Sustainable Rural Development for the Poor (SRDP) Project in Ha Tinh and Quang Binh

Transcription

1 Sustainable Rural Development for the Poor (SRDP) Project in Ha Tinh and Quang Binh Mid Term Review Supervision report Main report and appendices Mission Dates: October 2016 Document Date: 21 October 2016 Project No Report No: 4279-VN Programme Management Department

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3 Supervision report - Mission dates : 02 to 21 October, Table of Contents Abbreviations and acronyms ii A. Introduction 1 B. Overall assessment of project implementation 2 C. Outputs and outcomes 3 D. Project implementation progress 14 E. Fiduciary aspects 18 F. Sustainability 22 G. Other 23 H. Conclusion 24 Appendices Appendix 1: Summary of project status and ratings 27 Appendix 2: Updated logical framework: Progress against objectives, outcomes and outputs 31 Appendix 3: Summary of key actions to be taken within agreed timeframes 45 Appendix 4: Physical progress measured against AWP&B, including RIMS indicators 69 Appendix 5: Financial: Actual financial performance by financier; by component and disbursements by category 99 Appendix 6: Compliance with legal covenants: Status of implementation 103 Appendix 7: Knowledge management: Learning and Innovation 105 Appendix 8: List of Documents to File on (APR xdesk), including detailed working papers. 109 i

4 Supervision report - Mission dates: 02 to 21 October, 2016 Abbreviations and acronyms ABAC AWPB BMO CA CBDRM CIG CPC CSA DARD DA DoNRE DPC DPI E2F F2F GDP DPPR GoV IFAD MARD M&E MIS MTR MFI MoSEDP NGO NTP-NRD PCF PCU PIM PPC PPP PSC WDSF RFS RIMS SBV SCG SEDP SOE SRDP ToR ToT VBARD VC VCAP VCFU FU VFCRI VMB VND WDSF WU Agri-business Advocacy Committee annual work plan and budget Business Membership Organisation Cooperative Alliance community based disaster risk mitigation community interest groups Commune People s Committee Climate smart agriculture Department of Agriculture and Rural Development Designated Account Department of Natural Resource and Environment District People s Committee Department of Planning and Investment Enterprise-to-farmer Farmer-to-farmer Gross Domestic Product Decentralized Project for Poverty Reduction Government of Viet Nam International Fund for Agriculture Development Ministry of Agriculture and Rural Development Monitoring and Evaluation Management Information System Mid-term Review Micro Finance Institution Market-Orientated Socio-Economic Development Planning Non-Government Organization National Target Programme on the New Rural Development People s Credit Fund Project Coordination Unit Project Implementation Manual Provincial People s Committee Public Private Partnership Project Steering Committee Pro-Women Development Fund Rural Finance Specialist IFAD Results and Impact Management System State Bank of Viet Nam Savings and Credit Groups Socio-Economic Development Plan Statements of Expenditure Project: Sustainable Rural Development for the Poor Terms of Reference Training of trainers Viet Nam Bank for Agriculture and Rural Development Value Chain Value Chain Action Plan Value Chain Facilitation Unit Farmers Union Viet Nam Field Crops Research Centre Village Management Board Vietnamese Dong Women s Development Support Fund Women s Union ii

5 Supervision report - Mission dates: 02 to 21 October, A. Introduction 1 1. The Sustainable Rural Development for the Poor Project in Ha Tinh and Quang Binh (SRDP) came into force on 27 November 2013 and is due to be completed on 31 December The Project s overall Goal is: Sustainably improved income and reduced vulnerability of rural poor households in targeted poor communes of Ha Tinh and Quang Binh provinces. The Project Development Objective is: Investment in climate smart, socially equitable and profitable rural development models that promote pro-poor market linkages, value chains and enhanced rural business competitiveness. Both the Goal and the Development Objective remain highly relevant. The total programme cost for the two provinces is USD46.2 million, of which the IFAD loan is USD22.5 million; IFAD Grant USD0.5 million; Spanish Trust Fund co-financier loan USD10 million, Government of Vietnam (GoV) contribution USD6.1million; and beneficiary contribution USD7 million. In Ha Tinh the project area includes 50 communes in 10 districts. Project activities in Quang Binh cover 40 communes in six districts. Although the project became effective in November 2013, real implementation only started in the spring of The IFAD Mid-term Review (MTR) Supervision Mission of SRDP was undertaken in partnership with the Ha Tinh and Quang Binh Provincial Project Coordination Units (PCUs) between 02 to 21 October 2016, the duration of which was spent in the project area. Between 02 to 11 October, the mission worked in Quang Binh, and between October in Ha Tinh. The mission objectives were to: (i) review project implementation progress, impact and disbursement; (ii) as required, revisit design features and the logframe targets; (iii) agree with the PCU and Provincial authorities on priorities and next steps for implementing the SRDP approach, while ensuring the achievement of the objectives of poverty reduction; (iv) as required advice on the strengthening of interagency coordination, ownership and decentralisation; (v) advise on an exit strategy and possibly up-scaling of project activities; and (vi) address potential lags in disbursement and implementation progress. In addition, the MTR should clarify to what extent the project strategy (instruments, institutional arrangements, activities, implementation arrangements) is still valid and relevant and propose alternative approaches where relevant. 3. In both provinces the Mission met with PCU staff and partner agencies including the Department of Agriculture and Rural Development (DARD), Department of Planning and Investment (DPI), Pro-women s Development Fund (PWDF) and Farmers Union (FU). In Ha Tinh, the Mission also met with the Department of Industry and Trade (DoIT). In Quang Binh, the Mission also met with the Department of Natural Resources and Environment (DoNRE). In Quang Binh, the Mission visited 12 communes across the 5 Project districts, while in Ha Tinh, the mission visited 4 districts and 8 communes. During these visits, the mission met with Commune Peoples Committees (CPCs), District Peoples Committees (DPC), District Support Teams, and selected groups of farmers. In both Provinces, the Mission also met a number of private enterprises involved in the project implementation or interested to initiate cooperation. A preliminary debriefing was held with the project Steering Committee (PSC) of Quang Binh on 11 October A final wrap up meeting with the PSCs of both Quang Binh and Ha Tinh was held in Ha Tinh on 21 October The Mission would like to extend its sincere thanks to the Ha Tinh and Quang Binh Provincial People s Committees (PPC), their PCUs, representatives of line agencies, local governments at the district and commune levels, local farmers and private enterprises for their kind support, hospitality and cooperation. 1 Mission composition: The mission comprised: Mr. Garry Smith, FAO Consultant, Team Leader; Mr. Nguyen Thanh Tung, IFAD CPO, Microfinance, Institutions and Project Management specialist; Mr. Nguyen Ngoc Quang, SEDP Natural Resources/Sociologist, Ethnic Minorities/M&E Specialist; Mr. Phan Duy Toan, SEDP, Infrastructure and Procurement Specialist; Mr. Alvaro Fernandez, IFAD Financial Specialist, joined the mission between 02 to 13 October; Ms. Nguyen Thu Hoai, IFAD Country Office Financial Specialist; Ms. Doan Phuong Lien Interpreter/Translator for Quang Binh; Ms. Hoang Lan Anh, Interpreter/Translator for Ha Tinh; Mr. Liu Ke, CPO, IFAD China participated in the mission from 02 to 11 October, Mr. Henning Pedersen, IFAD Country Director, joined the mission for the finalization of the mission including the wrap up sessions at Quang Binh and Ha Tinh. 1

