Rural Livelihoods and Economic Enhancement Programme

Transcription

1 Rural Livelihoods and Economic Enhancement Programme Supervision report Main report and appendices Mission Dates: May-2015 Document Date: 30-Jun 2015 Project No Report No: 3799-MW East and Southern Africa Division Programme Management Department

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3 Contents Abbreviations and acronyms iii A. Introduction 1 B. Overall assessment of programme implementation 1 C. Outputs and outcomes 2 D. RLEEP implementation progress 5 E. Fiduciary aspects 7 F. Sustainability 9 G. Other 10 H. Conclusion 11 i

4 Appendices Appendix 1: Summary of project status and ratings 13 Appendix 2: Updated logical framework: Progress against objectives, outcomes and outputs 17 Appendix 3: Summary of key actions to be taken within agreed timeframes 21 Appendix 4: Physical progress measured against AWP&B, including RIMS indicators 23 Appendix 5: Financial: Actual financial performance by financier; by component and disbursements by category 27 Appendix 6: Compliance with legal covenants: Status of implementation (as of 27 May 2015) 29 Appendix 7: Knowledge management: Learning and Innovation 31 Appendix 8: Progress against previous mission recommendations 33 Appendix 9: Supervision mission schedule and persons met 35 Technical Annex 1: Component 1 & 2: Lessons learnt from value chain approach in RLEEP 37 Technical Annex 2: Review of Agricultural Commercialization Fund 41 Technical Annex 3: Efficiency of RLEEP institutional set-up and of operational processes 45 Technical Annex 4: Financial management report 49 Technical Annex 5: Monitoring, evaluation and knowledge management 63 Technical Annex 6: Nutrition mainstreaming 67 ii

5 Abbreviations and acronyms ACF AEDO AWPB CAHW EoI FBS GAP Ha M&E MOAIWD MOF MT MTE MTR MWK OFID PSC PSU RBM RLEEP SAPP SPs SOE Agricultural Commercialisation Fund Agricultural Extension Development Officer Annual Work Plan and Budget Community Animal Health Worker Expression of Interest Farm Business School Good agriculture Practices Hectares Monitoring and Evaluation Ministry of Agriculture, Irrigation and Water Development Ministry of Finance Metric Tonnes Mid Term Evaluation Mid Term Review Malawian Kwacha OPEC Fund for International Development Programme Steering Committee Programme Support Unit Reserve Bank of Malawi Sustainable Agricultural Production Programme Service Providers Statement of Expenditure iii

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7 A. Introduction 1 1. The Government of Malawi and the International Fund for Agricultural Development (IFAD), which acts also on behalf of the OPEC Fund for International Cooperation (OFID), has carried out jointly the annual supervision of the (RLEEP) in Malawi from May The objective of the supervision mission is to assess the overall performance of RLEEP against its goal and development objective, its implementation progress by component against the targets, the adherence to the Programme s strategy and institutional performance; to review the fiduciary aspects, compliance with financing covenants and prospects of sustainability beyond RLEEP s closing. The mission visited project sites in four districts during 5 days and consulted with beneficiaries and stakeholders at all levels in Malawi. 2. The IFAD funding was approved on 13 December 2007 and became entered into force on 1 October 2009 constituting a time lag of 22 months which shortened the start-up phase of the Programme. A Mid Term Review was held during February RLEEP is now in its 6 th year of implementation with the completion and closing date set at 31 December 2017 and 30 June 2018, respectively. 3. RLEEP s development goal is to sustainably improve the incomes of economically active poor rural households engaged in the production, processing and marketing of selected agricultural commodities (crops, livestock and fisheries) by advancing their integration with the emerging commercial sector. The goal shall be achieved through the following four objectives: (1) Strengthen value chains and enhance the enabling environment; (2) Improved linkages of farmers to value chains by establishing more efficient production, transport, storage, processing, and marketing systems; (3) Efficient Programme Facilitation and Management. 4. RLEEP is co-funded by an IFAD loan of USD 8.37 million equivalent at highly concessional conditions and terms and an IFAD grant of USD 8.33 million equivalent under the Debt Sustainability Framework (DSF); an OFID loan of USD 10 million equivalent; the Netherlands Royal Tropical Institute (KIT) a grant of USD 100,000 equivalent, whereby the Government of Malawi is committed to contribute USD 0.39 and the private sector and beneficiaries would contribute in kind approximately USD 2 million equivalent. B. 5. Overall assessment of programme implementation The overall implementation progress of RLEEP as of 30 April 2015 is rated satisfactory. 6. Annual Implementation Progress. Most of the targets set for the annual work plan and budget for 2014/15 are either substantially or fully achieved, while some targets have been surpassed, such as capacity building of value chain actors and the documentation of success stories/ case studies. The financial progress in terms of disbursement of IFAD funds for the current year 2014/15 stands at 73% (in USD), with a cumulative disbursement of 57% (in SDR). The disbursement of OFID funds stand at 39%.The current disbursement rate is considered as too low for a programme in its 6 th year with 2.5 years left until closing. 7. Under component 1 (value chain mobilization and organization) significant progress was noted as most of annual targets under this component have been fully achieved, including market analysis for value chains, support to commodity platforms collaboration with partners. The annual targets planned under component 2 to enhance agricultural productivity and commercialisation are substantially or fully achieved, by 62%-138%. Remarkable achievement of annual targets was recorded on activities planned under sub-component 2.1 for engaging value chain actors through 1 Mission composition: Mr Thomas Rath (IFAD Country Programme Manager and Team Leader), Ms Zainab Zitta Semgalawe (Deputy Team Leader and IFAD Institutions Specialist), Mr Philipp Baumgartner (IFAD Value Chain Specialist), Mr Godfrey Wanjohi (Financial Management and Procurement Specialist), Mr Mohamed El-Ghazaly (M&E specialist), and Ms Marian Amaka Odenigbo, (IFAD Nutrition Specialist). 1

