Document of The International Fund for Agricultural Development For Official Use Only
REPUBLIC OF GHANA
RURAL ENTERPRISES PROJECT (SRS-38-GH)
INTERIM EVALUATION Volume I: Main Report & Appendices
Report No. 1097 December 2000 Office of Evaluation and Studies RURAL ENTERPRISES PROJECT
INTERIM EVALUATION
AGREEMENT AT COMPLETION POINT*
* The Agreement at Completion Point was prepared in conformity with members of the Core Learning Partnership, viz: Chief Director, Mr. E.P.D. Barnes, Ministry of Environment, Science and Technology; Mr. K Attah-Antwi, Project Coordinator, Rural Enterprises Project; Deputy Director, Mr. K. Okyere , National Development Planning Commission; Mr. M. Manssouri (replacing Mr P. Saint Ange), Country Portfolio Manager, IFAD; Mr. F. Sarassoro, SPMO, UNOPS; and Ms. C. Palmeri, Senior Evaluation Officer, IFAD. In preparation for a possible second phase of the Rural Enterprises Project requested by the Government of Ghana (GOG), the International Fund for Agricultural Development (IFAD) undertook an Interim Evaluation (IE) of the Project in June - July 2000 using the new IFAD approach to evaluation. A Core Learning Partnership of stakeholders set the objectives and key questions for the IE. The members of the Core Learning Partnership, having reviewed the results of the IE, have come to agreement on the following findings, recommendations and follow-up actions.
GENERAL FINDINGS, RECOMMENDATIONS AND AGREED FOLLOW-UP
1. Small-scale enterprise development reduces poverty. New and existing businesses assisted by the Project have contributed to increased economic activity, increased employment and poverty reduction in rural areas. The performance and impact of the Project’s technology and business skills training and counselling programmes to create new businesses and employment demonstrate that they can be used as a model for reducing rural poverty in Ghana.
Recommendation The REP approach to the development of small scale rural enterprises should be used as a means to stimulate growth and reduce poverty in rural areas. The GOG should consider widespread replication of a number investments and activities tested by the project to promote poverty reduction throughout the country.
Agreed Follow-Up The Ministry of Environment Science and Technology supported by the National Development Planning Commission will promote the use of the Rural Enterprise Project model as a means to reduce poverty and stimulate growth in rural areas nationwide. IFAD will favourably consider requests to help finance such efforts.
2. Business Advisory Centres bring most benefits to enterprises. The Business Advisory Centres have been the most successful element of the Rural Enterprise Project model. Their activities have resulted in widespread benefits including increased incomes for entrepreneurs and, for communities, increased employment and economic activity. They have the potential for increased cost-effectiveness and sustainability. However, they could have generated even greater benefits with better support and an expanded mandate (see Specific findings and recommendations below.)
Recommendation Training and advisory services such as those provided by the Business Advisory Centres of the Rural Enterprises Project should be central to any technology-led or other intervention for the development of small scale rural enterprises.
Agreed Follow-Up The Ministry of Environment Science and Technology and the National Development Planning Commission will include business training and advisory services in their efforts to promote small scale enterprise development in Ghana. Any future IFAD-funded investments or activities in support of rural enterprise development will include support to the provision of such services. 2
3. Costs of handling complementary investments through project management too high, limited direct benefits for assisted enterprises. Feeder roads and financial services realised under the Project did provide direct benefits to the population in the project area in terms of access to services, public goods and finance. However, those benefits did not necessarily accrue directly to assisted entrepreneurs. Clients emphasised that, for them, training was the most important project activity. Complementary investments included in project design were not essential to the success of the activities in technology and business training that proved the most valuable to entrepreneurs. More importantly, these investments and activities required disproportionate PCMU inputs diverting scarce management resources that may well have been better applied to the main source of project benefits, in the main areas of management competence.
Recommendation Complementary programmes that help create general conditions favourable to rural enterprise development, especially financial services, should be available to entrepreneurs. However, they should be directly administered by responsible specialised agencies and not by project management units located in ministries with other areas of expertise.
Agreed Follow-Up The National Development Planning Commission, MEST and IFAD will emphasise support to developing business skills and transfer of appropriate technologies as the central means for promoting rural enterprise development in the country. They will fund and administer other investments to complement rural enterprise development, such as rural finance, through other national programmes by the relevant agencies, whilst still making every effort to see that investments complement one another.
4. Traditional apprenticeship system holds still untapped potential. The project Apprenticeship Starter’s Programme to fund the apprenticeship fees within the traditional apprentice system correctly builds on existing social and professional structures. However, project support to the traditional apprenticeship system is not sustainable outside a project setting as it has not been institutionalised and does not fit within any currently existing GOG programmes. It does not take into account the markets for traditional apprentices. And, even in association with the project, the traditional system is not supervised and produces apprentices with a wide range of capabilities. Accreditation, sought by apprentices, is not available to those trained under the traditional system.
Recommendation A national strategy is required to capitalise on the traditional apprenticeship system by integrating it with vocational education.
Agreed Follow-Up MEST, NDPC and IFAD will petition institutions responsible for vocational education to formulate a strategy to link with the traditional apprenticeship system and assist in the formulation of such a strategy.
5. Trade associations excellent intermediaries to reach entrepreneurs . Trade associations have been a critical link between the REP training activities and the clients, by providing potential clients, identifying potential areas for training and providing support to new businesses. They have also provided representatives for the DICs and been the basis for many successful group credit activities. They have developed from their traditional social role when given the opportunity and justification to expand their responsibilities.
Recommendation Links with existing associations to strengthen their capabilities and draw upon their resources should be part of any programme to support rural enterprises. Using trade associations as training and technology service providers should be considered.
Agreed Follow-Up MEST, NDPC and IFAD will explicitly plan for the direct involvement of local trade associations in any future efforts they make to promote rural enterprise development. MEST and NDPC will encourage others working in the sector to work with trade associations. 3
6. Current RTSCs unsuitable to meet national technology priorities, local technology needs. A national priority is adoption of appropriate, cost-effective small-scale technologies, that are environmentally sustainable. However, the design of the Project’s Rural Technology and Service Centres has not proven the best for meeting that priority. RTSCs were important proof of investment capital inflow and rallying points for local political support where they were located. However, they were designed with overly optimistic projections of potential benefits. Although the quality of output and services is high, as currently structured and equipped, they cannot achieve the level of benefits required to cover their costs. They have been short of guidance, management support and co-operation from national bodies responsible for technology development. They have not yet been given sufficient incentives to respond directly to local conditions or reach clients who need adapted technology, technical services and technical skills transfer.
Recommendation. To serve the national priority for the adoption of appropriate small-scale cost- effective technologies that are environmentally sustainable, the Rural Technology and Service Centres model needs major improvements. Incentives should be provided for them to operate in a more business-like fashion, increase cost-effectiveness and create bottom-up processes to obtain client feedback and respond to client needs.
Agreed Follow-Up MEST and IFAD will work in the ongoing Rural Enterprise Project with the current Rural Technology and Service Centres and the institutions responsible for backstopping them to improve their orientation and operations. MEST will not advocate creation of additional Centres of this type until an alternative model has been found and demonstrated to be sustainable.
7. District Implementation Committees are building blocks for better district results. The District Implementation Committee (DIC) model used by REP has facilitated project implementation at district level by including all the stakeholders, particularly clients. It also fits well with GOG decentralisation policies. However, the current level of time put in by DIC members may need to be better rationalised as it could become unsustainable if other related projects operate in a district. Informal co-ordination processes between programmes and projects relating to poverty reduction and small-scale enterprise development at district level are still weak and need to be formalised at both district and national level to improve the effectiveness of coordination.
Recommendation The approach of working with the district administrations, clients and other stakeholders at the district level should be replicated in future efforts. However, the current DIC approach should be improved by delegating operational responsibilities to lower level units, by creating district level mechanisms for better interaction and coordination among projects, and by including clients and implementing agency representatives in all such activities as in the current DICs.
Agreed Follow-Up MEST, NDPC and IFAD will encourage projects to adopt District Implementation Committee approach when working at district level. They will encourage district administrations to delegate operational matters to lower levels and to explicitly provide for coordination when more than one project is working in a given district. They will advocate client and implementing agency representatives in these groups. 4
8. Ministry commitment fosters good project management, good project performance. The REP has been a complex project to manage with a range of skills needed. The pilot programme was managed in an iterative way using implementation experience and stakeholder inputs to adapt and modify the activities to improve performance and impact. The support from MEST, and management by the PCMU, have been essential to project success. The National Committee for Rural Small-Scale Enterprises, (NCRSE) created to steer overall project implementation has also worked to coordinate the activities of the several government institutions that are project implementing agencies or stakeholders.
Recommendation Future programmes should replicate the REP approach to gradual phasing and expansion, so as to allow for adaptation of the approach and modification of activities based on stakeholder inputs and accumulated experience.
Recommendation Given the MEST performance record and its GOG mandate for the technology development, adaptation and transfer essential to small scale rural enterprise development, MEST should play a leading role in developing and managing future programmes in rural enterprise development investments and projects.
Agreed Follow-Up MEST will play a central role in future investments and activities to support the development of small scale rural enterprises. A national level mechanism will be used to coordinate activities in support of rural enterprise development by various government institutions and stakeholders in any future national rural enterprise programme. IFAD will collaborate with MEST in the design and implementation of a Phase II project for rural enterprise development. IFAD will encourage others channelling funds to rural enterprise development to work with MEST in these areas.
9. Opportunity to be business-minded overlooked by project. The project supported training in business skills to help entrepreneurs keep records that would enable them to see their profits and losses, as well as returns to capital and labour. Yet, neglected to “practice what you preach” by not creating a management information system for itself that would allow it to calculate economic returns to GOG and IFAD funds invested in the project. The Project documented physical and financial progress. It also made some effort to assess development impact. However, it did not monitor the financial and economic costs and benefits of the various project services in such a way as to permit a ready assessment of whether they could be sustained financially, or whether it would be desirable to do so from an economic standpoint. Information collected by the Evaluation Team points to high economic returns on a number of investments made through the project, particularly the BACs. With better data this could have been proved unequivocally to policy makers and investors.
Recommendation Future GOG investments in rural enterprise development should include management information systems that record the data necessary to calculate returns on investments made with public sector funds.
Agreed Follow-Up MEST will ensure that programmes and projects it supports have management information systems that take a private enterprise approach to monitoring the “profitability” of each type of project investment made. 5
SPECIFIC FINDINGS, RECOMMENDATIONS and AGREED FOLLOW-UP FOR BUSINESS ADVISORY CENTRES
The success of the Business Advisory Centres has been to a large extent derived from the enthusiasm and drive of their staff and the degree to which the services they did offer corresponded to needs of a large number rural people, especially women. It appears that BACs could have achieved even greater success and higher levels of impact were it not for insufficient funding, limited technical backstopping, low levels of management support and inadequate supervision from responsible institutions. Partly due to these factors, Business Advisory Centres have missed opportunities not originally foreseen at the time of project design such as working to facilitate skills training and support to the traditional master craftsmen through their trade associations.
Recommendation In the future the activities of Business Advisory Centres should be expanded and their mandates clearly specified, with defined performance criteria. They should be expanded into Business Development Centres. These Centres should provide existing technology and business management skills training and also facilitate skills training and support to the traditional master craftsmen through their trade associations.
Agreed Follow-Up MEST and IFAD will expand the mandates of BACs they work with in the future to become Business Development Centres, clearly specifying performance criteria upon which they will be evaluated. NDPC will encourage others working with BACs to do likewise.
Recommendation In the future, funding for Business Centre operations should be increased. Core staff, and core budgets, should be used to facilitate identification of counselling and training needs by clients. Whereas, additional operations funds should be used to contract appropriate government, NGO or private organizations to provide services required.
Agreed Follow-Up MEST and IFAD will support increased funding to Business Centres and assist them in improving arrangements for contracting counselling and training service providers.
Recommendation In the future funding for Business Centre backstopping, management support, and supervision of the Centres should be increased. This should also be undertaken on a contract basis. A range of different service providers including NBSSI, NGOs and private organizations that already provide similar services elsewhere in Ghana could be contracted to provide Centres with backstopping and other support they may require.
Agreed Follow-Up MEST and IFAD will support increased funding to Business Centres backstopping and they will assist Centres in improving arrangements for contracting backstopping and other forms of management or technical support they require.
As for the project generally, systems for managing BAC activities and staff have not provided readily accessible data for monitoring the activities of the BAC staff in each District. This has prevented the BACs from assessing whether target groups are being reached and from determining whether to modify the balance of training programmes between new and existing clients, or to alter the balance of time dedicated to client counselling.
Recommendation Business Centres should have management information systems that include record keeping and collection of data on selected indicators that will allow them to determine whether they are meeting selected performance criteria and to assess their own impact, so that such information may be used to modify operations as necessary.. 6
Agreed Follow-Up MEST and IFAD will ensure that the Business Centres they work with have management information systems that provide them, and the institutions that oversee their work, with relevant management information on their activities, performance and impact. The information will be used to orient Business Centre operations including the drafting of workplans and budgets .
REP charges very small commitment fees for courses and does not charge for counselling visits or meetings. As the REP model aims to make clients business-minded, and Business Centres increasingly need to cover their costs, some project stakeholders have suggested that clients should pay for services. While it would not be appropriate to charge fees to the unemployed or very low income groups for initial counselling and basic services, there is a case for charging fees for skill upgrading and more frequent counselling as the clients go beyond entry-level, reaping income gains and commercial advantage from higher level services.
Recommendation Initial ‘living skills’ and basic technology training and related counselling contacts for the target poor population should continue to have low commitment fees. Training to upgrade technical skills and introduce business management skills and frequent counselling visits should attract an increasing level of fees reflecting some of the value of this training and counselling.
Agreed Follow-Up MEST and IFAD will ensure that the Business Centres they work with introduce fees for services with progressively higher rates to help cover higher level services to relatively more developed enterprises. REPUBLIC OF GHANA
RURAL ENTERPRISES PROJECT (REP) (SRE-38-GH)
INTERIM EVALUATION
Volume I: Main Report & Appendices
TABLE OF CONTENTS Page No.