6 Supervision report - Mission dates: 02 to 21 October, 2016 B. Overall assessment of Project implementation Overall implementation progress 5. The rating of the implementation progress is satisfactory. While noting some variations in the rate of achievement across various outcomes/outputs, the Mission did not find any major issues concerning SRDP implementation. PCU staff and partners in government departments and agency teams in both Ha Tinh and Quang Binh have shown a high level of competence and commitment to Project implementation. While there are some concerns around CPC staff performance in some communes, related to commitment and timely submission of project accounts, the Mission believes this can be addressed through additional training and closer district- and PCU-level supervision and support. 6. Notable Project achievements include: (i) Market-oriented Socio-economic Development Plan (MoSEDP) 2. In Ha Tinh, the programme is being implemented across the provinces 262 communes, with pilot district-level MoSEDPs implemented in 2 districts, while in Quang Binh, MoSEDP is being implemented in 40 Project communes, 70 Non-project communes and 2 pilot districts; (ii) Community Infrastructure. In Ha Tinh, the community infrastructure programme includes 96 community investment sub-projects, of which 61 are completed, while in Quang Binh, the Project is supporting the development of 61 sub-projects, of which 28 are completed: investments include, inter alia, rural access roads, bridges, irrigation channels and dams/ponds; (iii) Climate Smart Agriculture (CSA). In Ha Tinh, 52 CSA grants have been signed benefitting 866 households, including 408 poor and near poor households (47%), and in Quang Binh, 102 CSA farmer investment groups are operational with 1,563 members, including 1,190 poor households (76%) and 1,091 female members (70%), with further establishment of CSAs underway in both provinces; (iv) Microfinance. Both provinces have registered Pro-Women s Development Funds (PWDF). In Ha Tinh, 96 new Savings and Credit Groups (SCG) have been established by the PWDF in 21 communes, with 803 members including 96 poor and near poor households (12%, while in Quang Binh, 185 new SCGs and 52 new Village Savings and Loan Associations (VSLA) (SCG precursors in upland ethnic communities) have been established in 28 Project communes with 3,771 members, of whom 3,681 are women, 1,461 are poor and near-poor people (39%) and 413 are ethnic people (11%); (v) Land use rights. In Quang Binh, the project has facilitated the issuance of 1,493 forest land use right certificates covering 1,870 ha, with work progressing satisfactorily on allocating at least an additional 4,000. Market linkages. Under the Public-private Participation (PPP) programme, 9 propoor value chains have been established, 4 in Ha Tinh and 5 in Quang Binh, benefitting more than 2,000 smallholder farm households (vii) Disbursement. As of 30 September 2016, the total disbursement for the IFAD loan, Trust Fund and by all financiers stood at USD16.88 million against total approved project cost of USD46.18 million (37%). This comprises disbursement of 48% of the IFAD loan (USD10.76 million) and 23% of the Trust Fund loan (USD2.27 million) and 62% disbursement of the IFAD Grant (USD0.31 million). GoV had met 43% of its commitment to the Project (USD2.65 million), and beneficiaries had met 13% (USD0.88 million) of their contribution. 7. The aforementioned Ha Tinh and Quang Binh outputs mostly equal or exceed Project mid-term targets, however, their implementation would benefit from further refinement. The MoSEDP requires; (i) further training of staff in some communes; (ii) the development of a medium-term planning framework; and (iii) greater diversity in associated community infrastructure investments, particularly relating to market access. The CSA programme should embrace greater diversity of climate change (CC) adaptation activity and strengthen the transfer of successful technologies to the wider smallholder community. The PWDFs would benefit from additional governance training and both PWDFs need to fully operationalise their accounting software and to pay greater attention to SCG development in the more remote communes and, in Quang Binh, amongst ethnic communities. In Quang Binh, the issuance of forest land use certificates and an associated programme to reclassify land for forestry development requires closer attention to the introduction of sustainable sloping land 2 Labelled Market-oriented Participatory Socio-economic Development Planning (MOP-SEDP) in more recent IFAD projects. 2