8 needs assessments, capacity building and identification of potential Agricultural Commercialisation Fund (ACF) grantees, especially private sector, and provision of grants to various beneficiaries. Targets for programme steering committee meetings, baseline study for new commodities, gender audit and youth participation, programme monitoring under component 3 have been fully achieved, with few lagging behind, such as international workshops and study tours. More than 60% targets under infrastructure development under component 4 have been fully achieved or surpassed, such as construction of milk bulking canters as a result of improved procurement processes, designs and supervision of works. RLEEP has made remarkable progress in reaching targeted households. The programme reached 9,500 smallholder farmers (of which 47% women) this financial year, and cumulatively reached 36,831 farmers (of which 41% women). In terms of total outreach by households, the programme has directly benefited 23,020 households and is close to achieve the programme target of 24,000 households. 8. RLEEP has produced some notable outputs this year: training of 5,900 smallholder follower farmers (43% females) in farm business schools; establishment of a commodity seed system for groundnuts which provided 39.7 tons through the revolving seed system; provision of 5 tons of quality declared seed potatoes to commercial seed distributor and the introduction of 5 tons of soya seed for the multiplication for next growing season; linking 5,417 smallholder farmers (53% females) to agrodealers, 2,000 groundnuts farmers (50% females) bought certified seed, gypsum and D-Compound fertiliser to enhance groundnut productivity and quality. 9. Likelihood of achieving development objectives. Rated as satisfactory. The project has also recorded substantial increase in household income, capital assets and productivity of target commodities value chains, associated with increased use of Good Agricultural Practices (GAP), value chain development, especially linkage to markets. Innovative initiatives such as Farm Business Schools (FBS) and Village Saving and Loans and other local institutions have supported the transformation of smallholder farming from subsistence farming to commercial, market oriented agriculture. Community institutions and service providers have been strengthened and linkages along the value chain are established. It can be concluded that RLEEP has good prospects to achieve its development objectives. 10. Implementation of Agreed Actions with the Previous Missions. Rated as moderately satisfactory. The last two implementation support missions conducted in November 2014 and followup mission of January 2015 identified a number of actions to be implemented including capacity building, project management. Most of the agreed actions have been fully implemented or are at advanced stage to completion, with a few exceptions. The critical activities such as assessment of value for money for the agricultural commercialization grants, refund of pre-financed VAT from IFAD loan resources, migration of Special Project Account (SPA) from Reserve Bank of Malawi (RBM) to Commercial Bank and the request for increasing IFAD's authorized allocation are still pending and needs to be taken up as high priorities in the coming weeks. The detailed status of implementation of actions is presented in appendix 8. Agreed action Responsibility Agreed date Document RLEEP lessons learned and best practices PSU Upgrade Knowledge management PSU July 30,2015 Conduct study on value for money and efficiency of PSU Sept. 31,2015 ACF Update annually Programme Implementation Manual PSU July 1, 2015 C. Outputs and outcomes 11. Component 1 (Value Chain Mobilisation and Organisation). Rated as satisfactory. The component 1 has made good progress towards the overall project goal. Some 77% of funds allocated to this component have been spent (status 30 April 2015) with 2 months left until the end of the financial year. This represents a slight improvement as compared to last year s result of 75%. 2

