 10.22
UA million equivalents 6.85 6.03
LC million equivalents 3.37 4.19

Financial Plan (UA million equivalents)

Appraisal Estimate ACTUAL
Source F.E L.C TOTAL % F.E L.C TOTAL %

ADF 6.85 3.37 9.21 90 6.03 3.17 9.21 90
GOU 0 1.01 1.01 10 0 1.02 1.01 10
Total 6.85 3.37 10.22 100 6.03 4.19 10.22 100

Projected Actual

Project Preparation Date March 1993 1 March 1993
Project Appraisal Date April 19-30 1993 April 1993
Deadline for first Disbursement N/A 2 August 1994
Effective date of First Disbursement November 1993 2 August 1994
Deadline for Last Disbursement N/A 31 December 1998
v

C. Implementation Performance Indicators

Cost Overrun (%) none
Time Over runs 13 months (27%)
Slippage on Effectiveness 27%
Slippage on Completion date 25%
Slippage on last Disbursement 19%
Number of Extensions of last Disbursement Nil

Project Implementation Status: Completed
List of verifiable indicators, and Levels of achievement:

Target districts 22 26
Total beneficiaries 26,000 25,877
Female beneficiaries (%) 60 62
Credit allocation (%) 77 72

D. Missions

No. Types of Missions No. of (cid:31)Date No of Persons Person/Day
Missions
1 Identification N/A N/A N/A N/A
2 Preparation N/A March 1993 N/A N/A
3 Appraisal 1 19-30 April 1993 4
4 Post-Approval
5 Supervision 4 14 – 24 Nov. 1994 3 10
05 – 21 Nov. 1995 2 16
11 – 13 Mar. 1996 5 3
23 Feb – 08 Mar. 4 14
1998
6 Mid-term Review 1 June 1997 4 14
7 Completion 1 May 1999 2 14
8 Post-evaluation 1 16 July – 12 Aug. 2 20
2000

E. Disbursements (UA Million)

Annual Disbursements
(UA '000 Equivalent)
Fiscal Year Projected Revised Actual

1994/95 2.68 2.59 0.89
1995/96 2.58 2.49 1.07
1996/97 2.48 2.39 2.39
1997/98 2.28 2.20 4.84
Total 10.02 9.68 9.20
EVALUATION SUMMARY

1 This Project Performance Evaluation Report (PPER) reviews the Uganda Poverty
Alleviation Project (PAP). The Project Completion Report (PCR) was prepared in 1999
by the Bank's experts. However, the PCR did not give an independent assessment of the
efficiency of the Bank's activities and development effectiveness of the project, and its
impact on the beneficiaries, with a view to assessing their sustainability. The PCR also
did not adequately assess some aspects relating to the quality of the project including
quantitative analysis of socio-economic indicators. .Hence, this PPER represents an
independent review that supplements the findings of the PCR and through such a review
draws lessons from the experience, for the purpose of improving future Bank operations
in micro-finance.

2. At project appraisal in 1993, 96 per cent of Uganda’s population lived in rural areas, and
52.2% of the total population lived below poverty line and less than 1% of the poor
population had access to institutional financial services. Therefore, the goal of the project
was to assist in poverty reduction, while the objective was to develop human resources and
institutional capital to enable the poor, especially, women in rural areas access effectively
and productively financial services of the formal sector. To ensure viability, the project
adopted market interest rate of 22% relevant to micro-credit and savings, and created an
environment sufficiently flexible to attract a wide range of the Intermediary Entities (Ies)
to deliver micro-finance services in rural areas. The project objective was to be achieved
by three major activities: (i) credit schemes to finance income generating activities; (ii)
training and extension services to local communities; and (iii) institutional support
(provision of long-term technical advisor, short-term consultants and training). To finance
these activities, the Government of Uganda (GOU) received a total UA 9.21 million from
the Bank Group. The loan was approved in August 1993 and became effective in June
1994. The Borrower for this loan was the Ministry of Finance, Planning and Economic
Development (MFPED).

3. Overall, the project had both strengths and weaknesses in conception and implementation.
The loan granted by the Bank Group was used effectively for implementing PAP, which
was conceived and designed in accordance with its participatory bottom-up approach
within Uganda's National Poverty Eradication Action Plan (NPEAP), and the Bank's
Assistance Strategy of sustainable equitable growth and poverty reduction.