7 Supervision report - Mission dates: 02 to 21 October, agroforestry management systems. Equally, in Ha Tinh, Project's support to the ongoing DARD land reclassification programme, if needed, would be justifiable. 8. These shortcomings, which are discussed in detail under Outputs and Outcomes below, do not detract from the solid Project achievements to date, but offer the opportunity to improve implementation efficiency and strengthen Project poverty impact, sustainability and scalability. Likelihood of achieving the development objectives 9. The likelihood of achieving development objectives of the SRDP in Ha Tinh and Quang Binh is ranked as satisfactory. The mission appreciates efforts made by the provincial agencies and the project management units of the SRDP in moving the project forward according to Project design and work plans. The design report and financing agreement remain relevant both in view of IFAD and implementing stakeholders, and no revision was deemed necessary. The annual implementation progress is also assessed as satisfactory. Agreed action Responsibility Agreed date Establish/implement a programme in Ha Tinh and Quang Binh for PCU and district accounting staff mentoring/training of commune accountants not meeting SRDP delivery standards; PCU Financial Controller 31 Dec C. Outputs and outcomes Components Component 1: Market-led Development Planning. Overall assessment of the component is rated satisfactory 10. Sub-Component 1.1: Market Oriented SEDP. The subcomponent is rated satisfactory. Over the last three years, MoSEDP implementation progress has improved significantly. Key achievements to date include: in Ha Tinh: (i) there has been an effective institutionalisation of annual commune-level MoSEDP, financed through budget mobilized by each commune/ward; (ii) the organisation of 28 MoSEDP ToT trainings for 3,420 provincial, district, and commune staff; (iii) ToT trainers, furthermore, trained 9,876 district staff, commune staff, and village heads in MoSEDP; (iv) the organisation of 5 MoSEDP experience sharing workshops to review the 2015 MoSEDP implementation; and (v) subsequently, MoSEDP roll-out in all 262 communes/wards of the province with the participation of 135,350 people including 14% poor and 33.4% women. In Quang Binh: (i) PPC's approval of commune MoSEDP manual; (ii) development of Excel template for commune MoSEDP data entry, reducing onerous deskwork; (iii) 14 MoSEDP Training of Trainers (ToT) courses for 289 provincial, district and commune staff, and subsequent MoSEDP training of 832 project and non-project commune staff; (v) plan for MoSEDP 2017 in 40 project and 70 non-project communes in the 7 Project districts. In total; there were 18,867 people involved in MoSEDP implementation process, of which 45% were poor and near poor, 9% were ethnic people and 55% were women. The project plans to conduct MoSEDP planning in the entire province s 159 communes/ward in In 2016, both provinces have continued to pilot district-level MoSEDPs. Results to date include: (i) recruitment of TA for development of district MoSEDP manual; (ii) approval of district MoSEDP manual by PPC; (iii) organisation of 5 MoSEDP training courses (2 in QB, 3 in HT) for district staff; and (iv) implementation of four district MoSEDPs (2 in QB, 2 in HT). Lesson-learnt workshops have been organised in both provinces (1 in QB, 2 in HT) and showed positive results including: (i) the systematic identification and prioritisation of investments for district socio-economic development; and (ii) the mobilisation and integration of different financial resources for the identified investments. 12. Project-developed private sector co-investments, including value chain action plans (VCAP) and PPP and CSA grants at provincial and commune levels help identify key commodities, stakeholder constraints and opportunities, and potential project interventions, all based on financial 3

8 Supervision report - Mission dates: 02 to 21 October, 2016 analysis of the commodity production. To date, 259 commune-level VCAPs (141 in QB, 118 in HT) and 11 provincial VCAPs (8 in QB, 3 in HT) have been developed. The VCAPs were valued by stakeholders and have improved investment planning by districts and communes. 13. Remaining challenges under this sub-component include, in both provinces: (i) commune planning staff turn-over after the recent Party congress, the MoSEDP expansion to 70 new communes/wards in 2016, and preparations for MoSEDP expansion to the remaining 49 provincial communes/wards in 2017 has resulted in capacity gaps in MoSEDP implementation; (ii) several MoSEDP-introduced tools, including local needs identification and prioritisation, and commodity selection, are challenging for commune staff, especially staff in non-project communes in Quang Binh, requiring regular experiential exchanges between non-project and Project communes, and additional guidance and capacity building by DPI and DPCs; (iii) inadequate mapping and engagement of private enterprises as partners or service providers in targeted commodity development at the local level; (iv) the need for new MSEDP procedures to address the recently introduced medium-term planning process. The Mission notes that, in Quang Binh, Project budget for MoSEDP implementation is almost exhausted and supports PMU s proposal to shift unused vocational training resources to support the completion of the Quang Binh MoSEDP implementation, which will be transferred to the provincial budget in 2019, following the 2018 MoSEDP. Agreed action Responsibility Agreed date Agreed action for both provinces Conduct continuous MoSEDP and market economics training courses for district, commune and village staff, especially for improved market analysis, service provider identification, and resource allocation, supported by experiential cross learning between non-project and project communes. Review the possibility of extending the annual district and commune MoSEDP to medium term MoSEDP and update the manual accordingly, using 2017 for testing and 2018 for MoSEDP manual finalisation and institutionalization. By 2018, establish/document procedures for the institutionalization of medium-term MoSEDP processes at commune and district levels; PCU/DPI PCU/DPI PCU/DPI Nov onwards Nov onwards. Nov onwards 14. Sub-Component 1.2: Market Development Capacity The subcomponent is rated satisfactory. The subcomponent provides training for government staff, farmers and household enterprises and business owners in management, planning, monitoring and evaluation (M&E), climate smart agriculture production and processing, and specific skills to enhance youth employment and market and value chain development. 15. For project and government staff in both provinces, the Project has organised appropriate courses and workshops in planning (MoSEDP, VCAP), financing (PPP, CSA, WSDF) and coordination (Agri-business Advocacy Committee (ABAC), CIG, SCG), providing techniques and skills in (i) value chain (VC) analysis and VC action planning; (ii) general market awareness; (iii) methods for financial and economic analysis; (iv) management skills for SRDP strategy and instruments; (v) contract negotiation skills, (vi) production cost-benefit analysis, (vii) new CC adapted agricultural technology, and (vii) business planning and management. In Ha Tinh, these capacity building activities have reached a total of 3,534 staff, of which 600 were selected as TOTs for production technique and business planning training at commune level. In Quang Binh, the training courses and workshops have reached 3,247 participants at provincial and district levels, including 1,200 staff who qualified as ToTs to train commune staff and farmers on agricultural production techniques, business planning, and management skills. 16. At the household level in Ha Tinh, under Farmer Union's coordination, the Project-trained trainers have provided (i) 50 training courses on market and farming economics for 1,936 participants (26% poor, 58% women); (ii) 78 training courses on group formation, management, and for business/production planning to 2,936 people (50% women and 36% poor and near poor); and (iii) 51 training courses on CSA fund application with 2,102 participants (21% poor and near poor, 44% 4