9 12. Sub-Component 1.1: Participatory Value Chain Analysis and Action Plans: The programme changed its approach in the identification of value chains and requested the private sector though a call for expression of interest to identify and develop three value chains i.e. honey, beef and sunflower. This approach was considered faster and less expensive than the usual way through SPs. However, the risk remains that weaknesses of smallholder producers and other value chain actors might not be fully considered as required. The mission observed improved market intelligence among members of Learning Alliances, and support to farmer associations and cooperatives shows a good progress. However, obtaining price information remains a challenge in many areas (e.g. for potato producers). 13. Sub-Component 1.2: Enhancement of Enabling Environment. At the policy level, the programme continues its support to the commodity platforms for legumes and roots/tuber, respectively, and held two national dairy workshops to raise sector-wide policy and production issues. The roots/tuber platform is in the process of formalising its structures following support from the programme. The participation of private sector actors in these platforms, however, remains limited and the programme should engage pro-actively with value chain actors to motivate their participation. In addition, these platforms currently rely on donor funding, which jeopardises their sustainability. Hence, an exit strategy will be required before the RLEEP closes. 39 SPs and government staff have been trained in cooperative management (Training of Trainers - ToT) to carry effective capacity building of farmer groups. The Programme continues its collaboration with Lilongwe University of Agriculture and Natural Resources (LUANAR) on producing improved seed potatoes (LUANAR produced 5 tons of quality seed potatoes in 2014/15 which were distributed to commercial seed multipliers and are further multiplied through a seed-revolving mechanism). 14. Component 2 (Agricultural Productivity Enhancement & Commercialisation). Rated as satisfactory, since a good implementation progress towards the overall programme goal is noted. The utilisation of funds of this component increased from 24% to 37% in 2014/15, as compared to 2013/14. The achievement rates in terms of outputs for this component ranged from 56% to 138% against the AWPB 2014/ Sub-Component 2.1: Engagement of Value Chain Actors in Focal Areas. 16. Substantial progress has been made in the communication of programme activities across a wide array of media (2 TV programmes Milk and Potato, 4 Radio jingles, 6 Newspaper articles) and a publication on farmer case studies. 17. Farm Business Schools (FBS) follow the model of farmer field schools while they focus to a business approach to farming. The training programme comprises three modules (pre-season, inseason, post-season). Participants of the FBS are trained by extension workers from the Agribusiness office at MOAIWD and expected to train their fellow farmers. The FBS trained 5,900 farmers in 2014/15 against the target of 9,500 farmers, representing an achievement rate of 62%. Unfortunately, the implementation rate is affected by limited capacities at Agricultural Extension Development Officer (AEDO) level in terms of staff numbers and other duties of extension officers. FBSs participants (lead farmers) have continued to train their fellow farmers, leading to a multiplication effect. 18. Training of Community Animal Health Worker (CAHW) and Artificial Insemination agents in the dairy value chain seems to be effective, while additional training needs for CAHW were identified by the mission. Following five-day training through a service provider (SP) and the Extension worker (Veterinary), CAHWs are enabled to undertake simple treatments of cows within their community. The CAHW and AI model seem sustainable given the additional income generated from the small service fee charged from both groups of actors. A risk in terms of sustainability is posed by absence of a proper financial and business management of the CAHW s revolving-fund, which is important for veterinary medicine purchases and the provision of working capital for AI technicians. 19. The mission observed that FBSs as well as training of CAHW and Artificial Insemination agents have empowered participants, who now serve their communities as source of knowledge and local service-provider. However, a clear assessment of the outcome and follow-up needs for the trained 3

10 lead farmers will be important in the coming years to ensure documentation of programme outcomes and their sustainability. 20. The programme in collaboration with the SPs identified the needs of the various value chain actors. These needs have partially been addressed through four training workshops for traders in commodity handling, with 138 participants (vs. 100 planned in AWPB). The trainings focused on production and product handling and put less attention to marketing. In the final phase, the programme should focus more on small and large traders, agribusinesses and transporters needs and identify potential areas of support. These could include capacity building in product handling and storage, grading and sorting, business management and access to finance, in order to render the enterprises profitable and sustainable. Access to finance has been repeatedly voiced as a constraint during the interviews with value chain actors. 21. In addition to the national platforms, five EPA level commodity platforms have been established (e.g. for potato in Dedza district). These platforms serve chain actors to raise and address practical issues, compared to the rather policy level discussions at the national platforms. While the mission found that all parties welcomed the establishment of these platforms, it was not clearly documented what are outputs and outcomes. Experiences in other countries suggest that the programme should motivate the participation of farmer representatives and other chain actors and encourage them to bring up their specific issues. The programme should consider measures to sustainability of the platforms beyond RLEEP s closing. 22. The programme has started engaging with large national processors, either through the national commodity platforms (Universal Industries as potato processor, Lilongwe Dairy for milk), or through market/supply linkages, especially the warehouse receipt system with AHL Commodity Exchange and Agricultural Commodity Exchange (ACE). The quality requirements of these final buyers have not been well transmitted to the producer level yet. The programme should address through an even stronger involvement of the larger private sector to train producer groups and traders and disseminate their quality standards. 23. Sub-Component 2.2: Agricultural Commercialisation Fund (ACF). The ACF provides three types of grants: research grants to national research institutions, and small and large grants to NGOs and private sector actors, so called service providers (SPs). It serves as a mechanism to deliver services, skills and technology to producers in all value chains covered by the programme. Small grants are confined to specific areas, while large and research grants cover multiple areas or are even national in scope. Small grants are managed by the district coordinators while large and research grants are managed by the commodity specialist with support of the district field coordinators. The disbursement of the ACF stands currently at 44%, while a large share (approx. 42%) of the total amount has been already committed. Some 14% of the total volume (approx. USD 900,000) remain uncommitted. 24. The performance of the three grant windows is mixed. The research grant window has disbursed 17% only, while the large and small grants disbursed 42% and 71% of the total, respectively. RLEEP succeeded to mobilise 25 large, 4 research and 34 small grants. It suggests that more and different efforts need to be employed in order to identify research needs. Possible areas of interest could be sustainability and scaling up of programme outcomes; access to price information, sustainable business models for FBS, CAHW, Learning Alliances and Village Saving and Loans, as well as capturing of key lessons regarding implementation modalities. 25. Some progress has been made in terms of contributions from beneficiaries and the private sector to match the grant, with cumulative beneficiaries contributions standing at 7% only thus far. As advised by earlier supervision/implementation support missions, it would be useful to understand the efficiency of the ACF mechanism with regard to delivering services and goods to beneficiaries. The Mid-Term Evaluation did not capture this aspect well and there is still no clear understanding of value for money across the 63 SPs. The programme is advised to conduct an assessment of cost per output across the service providers and understand which implementation modality yielded best results in terms of efficiency and sustainability. 4