4. The project achieved its policy goal of assisting in poverty reduction, but Uganda remains
a very poor country, with about 44% of the total population still living below poverty
line. This is because the national outreach to the poor is still limited despite the increased
micro-finance services. Currently, only 1.5% of Uganda’s poor population has access to
formal financial services. Poverty reduction requires continuous access to a broad range
of financial and non-financial services not a one-time access to loans. Nevertheless,
PAP’s contribution at the individual household level was significant.

5. The project also achieved its objective of developing human resources and institutional
capital, expanding access to credit by poor people, especially women, training and social
intermediation to the target group, and providing institutional support. The project
expanded micro-finance services including financial and social intermediation to over
25,000 poor people in Uganda, thus achieving its target set at appraisal. Of these, 62% or
15,500 are women, greatly reducing disparity in gender in terms of access to credit and
non-financial services, and empowering women.
2

6. The projections for most physical objectives (outputs) were also satisfactorily achieved.
At appraisal, the project anticipated to finance more than 26,000 micro-projects in crop
production, animal and fisheries, trade, and small-scale manufacturing. This target was
achieved and a total of 26,636 micro-projects were financed as follows: crop production
(35.4%); animal and fisheries (26.1%); trade (27.4%); small-scale manufacturing (6.9%;
and others (4.1%). The highest proportion of the credit went to agriculture, shattering the
myth that agriculture is not financially attractive enterprise to MFIs. And information
from PAP reports and the clients met during the PPER and other Bank missions show
overall increase in crop production, milk output, and poultry production. Other major
achievements include increased savings by households, increased income and higher
consumption, better education for children, social cohesion.

7. Probably one of the most significant results of the project was the establishment of an
autonomous operations oriented micro-finance institution in Uganda, as one of the first of
its kind funded by the Bank Group in Africa. The project also generated the development
of a Micro-finance Policy and Regulatory Framework, which is being drafted into a law
to regulate administration and delivery of micro-finance services by MFIs in Uganda. The
development of micro-finance institution in Uganda has set in motion a process of change
from activity that was mostly subsidy dependent to one that can be a viable business.
Probably, more than contributing to reducing national poverty, which is a long-term
commitment, the expanded outreach and the development of a micro-finance institution
are key achievements of PAP, making it a successful project. Today PAP is respected by
its counterparts and donors for its effectiveness in establishing a micro-finance delivery
system, which operates at market interest rates with high repayment rates comparable to
internationally acceptable standards.

8. In terms of sustainability analysis based on technical soundness, borrower commitment,
socio-political support, economic viability and organisational effectiveness, the project
results realised are likely to be sustained. However, the financial viability and
sustainability of micro-finance institutions is a long-term commitment, which requires 5-
10 years of investment. Nevertheless, PAP evolved around sound viability principles. Its
generally high loan recovery rate of over 92% and commercial lending interest rates of
22% are indicators of cost-effective use of project resources and viability. It is envisaged
that Phase II of Poverty alleviation programme (PAP) including Rural Micro-finance
support (RMSP), will not have any significant recurrent cost implications on the
Government budget. This is because the major part of project resources will be on lent to
viable and self-sustainable micro-projects using improved internationally acceptable
micro-finance best practices. These micro-projects will involve autonomous and viable
MFIs and entrepreneurs who will bear the entire operating cost of running them.
Strengthening institutional capacity of MFIs will be a major activity, resulting in Micro-
finance Support Centre (MSC) withdrawing its presence from the districts. Furthermore,
RMSP will operate as an autonomous entity that is run on best practices and will be
operationally sustainable after the first three years of incurring deficit due to heavy
expenditures on institutional development, technical assistance and operating cost. This
deficit will be financed from the assets in the balance sheet (budget allocated funds plus
funds rolled over from PAP). Thus, RMSP will reach out more clients and this will
generate more interest income and with fee structure in place, additional income is
expected to be generated to cover operating costs, therefore, accelerating the project's
financial self-sufficiency and sustainability in the next 5 years and beyond.