9 Supervision report - Mission dates: 02 to 21 October, women). In addition, with the participation of district FUs, district DARDs and the Centre of Science and Technology Application and Transfer, the Project has organised 192 training courses on agricultural production for 14,074 farmers (31% poor and near poor, 61% women). The 56 vocational training courses organised by the Project have reached 2,160 farmers (822 poor and near poor); of whom 2,160 (100%) reported finding part-time work during the off-farm season. In Quang Binh, trained trainers have provided: (i) 11 courses on business planning for 379 participants (82 poor and near poor, and 128 women) (ii) 11 courses on group formation and management for 371 participants (80 poor and near poor, 126 women); (iii) 218 courses on agricultural production techniques (SRI, cattle and poultry raising and mushroom and acacia cultivation) for 7,247 participants 3,278 poor and near poor, 3,566 women); and (iv) 20 vocational training courses for 67 people (486 poor and near poor, 457 women), of which 644 have found employment. In both provinces, the PCUs have coordinated enterprise-to-farmer training (E2F) with the participation of various enterprises including the Quang Binh Agricultural Supply Company, Cat Ngoc Company, Van Xuan Company, My Trach Cooperative, Tuan Linh Cooperative, Hanoi Food Company, NAfood Company, Mitraco, and Harphaco. The project has also provided farmer-to-farmer training (F2F) for 260 Lead Farmers (LF) (200 in QB, 60 in HT) identified and selected as farmer trainers. The F2F and E2F training has raised productivity, enabled smallholder farmers to meet enterprise quality requirement and opened new market opportunities. This capacity building programme has supported the project development in Ha Tinh of 310 collaborative group (CG) with 5,829 members (33% poor and near poor, 48% women). In Quang Binh, the Project has supported the development of 519 farmers common interest groups (CIG) and 3 cooperatives, which, together, have 7,403 members (6,570 poor and near poor, 3,316 women). 17. Despite its overall success, the Mission perceives some issues with this sub-component: (i) the Project presently promotes a relatively narrow range of agriculture technologies with an emphasis on income diversification as a CC adaptation strategy; (ii) there is insufficient piloting of innovative CSA approaches; and (iii) experienced farmers are not yet playing a sufficient role in technology transfer. The Mission has produced a brief discussion paper (Appendix 8) on CC adaptation technology that recommends additional focus on (i) sustainable hill-side farming, including forage production; (ii) reduced tillage and bio-fertilisers; (iii) integrated pest management; (iv) water conservation including drip irrigation; (v) more diverse livestock varieties/species; (vi) farmer-owned value addition; and (vi) off-farm income generation, including eco-tourism. In Quang Binh, SRDP has contracted the Viet Nam Field Crops Research Institute (VFCRI) to identify, in partnership with DARD, new CC adaptation technology for Quang Binh. The Mission suggests that, once the VFCRI report is finalised, the PCUs in both provinces organize a VFCRI-led workshop to discuss the Centre s recommendations and that, subsequently, both PCUs provide Project support for the on-farm evaluation and demonstration of positively evaluated VFCRI technical proposals. The Mission further recommends that both PCUs diversify the Project technology training programme and, with Farmer Union's (FU) support, establish a F2F extension programme for CIG members, paying particular attention to developing female and ethnic minority lead farmers. The Project has already established a pool of 110 lead farmers (80 in QB, 30 in HT) trained in effective communication. Agreed action Responsibility Agreed date Agreed action for both provinces Continue skill transfer to new district and commune staff in project instruments, including MoSEDP, CSA, VCAP, CDF, SCG and PPP. Identify and demonstrate more innovative and CC adapted on-farm production models and develop associated training programmes and manuals for farmer training and replication Diversify and expand farming systems- and agroforestry-based forage production in Project communes, in partnership with DARD. Intensify technical assistance to the CIGs to ensure capacity to adopt improved production technology and develop business and investment plans. PCU DARD, PCU, FU and DPCs PCU, DARD DPCs, PCU, FU-F2F 11/2016 onwards By end onwards 11/2016 onwards 5