11 26. Component 3 (Programme Management). This component will be discussed in section D. 27. Component 4: (Infrastructure Development). The implementation of this component is rated satisfactory. The needs assessment was conducted to identify core infrastructures to support the value chain development. The mission noted an increased rate of completion of designs, bid evaluations and tender documents. The programme rehabilitated 300 km of rural roads, which represents 75% of the annual target i.e. 400 km; 100 culverts, against annual target of 100; 14 reinforced concrete bridges against an annual target of 15 (93%); 5 Irish bridges against target of 5 (100%) and completed remaining 20% of carryover warehouses from last year. Despite this encouraging annual progress, more needs to be done to achieve the programme targets. The mission observed that the infrastructures supported addresses relevant challenges identified in value chain, in accordance to project design. However, the size of some of the infrastructure, such as warehouses may pose the risk to achievement of optimum returns to investment due to inadequate capacity of beneficiaries to optimally utilize some of the infrastructures. The beneficiaries need to be supported to develop business plans for the facilities and infrastructures provided by the programme Agreed action Responsibility Agreed date Accelerate use of resources allocated for research grants PSU Oct. 30, 2015 Train beneficiaries of RLEEP infrastructure on O&M PSU/SP Oct. 15, 2015 Update number of programme beneficiaries PSU June 30, 2015 Enhance linkages between farmers and large private sector on produce quality requirements PSU/SP July 30, 2015 Accelerate implementation of component 4 (infrastructure) as reflected in AWPB PSU June 30, 2015 D. RLEEP implementation progress 28. Programme Management Performance. Rated as satisfactory. The project has maintained robust mechanisms, structures and tools for effective programme management and coordination at national level through a dedicated (Programme Support Unit) PSU with designated authority and Programme Steering Committee (PSC), as the oversight body of RLEEP. At local levels, the implementation is coordinated through local level public and private sector institutions and organizations, such as district councils. The PSU has been proactive in addressing challenges to the programme implementation, such as the participation of the private sector, and has been instrumental to steer the RLEEP towards achieving its development objectives. The PSC held all the planned meetings and approved 5 grant proposals during the financial year 2014/15 AWPB, in line with its mandate for oversight and guidance to RLEEP. At local level, RLEEP has been adequately integrated into the public organizational and administrative structures for planning, implementation, monitoring and supervision of development projects through the district council and relevant departments/directorates at district and the Extension Planning Area (EPA) level, which represents the lowest administrative level. 29. Coherence between AWPB and Implementation. Rated as satisfactory. As of 30 th April 2015 RLEEP has used USD 4,616,187 out of USD 6,333,293 as allocated in the AWPB 2014/2015, representing an expenditure rate of 73% for the current financial year. For the same period, the project has achieved more than 75% of the targets in terms of physical progress as presented in the AWPB 2014/2015. Only the sub-component 2.2 is falling behind in terms of implementation of the ACF grants. A number of grant proposals sent to IFAD during March 2015 have been kept pending mainly due to inconsistent documentation and finally received a no-objection from IFAD, after the mission received satisfactory clarifications. 30. Monitoring and Evaluation. Rated as satisfactory. The M&E system at the PSU level is assessed as very comprehensive. Outcome and output monitoring are conducted on a regular basis and data are disaggregated by sex. Moreover, the M&E system is utilized as a management tool by the PSU and the data generated is used by the program in managing the different project activities. 5