Map: Location of Project and Participating Districts iii Currency Equivalents v Abbreviations and Acronyms v Project Summary vii Executive Summary ix GENERAL FINDINGS, RECOMMENDATIONS AND AGREED FOLLOW-UP...... 1
I. INTRODUCTION...... 1
A. CONTEXT FOR THE INTERIM EVALUATION...... 1 B. THE PROJECT PLAN ...... 2 C. TARGET GROUP ...... 2 D. PROJECT OBJECTIVES...... 3 E. EXPECTED EFFECTS AND ASSUMPTIONS...... 4 II. IMPLEMENTATION CONTEXT...... 5
III. PROJECT PERFORMANCE AND IMPACT...... 7
A. SUPPORT FOR PROMOTION OF SMALLSCALE ENTERPRISES...... 7 B. RURAL TECHNOLOGY AND SERVICE CENTRES...... 8 C. BUSINESS ADVISORY CENTRE ACTIVITIES...... 13 D. RURAL FINANCE SERVICES SUPPORT COMPONENT ...... 19 E. FEEDER ROAD ACTIVITIES...... 24 F. PROJECT MANAGEMENT ...... 25 G. COORDINATION...... 26 H. FINANCIAL AND ECONOMIC ANALYSIS...... 28 I. IMPACT OF ASSUMPTIONS ON PROJECT IMPLEMENTATION AND OUTCOMES...... 30 IV. SUMMARY FINDINGS TO KEY QUESTIONS ...... 33
V. RECOMMENDATIONS ...... 37
GENERAL RECOMMENDATIONS...... 37
SPECIFIC RECOMMENDATIONS FOR BUSINESS ADVISORY CENTRES ...... 38
VI. LESSONS LEARNED...... 39
LIST OF TABLES
Table 1 Technology and Business Skills Transfer Performance 8 ii
Table 2 Technical Training Course Participants and Businesses Formed or Improved 16 Table 3 Achievements in Rural Finance Support Component 20 Table 4 Achievements in Feeder Roads Components (to end of 1999) 24 Table 5 Returns to Labour From Enterprise Models 29 Table 6 Selected Benefit-Cost Ratios 29
VOLUME I: LIST OF APPENDICES
APPENDIX 1: APPROACH PAPER APPENDIX 2: BRIEF HISTORY, MAJOR EVENTS AND MAJOR DOCUMENTS – REP APPENDIX 3: PEOPLE MET APPENDIX 4: AIDE MEMOIRE APPENDIX 5: SUMMARY OF PROJECT EXPENDITURE APPENDIX 6: EVALUATION OF PROJECT, UNOPS, IFAD AND INTERIM EVALUATION TEAM APPENDIX 7: RECOMMENDATIONS FOR CURRENT RURAL ENTERPRISES PROJECT APPENDIX 8: BIBLIOGRAPHY
VOLUME II: LIST OF ANNEXES
ANNEX 1: SOCIO-ECONOMIC ANALYSIS AND PROFILES OF PROJECT CLIENTS ANNEX 2: TECHNOLOGY DEVELOPMENT TRANSFER AND TRAINING ANNEX 3: BUSINESS MANAGEMENT TRAINING AND COUNSELLING ANNEX 4: RURAL FINANCIAL SERVICES ANNEX 5: FINANCIAL AND ECONOMIC ANALYSIS iii iv v vi
FISCAL YEAR 1 January to 31 December
CURRENCY UNITS Currency = cedi (GHC) 1 USD = GHC 5,200
ABBREVIATIONS AND ACRONYMS
ADB Agricultural Development Bank ARB Association of Rural Banks BAC Business Advisory Centre BAS Business Advisory Section BCR benefit : cost ratio BDC Business Development Centre (proposed for future projects) BDO Business Development Officer BOG Bank of Ghana CLP Core Learning Partnership (part of new IFAD evaluation framework) DAs district assemblies DCE District Chief Executive DCD District Co-ordinating Director DED German Development Service DFR Department of Feeder Roads DIC District Implementation Committee DPCG District Projects Co-ordinating Group EFR Enterprise Facilitator EPD Enterprise Development Network GCB Ghana Commercial Bank GOG Government of Ghana GRATIS Ghana Regional Appropriate Technology Industrial Service GTZ German Agency for Technical Co-operation IEM Interim Evaluation Mission IFAD International Fund for Agricultural Development ISSER Institute of Statistical Social and Economic Research, University of Ghana, Legon ITTU Intermediate Technology Transfer Unit M&E Monitoring and evaluation MEST Ministry of Environment, Science and Technology MIS Management information system MOF Ministry of Finance MOFA Ministry of Food and Agriculture MLGRD Ministry of Local Government and Rural Development MTR Mid Term Review NBSSI Nationa l Board for Small Scale Industry NCRSE National Committee for Rural Small Scale Enterprise NDPC National Development Planning Commission PB Participating bank PCMU Project Coordination and Monitoring Unit POSDEV The Pan African Organisation for Sustainable Development RB Rural bank REDF Rural Enterprise Development Fund REP Rural Enterprises Project RFSP Rural Financial Support Project (World Bank/IFAD) vii
RTBC Rural Technology and Business Centre RTIP Roots and Tubers Improvement Project (IFAD) RTSC Rural Technology and Service Centre SCIMP Smallholder Credit, Input Supply and Marketing Project SSE Small scale enterprises SSEDO SSE Development Officer TES Training evaluation study by POSDEV UNOPS United Nations Office for Project Services VIP Village Improvement Project (co-funded by the World Bank, IFAD and KfW) viii
RURAL ENTERPRISES PROJECT (REP)
(SRE-38-GH)
INTERIM EVALUATION
PROJECT SUMMARY
Region: Central (Ashanti and Brong-Ahafo regions) Type of Project: Rural enterprises development Planned number of beneficiaries: 100,000 Previous IFAD operations in area: Smallholder Credit Input Supply and Marketing Project Co-operating institution: UNOPS Total project cost at appraisal: USD 9.31 million IFAD loan (%): 82.5% Cofinancier: None Borrower contribution: USD 1.18 million Participating Financial Institutions USD 0.45 million Contribution: IFAD Loan Disbursement: USD 5.5 Million (to December 1999) Evaluation (Interim): June 2000 Project identification: October 1992 Preparation: 1993 Appraisal: September 1993 Loan approval: December 1993 Loan Agreement: 23.06.1994 SOF Effectiveness: June 1994 Loan Effectiveness: February 1995 Project Start-up: February 1995 Original closing: March 2002 Present situation: Implementation Other project interventions in area: Village Improvement Project (GH-1002), Roots and Tubers Improvement Project (GH-1053), Rural Financial Services Project (about to commence) ix x
Executive Summary
1. During the period June-July 2000, the IFAD Office of Evaluation and Studies carried out an Interim Evaluation of the Rural Enterprises Project financed by IFAD in Ghana. The IFAD loan to finance this project was approved by IFAD’s Executive Board in December of 1993. The project is due to close in March 2002.
2. The Interim Evaluation was undertaken upon the request of the Government of Ghana to finance a second phase of the project. IFAD procedures require that an Interim Evaluation must be undertaken before designing a second phase.
3. In the evaluation, IFAD has applied a new approach to evaluation being implemented by the Office of Evaluation and Studies since January 2000. The new approach to evaluation is one that emphasises learning through partnership. To promote learning, a Core Learning Partnership is established during the planning stages of the evaluation. The members of the Core Learning Partnership, usually key project stakeholders, guide the evaluation.1 They draft an Approach Paper to orient the evaluation and agree on key questions that the evaluation should investigate. Upon completion of the evaluation, the members of the Core Learning Partnership prepare an Agreement at Completion Point for consideration by the main partners concerned by the evaluation.
The Evaluation
4. The objective of the Interim Evaluation of the Rural Enterprises Project was to provide an analysis of the performance and impact of the project. To achieve this objective, the evaluation was designed to answer seven key questions. They were:
· How was poverty reduced as a result of project activities? · How effective were each of the different project approaches to technology and skills transfer, and why? · Which activities and institutional arrangements led to successful use of financial services by entrepreneurs? · How have joint gains been achieved by exploiting complementarity between this project and other projects or government programmes? · How have District Administrations incorporated Rural Enterprise Project activities in their poverty reduction programmes? · What are the cost implications of sustaining selected Rural Enterprise Project services and institutions after project closure? · How has the performance of international agencies supporting the project influenced its results?
5. On the basis of findings with respect to the key questions, the Evaluation Team was to provide recommendations to guide Government of Ghana policies in the rural enterprise sector. 2 The Evaluation
1 Members of the Core Learning Partnership for this Interim Evaluation are: Mr. E.P.D. Barnes, Chief Director, Ministry of Environment Science and Technology; Mr. K Attah-Antwi, Project Coordinator Rural Enterprise Project; Mr. K. Okyere, Deputy Director, National Development Planning Commission; Mr. M. Manssouri (replacing Mr P. Saint. Ange), Country Portfolio Manager, IFAD; Mr. F. Sarassoro, Senior Programme Management Officer, UNOPS; and, Ms. D.C. Palmeri, Senior Evaluation Officer, IFAD. All Core Learning Partnership members participated in parts of the Evaluation fieldwork. 2 The Interim Evaluation Team was comprised of: Mr I. Teese (Mission Leader / Business Skills Training Specialist), Ms A. A. Quainoo (Rural Finance Specialist), Dr K. Prakah Asante (Technology Development and Transfer xi
Team was also to make recommendations relative to the features of an eventual IFAD-financed Phase II investment in the rural enterprise sector. It was agreed the Core Learning Partnership would conclude the evaluation process by sharing the findings and agreed follow-up actions with colleagues in government, the donor community and other interested parties at a roundtable meeting in September 2000.
6. During the evaluation fieldwork, more than 200 individual clients (previously referred to as beneficiaries) were interviewed in all 13 project districts of Ashanti and Brong Ahafo regions. In addition, the Evaluation team met with groups of trainees and clients, District Chief Executives, District Implementing Committee members and implementing agency staff.. A stakeholder and client workshop was held before the fieldwork began to guide the Evaluation team on the approach and issues related to the key questions. A similar workshop was held upon completion of fieldwork to brief stakeholders on the preliminary findings of the team and obtain their feedback.
The Project
7. The project was identified in October 1992, and approved by the IFAD Executive Board in December 1993. The IFAD loan became effective in February 1995, and will close in March 2002. The Ministry of Environment, Science and Technology, is the responsible ministry in Ghana and the project is implemented by a Project Coordination and Monitoring Unit based in Kumasi. The Ghana Regional Appropriate Technology Industrial Service, the National Board for Small Scale Industries, the Department of Feeder Roads, the Bank of Ghana, the Association of Rural Banks and fifteen participating rural banks work together as implementing agencies in the project. UNOPS supervises the loan as IFAD’s Cooperating Institution. The total cost of the project was estimated to be USD 9.3 million of which USD 7.68 million is funded by IFAD, USD 1.18 million by the GOG and USD 0.45 million by the participating banks. As at 31 December 1999, USD 5.5 million had been disbursed.
8. The objective of the project is to increase rural production, employment and income in order to alleviate poverty through the increased output of small off-farm enterprises. This is being accomplished by: facilitating access to new technology and business advice; promoting easier access to financial services; improving the efficiency of existing small rural enterprises, supporting the creation of new enterprises, and removing communication constraints through feeder road rehabilitation. The project was designed to build on the Government of Ghana’s economic reforms and to encourage individuals and other private sector actors in rural areas to take advantage of opportunities created by the opening up of the economy.
9. The project targets 48 000 families or 300 000 people in the project area who live in poverty. Of these, an estimated 10 000 families live in absolute poverty. At design, it was estimated that direct benefits would accrue to 16 000 families or about 100 000 people in the target group. The design gives special attention to the most vulnerable households, socially disadvantaged women, unemployed youth and those who have been apprenticed to a trade but lack the capital or experience to start a business.
10. The project has three components: (i) Support for the Promotion of Rural Small scale Enterprises, which includes the establishment of Business Advisory Centres, the construction of Rural Technology Service Centres, and the development and transfer of appropriate technologies; (ii) Rural Finance Services Support, which includes lines of credit to eligible participating banks, supported by training for groups and individual beneficiaries in managing credit, deposit facilities, and a monitoring unit for participating rural banks under the Association of Rural Banks that also provided training to selected rural bank staff; and (iii) Infrastructure Support, which includes rehabilitation of 100 km of feeder roads and a further 15 km of spot improvements to improve mobility and access to markets.
Specialist), Dr O. Gyekye (Rural Sociologist), Mr C. Reiner (Financial Analyst) and Dr M. Harper (Enterprise Development Specialist) who joined the Mission for the first 5 days. xii
Project Performance and Impact
11. Amongst the activities undertaken for the promotion of rural small-scale enterprises, those connected with services provided by Business Advisory Centres can be credited with much of the success of the project. Thirteen Business Advisory Centres have been created and have implemented successful programmes to train more than 4 000 individual clients in income generating and business management skills. From this training, about 1 900 new businesses have been established as of June 2000. This is over half the target for the whole project, whilst there are still two years remaining in project implementation. These new businesses have employed 6 000 people. It is projected that 90% of these businesses will succeed, with 40% - 50% growing to become medium size ventures. More than 3 500 existing businesses have also received business skills counselling. This has allowed existing businesses to employ a further 5 000 workers. Hence a combined total of 5 400 new and existing businesses (and their owners) plus approximately 11 000 people employed by them have been directly reached by the project. The majority were women.
12. Rural Technology Service Centres were created, equipped and staffed in three districts. Technology transfer activities were successfully implemented through short and long term training at the Centres for apprentices and for master craftsmen. The training for master craftsmen was one of the most effective of the Technology Centre activities. Technology Centres successfully undertook workshop operations including repair services, manufacturing services and dissemination of information. However, because of the high cost of capital equipment, the relative allocation of Centre resources amongst its various activities, and the relatively limited numbers of clients served, benefits generated do not compare well with total costs. Technology development has been less successful than expected.
13. The Rural Finance services activities of the project have allowed poor and under-capitalised small- scale business people to access the formal credit sector. More than half were women. Up to 70% of the 1 330 loans made as at December 1999 went to businesses which previously had no access to bank loans. However, this is less than half the number of new businesses started and a quarter of total businesses supported. Loan recovery rates have increased from an average of 43% in the Pilot districts at the end of 1997, to an average of 87% across all districts in June 2000. Savings rates in the formal sector have increased by up to 30%. However, only 25% of the resources for on-lending available in the Rural Enterprise Development Fund had been disbursed as of December 1999. Some conditions beyond the control of the Project Coordination and Management Unit have contributed to low performance levels in this component.
14. The Infrastructure Support activities through June 2000 resulted in the rehabilitation of 74km of roads. A study commissioned by the project showed that average traffic volumes – especially taxis and minibuses – on rehabilitated roads increased by 230% as a result. This provided social and economic benefits by providing better access to services and markets. Agricultural production, especially horticulture, has diversified and incomes increased as a result. Approximately 1 100 people have benefited from employment as unskilled labour for road works. However, plans for routine and recurrent maintenance of rehabilitated roads were not complete. There has been little direct complementarity between the feeder roads programme and the financial services, technology or business development activities. Due to contractor problems, the amount of Project Coordination and Management Unit time allocated to this component has been disproportionately high.
15. A major strength of the project has been the flexible approach adopted during project implementation using stakeholder meetings, annual review workshops and targeted consultancies and studies to assess activities and modify implementation to improve effectiveness. These activities have worked well at district level. The project has made efforts to coordinate with other projects and undertake project activities in such a way as to complement the work of others. However, the potential for achieving joint gains was not fully exploited. xiii
The Key Questions
How was poverty reduced as a result of project activities?
16. The Rural Enterprises Project has reduced poverty for self-employed entrepreneurs and employees in new and existing rural enterprises by increasing incomes and by reducing expenditures. The Project has achieved this by several means.
17. The Project has reduced poverty by transferring technical skills to rural people making it easier to get a job or to improve the returns to their own businesses. It has reduced poverty by improving the business skills of rural people, allowing them to start their own business or to reduce costs and increase benefits in their existing businesses. It has reduced poverty by providing low-income people with access to banking services and capital. It has reduced poverty by generating new jobs as new businesses were created or existing businesses expanded. It has reduced poverty by providing facilities for technical services that have allowed small rural entrepreneurs to grow and flourish. It has reduced poverty by providing short-term employment in roads. It has reduced poverty by lowering transaction costs linked to transport for rural people. In all, it has built self-confidence and fostered optimism among rural people with whom it worked.