10 Supervision report - Mission dates: 02 to 21 October, 2016 Component 2: Rural Financial Services. Overall assessment of the component is rated satisfactory 18. Sub-Component 2.1: SCG Development. The subcomponent is rated satisfactory. The MTR acknowledged the significant effort made by the WUs and the PWDFs in Ha Tinh and Quang Binh for developing SCGs and introducing microfinance services to disadvantaged villages in mountainous districts. In Quang Binh over the last 18 months, 185 new SCGs and 52 VSLAs have been established. Among the 3,771 new SCG members, 3,681 are women (97.61%), 1,461 are from poor and near-poor households (38.74%) and 413 are ethnic minority people (10.95%). The PWDF has also integrated into its network the 423 existing SCGs (with 6,187 members) that were established in 25 Project communes by the previous IFAD-supported DPPR. 19. The PWDF in Quang Binh has received capital support of VND24,752 million (USD1.12 million), being 72% of the SRDP commitment. As of 31 August 2016 the PWDF has, through the SRDP-supported SCGs, delivered loans totalling VND24,524 million (USD1.1 million) to 3,210 SCG members (of whom 1,252 (39%) are poor and near-poor) with an average loan size is about VND7.6 million (USD350). SCG-member savings results are only satisfactory. SCG members have generated compulsory savings of VND3.216 million (USD146,000) and voluntary saving of VND469 million (USD21,000). The VSLAs, which are an SCG entry point for poorer and more isolated ethnic women and start with a rotational savings and loan programme, have accumulated savings of VND464 million (USD21,000) that have been applied to loans to their 119 members. All group members have used the available funds for agriculture production and micro-business (60% for cultivation, 30% livestock and 10% for micro-business). The PWDF initiated a ToT programme for 37 cadres who delivered further training to SCG members on preparing household business plans. According to a recent SRDP survey, 85% of the SCG members assessed positive changes of their household income resulting from SCG/VSLA membership. 20. In Ha Tinh 97 new SCGs (54% of project target) have been established in 21 project communes in three mountainous districts with 858 members of whom, 100% are women and 112 are from poor and near-poor households (13%). The PWDF has also integrated into its network the 69 existing SCGs (with 788 members) that were established in 10 project communes by the IFADsupported HRDP project ( ). The PWDF in Ha Tinh has received capital support of VND12.0 billion (USD0.543 million), being 36% of the SRDP commitment. As of 31 August 2016 the PWDF has, through the SRDP-supported SCGs, delivered loans totalling VND11,442 million (USD0.518 million) to 768 SCG members (of whom 100 members (13.2%) are poor and near-poor) with an average loan size of about VND14.9 million (USD674). SCG members have generated compulsory savings of VND200 million (USD9,050). All group members have used the available funds for agriculture production and micro-business (12% for cultivation, 68% livestock and 20% for microbusiness). In order to develop the SCGs the WU has organized 183 community mobilization meetings and training courses on SCG modality for 11,000 participants. According to a recent SRDP survey, 64.7% of the SCG members assessed positive changes in their household income resulting from SCG membership. 21. While the rural financial services outcome is impressive in both provinces, the mission found the following issues: (i) Targeting: in Quang Binh, 13 Project communes, all located in less accessible mountainous areas where ethnic populations form the majority of the community, do not have access to SRDP financial services, despite 72% of funding having been transferred to the PWDF. This requires urgent PWDF attention, including the development of a comprehensive targeting strategy and a VSLA-to-SCG graduation framework. In Ha Tinh, the participation of poor and near-poor households in the new SCGs is limited (13%). This requires relevant changes in loan size and duration to suit poor households, and the establishment of more SCGs in the remaining un-serviced villages, with an initial focus on saving and on-lending, prior to loan provision (as with the VSLA in Quang Binh); (ii) Integration with non-finance services: for both provinces, the PCUs and DSTs should enhance SCG member linkages to CSA and PPP programmes, linking these rural financial services to new economic opportunities, particularly amongst the poor (in Ha Tinh) and ethnic minority communities (in Quang Binh). An additional WU's role in both provinces to support SCGs through F2F 6