12 During the regular meetings conducted at the PSU data generated from the M&E system is used to guide the implementation arrangements and whenever an issue is addressed corrective actions are taken. It would be most useful for further strengthening its targeting of the youth, if the PSU could add to the current M&E system a further level data disaggregation by including youth category (defined as years old). 31. Reporting is comprehensive at the project. The commodity specialists at the PSU receive monthly progress reports from the field coordinators, while service providers provide quarterly progress reports to the relevant commodity specialist. The PSU prepares semi-annual progress reports which are reviewed by the project technical committee and approved by the PSC before submission to IFAD for review. 32. The PSU conducts monthly technical meetings to discuss the progress of activities actual against planned in the AWPB and to prepare the implementation arrangements for the following month. The four district level field coordinators attend these meetings to review the performance of the service providers at the district level. Every Monday morning, a PSU meeting is held to review staff performance and discuss implementation arrangements. 33. The RIMS report for 2014 was submitted to IFAD on March 2015 who reviewed and provided comments to the project for corrective action. The M&E officer has addressed the comments and an amended version of the RIMS report has been sent back to IFAD. 34. A database on the Agricultural Commercialisation Fund (ACF) is managed by the M&E unit in the PSU and captures salient information on service providers, grants types and its outputs and outcomes. Unfortunately, outcomes have not been entered into the system yet in terms of the progress of outcomes by year. A second database (in form of an excel spreadsheet) captures information on farmer groups by service provider, while it lacks detailed information about the beneficiaries for each group. 35. The mission appreciates the initiative by the PSU to conduct a Mid-Term Evaluation (MTE) which aims to deepen the understanding of the findings of the MTR, conducted in The PSU wants to understand which activities and approaches have worked best in order to scale up the successful ones and to address short-comings among the programme interventions. A summary of first findings of the MTE study was presented to the IFAD mission and RLEEP staff. The study suggests a number of positive results and impact related to RLEEP interventions, while it shows also some conceptual limitations. The latter will be detailed in the technical annex of the supervision report for guidance to the consultants team and the PSU. The final MTE report is expected by 30 June Gender focus and Targeting. Rated as satisfactory. RLEEP is focusing on engaging and empowering women through the active participation in value chain activities. As of 30 th of April 2015 women participation averaged at 41% of total target group. Service providers are working on meeting the appraisal targeting criteria for female participation where at least 30% of farmer group members are females and 30% of the leadership positions are held by females. Thus, during the screening process before group formalization females are highly encouraged to actively participate. Field visits conducted by the mission members confirmed a strong gender focus. 37. A gender mainstreaming and youth participation strategy was developed by RLEEP based on the gender audit and youth participation study which was carried by external consultants in February It is commendable that the programme will mainstream this strategy in the next AWPB 2015/ Climate and environment focus. Rated as satisfactory. The programme s impact on the environment including climate change are benign to beneficial, and mainly related to the promotion of GAP, such as the promotion of intercropping, soil coverage in groundnuts cultivation to reduce the loss of moisture, and training on prudent use of agro-chemicals. For the AWPB 2015/2016, the programme intends to include the promotion of conservation agriculture through the provision of training to government extension staff, in collaboration with the IFAD funded Sustainable Agricultural Production Programme (SAPP). 6

13 39. Partnerships. Rated as satisfactory. Building sustainable partnerships has been the key driver to achievement of RLEEP s outcomes. The programme has continued its good performance in establishing public-private partnerships for programme management and implementation at national, district and community levels. Since the supervision mission in 2014 substantial efforts have been put in strengthening mechanisms for enhancing commercial partnerships between smallholder farmers and other actors along the value chain, such as commodity platforms, learning alliances, etc. The focus has been on mobilization and organization of beneficiaries into business linkages with other value chain actors, such as agro-dealers, processors, micro-finance institutions, commodity vendors and aggregators. More effort is required to strengthen hands-on capacity building to smallholder farmers in business management, cooperative and warehouse management and credit and saving skills. 40. Poverty focus. Rated as satisfactory. The project is focusing on selecting the different poor categories. The project is also working on selection of EPAs with the highest level of poverty. The programme is monitoring service providers to ensure that the different poverty categories are included within each farmer group. 41. Effectiveness of targeting approach. Rated as satisfactory. The programme follows up on the targeting approach of service providers to ensure the inclusion of poor, youth and women. Field visits suggest a satisfactory inclusion of youth in various programme activities such as trainings and seed multiplication. Also, the new revolving fund committee includes a youth representative. As of 30 th of April 2015, the programme has reached out to 36,831 direct beneficiary of whom 41% are women. In terms of total outreach, the programme has directly benefited 23,020 households and is close to achieve the end of programme target of 24,000 households. 42. Innovation and learning. Rated as satisfactory. RLEEP s M&E system is able to track best practices at the field level. A total of 16 case studies were conducted and presented in the RLEEP progress reports. The programme produced a publication to present the findings of the case studies and shared them with stakeholders and the wider public. However, the programme is still lacking a consistent approach to document and disseminate best practice for cost effective analysis and to promote replication and scaling up. In terms of innovations, RLEEP has introduced the use of Mandela Cork method for the drying of groundnuts which in turn should reduce aflatoxin, a cancerogenous funghus leading to loss of quality and economic value in groundnuts. Another innovation promoted has been the storage of seed potatoes in diffused light to enhance the survival rate after planting. Agreed action Responsibility Agreed date Document RLEEP lessons learned and best practices PSU Sept Upgrade Knowledge management PSU Sept. 31,2015 Conduct study on value for money and PSU July 15, 2015 efficiency of ACF * Update annually Programme Implementation Manual PSU Aug 30, 2015 E. Fiduciary aspects 43. Financial Management - Overall overview. Rated as moderately satisfactory. From the positives the Programme management have maintained accurate books of account and submitted quality informative financial statements regularly on a quarterly basis. The submission of the WA for replenishment has been carried in a timely manner. However, on the negatives the disbursement of funds from the RBM has been sluggish and denied funds to implementing partners at the right time. The programme management has not been swift to initiate the transfer of the account to a commercial which would resolve cash flow challenge. The combined Loan and Grant disbursement as at 30 April 2015 was SDR 5.9 million or 57% of the combined loan and grant of SDR 10.3 Million. This disbursement rate compares unfavourably with the expected rate of 86% in the 6 th year of implementation. The other negative aspect is failure of the management to oversee and manage the Imprest account whose balance is currently USD 51,000 or 5% of the SPA allocation. The list contains 7