18. It appears that loan size limitations, training course content and the level of basic technologies supported by the project, functioned as targeting mechanisms, given that more affluent entrepreneurs are unlikely to have sought support at such levels. However, among those who did seek project support, the project has taken a business-like approach. It selected clients for courses, and approved client requests to borrow funds, taking need into account, but using commercial criteria to determine the probability that they would be successful entrepreneurs.
How effective were each of the different project approaches to technology and skills transfer, and why?
19. The Business Advisory Centres have provided the most cost effective technology and skills transfer services. They have helped to establish more than 1 900 new businesses and assisted another 4 000 existing businesses through counselling. This has been achieved despite substantial under-resourcing at the Business Centres. The Business Centres have focused on easily transferable technologies and provided programmes to improve the ‘living skills’ of participants. They have not, however, made significant impact on business management skill development. Business Advisory Centres could have done more had they served as Business Development Centres with a wider role in technology and business management skill training. The successful implementation of the Centres as designed has been achieved through the enthusiastic input of their limited staff, supported by the Project Coordination and Management Unit, as support from the implementing agency was not systematic.
20. The traditional role of trade associations in Ghanaian society has been a key element of the success of the project, as they have provided a strong link between individual clients and the project technology and skills transfer programmes. The associations, which often in the past have had only a social function, have responded very positively to the challenges and opportunities created by the project. This energy and enthusiasm needs to be harnessed and developed in future projects.
21. The Rural Technology Service Centre’s apprenticeship training programme has trained, supported and motivated a small number of apprentices from poor backgrounds at the Technology Centres. It has not been institutionalised, is not part of the formal Government of Ghana vocational education system. It is also not cost-effective in comparison with provision of technical and train-the-trainer training to master craftsmen. The fee support to traditional apprentices to train with master craftsmen has also helped some poor families finance training of youth but it, too, has not been institutionalised. That is, it will not be continued by a government agency once the project has ended. xiv
22. As already identified in the Appraisal document and the Mid-Term Review, support to master craftsmen remains a cost-effective way of developing their businesses and improving the traditional apprenticeship training. In the Project this has been handled through the Rural Technology Service Centres. Hence this will need to be revised in future programmes if there are no district-level Technology Centres.
23. The Rural Technology Service Centres have not yet been able to develop a sustainable model of technology development and transfer. Projections of potential benefits at design were overly optimistic. The Technology Centres provide high quality output and services, but as currently structured, costs exceed benefits. Moreover, they have not been given adequate incentives to respond directly to the needs of local clients for technology development, services and skills transfer. They have not been provided with sufficient guidance or management support needed to re-orient their approaches.
Which activities and institutional arrangements led to successful use of financial services by entrepreneurs?
24. The project activities in financial services have allowed a group of clients who would not normally gain access to bank finance to secure short-term loans without guarantees. The activities and institutional arrangements that have led to the successful use of financial services have included: (i) technology and business skills training activities by non-bank institutions; (ii) supervision and support to participation of clients in both enterprise and banking activities by District Implementation Committee; (iii) careful communication of information about financial services to potential clients in the form of client briefings; (iv) external oversight by the District Implementation Committee of the client selection process by the bank; and, (v) ongoing monitoring of repayments. These have led to significantly higher loan recovery rates. Clients have gone on to secure further loans to develop their businesses. The degree of success achieved in the various participating using these arrangements has been influenced by the character of the banks themselves and other external factors.
How have joint gains been achieved by exploiting complementarity between this project and other projects or government programmes?
25. The project has developed some coordination and management systems that can improve implementation and exploit complementarity between projects in the area. Project activities have incorporated groups from the previous IFAD Smallholder Credit Input Supply and Marketing Project. In Wenchi District, the project has been assisting cashew grower groups working with an international NGO. Eleven of the banks involved in the Smallholder Project have become part of Rural Enterprise Project with higher loan recovery rates. The Project has used a District Implementation Committee approach that is highly regarded by clients and implementing agencies. This district level unit could be a good means through which a project can be more integrated with other district level activities, but this has not yet been explicitly developed as such or made part of a district level system for coordination.
How have District Administrations incorporated Rural Enterprise Project activities in their poverty reduction programmes?
26. Certain District Assemblies, for example Offinso, Kintampo and Tano, and participating banks have adopted the Project credit management and borrower assessment processes (including participation in technology and business management skills training) to implement the Government of Ghana district Poverty Alleviation Loan programme from the District Assembly Common Fund. These processes have led to higher recovery rates for the government Poverty Alleviation Loan programme than when these funds have been allocated by district authorities with other less structured procedures. Some other districts have indicated that they plan to adopt the Project model for funds they have available through the government programme. They are especially interested in the technical and business management skill development they have seen working in the Rural Enterprise Project, but few initiatives have been taken to implement such activities without the Project support. xv
What are the cost implications of sustaining selected Rural Enterprise Project services and institutions after project closure?
27. The total annual costs of the existing Rural Technology Service Centres have been estimated to be, on average, GHC 214 million. This includes replacement of existing assets as well as staff and other operating costs. The costs per client trained at the Centres are significantly higher than through other means. The prices charged for manufacturing and repair services were competitive, but these did not reflect the true cost to the Centre. The exact costs and benefits in adaptive research and technology were not estimated as only roughly 4% of staff time has been dedicated to these activities. The current approach of the Centres in providing the various services and the current share of resources allocated to the various services will not permit sustainable provision of the services. However, the services are useful and there is some evidence of alternative means of providing them - in conjunction with the private sector, trade associations or NGOs – that can be tried in the future.
28. The total annual costs of Business Advisory Centres have been estimated to be, on average, GHC 58 million. Costs per client for training activities (including Business Centre overheads and direct training expenses) range from a low of GHC 15 000 for a one day credit management course to a high of GHC 256 000 for technical training in soap making course. With some improvements in management and resource allocation, the Business Centres could be partly, if not fully, financially self-sufficient, hence sustainable. Moreover, selected benefit/cost ratios calculated on the basis of returns for the supported enterprises are positive, (except for exotic mushrooms). As a result, economic returns to government expenditures to support the Centres are high.
How has the performance of international agencies supporting the project influenced its results?
29. The performance of UNOPS, IFAD and the Evaluation Team was assessed by staff of the Ministry of Environment, Science and Technology, the Project Coordination and Monitoring Unit, the Rural Technology and Service Centres, the Business Advisory Centres and by project clients. The assessment showed that UNOPS support positively influenced project results by listening to and consulting with government counterparts, and taking action to solve project problems. UNOPS also contributed to success by providing clear instructions on procedures. The regular checking on information provided, the time in the field, and the technical advisors it recruited also helped the project. IFAD’s performance was rated as positively influencing project results in similar ways. Aspects of the performance of the Evaluation Mission that stakeholders found to be positive included clear explanations of the work, feedback on information received, and time spent in districts and with clients. Clients and staff of Centres believed that evaluation results would have been better had members of their groups been part of the Evaluation Team.
Recommendations and Follow-Up
30. The Evaluation Team made a number of recommendations and proposed follow-up action related to its recommendations. Those recommendations and follow up actions that are supported and agreed upon by the members Core Learning Partners are detailed in the Agreement at Completion Point. I. INTRODUCTION
A. Context for the Interim Evaluation
1. The Government of Ghana (GOG) believes that the Rural Enterprises Project (REP) has been very successful and, in October 1999, requested the International Fund For Agricultural Development (IFAD) to finance a second phase project to cover investment costs relating to expansion and replication of the REP in areas adjacent to the current project. IFAD procedures require that, before IFAD finances a second phase project, the first phase project must be the subject of an Interim Evaluation (IE). A Mission to undertake an IE of REP was undertaken in June and July 20001 using the new IFAD approach to evaluation as outlined in Appendix 1, this uses a Core Learning Partnership 2 (CLP) of stakeholders to set objectives and key questions for the IE and finalise the recommendations.
2. The objective of the Interim Evaluation is to provide the GOG, IFAD and other interested parties, with an analysis of the performance and impact of REP that can be readily used for two purposes: i) to plan a framework for future investment in rural enterprise development in Ghana; and, ii) to design specific investment activities that can be undertaken within that framework. To guide the evaluation, a series of seven key questions, covering the areas of technology transfer, transfer of technical skills, transfer of business skills, and use of financial services by smallscale entrepreneurs in business development, were framed for investigation.
3. The expected outputs were: (i) to provide detailed replies to the key questions; (ii) recommend major features of an IFAD financed REP Phase II Investment; (iii) recommendations for how to increase complementarity between the project and other investments in rural areas in order to maximise the poverty reduction impact of micro-enterprise development; (iv) Recommendations on strategic directions in policies to promote rural micro-enterprise development for poverty reduction in Ghana.
4. The IE used two field impact surveys of client (previously referred to as beneficiaries3) and trainee groups to frame structured interviews of more than 200 individual clients, District Chief Executives (DCE), District Implementing Committee (DIC) members and implementing agency staff plus groups of trainees and clients. Fieldwork was undertaken in all 13 project districts of Ashanti and Brong Ahafo regions. More
1 Interim Evaluation Mission (IEM) members were: Mr I. Teese (Mission Leader/Business Skills Training Specialist), Ms A. A. Quainoo (Rural Finance Specialist), Dr K. Prakah Asante (Technology Development and Transfer Specialist), Dr O. Gyekye (Rural Sociologist), Mr C. Reiner (Financial Analyst) and Dr M. Harper (Enterprise Development Specialist) who joined the Mission for the first 10 days. Ms D. C. Palmeri, Senior Evaluation Officer, IFAD, joined the Mission from 11 to 16 June. Mr P. St Ange, formerly Country Programme Manager (CPM), IFAD, participated in the Mission opening workshops. Mr M. Mansourri, CPM, IFAD and Mr F. Sarasorro, Senior Portfolio Manager (SPM), United Nations Office for Project Services (UNOPS) participated in the main Debriefing/Wrapup workshop.
2 Members of the Core Learning Partnership are: Mr. E. P.D. Barnes, Chief Director (MEST); Mr K. Attah-Antwi, Project Coordinator, (REP); Mr. K. Okyere , Deputy Director (National Development Planning Commission); Mr M. Mansourri (replacing Mr P. St. Ange), CPM (IFAD); Mr F. Sarassoro, SPMO, (UNOPS); and, Ms C. Palmeri, Senior Evaluation Officer (IFAD).
3 The term client has been adopted as most project activities involve a business relationship between the beneficiary and the implementing agencies. Many of the services provided currently or in future should require the target group to pay at least some of the costs of providing the service to them which will increase their business income. The list of people met are listed in Appendix 3. 2 than 70 clients and staff quantitatively assessed the impacts of the project and the effectiveness of the PCMU and IE Mission. 4 A qualitative assessment was also made of UNOPS and IFAD performance.
5. Meetings were held in Accra with senior officials of the Ministry of Environment, Science and Technology (MEST) and members of the National Committee for Rural Small Enterprise (NCRSE) which is the steering committee of the project. Stakeholder and client workshops were held at the start of the fieldwork to allow all project stakeholders to put forward their views. A Debriefing/Wrap-up meeting in Kumasi on June 26 th presented issues and preliminary recommendations on technical areas for discussion by stakeholder representatives. Regional Wrapup meetings in Mampong and Techiman allowed clients and district staff to participate in the feedback process.
6. The conclusions and recommendations in this draft final report presented to IFAD will be the basis for further consultations with the CLP managing the Interim Evaluation and other stakeholders. Assistance from the PCMU and contributions from PCMU and MEST staff greatly helped the Mission.
B. The Project Plan
7. The project was identified in October 1992, approved in December 1993 (Loan Agreement SRS-38- GH) and became effective in February 19955. The project operates in five districts in Ashanti region and eight districts in Brong Ahafo region in the Transitional agro-climatic zone of central Ghana. The first three years were used as a pilot phase in two districts (Sekyere West and Techiman); activities were expanded to another six districts in 1998 and five districts in 1999. In 1998, two districts (Tano in Brong-Ahafo, Afigya Sekyere in Ashanti) were added to the original 11 districts included in the Appraisal Report. The project is due to be completed in March 2002. The project was designed to build on the GOG’s economic reforms by encouraging private productive activities in the rural areas to take advantage of opportunities created by the opening up and development the economy.
8. The total cost of the project was estimated to be USD 9.3 million of which USD 7.68 million is funded by IFAD, USD 1.18 million by the GOG and USD 0.45 million by the participating banks (PB). As at 31st December 1999, approximately USD 5.5 million had been disbursed.
9. MEST is the responsible government ministry and the project is implemented by a Project Coordination and Monitoring Unit (PCMU) based in Kumasi. UNOPS is the supervising agency. The project and its physical environment are fully described in the 1998 Mid Term Review (MTR) and 1994 Project Appraisal documents.
C. Target Group
10. The project targeted 38 000 families or 237 500 people 6 in the project area who live in poverty with an estimated 10 000 families living in absolute poverty. Special attention was to be given to the most vulnerable households, socially disadvantaged women, unemployed youth and those who have been apprenticed to a trade but lack the capital and/or acumen to start a business.
4 A summary of the responses is provided in Appendix 6.
5 A chronological listing of project events is provided in Appendix 2.
6 As specified in Para. 123 of Appraisal Report. 3
D. Project Objectives
11. The objective of REP is to increase rural production, employment and income so as to alleviate poverty through increased output of small off-farm enterprises, rather than agricultural production itself. This is being accomplished by:
(i) facilitating access to new technology and business advice; (ii) promoting easier access to financial services; (iii) improving the efficiency of existing small rural enterprises and supporting new initiatives; and, (iv) removing communication constraints through feeder road rehabilitation.
12. To achieve its objectives, the project has three components:
(i) Support for the Promotion of Rural Smallscale Enterprises, which includes construction of Rural Technology Service Centres (RTSCs), the establishment of Business Advisory Centres (BACs) and the development and transfer of appropriate technologies. These centres would also oversee a master artisan – apprentice training scheme, and provide ongoing business advice and training to small-scale enterprises; (ii) Rural Finance Services Support which was designed to provide access to the formal financial sector for small rural entrepreneurs who had previously been excluded. This would be achieved by provision of a line of credit to eligible PBs for on-lending, and training for both groups and individual beneficiaries in managing credit and deposit facilities. Additionally, the network of rural banks (RB) would be strengthened by the establishment of an inspectorate under the Association of Rural Banks (ARB) and by providing training to selected rural bank staff; (iii) Infrastructure Support This was to improve mobility and access to markets through the improvement of feeder roads. Light equipment and tools were provided to two labour- based contractors, 100 km of feeder roads were rehabilitated and a further 15 km of road were to receive spot improvements.