11 Supervision report - Mission dates: 02 to 21 October, services is clearly indicated; (iii) Incentives: In Quang Binh the Mission noted that the allowance paid to SCG leaders has been increased, however, it is still modest relative to the cost of delivering their functions and, unlike PWDF staff salaries, is not performance-linked. SCG leaders are a lynch pin in the PWDF structure, ensuring SCG coherence and providing guidance to inexperienced members on their investment portfolio. As such, the Mission recommends the review of the SCG leader payment and its increase to a level commensurate with their responsibilities and costs, either through a salary increase or an incentive payment. (iv) Group size: In Ha Tinh, in order to increase allowance for SCG leaders (based on number of SCG members) and apply the one-village-one-scg approach, the current PWDF strategy is to increase the size of existing SCGs to up to 50 members. The mission recommends that the SCG size be kept at members with a view to enhancing group solidarity and ensuring sufficient group leader mentoring of members, and that the modality for SCG leader allowance be revised as recommended above for Quang Binh. 22. To further strengthen SCG implementation, the Mission recommends the following actions: Agreed action Responsibility Agreed date Agreed action for both provinces Organize meetings for all SCGs and VSLAs to discuss group business plans including collective actions for procurement of agriculture inputs, sale of products and contract farming with private enterprises; PCU, FU and WU to coordinate the development of F2F services to SCG and VSLA members, linked to CSA and PPP opportunities Regularly review allowance level with a view to incentivizing SCG leaders, and equip them with calculators, briefcases, etc. Agreed action for Ha Tinh Revise PWDF manual to reduce loan size/duration and keep SCG size of maximum 20 members PWDF, PCU, DPCs, District agencies, CPCs, SCGs, VSGs PWDF, PCU, district FU PWDF Nov onwards Nov onwards Nov onwards WU, PWDF 31 Dec Mobilize more poor and near-poor households to participate in the existing SCGs and establish VSLAs in all remaining villages in the 21 project communes and support for group management capacity building for at least 6 months prior to loan provision Agreed action for Quang Binh Develop and implement a comprehensive plan for the delivery of financial services to the ethnic minorities in the remaining 13 Project communes and a framework for VSLAs graduation to SCGs. Technical assistance from Plan International could enhance this process. WU, PWDF Nov onwards PWDF, PCU Nov onwards 23. Sub-Component 2.2: MFI development. The subcomponent is rated satisfactory. In Quang Binh the PWDF, established in 2009, is functioning effectively and, as of 31 August 2016, has established 1,240 SCGs with 18,741 members (4,906 members participate only for savings) and delivered financial services to 13,835 members with total loan portfolio of VND95.8 billion (USD4.3 million). Total members' savings stand at VND24,462 million (USD1.1 million) and the PWDF capital base is VND97,330 million (USD4.42 million). Over the last eight months the PWDF has generated a VND3,065 million (USD139,000) profit. Its Operational Self-Sufficiency (OSS) stands at 196% and its Financial Self-Sufficiency (FSS) stands at 150%, while the Portfolio at Risk (PAR) is 0.12%. The SRDP has assisted the PWDF in the formulation of its Strategic Business Plan, together with the provision of equipment packages to all district branches and project commune WUs and the installation of accounting/mis software. Following the last Supervision Mission (SM) recommendations, the PWDF has established a branch in the most remote district of Minh Hoa completing its Quang Binh districts branch network. PWDF employs 41 fulltime and 5 part-time staff at its provincial headquarters and district branches. The fund has strengthened the capacity of its financial management staff, cancelled the 1% WU's levy on IFAD grant funds and provided district branches with equipment/facilities as recommended by the last SM. As reported by the WU, over the last 3 years, the PWDF has successfully assisted 666 poor households out of poverty, enabled 7

12 Supervision report - Mission dates: 02 to 21 October, ,227 near-poor households to achieve medium-class status, and enabled 483 members receiving awards as excellent economic models. 24. In Ha Tinh, the PWDF is younger, having been established in September 2015, based on the WU s former microfinance management unit. As of 31 August 2016, the PWDF operates with 973 SCGs (mostly established under HRDP and IMPP) in 131 communes of 12 districts with 21,061 members (6,158 poor and near-poor (29.2%)) and currently provides financial services to 18,596 members with total outstanding loan portfolio of VND93.45 million (USD4.23 million). Total members' savings stand at VND9,964 million (USD0.45 million) and the PWDF capital base is VND96,005 million (USD4.34 million). Its Operational Self-Sufficiency (OSS) stands at 134% and its Financial Self-Sufficiency (FSS) stands at 86.5%, while the Portfolio at Risk (PAR) is 0%. The PWDF has established branches in 12 of the provinces 13 districts and employs 57 fulltime and 27 part-time staff at its provincial headquarters and district branches. SRDP has assisted the PWDF in strengthening staff capacities through 6 training courses on credit and finance management and two experiential study tours to PWDFs in Ben Tre and Quang Binh. SRDP has also provided equipment packages to all district branches and the PWDF Head Office. In 2015, the SRDP has assisted the PWDF in the formulation of a Strategic Business Plan. However, this should be substantively revised to guide PWDF towards a reduced operational cost, efficient province-district structure, professional human resource and financial self-sufficiency. Software for Ha Tinh PWDF financial and credit portfolio management is at early tender stage of SRDP procurement. Considering the size of the current loan portfolio, the purchase and installation of this software is critical. 25. To further strengthen PWDF implementation in Quang Binh, the Mission recommends that: Agreed action Responsibility Agreed date Agreed action for both provinces PWDFs should arrange joint Governing Council member training programmes addressing finance management, credit management, staff management and banking procedures; mobilize SCGs, VSLAs and staff of WU in the Project communes and villages to implement VCAPs and promote innovative extension approaches, including F2F and E2F extension, particularly in mountainous and ethnic communities; significantly increased targeting of disadvantaged groups in less accessible communes and villages; the immediate procurement (for Ha Tinh) and full operationalization (for Quang Binh) of PWDF accounting/mis software Transfer remaining SRDP credit funds to the PWDFs once the aforementioned SCG and MFI actions are operational or completed as required. Agreed action for Ha Tinh IFAD to provide an international consultant to assist the PWDF in updating of its Strategic Business Plan IFAD to discuss with MoF the possibility of extending the repayment period for the VND28 billion HRDP loan to the PWDF beyond 2021, including applying phased payments; PWDFs, PCUs 31 Dec PWDFs, PCUs 30 Nov onwards PWDFs 31 Dec PWDFs, PCUs 31 Dec PCU TBD IFAD Dec IFAD Nov Increase level of compulsory savings and launch voluntary savings; PWDF 30 Nov onwards Review TORs and performance of recruited staff, in particular those PWDF 30 Nov in management positions; Consider redistribution of fulltime staff among district branches or PWDF 30 Nov request one branch to work in two districts in order to reduce parttime staff number; Consider inclusion of credit insurance for SCG members, as applied PWDF 31 Dec in Quang Binh; Organize experience exchange and training workshops together with the Quang Binh PWDF. PWDF 31 Dec