14 items which are over the procedural 14 day limit and dated back to 2014, 2013 and 2012 creating a significant risk of recovery of the initial deposit at programme closure. It was agreed that: a) The programme will initiate and follow-up the migration of the Special account and from the RBM for domicile to an acceptable Commercial bank. b) The programme management will dissolve the current over aged imprests and thereafter maintain only current advances that with the 14 day rule procedure. 44. Financial Systems and internal Controls: The financial systems internal controls and checks have been put in place and are included in the Programme implementation manual. These are Data capture and accounting, Financial Reporting, Cash flow, Auditing and Procurement. The financial procedures are still in the original form and have not been updated since January It was agreed that the procedures will be updated annually to reflect implementation changes and improved financial monitoring and reporting templates. 45. Financial Management Capacity and Reporting: The capacity of the financial controller is supported by two accountants. Computers and other equipment as well as the ACCPAC accounting software have been acquired, installed and put into full use. The key staffs have been trained in IFAD financial management procedures through the IFAD e-learning. The financial reporting is carried out on a quarterly basis that include statements for Financial budget performance against actual by activities, Loan utilisation statements, Cash flow performance and status, and statements of receipts and uses of funds. However, the USD values as presented in the financial statements are not in harmony with the IFAD historical transactions statements. It was agreed that reconciliation will be carried out so as to ensure future reporting is consistent with the IFAD statements. 46. Review of the Designated Account and the Operational accounts: The Special Account allocation of USD 1.0 million is fairly accounted for as at 31 March As of this date, the combined cash position in the SPA and other programme accounts amounted to USD 17,619. Included in the reconciliation is WA 36 for USD 451,804, which has since been settled. Also disclosed is the expenditure pending submission of USD 434,989. Another outstanding is an amount of USD 43,632 being the VAT payments made from the special account and claimable from the MRA. The other item is the imprest amount of USD 52,000 claimable from project staff and other implementing partners, whose list contains unacceptably aged advances. It was agreed that the VAT will be followed up with MRA, and that the imprest account will be dissolved to yield the much needed cash resources by 5 June Disbursement - IFAD Loan and Grant Disbursement: Rated as moderately satisfactory. Given that it is in its 6th year since programme effectiveness, this rate compares unfavourably with the expected rate of 75%. The combined IFAD Loan and Grant disbursement to 30 April 2015 is SDR5.9 million or USD 9.2 million representing 57% of the combined Loan and Grant allocation of SDR 10.3 Million, including the Initial Deposit of USD 1.0million. This status has been reconciled to the IFAD statements. However, the loan utilization, excluding the Initial Deposit is SDR 5.2 million, or USD 8.2 million, and represents utilization level of 51%. The mission has gone further to factor in WA 38 for USD 435,000 or SDR 309,000 equivalents, at the current exchange rates. Consequently, the projected utilization is estimated at SDR 5.5 million or 54% of the loan and grant leaving a balance of SDR 4.8 million or approximately USD 6.7 million at the current exchange rates. 48. Counterpart funds. Rated as moderately satisfactory. The Financing Agreement require the GoM to provide counterpart financial support of up to USD 400,000 to cover Taxes, duties. As at 31 March 2015 the total contribution made was valued at USD 155,000 or 39% of the allocation of USD400,000. However, as of the date of the mission, USD 43,632 in form of VAT is outstanding for collection from MRA. It was agreed that GoM will assist in speedy collection of the VAT amount so as to improve the cash flow position. 49. Compliance with loan covenants. Rated as moderately satisfactory. The review by the mission has not noted any contravention of covenants except the borrowing between funds which is not allowed by the Financing Agreement. 8