13. At the Mid Term Review in early 1998, recommendations made to improve the effectiveness of the project included:
(i) setting up operational framework for the BACs under the auspices of the District Assemblies (DA), National Board of Small Scale Industries (NBSSI), the National Development Planning Commission (NDPC) and Ministry of Local Government and Rural Development (MLGRD); (ii) the DIC include the following as appropriate; District Co-ordinating Director (DCD) and District Planning Officer and District Director of MOFA for DIC, and for NCRSE, representatives of the NPDC and the MLGRD; (iii) fees, however minimal, should be charged for some of the Rural Training and Business Centres’ (RTBC) services such as the preparation of feasibility reports. (iv) training more master craftsmen and apprentices; (v) training should be expanded for master craftsmen and entrepreneurs (vi) REP should provide equipment on hire purchase or other terms that would allow the master craftsmen to meet market demand and train project animated apprentices; (vii) there should be more active collaboration with existing technology-based organisations (viii) enterprises selected for project financing should, in general, be individually operated to facilitate decision-making, rather than groups; (ix) the PBs should take full responsibility for the appraisal of beneficiaries loans; and, (x) an additional capital-intensive contractor should be used in the Techiman District and an additional fully equipped labour-based contractor used in the Sekyere West District; 4
E. Expected Effects and Assumptions
14. Benefits: The project rationale and design assumptions underlying its development developed at appraisal still apply. The overall objective of REP was to diversify the productive base of the rural economy by promoting small-scale enterprises with about 16 000 poor families or approximately 100 000 people 7 with an additional 50 000 jobs being created for unemployed people. The road rehabilitation component was expected to create more jobs and benefit additional people.
15. Women: Because of women’s role in food processing and marketing, the project planned to address women’s needs through training, organization and access to credit. It was stated that technologies to be supported would ease the burden of women and ameliorate their family labour constraint.
16. Environment: As the project would involve people in the planning and management of their own natural resources, this would improve participants understanding of the environmental consequences of the businesses they are establishing.
17. The feeder road construction and rehabilitation was not expected to leave significant environmental impacts because of the use of labour-intensive construction techniques on existing road alignments.
18. Promotion of occupational safety was seen as an important part of the extension and training effort as it would have a positive impact on the rural entrepreneurs.
Assumptions:
(i) The project design assumed that, as economic forecasts at that time were generally positive, clients would find favourable market conditions for new businesses that were established.
(ii) An unstated assumption was that, based on their institutional responsibilities and previous experience, the key implementing agencies – the Ghana Regional Appropriate Technology Industrial Service (GRATIS), NBSSI and the Department of Feeder Roads (DFR), had the capability to implement the planned activities under their responsibility. It was accepted that the RBs would require additional support to implement activities in their component.
(iv) It was assumed that local communities would take responsibility for maintenance of the newly upgraded and rehabilitated feeder roads.
7 As specified in Paragraph 192 of Appraisal Report. 5
II. IMPLEMENTATION CONTEXT
19. The population of Ghana was estimated at 18 million in 1997 with a growth rate of about 3% per annum. Of the total population, 36% lived in urban areas in 1995 compared to 31% in 1980 (World Bank data). The economy has, traditionally, depended to a high degree on primary (agricultural and mineral) production and exports. Exports of minerals (especially gold), cocoa and timber form the bulk of total merchandise exports. The most important economic sector remains agriculture accounting for 37% of GDP in 1999 and employing about 60% of the labour force. Rural small-scale enterprises (SSE) are seen as providing valuable income-generating opportunities for the rural poor outside the agricultural sector.
20. Following a sharp deterioration on the early 1990’s, the economy experienced some recovery in the second half of the 1990s, induced by more rigorous fiscal and monetary policies as well as high export earnings from cocoa (world prices peaked in 1996 and the 1996-99 period saw three good harvests) as well as minerals (raising gold production and shifting to open-pit mining has been able to more than offset falling prices). Until the past six months, the Ghanaian economy performed to the levels projected at appraisal.
21. However, during the first half of 2000 the falling international prices for gold and cocoa and the rising price of oil imports appear to have raised the forex demand greatly, causing the cedi to depreciate by about 60% over six months to GHC 5 800 to the USD at the end of June 2000. This has in turn fuelled inflation, which rose to 17.5% from below 10% in April 2000. At the same time, agriculture has had a good season and tax receipts have risen steadily. While public expectations that prices would rise further and increased GOG spending in the months preceding the presidential elections may maintain the pressure on the cedi, the economic outlook for the trade balance and, in the medium term, the balance of payments is not as weak as it may appear.
22. From the late 1980s, GOG began implementing a decentralization policy for government structures, entrusting development activities to the ten regions, which are further sub-divided into 110 districts of which 103 are rural. DAs are now taking decisions on a wide range of developmental issues, and planning and managing their own programmes. This process has developed further and REP worked very closely with the DAs through the DICs to implement its activities at District level. 6 7
III. PROJECT PERFORMANCE AND IMPACT
23. The project has three components: i) Support for Promotion of Rural Smallscale Enterprises through RTSCs and BACs; ii) Rural Finance Services Support; and, iii) Infrastructure Support. The PCMU managed implementation. The analysis takes account of activities up to December 1999, and, in some cases, has used new project data produced for the Mission.
A. Support for Promotion of Smallscale Enterprises
24. The Support for Promotion of Smallscale Enterprises component included construction of RTSCs, the establishment of BACs and the development and transfer of appropriate technologies. These centres were to also provide ongoing business advice and training to SSEs. The initial concept was that the RTSC and BAC in each district would be combined in a Rural Technology and Business Centre (RTBC) with its own building and facilities. As the cost of developing the first two RTBCs (Mampong and Techiman) was much higher than budgetted, the MTR recommended that only one more RTSC (Drobo) be developed with the remaining districts only having a BAC operating from offices provided by the DAs. Therefore the analysis considers the performance and impact of the RTSCs and BACs separately.
25. Data on progress towards achieving implementation targets and project expenditure to date8 is provided in Table 1 on page 8.
A welder at Mampong, building a rice processing machine
8 A more detailed analysis of planned and actual project expenditure is provided in Appendix 5. 8
Table 1: Technology and Business Skills Transfer Performance
Activity/Indicator TargetA/ Achieved to Proportion of end of 1999 Target Achievements 1. Master craftsmen trained 556 395 71% 2. Apprentices trained 1 796 781 44% 3. Clients trained in SSE technologies 2 430 1 446B/ 60% 4. SSE businesses established 3 400C/ 1 602 47% 5. SSEs provided with counsellingD/ 5 450 2 733 50% Financial Status Appraisal Budget Expenditure to end of 1999 RTSCs and BACsE/ 3 026 1 373 45% Training in SSE technologies 529 251 47% Adaptive Research Fund 331 0 0%
Note: A/ These targets were set at Appraisal or have been revised and included in the Annual Work Plan and Budgets. B/ The number of trainees has been restricted by training budget constraints in 1999 and early 2000 due to project funds being required for feeder road contracts. C/ This target is optimistic as the lack of technical skills is the major constraint to developing new SSEs and these skills are largely provided through training programmes. D/ These are described as distressed businesses in project reports. They are, possibly, more appropriately described as businesses that sought counselling assistance. E/ PCMU accounting data does not separate RTSC costs from BAC costs.
Source: UNOPS Monitoring Indicators reported in REP Annual Report No. 9, 1999
B. Rural Technology and Service Centres
(1) Implementation Experience
26. RTSC activities are based on extending the role of the Intermediate Technology Training Units (ITTU) managed at regional level by GRATIS to the District level. In addition to training technical apprentices within the RTSC, the project introduced support for unemployed and disadvantaged youths to take apprenticeships with suitable traditional craftsmen. The RTSCs were to also undertake development and transfer of technology for the light engineering sector of the rural economy. 9
27. The first two RTSCs cost more than was originally budgetted (final equipment costs more than USD 500 000 for three RTSCs cf. a total Appraisal budget of USD 355 000 for 11 RTSCs and building costs of USD 262 000 for three RTSCs cf. to Appraisal estimates of USD 390 000 for eleven). The over- expenditure was increased by the MTR recommendation that some of the engineering equipment in the RTSCs should be upgraded to make the RTSCs more commercially viable through securing outside work for the specialised equipment only available at the Suame Magazine in Kumasi. GRATIS did not upgrade the management of the RTSCs to take advantage of the better engineering equipment.
Female apprentice blacksmith trained at the RTSC in Techiman
28. RTSC management continued the apprenticeship training and technology development/extension models developed by GRATIS at the ITTUs but the managers employed did not have the same qualifications and experience as those in the ITTUs.
(2) Performance
29. Apprenticeship Starter’s Programme: The project’s innovative programme to facilitate unemployed youth and school dropout obtain apprenticeships within the traditional apprenticeship system, has assisted 353 from the target poor group by paying part of the apprenticeship contract fees and the full costs of basic tools. The first 19 apprentices graduated in December 1999.
30. Visiting Apprentices: 171 apprentices working for master craftsmen have upgraded their skills and learned to use modern equipment in the RTSCs through 3-6 month training programs. In addition a further 80 students from vocational colleges have taken internships in the RTSCs. These numbers are low, given the emphasis that was placed on this activity during appraisal and reinforced at the MTR.
31. Technical Apprentices: The three and four year technical apprentice programmes are being run successfully by the RTSCs. Twenty technical apprentices have been trained with a further 12 scheduled to complete their training in the next twelve months. Most of the current technical apprentices come from poor families. The apprentices were very enthusiastic and felt proud of the newly acquired skills. The intensive on-the-job training seems to have instilled confidence in them and prepared them to establish their own enterprises. The first year programme allowing apprentices to try their hand at all trades taught in the RTSC helped apprentices take up a trade that best suits their natural skills which is important given that some do not have strong academic backgrounds. The provision of theory to support the practical skills is seen as a strength of the programme. Women were recruited as apprentices breaking the traditional norm of keeping the light engineering sector a male domain. 10
32. Technology Transfer to Master Profile on Abena Oforiwa – Apprentice trainee at RTSC Craftsmen: The project design and MTR acknowledged the important role Abena was the third child of five. She was born at Krobo in of master craftsmen in the local Techiman in 1977. Her father taught in the local elementary school, and her mother was selling at the market in Techiman. economy. The RTSC was to use them as Abena began primary school at a day nursery near her father’s the conduit for technology transfer and school when she was three years old. She continued her product quality improvement programs. education in her father’s school, and in 1993 obtained admission Suitably trained masters would qualify into one of the secondary schools in the district. After to admit REP apprentices for vocational completing secondary school in 1996, she responded to a radio training. The project design also announcement asking for applicants to apply for the envisaged the training of master apprenticeship training course under REP. After keen craftsmen or artisans in manufacturing competition, she and three others were selected. high quality products. This sometimes provided the opportunity for an artisan Abena said she was happy to be selected for two main reasons. Firstly, her parents would not have been able to support her to to train on the more sophisticated RTSC further her education. Secondly, it was not common in the machines. 395 master craftsmen have district to see girls working as artisans. As she put it, “when participated in project technical people see me in my working uniform, they become proud of me. training. These activities have I have personal satisfaction that I have become an inspiration to emphasised workshop maintenance and other girls who have been thinking that the profession is only safety, which has led to improved for men. I have become a role model to these girls.” conditions in modernised workshops
Another aspect which she is happy about is that the Centre 33. RTSC Workshop Activities: where she does her training has modern machinery which is not Commercial competition between the available to artisans in the district. She hopes to complete her training soon and seek employment with the RTSC. If that is not RTSC and its clients was discussed possible, she will set up her own workshop either in Kumasi or during the field visits as the range of in Sunyani, where she thinks she will get clients. products listed by the clients included those produced by the RTSC. The RTSCs have manufactured a range of equipment and machines including maize shellers, cassava graters and pressers, and furniture. Evidence in the field, however, did not suggest that the market of the clients have been encroached upon by the RTSCs.
34. There were many instances where specialised equipment at the RTSCs was used by district craftsmen to make repairs beyond their own capabilities, which previously would have had to be taken to tradesmen in the Suame Magazine. Craftsmen gave examples of large time savings and improved service to their customers. Trade associations often referred to the benefits of having specialised equipment in their district.
35. Technology Development, Adaptive Research and Information Transfer: The original project concept included linkages between the RTSCs and GRATIS, the Technology Consultancy Centre (TCC) and the Institute of Industrial Research (IIR) and other related organisations which would lead to adaptive research and product development. It is estimated that less than 4% of staff time is devoted to this important activity. The project design identified field demonstration as one of the tools for technology transfer. The RTSCs have run 36 information seminars since 1998 and made 31 field demonstrations of relevant technologies. Master craftsmen and apprentices were pleased with the information provided by the RTSCs.
36. After some initial meetings, these links between the organisations did not develop; so only limited adaptive development has occurred. A further limitation has been the management capability of staff provided by GRATIS as implementing agency, this weakness was accentuated after implementation of the MTR recommendation to upgrade some equipment in the RTSCs to improve their ability to capture commercial work, without upgrading the management and commercial capabilities of the senior RTSC staff. 11
37. Project Expenditure: The budget summary indicates that these components are underspent. Part of the reason for this is that the salaries and allowances for advisers have been allocated to the Coordination/M&E category.
(3) Impact of Activities
38. Apprenticeships: Given the time allocated to technical apprentice training by the RTSCs (basically one supervisor for each five apprentices) compared to traditional apprenticeships where there is an average of at least 10 apprentices per master (and up to 30), the number of technical apprentices trained is low. Although the technical apprentices are following a defined syllabus, they are not entitled to accreditation. Information in the GRATIS Five Year Business Plan suggests that less than half of apprentices from the ITTU system start their own business with the remainder taking employment as skilled operators. It would be expected that a similar proportion of RTSC trained apprentices will also prefer to work as skilled operators rather than self-employed business people.
39. The RTSC system of apprentice training under the master craftsmen provides opportunities for many more apprentices to develop their technical skills, provides exposure to the experience and entrepreneurial skills of the master craftsmen, such as Yaw Atta9, and promotes collaboration between the RTSC and its clients.
40. However, most master craftsmen continue to follow an informal approach, Stephen Opoku, apprentice automechanic trained by master craftsman at Jaman. which has weaknesses. Apprentices are, in some cases, being unduly exploited; could not receive adequate support as the master craftsman-apprentice ratio was too low (down to 1:30) and training was not properly structured to benefit the apprentice. Also, some of the masters lack basic primary education and their capability to impart useful skill and knowledge to the apprentice is suspect. Furthermore, complementary training by the RTSCs is weak.
9 More detailed profiles on 19 REP clients are presented in Annex 1. 12
(4) Issues Profile on Yaw Atta: A client who has diversified his enterprise 41. Balance of RTSC Training: Yaw Atta, aged 41, was apprenticed to a master welder and, through hard work and determination, became one of the best master gas Analysis of the relative resource welder in Sekyere West District. In 1995, he became a client of the commitments to the roles of the RTSC REP under the master craftsman training programme. He studied indicates that, as recommended in the business management, book keeping, banking practices and safety in MTR, there is still a need to change the workshop. As a result of the training programme, Yaw has the emphasis from training of diversified his business and is now using arch/electric welding technical and visiting apprentices to technology. Yaw’s business has taken a positive turn after his training of master craftsmen. The participation in the REP activities. He now has 35 apprentices current structure of the RTSCs has not undergoing training, six of whom are not paying any fees because achieved the outputs projected at their parents could not afford to pay the required apprenticeship fees. appraisal due to confusion as to their Yaw also employs two of his graduate apprentices on a full time intended roles and inadequate basis. The RTSC at Mampong has assisted three of his graduate apprentices to successfully establish their own workshops. management to take advantage of the upgraded workshops. According to Yaw, the training received has enabled him to manage his business properly. Before the training as he stated: “I was 42. The REP apprenticeship spending the money I received anyhow without making any savings. programmes are working between the Sometimes payment became difficult. I could not manage my home formal vocational education system, properly and there were frequent quarrels between myself and my which provides more theoretical than wife. All these are the things of the past. ” practical training and the unregulated and non-accredited traditional Yaw now keeps proper accounts of his business and even maintains apprenticeship system, which provides time sheets for the attendance of the apprentices. As he puts it: “I can now measure things properly. Formerly, I was using my eyes to practical experience and exposure to measure things.” Yaw was able to access loans of GHC 15.4 million commercial activities but is of variable to buy welding machines and other tools. He has repaid GHC 10.2 quality. Technical apprentices from million of the loans. the RTSCs want to gain some form of accreditation to enhance their income Since 1995, Yaw had been able to build his own house on a plot he earning potential. Apprentices bought when he first came to Mampong. He has three vehicles – a working for good master craftsmen five tonne truck, a 15 seat passenger bus and a taxi. His three children develop comparable skill levels but are attending international school at Mampong. there is currently no way to regulate or monitor traditional apprenticeship training to allow an accreditation scheme to be implemented. Any proposed scheme will need to allow for the different educational backgrounds of the different types of apprentices and recognize the place of technical apprenticeships for less academic students who may have a natural flair for a trade.