13 Supervision report - Mission dates: 02 to 21 October, Agreed action for Quang Binh Establish a performance-based award and allowance scheme for district branch staff in the more difficult districts/communes. PWDF 31 Dec Complete equipping of district PWDF branch offices PWDF 31 Dec Update the PWDF manual to include the credit insurance policy and launch a community awareness programme on purpose of the life insurance policy PWDF 31 Dec Sub-Component 2.3: Agro-finance Workshops. The subcomponent is rated satisfactory. On 7 July 2016 an Agro-finance Workshop was organized in partnership with the Quang Binh Entrepreneur s Association and SRDP. Another Agro-finance Workshop was also organized by SRDP for three mountainous districts in Ha Tinh on 30 June Representatives from the State Bank and all commercial banks attended the workshop, together with local private companies and cooperatives investing in the agriculture sector. The workshops provided a platform for SRDP to introduce private sector investment support programme the PPP and CSA schemes. Participants reviewed the recently-issued State policies and current obstacles in the implementation of those policies and delivery of rural financial services to agriculture business and agricultural investment projects by banking institutions. The dialogue proposed immediate solutions and continued dialogue for improving the partnership between financial institutions and the private sector, potential investors, agribusinesses and farmers. In this regard, agribusinesses and farmer s groups should be better empowered to prepare and monitoring their strategic business plans as a step towards enhancing their potential for commercial credit. The local Government recommended providing the private agribusiness sector with technical support, improved public infrastructure and direct co-investments, thereby lowering the credit risk for banks and funds investing in the agricultural sector. Both provinces have indicated a preference to continue the agro-finance workshops at provincial rather than regional level. Component 3: Leveraged market and value chain investments 27. Sub-Component 3.1: CSA Investment. The component is rated satisfactory. The CSA fund supports a competitive farmer grant programme, facilitating co-investments in climate smart and propoor agriculture. The fund, which has been in operation in Quang Binh and Ha Tinh since March 2015, has developed the regulatory framework, and information material for the grant process, disseminated these widely amongst the established CIGs, conducted necessary capacity building activities, and initiated the CSA fund in all project communes. In Ha Tinh, key results include: (i) in collaboration with the DARD and DoIT, developed 3 provincial and 118 commune level VCAP as frameworks for investment; (ii) implemented 243 training courses on agricultural production and CSA application, delivered by FU and district DARD TOTs and LFs, reaching 16,176 households; (iii) under PCU management, under the first three CSA competitive rounds selected 45 CSA proposals for implementation with the value of VND9 billion (USD407,000); (iv) under decentralised district-level management with DARD, FU and LF participation, financed 33 CSAs, valued at VND6.4 billion (USD290,000). After two years, the CSA fund has reached 1,300 households (47% poor and near poor, 61% women). Districts, communes and farmer groups appreciate the CSA methodology, which has showed initial, positive impacts on household income. Quang Binh has: (i) developed 8 provincial and 141 commune-level VCAPs as a framework for the investments; (ii) organised of 19 CSA ToT courses for 740 CSA facilitators (232 women); enabled CSA facilitators to actively support the process of CSA proposal development with positive feedbacks from CIG members; (iii) under PCU management, implemented the first CSA competitive round, resulting in 137 proposals and 56 investments selected for implementation with the value of VND billion (USD1.1 million); and (iv) under decentralised district-level management and DARD, FU and lead farmer participation, implemented a second competitive round generating 84 proposals of which 46 proposals, valued at VND18.4 billion (USD833,000) were selected. To date, the 102 approved CSA grants have reached 1,563 farmers, of which, 1,190 are poor and near poor (76%), 1,092 are woman (70%), and 129 are ethnic households (8%). Market linkages with agri-enterprises and cooperatives are facilitated for 9

14 Supervision report - Mission dates: 02 to 21 October, 2016 CSA candidates, with about 80 CSA groups opting for output sale contracts with enterprises/cooperative. Unsuccessful CSA applicants are assisted to form Common Interest Groups (CIG) that also receives Project technical support. The Project s initial impact assessment of sample households (in chicken and rice value chains) showed an average income increase of 20% due to CSA participation 28. Despite these initial positive results, a number of challenges persist that require increased attention by the PCU, DARD, DPCs, and the FU in both provinces including: (i) the scheme has progressed slowly against the overall investment target (in QB 22.9% disbursement and 38.7% commitment rates, in HT: 21% disbursement due to (a) procedural issues limiting the flow of funds to CSA groups, (b) limited institutional capacity at the district and commune levels, (c) limited production and business planning skills amongst CSA leaders and members, and (d) the slow start of the support mechanisms for CIG/CG investment planning, especially the engagement of the available Farmers Union networks and local agribusiness enterprises; (ii) in order to function adequately, the CSA groups require substantial on-going support in group management, business skills development and market connections the absence of a comprehensive support strategy for CIGs/CGs and CSA undermines the rollout of this programme; (iii) F2F and enterprise to farmer extension services are effective, cost-efficient rural development support mechanisms, however these are not yet systematically implemented by the Project; and (vi) some CSA grants, such as cow breeding and acacia monoculture plantation, do not demonstrate sufficient CC adaptation impact, highlighting the need for closer Project attention to the identification and demonstration of poverty reduction and CC adaptation and resilience models/practices for replication. 10