15 50. Procurement - Procurement Plan. Rated as satisfactory: The Plan document for 2014/15 with a total estimate of USD 4.3 million is fairly prepared with the requisite milestones spelt out. The items included in the plan are works infrastructure estimated at USD 3.6 million, goods including two motor vehicles estimated at USD 213,000, and service contracts USD 532, Procurement Progress and Contract Management: The bulk of the works infrastructure contracts awards have been pending reportedly waiting for expressions of No Objection from IFAD. Contracts for service providers have been signed and the activities are being carried out accordingly. Most of the goods have also been contracted and supplied. 52. Audit. Rated as satisfactory. The statutory audit is up-to-date with the audit of 2013/14 having been carried out by the private firm of AMG Global. The auditor returned unqualified opinions on the 3 areas of SPA, Financial statements, and SoEs. The management letter review discloses lapses of failure to adhere to some internal control and laid down financial procedures. It was agreed that the PMU will ensure that all the management letter points will be followed up and corrective actions put in place. Agreed action Responsibility Agreed date Adhere to GoM financial procedures in the expenditure FC Ongoing. payments Update the financial and Accounting procedures FC 30 September Follow up for settlement the VAT payments FC 30 June Dissolve the balances over and above 14 days in the NPD/FC 5 June 2015 imprest account of USD 52,000 Initiate the process for migration of the SPA from RBM NPD/FC Immediate Update annually Programme Implementation Manual NPD/FC Annually Harmonise USD figures in the financial statements with the IFAD statements FC 30 June 2015 F. Sustainability 53. Institutions building. Institution Building is rated satisfactory. RLEEP is implemented and managed across the mandate of various institutions, including public sector institutions, such as relevant line ministries, multi-institutional Programme Steering Committee, district councils, village level organizations, value chain actors and service providers. RLEEP has mobilized and build several local business oriented institutions such as farmer organizations (cooperatives and associations), Farm Business Schools, Learning Alliances, and has supported capacity building of these institutions to ensure adequate performance. Other mechanisms such as Saving and Loan initiatives, revolving funds and lead farmer approaches have played a great role in ensuring sustainability of local institutions. The mission noted that there is high level ownership of the local institutions as a result of participatory approaches in their establishment and management. The ownership by the beneficiaries has been achieved through cash and in-kind contributions, credit and savings initiatives, such as revolving funds, and self-management through beneficiaries committees and sub-committees. In addition, the local institutions have taken on a business orientation which together with the ownership fosters a sustainable performance and the potential to be economically viable. 54. Empowerment and social sustainability. During the field visits the mission noted satisfactory empowerment among programme beneficiaries, especially women and youths. Their participation in business oriented capacity building initiatives such as the FBS, Learning Alliances, clubs and cooperatives/associations have provided them a strong base for collective business activities and negotiations competencies with different business partners in the value chains. Farmer Business Schools have substantially enhanced the capacity of beneficiaries in doing farming as business and control their economic relations with other actors. Additional efforts are required to strengthen further community institutions, including farmer organizations, cooperatives and others to enhance their management and business skills to ensure their sustainability. 9

16 55. Quality of beneficiary participation is rated satisfactory. RLEEP continues involving beneficiaries (men, women and youths) in the planning and implementation of programme interventions. All interventions for enhancement of commodity value chains are identified through participatory analysis of constraints and challenges of the value chains. Beneficiaries (men, women and youths) have adequately participated in identification, contribution in kind and supervision of construction works of infrastructures that support value chain development. Mechanisms for participation of beneficiaries in O&M have been put in place by formation of beneficiary infrastructure committees. Additional capacity building is required in the areas of business management, including development of business plans to optimally utilize large investments provided by the programme such as warehouses and processing facilities. 56. Responsiveness of service providers. The engagement of private service providers in promoting market/commercial linkages between farmers and other commodity value chain actors is rated satisfactory. Service provider's support is demand driven, as needs oriented action plans are developed through participatory value chains analysis conducted by project beneficiaries. The mission observed high involvement of beneficiaries (men, women and youths) in the selection, implementation and management of services provided. In all sites visited, the services provided reflect the needs and interests of beneficiaries. The programme field coordinators have involved beneficiaries, to some extent, in the monitoring and evaluation of performance and quality of services providers through monthly field level monitoring. 57. Exit strategy. Rated as moderately satisfactory. RLEEP lacks an articulated exit strategy. The mission noted that a high degree of ownership and strong integration of the programme into government structures, at national, district and EPA levels provide a good basis for the development of a realistic programme exit strategy. In line with the previous missions, the PSU should develop a comprehensive exit strategy for implementation during the remaining programme period as soon as possible. Agreed action Responsibility Agreed date Strengthen capacity of beneficiary associations/cooperatives and others on business planning and management PSU Sept. 30, 2015 Develop sustainable business plans for efficient utilization of infrastructures constructed by RLEEP PSU Sept. 30, 2015 Develop a comprehensive exit strategy PSU Aug. 30, 2015 G. Other 58. Impact on physical and financial assets. Rated as satisfactory. Discussions with beneficiaries during the field visits indicated that income increased through RLEEP supported business linkages, which enables them to acquire physical assets such as additional land, houses, bicycles/motorcycles, livestock and storage facilities. The programme has also assisted farmers to increase their financial assets by building their financial base through community based savings schemes, such as Village Saving and Loan Groups, and other initiatives such as revolving funds. RLEEP has also linked its beneficiaries to Micro-finance Institutions such as Opportunity Bank of Malawi (OBM) to strengthen access to financial services. The enhanced financial base has led to increased ability of beneficiaries access to critical inputs, especially seeds and fertilizers, investment in GAPs and access to education and health services for improved livelihoods. 59. Impact on incomes. Rated as moderately satisfactory. The impact of the project on the income level of the beneficiaries has improved through their participation in project activities, especially those associated with development of market linkages for target commodity value chains. Discussions with beneficiaries of the first phase of the project during the field visits, indicated that they are receiving better prices through collective marketing, access to market information and greater bargaining power, which have resulted to improved household income. For example potatoes farmers 10