43. Technology Development and Adaption: RTSC workshop activities should be reduced to provide only specialised services not available from other master craftsmen and greater emphasis needs to be put on technology development (and adaption) and information transfer. These changes will require a significant change in management philosophy and skills, which may need to be sourced from outside the current GRATIS system. The GRATIS technology adaption model (top down) has not worked in REP and future projects should test alternative approaches to bottom up driven technology adaption as most innovations come from users, not researchers. This can be achieved by inviting groups of producers and/or trade associations to participate in targeted hands-on workshops at the shop floor where the technology is being used. Participants should be challenged to assess each part of the production process to identify areas where the equipment or production processes can be improved. BAC staff, supported by ITTU or RTSC staff could facilitate the process.
44. Role of Current RTSCs: Several reports and workshops have highlighted the need to restructure the management and ownership of the RTSCs before the current project ends. The highest priority is management of the RTSCs, whereas ownership of the assets is not as critical as they belong to GOG which 13 only has to allocate responsibility (and funding) to maintaining the assets. An important element of considering alternative management proposals will be development of detailed terms of references, specified outputs to be provided by the RTSCs to meet the needs of their clients and contractual arrangements to provide training services to be funded by GOG. Alternative management structures could include:
(i) Transferring the management (most importantly) or management and assets of the RTSCs to trade associations or individuals who would provide contract services where required; (ii) Inviting the GRATIS foundation to include the RTSCs in their network of ITTUs to offer business services to clients in cooperation with the District Assembly and trade associations. This approach aligns with GOG directions for national R&D organisations such as GRATIS to work with Districts to address their technology needs; or,
Adiyie Boake Yiadom, Tailor at Agona (Afigya Sekyere District)
(iii) Seeking tenders from qualified organisations to operate the RTSCs on behalf of the project.
45. Role of RTSCs in Future Projects: RTSCs based on the current model cannot be justified in future projects. However, the need for some level of technology service centers at District centres remains. A possible model would be for trade associations, individuals or groups to set up private centres with specialised equipment identified on a commercial basis, which will be linked closely with the existing RTSCs and ITTUs for technology development and transfer. The equipment could be housed in a private workshop with assured access for all master craftsman, or the DA may identify a suitable building, which would be rented. The DICs could assist the manager to obtain loans for basic equipment. Training services could be contracted out to specialists if necessary.
C. Business Advisory Centre Activities
(1) Implementation Experience
46. The impact of the BAC activities has been good considering the lack of staff resources and support. The BACs have only 13 professional staff compared with the planned 39 staff. The implementing agency, NBSSI, has only been able to provide 10 staff with DAs funding the BAC positions in three districts10. The shortfall in resources was identified at the MTR but ongoing discussions with NBSSI have not been able to improve the situation, which is limiting project effectiveness and impact. The staff are mostly inexperienced recent graduates with six months of specialised training and are working without regular technical and institutional support. Their enthusiasm and energy is highly regarded by clients and has
10 This was possible because several REP districts were part of an earlier GTZ project to establish and strengthen BACs in these areas. Local staff were selected and trained and became available when the GTZ project was closed down early. 14 largely offset their lack of commercial experience. Fortunately a senior BAC officer has taken on the mentoring role for less experienced staff members.
47. Initially the BAC staff took a major role in appraising loan applicants but, following the MTR, this role has now been transferred to the PBs. To create awareness of the skill development activities, the BAC staff, with assistance from the DICs, run sensitization meetings in towns and villages where the DIC wishes to target activities. At these meetings, potential clients are made aware of the range of technology training courses available and are invited to express interest in undertaking training courses.
48. Funding for training courses has been limited during the second half of 1999 because of the need for funds to meet feeder road construction contracts. BAC staff were asked to redirect their efforts from sensitization of potential clients to followup and counselling of existing clients. Therefore the training performance is lower than what it would have been if budgetted funding had been available.
49. The BACs have three main functions: technology and management training, business counselling and, in most districts, a business development role. There is a conflict between provision of mostly free training and providing business advice, which has value to an individual client. If the same officer provides both services to the client, it can be difficult to separate the value of each.
(2Profile) Technology on Hilda Ayensu Training – A client Performance who has added another enterprise to an existing one 50. The BACs have facilitated an estimated Hilda was born in 1966 in the Volta Region of Ghana. She 11 was the seventh out of eight children. Their father was in the 52 short courses in technologies including 12 Ghana Police Service, which meant they were transferred soap making, batik tie and dye, pomade and several times, allowing Hilda to pick up several Ghanaian powder making, baking and confectionery languages. making, beekeeping, mushroom growing and snail farming which can be adopted by new When she married, her husband encouraged her to take a small businesses. It is estimated that more than vocational course, and she decided to study dress making. 1 900 clients from project districts have After a three year course, she set up a workshop, her elder undertaken 5 – 20 day training courses in these sister giving her the initial capital for the enterprise. She has technologies. Clients have indicated that the already trained five apprentices. courses and resource staff used have provided Between April and August however, dress making is not a valuable skills and support that have been used profitable business and Hilda found it difficult to manage by the majority of participants to develop new the house financially. She decided to participate in the REP businesses. one week course in soap and pomade making, and with the financial assistance of her husband together with her own 51. Some of the courses have had up to 40 savings, she started a soap making business. participants which is larger than can be satisfactorily trained, particularly when there are Hilda makes a profit margin of GHC 200 000 per week, and, trainees with limited literacy and numeracy from the profit, has been able to construct a big shed from skills. The issue of literacy and numeracy where she makes the soap. Her husband, a trader in food and household goods, has decided to stop his trading activity and training has been raised through the project life concentrate on soap production. Hilda believes that the but has not affected training course participation project should organise an advanced course for them to as evidenced by the high participation rates. improve upon their skill instead of solely training new Some modifications to the training material and members who will saturate the market. training techniques to use experiential learning techniques with case studies and work on
11 All information on technology and business management training courses are based on returns from 12 of the 13 districts.
12 Pomade is a skin cream made by mixing petroleum jelly and other ingredients and then packing the mix in small containers for sale. A constraint is the availability of small plastic containers and labels for the containers which are seen to provide a marketing advantage. 15 participants’ own business plans would reduce the constraints13. Training programs in areas such as marketing should use action learning programs where participants practice the skills taught.14 Literacy and numeracy skill development should be seen as part of the adult education system, not a core activity of a REP type project.
52. There is a limited range of technology training courses but courses have been fully utilised within the constraints of funding which has been restricted for the past 12 months due to other project commitments. The Appraisal document, baseline studies and training manuals all suggested a greater range of possible courses. This has not occurred because demand for the limited number of courses being offered has been high. Snail farming and, possibly, mushroom growing may not be suitable ventures for a poor person to start as full time business. The snail venture takes too long to generate income and production of local mushrooms is not profitable enough for loan-based establishment15.
53. Cost recovery from participants in training courses is very low with the fees only covering meals and snacks. However, clients who have developed their own businesses in soap making and pomade making strongly indicated that they would like refresher and update courses to upgrade their skills and provide a marketing edge to develop their businesses further. Most of these clients indicated that they would be prepared to pay more than a nominal fee for the courses16.
54. The project continues to refine its screening process to reduce the number of technical trainees who will not be able to start a business. An early issue was that clients were not aware of the capital needs and borrowing conditions applied to new startup loans so they could not start their businesses after the courses. This has been addressed by holding orientation seminars before courses to highlight capital requirement and the need for an entrepreneurial outlook. The major constraint to conversion of skills developed at the courses into new businesses has been lack of capital (and loans), not technical skills.
Employees of Nana Yaw-Addo, soap maker at Sekyere, forming soap balls from the cut-off of bar soap making
13 To assist illiterate trainees, an ILO project has used videotapes and live videos to illustrate the steps involved in arc welding a new product so that the trainees can see what has to be done and then see how each of the group progresses.
14 The ILO funded Farm Implements and Tools programme across Ghana in the mid 1990’s trialled activities called ‘Rapid Market Appraisals’ where craftsmen participants in a four morning course identified a potential product, then went out and tested the market for the product.
15 A financial analysis of the enterprises supported is provided in the Financial and Economics Analysis Annex (Annex 5) and is summarised in Chapter III, Section H.
16 One soap maker in Tano indicated that members of her soap making association would pay up to GHC 100 000 each for an advanced course in soap making. 16
(3) Performance of Business Management Skills Activities
55. REP has offered at least 180 business management and credit awareness training courses to more than 4 000 participants by June 2000. Because some clients have taken more than one of the business or credit courses offered, the number of clients assisted is about 3 500. Most participants in technology training programs have undertaken a management training course. About 2 800 clients have attended the business management appreciation, entrepreneurial awareness and Start Your Own Business seminars.
56. Business counselling is the other major activity in business skill development. Counselling is provided as part of the training programs and to about 4 000 non trainee clients. The inputs range from the 2-3 follow up visits after training courses to intensive inputs to 10% - 15% of clients17. In some cases, clients have still seen the BAC role as facilitating loan applications. Clients believe that business management training and/or counselling services have led to changes in mainly attitudes and some practices, which increased profitability and cash incomes. As for training, no charges are made for counselling services.
(4) Impact of SSE Training and Counselling
57. The BAC concept is the core of the success of the REP and needs greater emphasis in future programs and projects. They have implemented a successful programme to train more than 4 900 individual clients in income generating and business management skills. From this training, about 1 900 new businesses have been established which is over half the target for the whole project with two years remaining. These businesses have employed another 5 500 people. It is projected that 90% of these businesses will succeed with 40% - 50%% growing to become medium size ventures. More than 4 000 existing businesses have also received business skills counselling which has allowed them to employ a further 3 900 workers.
Table 2: Technical Training Course Participants and Businesses Formed or Improved 1995-97 1998 1999 2000 to Total June Districts in project 2 8 13 13
Estimated participants in technical training 58 58 803 716B/ 301B/ 1 879 coursesA/ Estimated businesses started 4 4 576 1 040 284 1 904
Estimated businesses improved 78 78 229 533 246 1 086 (REP technologies)
A/ Estimates based on BAC data received from one pilot district, five second year districts and six first year districts. B/ The number of training courses in 1999 and to date in 2000 has been limited by cashflow problems arising from payments on the feeder roads contracts.
Source: Project records and Consultant estimates
17 These estimates are based on data collected from the BACs during the field work. 17
58. An estimated 5 000 additional jobs have been created for mostly apprentices (who receive minimal payment) and some paid workers and product distributors working on commission. Flow-on benefits from the extra jobs created will take several years to reach their potential as apprentices leave and start their own businesses or become paid employees.
59. Clients who, after completing a course, trained other people who could not gain access to the course have boosted the impact of the technology training programme in some districts. In Techiman, one of the first trainees in mushroom growing has become the resource person. The REP intervention is leading to flow-on effects in skill transfers to indirect beneficiaries who also establish businesses. This has led to the number of businesses formed being similar to the number of initial trainees even though some trainees could not raise necessary working capital to start their own enterprise or were not suited to the enterprise.
60. Training Effectiveness: There is strong anecdotal evidence from clients that the training sessions on savings culture, spending management and costing had had a large impact on the clients with clients claiming cash savings of up to GHC 100 000/month from changes in their business management and spending practices. Many of the clients interviewed had a clear vision in their mind of where they wanted their business to be (in strong contrast to some non clients spoken to, a majority of whom had trouble articulating the steps that were needed to get to their desired end point). Also some clients did not understand the implications of the business they were starting and/or loan they were taking out.
61. The training evaluation study18 (TES) found that the adoption rate of formal business management practices such as record/book keeping were being implemented by 31% of the 897 respondents across the eight pilot and second year districts but with major differences across districts. In Ejura Sekyedumase, 70% of respondents kept records while over 40% of respondents in Techiman and Jaman kept them. Mission field visits did not find these rates of adoption. The TES response to banking culture practices was 22%. There were very low responses to market survey and customer relations, although in part this could reflect on the short period that clients have been operating their businesses. Caution needs to be taken in using adoption of management tools as a measure of business improvement as even in developed rural economies less than half the small businesses would have formalised bookkeeping systems or a written business plan.
62. The project has had excellent results in delivering ‘living’ skills – thrift, savings culture, cost consciousness, personal discipline, etc. which are useful to all potential clients in their own life, but is weaker in delivering actual business management skills such as budgeting and planning which are needed to make a business grow and adapt to changing conditions. Clients will not seek out these skills until they can see the need for them in developing their own businesses.
63. Given the project’s emphasis on assisting poor people who will gain benefits from receiving ‘living’ skills training alone, the current practice of not charging for the first training courses and providing free initial business counselling should continue. However, once the clients start to develop their business or need assistance for their second loan application, the clients should contribute an increasing proportion of the costs of the training and counselling costs to help recover some costs and also to ration the services.
18 The study titled Evaluation of Beneficiary Training March 2000 undertaken by The Pan African Organisation for Sustainable Development (POSDEV). 18
(5) Other Issues
64. Role of Trade Associations : An important element of the success of the project has been the involvement of trade associations which provide a link between project activities and individual businesses. These have been a traditional part of Ghanaian social structures with varying levels of involvement and activity. In many cases they have been a social grouping only collecting money for members’ families at funerals. In towns like Offinso and Drobo, the associations meet regularly each week and exchange technical and management information. In most project Districts, the existing trade associations have developed their capabilities and new trade associations have been established for new enterprises such as soap making. In most Districts, executives of the main trade associations are the client representatives on the DIC.
65. Group formation has been noted to act as a catalyst for socio-economic development among low income earning operators, being farmers or small business operators. However, it has not always been easy to organise such groups to function properly in Ghana. Among problems often identified to account for the failure of these groups include lack of trust among officials, misappropriation group funds, ethnic groupings, religious differences, etc. Despite the
Members of a wood carving group at Sekyere making wooden mortars problems mentioned, some groups under REP are functioning well. The members have been able to access credit and repay all the credit given to them. A typical successful group is the Denten - Offinso Dressmakers Association.