15 Supervision report - Mission dates: 02 to 21 October, Agreed action Responsibility Agreed date Agreed action for both provinces To speed up disbursement: (i) continue to capacitate district officials for CSA grant management; and (ii) accelerate the CSA grant competition process through lead farmer/fu support to CIGs/CGs proposal preparation and submission. Develop a set of criteria to classify the CIGs/CGs into 3 main categories (market ready, market potential, and food security), to be used as the basis for the development of a roadmap for CIG/CG support. Develop an action plan for the rollout of F2F extension services. Steps to be considered include: (i) lead farmer selection and capacity building; (ii) lead farmer certification by FU; (iii) implementation of F2F programme with remunerations for lead farmer covered by CSA groups; and (iv) PPC/DPC institutionalisation of the F2F programme with long-term budget allocation to cover lead farmer remunerations. Ensure poverty reduction and CCA impact through: (i) assessing the quality of the CSA investment models, (ii) modifying or ceasing investing in models that do not survive the CC adaptation assessment or do not have sufficient poverty reduction impact, (iii) expanding successful models, and (iv) including new on-farm models that show high potential. Agreed action for Ha Tinh To support cooperatives, the PCU can propose a revision in the CSA manual, introducing another category under the CSA fund, with a maximum cap of USD50,000/cooperative and up to USD750/supplying household. In such proposals, direct and indirect development impact assessment templates need to be attached. Agreed action for Quang Binh Cancel the time-based two-tranche disbursement mechanism for CSA grants, moving instead to a progress-based disbursement system. PCU, DPCs, district DARDs and FUs, CDBs FU, PCU with consultant support FU, PCU, DPCs PCU, DARD. VFCRI, FU, district DARDs, CPCs PCU PCU, Nov onwards Nov Nov for action plan; implementatio n Nov onwards Nov onwards Nov onwards 29. Sub-Component 3.2: Public Infrastructure Investments. The subcomponent is rated moderately satisfactory. The Public Infrastructure Investment Fund aims to support market and value chain development at commune and district levels, identified and prioritized for investment through VCAPs and MoSEDPs at commune level. In Ha Tinh, the 96 public infrastructure works with a total investment of VND159 billion (USD7.19 million) including 77 roads (total length of 70.7 km), 17 irrigation canals (total length of 14.4 km for hectares), 1 irrigation dam (for 20 hectares) and 1 overflow bridge were implemented for the direct benefits of 46,502 people including 24% of poor and near-poor households. By September 2016, 61 works were completed and put in use and 35 are under construction, including 29 works managed by CPCs and 6 inter-communes works managed by the PCU. Decisions of liquidation approvals were issued for 38 completed works. The force account method was applied for 3 small infrastructure works. The financial/economic (cost-benefit) analysis of public infrastructure investments conducted in September 2016 showed positive results on investment effectiveness with average financial IRRs at 18.1 % (in a range from 12.3% to 31.76%) and average economic IRRs at about 30% (in a range from 17.32% to 45.37%). The infrastructure investments support the development of agriculture VCs in terms of saving time and costs for input/output transportation and increasing irrigated areas and productivity. For instance, the transport cost has been reduced from VND24 million to VND7 million per harvested hectare for a total of 160 hectares of acacia as the result of construction of an overflow bridge to access an acacia production area in Huong Lam Commune. 30. In Quang Binh, commune staff were trained on public works procurement and investment management. The 61 Project-financed public infrastructure investments to date in Quang Binh, with total investment of VND79.5 billion (USD3.59 million) include 27 inner-field roads, 18 forestry roads, 3 irrigation dams, 9 irrigation canals, 1 low voltage power line, 1 market place, 1 production zone land 11

16 Supervision report - Mission dates: 02 to 21 October, 2016 levelling, and 1 animal quarantine station were implemented. These investments will directly benefit 25,919 households including 33.5% poor households, 27.6% near-poor and 7.7% ethnic minority households. As of September 2016, 28 of the aforementioned works were completed and in use, 23 are under construction and 10 are under procurement process. Decisions of liquidation approvals were issued for 12 completed works, while the force account procurement method was applied for 7 small infrastructure works. From 2016, all Project CPCs have, with DST/PCU support, taken responsibility for Project public infrastructure investments management, negating the need to recruit project management consultants. 31. Despite this demonstrable progress, particularly concerning Project CPC empowerment, there are some constraints and challenges for the public infrastructure investments including in Quang Binh: (i) implementation progress of infrastructure investment is behind the contract-detailed delivery schedules, with disbursement for 16 AWPB 2015 investments being carried over to By September 2016, over 1/3 rd of planned AWPB 2016 infrastructure investments are still under procurement. The two-step appraisal and approval process of the technical economic report and procurement plan for small infrastructure works at project communes in Tuyen Hoa and Quang Trach districts are time consuming, with a one-step process recommended for future implementation. 32. In Ha Tinh, constraints included: (i) due to reduced ODA budget approval by the GoV (VND50 billion approved out of total planed VND155.6 billion for the AWPB 2016), the contractors for a number of work contracts have still not received their contract advance, despite construction contracts being signed in August 2016, and a significant volume of construction works (30% - 40%) being completed by 30 September This situation will cause negative impacts on implementation progress of project activities if delays in approvals of additional budget under the AWPB 2016 are not solved in Quarter IV/2016; (ii) most of the funds for public infrastructure investments were planned and implemented over the periods. The balance of the allocated fund for public infrastructure investments (approximately USD250,000) is marginal for the sub-component planning and implementation after 2016; (iii) quality of concrete works in a section of the road (about 25 metre length at Km0+610 to Km0+635 location) constructed in 2015 in Bong Giang 2 village, Duc Giang commune, Vu Quang District does not meet technical requirements. Cracks, flaking-off and abrasion of concrete surface appear in this section. The contractor is required to redo concrete works for the low quality sections and to correct all deficiencies before certifying completed works over the 12- month warrantee period and releasing the contract retention amount. 12