17 in Ntchisi district reported increased income from potatoes by 30%. The actual impact of RLEEP on incomes of beneficiaries will be established by the on-going Mid-term Evaluation. 60. Policy impact. RLEEP has supported Commodity Platforms, at both national and local level. The National level commodity platforms such as the Root and Tubers and legumes have great potential to influence policy through evidence based policy dialogues and studies on issues relevant to specific commodities. The programme supported Malawi Bureau of Standards to develop potato standards which has improved quality and markets for potatoes farmers. RLEEP has also supported policy related studies on contract farming, grading and measures, enforcement of seed law to enhance enabling environment for commercialization. 61. Impact on food security. Rated as moderately satisfactory. The efforts and action plans for implementation of nutrition activities in RLEEP interventions were noted. Field visits confirmed progress reports and other documentations on food availability and income increase in the targeted households. For example, the Kahereri farmer group in Kasungu district recorded increased soya harvest from 20.9 MT in 2013 to 22 MT in The increase in harvest resulted to income increase from 2.9 to 3.3 million MKW but it did not seem to have a clear influence on a change in beneficiaries dietary behaviours in terms of food diversity, as ascertained during the interviews. 62. In order to establish a benchmark for monitoring, documenting progress and impact of programme contribution to nutrition, the mission suggested a food knowledge, attitude and practices (KAP) survey to compliment available baseline report. Agreed action Responsibility Agreed date Conduct food KAP survey PSU/SP/DADO Nov. 15/2015 Conduct training in nutrition targeting Districts staff PSU/SP/DADO Aug. 30, 2015 H. Conclusion 63. The implementation of the expansion phase of RLEEP has been successful. RLEEP continues to generate results, experiences and lessons learnt on the basis the pilot phase. RLEEP is on track towards the achievement of its development objective in terms of integration of smallholder farmers into commercial agriculture. Sustainable business partnerships have been established along the commodity value chains, as identified under RLEEP, and the associated commercial systems and processes for market oriented agriculture. During the remaining 2 years of the programme attention should focus on: Develop an exit strategy and strengthen the sustainability of the programme. It includes the phasing out of service providers under the ACF and phase in government budget to continue RLEEP core activities; Strengthen the capacity of beneficiaries for maintaining/developing commercial linkages and partnerships; Fast-track uptake of research grants and improve the utilization of ACF funds and other low spending categories; Complete the construction of key infrastructure in support of value chain development; Plan and carry out studies to assess impact of RLEEP: a) nutrition; b) identify best practices and approaches for scaling up; c) identify pre-condition (drivers and space) for successful scaling up of RLEEP. 64. IFAD and the Government of Malawi endorse the findings of the supervision mission. 11

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19 Appendix 1: Summary of project status and ratings Appendix 1: Summary of project status and ratings Basic Facts Country Malawi Project ID Project Date of Update Supervising Inst. No. of Supervision s Last Supervision 6 26-May Jun-2015 IFAD No. of Implementation Support/Follow-up missions Last Implementation Support/Follow-up mission Sep Loan/DSF/Grant/ASAP , [ ] FI No Top-up Loan/DSF/Grant/ASAP FI No. Approval 13-Dec-2007 Total financing Agreement 23-Jan-2008 Effectiveness lag 21.9 IFAD Total USD million Disb. rate % Entry into force 01-Oct-2009 PAR value IFAD loan First disbursement 14-Apr-2010 DSF grant MTR 15-Dec-2013 Last amendment IFAD grant Original completion 31-Dec-2017 Last audit 05-Jan-2015 ASAP grant Current completion 31-Dec-2017 Domestic Total 2.44 Current closing 30-Jun-2018 National Govern No. of extensions 30-Jun-2018 Beneficiaries Project Performance Ratings 0 External Cofinancing Total Netherlands OFID B.1 Fiduciary Aspects Last Current B.2 Project implementation progress Last Current 1. Quality of financial management Quality of project management Acceptable disbursement rate Performance of M&E Counterpart funds Coherence between AWPB & implementation Compliance with financing covenants Gender focus Compliance with procurement Poverty focus Quality and timeliness of audits Effectiveness of targeting approach Innovation and learning Climate and environment focus 4 5 B.3 Outputs and outcomes Last Current B.4 Sustainability Last Current 1. Component 1- Value chain mobilisation & org Institution building (organizations, etc.) Component 2 - Agricult. Product.Enhance & commerci Empowerment Component 4 - Infrastructure Quality of beneficiary participation 5 5 B.5 Justification of ratings 4. Responsiveness of service providers Exit strategy (readiness and quality) Potential for scaling up and replication 4 5 Component 1 has made good progress towards the overall project goal. Some 77% of funds allocated to this component have 13