66. The project has been providing group facilitation training and counselling to groups which operate similar businesses and have sought credit but has not specifically targeted the trade associations with capability building activities. Further training in group dynamics, working in groups and group business management should lead project activities in new districts and will also improve the capabilities of client representatives on the DICs. 19
A Good Borrowing Group: Denten-Offinso Dressmakers Association
The Offinso Dressmakers Association was formed ten years ago at the instigation of the Queen Mother of Offinso. The association represents more than twenty societies in towns and villages in the district with a membership of from five to more than 30 members. Association executive members are drawn from the societies
The Denten Group was formed to bring together the numerous dressmakers in the town to promote their industry and help one another. All trained dressmakers can be members of the group. The group has rules and regulations covering the amounts to be paid as apprenticeship fees, the duration of apprenticeship training, fees to be charged for sewing clothes and dresses, what to be done for a members in time of sickness of a member, death of a relative or the member and any other issues which will affect the interest of a member. There is a disciplinary committee. The association meets monthly with monthly dues of GHC 2 000.
Before the group was formed the individual members were doing business on their own. They did not have any rules regarding charges for sewing dress, each dressmaker charged what she liked. This often led to quarrels among customers and the dressmakers as some customers often felt cheated.
Until the members of the group were given credit facilities two years ago, they had not obtained any material benefits from their membership. Emphasis has been on the social benefits. After participating in the BAC training programme the members were given loans of various sums depending on each member’s request. These were repaid and further loans have been taken out since the beginning of the year.
The association organised a fashion show last year where members displayed the latest styles in dress making. The group hopes to bulk buy materials for their business to share among members. This should reduce unit costs. There is keen competition and rivalry among members who are always trying to sew the latest styles. This has a positive effect since members are now encouraged to improve their performance to the advantage of their customers.
D. Rural Finance Services Support Component
(1) Implementation Experience
67. Financial services to entrepreneurs were upgraded through this component which included provision of a line of credit to eligible participating banks (PB) for on-lending, and training for both groups and individual beneficiaries in managing credit and deposit facilities. A monitoring unit was developed at the Association of Rural banks in Kumasi (the ARBMU) to monitor activities of the RBs and to train bank staff. Data on progress towards achieving implementation targets and project expenditure to date is provided in Table 3. 20
Table 3 Achievements in Rural Finance Support Component
Activity/Indicator TargetA/ Achieved to end Proportion of of 1999 Target 1. Participating banks 20A/ 15 75% 2. Credit extended (GHC million) 2 344 1 039 44% 3. Credit clients 7 560 1 330 18% 4. Women credit clients 5 200 848 16% 5. Rural Bank staff trained 320 282 88% Financial Status Appraisal Budget Expenditure to end of 1999 REDF 2 255 569 25% ARBMU 282 208 74% Note: A/ These targets were set at Appraisal or have been revised and included in the Annual Work Plan and Budget. Source: UNOPS Monitoring Indicators reported in REP Annual Report No. 9, 1999
68. The number of PBs (15) is still below the target number (20) because of the requirements for PBs to meet prudential requirements including that they have no outstanding debts from other loan programmes through the BOG. Each bank has project officers responsible for REP lending.
69. Learning from the experience of previous projects, REP did not directly fund the PBs’ activities in lending to the target group, except for providing motorbikes for bank project officers to use to visit clients. In earlier projects, the costs of project officers were directly supported. Lending margins for the participating banks in REP were established to cover all the costs of servicing the large number of small loan accounts. A margin of 26.5% was allowed by REP to cover bank lending costs to REP clients as well as a margin for the risk fund.
70. Also, based on previous project experience, a major effort was put into the early communications/sensitization activities by the DIC and BAC staff in each District to ensure that clients understood that the REP loans were at commercial rates and should be repaid.
71. In the Pilot Phase, the BAC staff took a major role in developing and appraising client loan applications. This led to some confusion and lack of clarity in the PBs responsibility for servicing the new clients and also in developing a strong bank – client relationship. The MTR recommendation that the BAC staff should reduce their involvement in these activities giving the bank project officers full responsibility for loan appraisal has been taken up. However, the BAC staff still have inputs into selecting suitable clients through inputs into the DIC screening process of proposed borrowers. This screening process was spelt out in the Project Credit Operation manual with a subcommittee of the DIC responsible for the process. In practice, many of the DICs have not set up this subcommittee and have been undertaking the screening at DIC level, taking more of their time.
72. The Association of Rural Banks Monitoring Unit (ARBMU) This was established by the project to address capacity building constraints of the participating rural banks found in earlier projects, train the rural banks in response to their identified needs, monitor and inspect the operations of rural banks and provide them with on-site technical assistance for the adoption of relevant and appropriate procedures to ensure more efficient operations. 21
(2) Performance
73. Loan Recovery Rates Recovery rates averaged 80% at the end of December 1999 and have reached 87% at the end of June 2000, which is up from 80% in December 1999 when five out of the 23 PBs had reached the preferred level of 100% recovery rates19. This a marked increase from the 43% recovery rate at the end of 1997 in the Pilot Districts. SCIMP, REP loan recovery rates at the end of 1999 had just matched those of SCIMP at the end of 1998 but have now started to improve above the recovery rates achieved by SCIMP due to extra inputs made by the DICs and DAs. However, 100% loan recovery (as achieved by at least three banks now) has to be the target for future projects given the resources, skill development and, selection and monitoring systems that have been developed and put in place.
74. Following recommendations made in the MTR and closer adherence to the Project Credit Manual (developed in 1995 based on experience from earlier IFAD supported projects including SCIMP), the improvements in recovery rates for REP loans relative to other programs are attributed to: the DICs implementing credit awareness programs and screening, then monitoring the performance of new borrowers; entrepreneurial training provided by the BACs, strong group cohesion (where it exists), effective monitoring by bank staff and the inputs by the DICs. Recovery rates are also high where experienced bank staff have been retained or have previously implemented micro-credit or small-scale loan funds. Lending was also higher in banks in this group. Coordination and co-operation at District level has greatly reduced loan duplication and repayment avoidance.
75. Savings Mobilisation: Banks have reported up to a 30% increase in savings, partly because funds have to be deposited in the banks before loans can be approved. The project has not incorporated the traditional susu collector or group into its operations even though more than 50% of savings deposits by small scale businesses each month would be made through these systems. The susu system can manage regular small deposits that are too small for the normal banking system and provides a more convenient service for many rural businesses by eliminating the need to go to a bank to deposit small amounts of cash each day20. A disadvantage is the time lag in savings records this creates, as the lag is not recognised in project credit guidelines. Also deposits held in non-participating banks are not taken into account when assessing approved savings periods.
76. Bank Performance Some of the problems highlighted by the MTR: the unduly long loan processing period and its effect on prices and, hence, cost-overruns; bad timing of credit disbursement; and inadequate loan supervision and monitoring on the part of PBs, are still reducing performance.
77. The most disappointing area has been the long loan processing time where REP has taken up to twice as long as SCIMP to disburse loans. Although DIC/BAC involvement in the client selection/loan approval process has extended the period marginally, the main problem appears to be in the flow of funds from the BOG as PBs are not prepared to pre-finance loans before the funds are received from BOG.
78. There is much discussion at all levels of the project of developing a ‘savings culture’. There is a greater need for banks to develop a ‘client culture’ where customers are seen as part of an ongoing banking business, not just as people who deposit money and want cheap loans.
19 Two of these banks had recovery rates greater than 100% as clients had made advance payments on the loans.
20 A susu collector visits clients regularly to collect savings and then repays the funds at the end of each month less a service fee of 1/30. The collector deposits the funds in a bank each day. Currently, most collectors return the funds at the end of each month that creates cash flow issues for businesses on a different credit cycle. 22
79. Loan Disbursement Levels The project has loaned only 25% of the total funds available in the Rural Enterprise Development Fund (REDF) and 36% of the budgeted amount to the end of 1999. Part of the reason for low disbursements is that training programmes in 1999 were restricted by lack of funds, while in the year 2000, they are being restricted by other project activities and the coming presidential elections. No hard evidence was found of high interest rates21 being a significant constraint to potential borrowers. A reason for low disbursement of REP credit by some Rural Banks is a lack of understanding of bank Board members of micro-credit activities. Currently there is a disincentive for banks to lend as they can achieve good risk free returns by investing in Treasury Bills rather than new customer loans22.
80. ARBMU: This programme has provided five training programmes with 126 participants from the REP RBs and has also monitored bank performance. The new RFSP will extend and strengthen these activities which will not need to be included as part of a future REP type project. The unit has also undertaken monitoring visits to the participating rural banks to support inputs from the Rural Finance and Inspection Department of the BOG.
81. However, the level of adoptation and compliance to policies and procedures by the PBs is low. This affects their level of compliance to REP’s established procedures and results in some misinterpretation of requirement from clients. This is due to the fact that, with new PBs joining the project each year, the learning and absorption of REP procedures in these new institutions is slow. There are varying responses to the REP reporting requirements and forms with some banks such as the Drobo Community Bank adopting the formats for their own use.
82. The PBs still appear reluctant to lend non-REP funds to REP clients even after the client has established a record of repayments. This is a constraint to achieving maximum impact from this component.
83. Group Lending: An ongoing issue within the project is the balance between group lending (solidarity lending) and individual lending. Features of groups with good repayment performance include: cohesion amongst the group based on ethnic or religious grouping, a well-defined structure, constitution and specified sanctions for defaulters. Groups formed solely for obtaining credit have a poor repayment record. Banks appear to prefer to lend to individuals but the project is encouraging solidarity group lending even though most enterprises are developed by individuals. Comparative data on the loan recovery rates for the two forms of lending should be collated in future.
(3) Impact
84. The credit activities of the project have allowed poor and under-resourced small scale business people to access the formal credit sector, with up to 70% of the 1 330 loans to December 1999 going to businesses which had previously not had access to bank loans. This is less than half the number of new businesses started and a quarter of total businesses supported.
A carpenter in Offinso, recording the sale of a divider
21 The real interest rates on loans at a nominal 35% interest rate have been up to 20%. This is now changing due to increasing inflation rates driven by the continued slide of the exchange rate which declined by 25% over the period of the Mission.
22 Real risk-free interest rates on Treasury Bills have been up to 20%. 23
85. Loan recovery rates have increased from an average of 43% at the end of 1997 (in the Pilot districts) to an average of 87% (at June 2000) across all districts. Savings rates in the formal sector have increased by up to 30%.
86. The project has developed a model for lending funds to clients who could not readily access the formal credit sector. The provision of training in business skills and new technologies, combined with the more thorough screening of potential borrowers has allowed at least 800 clients access to previously unavailable credit. Funds have been used for working capital and upgrading equipment and facilities, as highlighted in the following example (the complete profile can be found in Annex 1, Profile 2):
87. Because there are a large concentration of carpenters at Techiman, Peter Okyere decided to migrate to work at Drobo in 1989 with his wife who is a dressmaker.
Profile on Peter Okyere: Master craftsman (carpenter) who has 88. A benefit of the credit programme received counselling advice and credit facility has been to allow craftsmen to break their dependency on expensive pre-financing Peter heard about REP and attended the business counselling from customers, which also tied the programme where he was also given advice on business craftsman to the customer. This lack of management. He later applied for financial assistance and he working capital also prevented craftsmen was given a loan of GHC 3,000,000) at the beginning of the from having finished products in stock year. ready for customers to purchase. Loan Peter was previously working under a tree, but with the credit funds allowed producers of soap and facility received, he has been able to build a workshop and buy other products to bulk buy raw materials, some more tools for his work. reducing the costs but further training is needed to develop producer skills in He now buys all the wood and other items used for his joinery buying when materials prices are at their work with cash, not using credit from his customers. He has seasonal lowest, rather than when the increased from five to thirteen apprentices, including three who loan funds become available 23. Clients are are being supported by REP under the apprenticeship currently having some problems programme. matching loan funds required with the inflation of input prices because of the Peter thinks he is making much progress in life than his two brothers working on their father’s cocoa farms in the Western delays in loan disbursements. Region, As he puts it “ I have been able to educate two of my brothers children in this town to the senior secondary school 89. Although more than 800 clients level. Sometimes they come to me for money when they get who had not previously had access to broke.” formal credit have gained project loans, this is less than a quarter of the total number of businesses which have been developed or assisted by the project. As a participant (strongly supported there and in other forums) in the Client evaluation workshop said: ‘The training is the most important part of REP, not the credit’. Most of the businesses have raised the capital needed from private sources (as most new small businesses need to). .
23 Several examples were seen in the palm kernel oil sector where clients applied for funds to purchase raw materials that had strong seasonal variations in price. Because the loans were delayed, the material prices had increased and the benefits of bulk buying cheap materials were negated. 24
E. Feeder Road Activities
(1) Implementation Experience
90. Feeder road construction was the only activity in the Infrastructure Support component. This was to improve mobility and access to markets through the improvement of feeder roads. Funds were provided to allow two labour-based contractors to purchase light equipment and tools, 100 km of feeder roads were to be rehabilitated and a further 15 km of road were to receive spot improvements. Data on progress towards achieving implementation targets and project expenditure to date is provided in Table 6. The Department of Feeder Roads (DFR) has supervised the contracts.
91. The labour-based construction programme in Techiman was slowed down due to difficulties the contractors had finding enough labour at the daily rates allowed in the design as potential workers from villages could earn higher wages working in Techiman. The programme in Sekyere West was slowed down by the inability of the new contractors to manage their activities.
Table 4: Achievements in Feeder Roads Component (to end of 1999)
Activity/Indicator TargetA/ Achieved to Proportion of end of 1999 Target 1. Rural roads rehabilitated (km) 100 87.5 87.5%
2. Road spots maintained (km) 15 0 0
3. Equipment loan repayments 1 199A/ 202B/ 17% (GHC million) Financial Status Appraisal Budget Expenditure to end of 1999 Feeder roads 1 881 1 334 71%
Note: A/ These targets were set at Appraisal or have been revised and included in the Annual Work Plan and Budget. B/ An additional GHC 46 million has been paid in the first quarter of 2000. Source: UNOPS Monitoring Indicators reported in REP Annual Report No. 9, 1999
(2) Performance
92. The roads programme has constructed 87% of the planned new roads with the balance in progress. No work has been done on spot maintenance as planned. One contractor did not have the financial resources to support the contract work which led to workers being laid off until further project funds were received.
93. Despite the problems with contractors, expenditure to date on contracts is in line with work completed. The major shortfall is with contractor repayments on loans to purchase the equipment and tools. The contractors are well behind on payments (17% of scheduled) and would not be able to repay the loans from REP contracts. The PCMU has facilitated discussions between the DFR and the Agricultural Development Bank (ADB), who financed the equipment, to address the shortfall which will not be recovered from the contractors’ contracts under REP. 25
(3) Impact
94. Reports prepared by the Department of Feeder Roads and the PCMU, and subjective assessment of site visits made to villages on the new feeder roads and to meet workers on the roads are summarized in the Financial and Economic Analysis Annex. It is clear that feeder roads provide social and economic benefits by providing better access to villages and enhancing the business environment in remote locations.
95. The impact of feeder road construction in one village visited by the Mission was similar to that stimulated by the technology and business development activities of REP, with new business activities and additional income being generated. However, management of the component appears to have absorbed excessive PCMU time largely due to contractor problems. The project initiative to stimulate development of new labour-based road contractors has not been successful. In addition, project funds for training in 1999 were cut back due to funding requirements for road contracts.
96. Discussions with both villagers on new feeder roads and road workers indicate that there has been little interaction or flow-on benefits from the feeder roads programme to the project credit and business development activities. This view was reinforced in the evaluation survey where the clients, implementors and project management all perceived feeder roads as not providing significant complementary benefits to the REP business development and support programme.
F. Project Management
(1) Implementation Experience
97. The PCMU based in Kumasi has employed four professional staff plus 17 support staff. Most of the staff have been involved since the start of the project and have developed a core knowledge on implementation of REP type projects. The BAC staff have had provided a link with the DDIC structure and facilitated inputs by DIC members to project activities.
(2) Performance
98. The PCMU has provided good support and direction to the project through the capabilities of its staff. This conclusion is supported by the evaluation of the PCMU inputs by clients and implementing agency staff 24which rated the PCMU highly in most areas. The skills and experience of the SSE Policy Adviser have not been used in the policy advisory role proposed in the Appraisal document.
99. Monitoring and Evaluation (M&E) The M&E Officer and assistant have implemented a simple M&E system using information provided from the District level staff. The system is based on summarized data provided to the PCMU by the implementing agencies. This data is then collated into prescribed project reports. The system is not designed to allow more detailed collation and/or analysis of data to assist project management reallocate resources within the project programme.
100. Zonal Management Because of coordination problems, GRATIS introduced a zonal management structure across districts (but not at regional level) to address some of the institutional constraints and concerns of the MTR. There have been difficulties with high turnover of staff and the system has not improved coordination.
24 The responses to the evaluation are summarised in Appendix 6. 26
(3) Impact
101. A major strength of the project has been the flexible approach taken to project implementation by the PCMU using stakeholder meetings, annual review workshops and targeted consultancies and studies to assess activities and modify implementation to improve effectiveness. These activities have worked well at District level.
102. The M&E system is not collecting or providing information which could be used to improve implementation effectiveness in the main components.
(4) Other Issues
103. Training and Counselling Management Information Systems : The effectiveness and impact of the technology transfer and skills training programmes could be improved further if the project M&E system was upgraded to routinely capture information on clients being recorded at the BACs and RTSCs. Currently, summarised data is provided to the PCMU for production of routine reports but there is not a central database of information on numbers and types of courses and apprentices, gender disaggregated numbers attending each training course and their progress towards developing a successful business. 104. A major omission is that no measure is recorded or included on the socio-economic profile of the client as this is needed to assess if the project is achieving its objective of assisting poor people. The current measures of successful implementation of the business development component: number of businesses recording given increases in profitability and given increases in production, are weak as they lead to double counting and, although an objective measure, are not being measured objectively. Improvements to the training and counselling systems management information systems (MIS) would also provide a valuable tool for project and BAC management staff to assess the effectiveness of resource use in the training and resource areas so that the balance between the two areas can be changed to suit local conditions and skill or service weaknesses can be identified and upgraded.
G. Coordination
(1) Implementation Experience
105. The project design identified improved coordination as an important element of improved project effectiveness. The concept of a formal DIC including all stakeholders, including clients, was developed and implemented. The recommendations by the MTR to widen membership were adopted.
(2) Performance
106. Coordination at District Level: An issue raised at all levels has been the coordination of both project activities and between projects. At district level, the DIC structure proposed at appraisal and reinforced by MTR recommendations has worked effectively to decentralize management to the district level and are strongly supported by the DCEs. Client representatives on the DIC25 believe they are part of the decision process. Most DICs have two client representatives which may limit representation of all trades and create significant time commitments for self-employed business people.
107. All DICs believe that the involvement of bank representatives in the DICs is a major strength. One DIC has added a Ministry of Education representative to increase the awareness of students to opportunities in the trades and business. DICs do not include general community representatives such as traditional leaders.
25 In most cases, two representatives are selected from trade associations or training course participants. 27
108. Some DICs are using subcommittees to review loan applicants as proposed in the original credit guidelines. The DICs have become involved in day to day Project management and may not be able to sustain the number of meetings they have. Some have been meeting weekly, even though they are only receiving sitting fees for quarterly meetings. This intense involvement may be partly due to the lack of experience of BAC officers.
109. Other Projects: Several other IFAD projects operate in the REP area. The appraisal documents for the Village Infrastructure Project (VIP) and the upcoming Rural Financial Services Project (RFSP), which are both being co-financed by IFAD, do not include REP in their lists of operating projects in the area. As REP is implementing activities which will be extended in these two projects, this suggests that there is a need for much closer liaison between IFAD-funded or other similar projects. VIP is supporting the development of agro-processing and low cost transport options in Nkoranza district which are activities which would be complemented by REP activities in business skills development and counselling. As the Roots and Tubers Improvement Project (RTIP) moves into its extension phase, marketing and agro- processing activities will be developed where the technology and business skills training and business counselling functions of REP will strengthen implementation. The RFSP is building on the work undertaken in REP and earlier projects to strengthen the rural banks.
(3) Impact
110. An overriding problem in all districts is that several projects are currently being implemented or are scheduled to start and it will not be practical for senior District officials to maintain the same level of inputs they have been making to the REP DIC structure.
111. REP has developed coordination and management systems that can improve implementation and exploit complementarity between projects in the area. The DIC approach is highly regarded by clients and implementing agencies. REP activities have incorporated groups from the previous SCIMP while in Wenchi REP has been assisting cashew grower groups working with Technoserve. Eleven of the banks involved in SCIMP have become part of the project with higher loan recovery rates.
112. Informal coordination at district level has not been implemented, despite the high regard that is given to the REP DIC model. Adoption of the successful REP DIC model for each project in a district potentially weakens the impact that the DCE and senior district staff can have on coordination, strategy, monitoring and solving problems. A further development of the DIC process could be to introduce a District Projects Coordination Group (DPCG) above the DIC level, which would include representatives of all relevant projects operating in the district. This group would focus on district strategies to reduce duplication and Members of the Effiduase Palm Kernel Oil Women’s Group pouring roasted and ground palm kernel in a pot to separate the oil from the residue (Sekyere East District). 28 strengthen complementarity between projects. The DICs would focus on strategies for improving project effectiveness, monitoring outputs and problem solving with routine management and client links being delegated to subcommittees which would provide stronger links to the trade associations and implementing agencies, particularly the BACs (or their replacement).
(4) Other Programs
113. At national level, the NDPC has thematic groups addressing issues relating to Poverty Reduction. The Technical Committee on Poverty is due to make recommendations to the GOG on ways to strengthen the capacities of DAs to administer poverty reduction programs in the second half of 2000.
114. A new World Bank funded project at the planning stage will develop a pilot integrated project monitoring system from district level through to the NDPC in four districts across Ghana. This monitoring system will provide a valuable link between District level activities and national coordination groups.
H. Financial and Economic Analysis
115. Overview: The SSEs being introduced and supported by REP are providing a return to the owner- operator’s labour above that which could be obtained from unskilled work, if this work was available. The benefit : cost ratios (BCR) for baking, batik tie and dye and soap making receiving technology and/or business management plus counselling are above 2 as is the ratio for gari preparation supported by business management training and counselling. The internal rate of return (IRR) for the BAC SSE development activities is more than 90%.
116. Financial Analysis of Effectiveness: Table 5 shows the returns to labour for the enterprises considered in the analysis 26. The opportunity cost of labour in urban areas is at least GHC 4 000 per day (up to GHC 10 000), in rural areas it is about GHC 2 000 per day, particularly where the client can still tend to their farming area part-time. Pomade making and mushroom farming provide the lowest returns and cannot support borrowings.
26 A detailed analysis of the enterprises being introduced and/or supported by the BACs and operations of the RTSC and BACs is provided in the Financial and Economic Analysis Annex (Annex 5). Project expenditure to date is summarised in Appendix 5. 29
Table 5: Returns to Labour From Enterprise Models Eventual Returns to labour Enterprise Model (GHC per person-day)
REP Client Models 1. Soap Making 15 400 2. Pomade Production 4 400 3. Batik and Tie & Dye 12 200 4. Bread Baking 28 000 5. Beekeeping 25 100 6. Snail Farming 8 900 7. Mushroom Farming (local "domo") 5 100 8. Mushroom Farming (exotic variety) 4 000 9. Gari Preparation Group 2 800 10. Palm Kernel Oil Production Group 6 400 11. Carpentry Workshop 27 000 12. Roadside Tailoring 4 700 Source: Table 2, Financial and Economic Analysis Annex
117. The effectiveness of the training and counselling programmes were assessed by estimating BCRs for the main enterprises and are summarized in Table 6. The average BCRs indicate that the technology and business management skill development activities were cost effective. The estimated costs of BAC training programmes was higher than those estimated in the POSDEV study, possibly because the high level of overhead costs, largely from replacement costs allowed for the project vehicles, was underestimated.
Table 6: Selected Benefit-Cost Ratios Benefit- Type of Enterprise Benefit Cost Cost Ratio New Enterprises: Average 3 256 250 704 222 4.6 Lowest BCR (293 385) 740 622 (0.4) Highest BCR 15 910 000 824 622 19.3 Existing Enterprises: Average 8 238 000 270 222 30.5 Lowest BCR 3 040 000 312 622 9.7 Highest BCR 12 270 000 312 622 39.2 Specific Typical Training and Counselling Sets: Soap Making: Technical + Business Mgt. + Counselling 7 320 000 824 622 8.9 Pomade Making: Technical + Business Mgt. + Counselling 90 000 734 121 0.1 Batik Tie & Dye: Technical + Business Mgt. + Counselling 1 750 000 692 622 2.5 Baking: Technical + Business Mgt. + Counselling 15 910 000 824 622 19.3 Beekeeping: Technical + Business Mgt. + Counselling 480 000 709 221 0.7 Exotic mushrooms: Technical + Business Mgt. + (293 385) 740 622 (0.4) Counselling Gari Preparation (Individual): Business Mgt. + Counselling 3 040 000 312 622 9.7
Source: Financial analysis and BAC cost estimates by the Evaluation Mission
118. Financial Sustainability: The largely positive BCRs for the BAC activities indicate that the technology and business management skills development activities will provide benefits to both the clients and GOG. Clients who have received basic training and support to development of their first business will 30 be able to justify some contribution to the costs of further training and/or counselling. These client contributions cannot be expected to recover the full costs of the BAC services. The proposal from the 1999 Stakeholder’s Forum on Sustainability of REP that DAs would fund the BACs over a three year phase in period is feasible.
119. Analysis of RTSC training activities and operating costs indicates that the RTSC training activities will not be able to compete with services provided by master craftsmen with upgraded training skills27. The projected daily charge rate needed to service asset replacement and staff costs (GHC 30 000 to GHC 63 000) is well above the charge out rates that could be recovered from customers.
120. Economic Returns from BAC Activities: The BAC SSE development and support component is the most successful in the project. Assessment of the IRR for this component show returns of over 90% which remain above 50% even with major changes to any of the main assumptions. These high returns also support the proposal that clients who have developed a business should contribute some proportion of the costs of further training or counselling support as the returns from these inputs will be high. Returns from other project components will be much lower.
I. Impact of Assumptions on Project Implementation and Outcomes
121. Economic Conditions : In the first half of 2000, inflation has increased, due to a declining exchange rate driven by adverse current account balances created by higher oil prices and lower world export prices for major Ghanaian exports. Given the already high interest rates (> 35%) and inability of the SSEs to influence market prices, further increases in interest rates for working capital will reduce profitability and cashflow. Some problems have been created for new startup business and those buying capital equipment where there have been significant increases in input and equipment prices, which were not incorporated into proposed borrowings.
122. The indicative ceiling of GHC 3 million on loans has not changed since the start of the project even though its effective purchasing power has been halved. These problems will increase while the inflation rate increases and not stabilise until inflation rates return to the average levels experienced over the first five years of project implementation.
123. Institutional Performance: GRATIS and NBSSI were allocated important implementation roles in the project. Both organizations did not perform to expectations and this has reduced project impact. NBSSI has had ongoing difficulties providing trained staff to fill the positions of SSE Development Officer (SSEDO) and Enterprise Facilitator (EFR)28 with only one third of planned professional positions filled. Some DAs have continued to fund Business Development Officers who were put in place by the GTZ project to assist BACs in east Brong-Ahafo and Ejura Sekyedumase. Despite MTR recommendations that the situation should be addressed, NBSSI has not been able to provide the required staff and necessary support. The inability to secure recurrent funding to support the proposed staffing levels and a shortage of suitable new staff appear to be major constraints to NBSSI inputs.
124. Following the MTR recommendations to upgrade equipment in the RTSCs to provide better service to the local communities, GRATIS has not upgraded the management of the RTSCs to realise the opportunities that had been created and to strengthen the links with the their client groups and local trade associations.
27 These ratios are summarized in Table 5 in the Financial and Economic Analysis Annex (Annex 5).
28 Table 1, page 18, and table on page 20 in the 1999 Annual Report indicate that the BACs had 13 professional staff compared with a planned number of 38. In some BACs, staff are being assisted by recent undergraduates completing their national service obligations. 31
125. The overriding issue is that there are not clear terms of reference and specified performance criteria for the two implementing agencies. Their roles were broadly specified in memorandums of understanding between the agencies and the PCMU without firm commitments or contractual arrangements. The problem is also being masked by the project budgets not including recurrent staff costs as a GOG input. Thus while the PCMU 1999 Annual Report (Report 9) states that GOG contributions were 99.4% of the annual budget, recurrent agency funding was not provided for 20 full time BAC staff.
126. An immediate priority is for the PCMU, with trade associations, GRATIS, NBSSI and the DICs, to develop detailed TOR and performance criteria for the activities managed by GRATIS and NBSSI. The organisations could then be contracted to provide the specified services for the remainder of REP. For future projects, all staff inputs necessary for implementation should be costed in the design so that flexibility is provided to use the most appropriate government, NGO or private organisation for implementation in each location.
127. Environmental Impact: Project activities such as soap making, gari and palm kernel oil production are creating some additional environmental problems both through organic waste created and from inefficient use of energy from fire wood and charcoal. Future projects should put more emphasis on reducing waste and environmentally unsound byproducts and encouraging new businesses to use more efficient heat sources such as gas heating as produced by the RTSCs. The feeder road activities have generally not created significant environmental problems.
A brewer and potential REP client: boiling the next day’s millet beer 32 33
IV. SUMMARY FINDINGS TO KEY QUESTIONS
How was poverty reduced as a result of project activities?
128. The Rural Enterprises Project has reduced poverty for self-employed entrepreneurs and employees in new and existing rural enterprises by increasing incomes and by reducing expenditures. The Project has achieved this by several means.
129. The Project has reduced poverty by transferring technical skills to rural people making it easier to get a job or to improve the returns to their own businesses. It has reduced poverty by improving the business skills of rural people, allowing them to start their own business or to reduce costs and increase benefits in their existing businesses. It has reduced poverty by providing low-income people with access to banking services and capital. It has reduced poverty by generating new jobs as new businesses were created or existing businesses expanded. It has reduced poverty by providing facilities for technical services that have allowed small rural entrepreneurs to grow and flourish. It has reduced poverty by providing short-term employment in roads. It has reduced poverty by lowering transaction costs linked to transport for rural people. In all, it has built self-confidence and fostered optimism among rural people with whom it worked.
130. It appears that loan size limitations, training course content and the level of basic technologies supported by the project, functioned as targeting mechanisms, given that more affluent entrepreneurs are unlikely to have sought support at such levels. However, among those who did seek project support, the project has taken a business-like approach. It selected clients for courses, and approved client requests to borrow funds, taking need into account, but using commercial criteria to determine the probability that they would be successful entrepreneurs.
How effective were each of the different project approaches to technology and skills transfer, and why?
131. The Business Advisory Centres have provided the most cost effective technology and skills transfer processes. They have helped to establish more than 1 900 new businesses and assisted another 4 000 existing businesses through counselling. This has been achieved despite substantial under-resourcing at the Business Centres. The Business Centres have focused on easily transferable technologies and provided programmes to improve the ‘living skills’ of participants. They have not, however, made significant impact on business management skill development. Business Advisory Centres could have done more had they served as Business Development Centres with a wider role in technology and business management skill training. The successful implementation of the Centres as designed has been achieved through the enthusiastic input of their limited staff, supported by the Project Coordination and Management Unit, as support from the implementing agency was not systematic.
132. The traditional role of trade associations in Ghanaian society has been a key element of the success of the project, as they have provided a strong link between individual clients and the project technology and skills transfer programmes. The associations, which often in the past have had only a social function, have responded very positively to the challenges and opportunities created by the project. This energy and enthusiasm needs to be harnessed and developed in future projects. 34
132. The Rural Technology Service Centre’s Profile on Comfort Aseduaa - A poor and unemployed youth who received training, business advice apprenticeship training programme has trained, and counselling supported and motivated a small number of apprentices from poor backgrounds at the Comfort Aseduaa was born in 1976. She was ten years Technology Centres. It has not been old when her mother died. Comfort started trading in institutionalised, is not part of the formal plastic boots at Techiman market when she completed school in 1995. Even though she worked hard and sent Government of Ghana vocational education some of her products to Techiman market for sale she system, and will therefore not be funded from was not making profit form her trading activity. As she future recurrent budget allocations. It is also not put it “all my efforts to break even in my trading cost-effective in comparison with provision of enterprise proved futile. I did not understand why my efforts were not yielding good results.” In desperation technical and train-the-trainer training to master Comfort decided to abandon the trading activity and craftsmen. The fee support to traditional learn a trade. apprentices to train with master craftsmen has also helped some poor families finance training of She could not decide immediately on what to do because youth but it, too, has not been institutionalised. she had become confused as result of the losses she had incurred. Comfort did clothing and textile at school so That is, it will not be continued by a government she decided that she would learn how to make batik, tie agency once the project has ended. and dye. In the latter part of 1998, Comfort took advantage of the one-week training programme organised 133. As already identified in the Appraisal under the REP in Techiman. This was followed with another training course in business management and document and the Mid-Term Review, support to book keeping. Comfort could not get the initial capital to master craftsmen remains a cost-effective way of start the business after the training so she went to acquire developing their businesses and improving the more training from a woman who had been making batik, traditional apprenticeship training. In the Project tie and dye in the town. She was with the woman for this has been handled through the Rural three months but was not asked to pay for the training she received. She was able to learn new techniques for Technology Service Centres. Hence this will need producing batik, tie and dye which were different from to be revised in future programmes if there are no those that she learnt under the REP programme. district-level Technology Centres.
Comfort approached her father with reluctance for financial assistance to enable her to start her enterprise. 134. The Rural Technology Service Centres He gave her ¢500,000 and a room to use as her have not yet been able to develop a sustainable workshop. She started production since early May, 2000. model of technology development and transfer. At the time of interview during the last week in June, Projections of potential benefits at design were Comfort has been able to produce 17 pieces of batik, tie overly optimistic. The Technology Centres and dye. She is operating alone without any assistance. provide high quality output and services, but as According to Comfort, even though she has not been in currently structured, costs exceed benefits. business for a long time her customers are increasing Moreover, they have not been given adequate rapidly because she is able to make variety of clothes. incentives to respond directly to the needs of local She is able to combine the techniques she learnt from the woman with those she learnt under the REP training clients for technology development, services and programme which is helping her to produce a variety of skills transfer. They have not been provided with batik, tie and dye. Comfort could not show details of her sufficient guidance or management support needed business records. She said she was making profit and to re-orient their approaches. hopes to employ an assistant in due course.
Which activities and institutional arrangements led to successful use of financial services by entrepreneurs?
135. The project activities in financial services have allowed a group of clients who would not normally gain access to bank finance to secure short-term loans without guarantees. The activities and institutional arrangements that have led to the successful use of financial services have included: (i) technology and business skills training activities by non-bank institutions; (ii) supervision and support to participation of clients in both enterprise and banking activities by District Implementation Committee; (iii) careful communication of information about financial services to potential clients in the form of client briefings; 35
(iv) external oversight by the District Implementation Committee of the client selection process by the bank; and, (v) ongoing monitoring of repayments. These have led to significantly higher loan recovery rates. Clients have gone on to secure further loans to develop their businesses. The degree of success achieved in the various participating using these arrangements has been influenced by the character of the banks themselves and other external factors.
How have joint gains been achieved by exploiting complementarity between this project and other projects or government programmes?
136. The project has developed some co-ordination and management systems that can improve implementation and exploit complementarity between projects in the area. Project activities have incorporated groups from the previous IFAD Smallholder Credit Input Supply and Marketing Project. In Wenchi District, the project has been assisting cashew grower groups working with an international NGO. Eleven of the banks involved in the Smallholder Project have become part of Rural Enterprise Project with higher loan recovery rates. Several District Assemblies have specified that the lending principles used by the project should be used for the Poverty Alleviation Loan programme funded by the Government of Ghana in each district. The Project has used a District Implementation Committee approach that is highly regarded by clients and implementing agencies. This district level unit could be a good means through which a project can be more integrated with other district level activities, but this has not yet been explicitly developed as such or made part of a district level system for coordination.
How have District Administrations incorporated Rural Enterprise Project activities in their poverty reduction programmes?
137. Certain District Assemblies, for example Offinso, Kintampo and Tano, and participating banks have adopted the Project credit management and borrower assessment processes (including participation in technology and business management skills training) to implement the Government of Ghana district Poverty Alleviation Loan programme from the District Assembly Common Fund. These processes have led to higher recovery rates for the government Poverty Alleviation Loan programme than when these funds have been allocated by district authorities with other less structured procedures. Some other districts have indicated that they plan to adopt the Project model for funds they have available through the government programme. They are especially interested in the technical and business management skill development they have seen working in the Rural Enterprise Project, but few initiatives have been taken to implement such activities without the Project support.
What are the cost implications of sustaining selected Rural Enterprise Project services and institutions after project closure?
138. The total annual costs of the existing Rural Technology Service Centres have been estimated to be, on average, GHC 214 million. This includes replacement of existing assets as well as staff and other operating costs. The costs per client trained at the Centres are significantly higher than through other means. The prices charged for manufacturing and repair services were competitive, but these did not reflect the true cost to the Centre. The exact costs and benefits in adaptive research and technology were not estimated as only roughly 4% of staff time has been dedicated to these activities. The current approach of the Centres in providing the various services and the current share of resources allocated to the various services will not permit sustainable provision of the services. However, the services are useful and there is some evidence of alternative means of providing them - in conjunction with the private sector, trade associations or NGOs – that can be tried in the future. 36
139. The RTSCs in their current format are not sustainable after project closure and future projects will need to radically change the RTSC model to make it more cost-effective. Functions of the RTSCs can be implemented by a combination of local trade associations and other institutions such as NGOs or other GOG agencies.
140. The total annual costs of Business Advisory Centres have been estimated to be, on average, GHC 58 million. Costs per client for training activities (including Business Centre overheads and direct training expenses) range from a low of GHC 15 000 for a one day credit management course to a high of GHC 256 000 for technical training in soap making course. The Business Centres, with some improvements in management and resource allocation could be partly, if not fully, financially self-sufficient, hence sustainable. Moreover, selected benefit/cost ratios calculated on the basis of returns for the supported enterprises are positive, (except for exotic mushrooms). As a result, economic returns to government expenditures to support the Centres are high.
How has the performance of international agencies supporting the project influenced its results?
141. The estimated IRR for the BAC SSE development activities is more than 90%. This indicates that the BAC technology and business skill development activities provide enough returns for individual clients to contribute part of the BAC costs with the balance provided by GOG funding to the DA and implementing agencies which will be partially offset by taxation revenue generated by the new and improved businesses. The BACs may not be able to fund replacement of project vehicles so alternative approaches to delivering services will need to be developed.
142. The performance of UNOPS, IFAD and the Evaluation Team was assessed by staff of the Ministry of Environment, Science and Technology, the Project Co-ordination and Monitoring Unit, the Rural Technology and Service Centres, the Business Advisory Centres and by project clients. The assessment showed that UNOPS support positively influenced project results by listening to and consulting with government counterparts, and taking action to solve project problems. UNOPS also contributed to success by providing clear instructions on procedures. The regular checking on information provided, the time in the field, and the technical advisors it recruited also helped the project. IFAD’s performance was rated as positively influencing project results in similar ways. Aspects of the performance of the Evaluation Mission that stakeholders found to be positive included clear explanations of the work, feedback on information received, and time spent in districts and with clients. Clients and staff of Centres believed that evaluation results would have been better had members of their groups been part of the Evaluation Team. 37
V. RECOMMENDATIONS
GENERAL RECOMMENDATIONS
143. The REP model for the development of small scale rural enterprises should be used as a means to stimulate growth and reduce poverty in rural areas. The GOG should consider widespread replication of a number investments and activities tested by the project to promote poverty reduction throughout the country.
144. Business Advisory Centres should be at the center of any effort to plan future investments for the development of small scale rural enterprises.
145. Complementary programmes such as apprenticeship training, feeder roads, financial services or literacy development that help create general conditions favourable to rural enterprise development should be provided through other national programmes and managed directly by the responsible specialised agencies.
146. A national strategy is required to capitalise on the traditional apprenticeship system by integrating it with vocational education.
147. Local trade associations should be used in development of new master, apprentice and technology training programmes. They should also be used as a means to work with technology users who should drive technology development and adaptation. The extent and form of collaboration in these activities may vary according to local conditions. However, links with existing associations and assistance to them to strengthen their capabilities should be part of any programme to support rural enterprises.
148. To serve the national priority for the adoption of appropriate small-scale cost-effective technologies that are environmentally sustainable, the Rural Technology and Service Centres model needs major improvements. Incentives should be provided for them to operate in a more business-like fashion, increase cost-effectiveness and create bottom-up processes to obtain client feedback and respond to client needs.
149. The approach of working at the district level with the district administrations should be replicated in future efforts. However, districts should improve on the DIC model in three ways. Districts should: (i) add a District Projects Coordination Group (DPCG), above DICs created for individual projects for better inter-project interaction and complementarity; (ii) create DIC sub-committees to handle operational matters so that the DICs can focus on strategy and monitoring; and, (iii) include client and implementation agency representatives in the DPCG and DICs.
150. Given the MEST performance record and its GOG mandate for the technology development, adaptation and transfer that are essential to small scale rural enterprise development, MEST should play a leading role in developing and managing future programs and projects based on the REP model. 38
SPECIFIC RECOMMENDATIONS FOR BUSINESS ADVISORY CENTRES
151. In the future the activities of Business Advisory Centres should be expanded and their mandates clearly specified, with defined performance criteria. They should be expanded into Business Development Centres. These Centres should provide existing technology and business management skills training and also facilitate skills training and support to the traditional master craftsmen through their trade associations.
152. In the future, funding for BAC operations should be increased. Core BAC staff, and core budgets, should be used to facilitate identification of counselling and training needs by clients. Whereas, additional operations funds should be used to contract appropriate government, NGO or private organizations to provide services required.
153. In the future funding for BAC backstopping, management support, and supervision of BACs should be increased. This should also be undertaken on a contract basis. A range of different service providers including NBSSI, NGOs and private organizations that already provide similar services elsewhere in Ghana could be contracted to provide BACs with backstopping and other support they may require.
154. BACs should have management information systems that include record keeping and collection of data on selected indicators that will allow them to determine whether they are meeting selected performance criteria and to assess their own impact, so that such information may be used to modify operations as necessary..
155. Initial ‘living skills’ and basic technology training and related counselling contacts for the target poor population should continue to have low commitment fees. Training to upgrade technical skills and introduce business management skills and frequent counselling visits should attract an increasing level of fees reflecting some of the value of this training and counseling. 39
VI. LESSONS LEARNED
156. The REP has highlighted a number of lessons that are applicable to future programmes and projects.
(1) General
(i) The REP model combining (simple) technology and business management skill development provides a valuable model for developing rural SSEs and is well regarded by clients as it reaches the core of the rural community; (ii) A strong link is needed between clients and the implementing agency to facilitate implementation. If this is not available through trade associations or other social networks, additional resources will be needed to develop awareness and maintain links with clients after their training programmes; (iii) The use of credit to encourage participation in skill development projects is not necessary. REP clients are prepared to participate in project activities and establish new enterprises without necessarily obtaining a credit facility. Appropriate sensitization processes and proven benefits seem to be the key to adoption; (iv) Development of ‘living skills’ such as thrift and a savings culture should not be confused with business management skill development. The former should be readily available to potential clients but the later will only be requested as clients develop their businesses; (v) Responsibilities and planned outcomes for each implementing agency need to be clearly defined at the start of a project and confirmed by contract rather than MOUs to facilitate monitoring and assessment of performance; (vi) A number of different government, NGO or private organisations can implement business skill development activities. Project designs should incorporate flexibility to facilitate use of the most appropriate implementing agencies in each location; (vii) In project designs, all project inputs should be costed (not only incremental costs) to clearly allocate funding responsibility and to allow alternative service providers to be considered on a competitive basis; (viii) Informal coordination processes at District (and probably central) level do not work, so formal structures involving implementing agencies and clients are needed; (ix) SSE (and agricultural) development projects should focus on clients, not beneficiaries, as the services provided need to be commercially sustainable; and (x) Targeting of activities towards poor people may be best achieved by offering training in simple technologies with low capital requirements which are not of interest to people with greater financial resources.
Technology Development and Transfer
(i) The RTSC model of training and technology development is not appropriate at District level because of the high capital investment, difficulty in balancing the required outcomes and a lack of suitable management; (ii) Apprentice training programmes need to work within an agreed government framework to avoid overlap, inconsistent accreditation processes and targeting of appropriate school leavers; (iii) Despite low levels of literacy, rural artisans are generally willing to learn new skills. Their level of skill acquisition however is usually constrained; (iv) The GRATIS ‘top down’ model of technology development and adaption does not work in rural areas; and 40
(v) The poorest in the community may be laggards and not easily predisposed to innovation. Perhaps the best targets are the low income innovative groups whose benefits could spill over to the poorer ones.
Credit Provision
(i) Establishing performance standards for accessing on-lending funds by PBs is a strategy to assist them improve operational performance even beyond the lifespan of the project intervention; (ii) Developing performance based eligibility criteria for clients of a financial service scheme, which aims at capital accumulation, is useful for ensuring high loan repayment rates; The provision of financial services will lead to business growth and expansion if complemented with business management training, counselling and frequent monitoring; (iii) Technology transfer and improvement activities targeted at business start up and expansion will only achieve its objectives if entrepreneurs have access to equipment financing options; and (v) To achieve rapid scale and outreach of rural finance scheme, the identification and development of trade associations is a relevant approach for group lending.