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Rpopt N.. 8471

PROJECT COMPLETION REPORT

LIBERIA

SMALL AND MEDImM-SCIALJF, ENTERPRISE PROJECT(CREDIT 1076-LBR)

MARCH 28, 1990

Industry and Energy Operations DivisionWestern Africa Department

This docum bas a esticted disribution and may be aued by recipiets only In tde performac oftheir officil dues Its conteots may not otherwe be dislosed without World BDak authorzaton.

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CURRENCY EQUIVALENTS

Name of Currency: Liberian DollarAppraisal Year Average Exchange Rate: US$1.00 - LS1.00Completion Year Average Exchange Rate: US$1.00 = L$l.00

ABBREVIATIONS

ACDB - Agricultural and Cooperative Development Bank

FMO - Netherlands Finance Company for Developing Countries

LBDI - Liberian Bank for Development and Investment

LDC - Liberian Development Corporation

MSEs - Medium-Scale Enterprises

NBL - National Bank of Liberia

NIC - National Investment Commission

PCR - Project Completion Report

PFIs - Participating Financial Institutions

SAR - Staff Appraisal Report

SEFO - Small Enterprises Financing Org&nization

SME - Small and Medium-Scale Enterprise

SSEs - Small-Scale Enterprises

USAID - United States Agency for International Development

WOR OFFICIAL USE ONLYTWE WORDO SANK

Wasington. OC. 2033U.S..

OMi. Ow.ct.GwfOpw&Mtae Evioutw

March 28, 1990

ME-ORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Liberia Small- and Medium-Scale Enterprise Project (Credit 1076-LBR)

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on Liberia Small- and Medium-Scale Enterprise Project(Credit 1076-LBR)," prepared by the Africa Regional Office. Noaudit of this project has been made by the Operations Evaluation Departmentat this time.

Attachment

Thts dument has a osriked distibution and may be uad by rneibts only in the pufonnuaeof their offical dutbe Its contests may not othowe be diasebd without World Bank authoniution.

FOR OFFICIAL USE ONLY

LIBERIA


SMALL AND MEDIUM-SCALE ENTERPRISE PROJECTCREDIT 1076 - LBR

TABLE OF CONTENTS

Paae No.

PREFACE ......................... ...............................

BASIC DATA SHEET .............................................. i

HIGHLIGHTS ............................ ............ - v

I. INTRODUCTION ................... .......................... 1

II. THE ENVIRONMENT .......................................... 1A. Economic Background ......................... ........ 1B. The Industrial Sector .. . . ....... 2C. The Financial Sector .. . ....... 3

LII. NATIONAL BANE OF LIBERIA AND PARTICIPATINGFINANCIAL INSTITUTIONS .. ............................ 5

A. National Bank of Liberia . ....................... Si. Ownership ...................................... 5ii. Nature of Operations ..... ...................... Siii. Financial Performance and Condition ............ 5 iv. NBL as the Apex Institution ................. ... 6V. Credit Guarantee Scheme ................. ....... 6

B. Participating Financial Institutions ............. ... 6i. Agricultural and Cooperative

Development Bank ..... ..................... 6ii. Liberian Bank for Development

and Investment ..... ....................... 7iii. Small Enterprises Financing Organization 8.......

IV. THE PROJECT .............................................. 9A. Objectives ..................... ......................... 9B. Project Implementation ...... ........................ 11C. Compliance with Credit Covenants ................. ... 14D. Utilization of the Credit ........................... 14

V. CONCLUSIONS AND LESSONS LEARNED ............. .............. 17

This document has a rstricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherie be disclosed without World Bank authoriation.

TABLI OF CONTENTS (cont'd)

Pate No.

ANNEXES

ANNEX I Income Statements of the National Bank of Liberia,1981 - 1985 ........... .. * .. 20

ANNEX It Balance Sheets of the National Bank of Liberia1981 - 198S ........... *. .*.. 21

ANNEX III Suimarized Balance Sheets, Income Statements andSelected Financial Ratios of the Agricultural and

Cooperative Development Bank, 1984 - 86 ..... 22ANNEX rV Sumarized Balance Sheets, Income Statements and

Selected Financial Ratios of the Liberian Bank forDevelopment and Investment, 1984 - 86 ............ 24

ANNEX V Sunmarized Balsnce Sheets, Income Statements andSelected FinancLal Ratios of the Small EnterprisesFinancing Organimation, 1984 - 86 .............. 26

ANNEX VI Participating Fitnancial Institutionss ArrearsSituation as of September 30, 1986 .......... 28

ANNEX VII Schedule of Estimated vs. Actual CumulativeDisbursements ........................... 29

ANNEX VIII Subprojects Financed under the Credit ............ 30ANNEX IX Characteristics of Subprojects Financed under the

Xrerit Co..nt.on.te....................... 32ANNEX X Borrowerl's Comments an the PCR ....... 33

L iX


SMALL- AND MEDIUM-SCALEU ERpR;SR PROJRCT

CREDIT 1076-LER

PtIEFACE

This Project Completion Report (PCR) relates to IDA Credit 1076-LBRof SDR3.2 million to the Government of Liberia to support small- and medium-scale enterprises. .he project was approved by the Board on November 18, 1980and was declared effective on September 14, 1981. The closing date wasextended three times from June 30, 1984 to June 30, 1987. The Credit has notbeen closed yet as there is still an outstanding Special Account beingrecovered. The Loan Department is actively pursuing the recovery of theinitial deposit. The current suspension of Bank Group disbursements toLiberia was in force at the present closing date of June 30, 1987. 71X of thecredit had been disbursed. The balance is in the process of being cancelled.

The PCR was prepared by staff of the Western Africa Department,based on information obtained from the Staff Appraisal Report, President'sReport, legal documents, supervision reports, progress reports, projectcorrespondence files and subloan application documents. No Bank mission wassent out for the purpose of preparing the PCR.

This PCR was read by the Operations Evaluation Department (OED).The draft PCR was sent to the Borrower and the implementing agencies forcomments, which have been reflected in this report and reproduced as Annex X.

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LIBERIA

LbMLL AND MEDIU-SCALE ENTERPRISE PROJECT

CREDIT 1076-LBR

KEY PROJECT DATA

Item Apnraisal Estimate Actual

Credit Amount SDR 3.2 million SDR 3.2 millionDisbursed SDR 3.2 million SDR 2.3 millionSpecial Accounts a/ 0 SDR 0.3 millionCancelled b/ 0 SDR 0.6 millionRepaid to IDA 0 0Outstanding to IDA SDR 3.2 million SDR 3.2 million

a/ Not yet accounted for.bi In the process of being cancelled.

OTHER PROJECT DATA

Item Original Plan Actual

Appraisal 05/14179 5!1&/179Negotiations 04/22/80 04122180Board Approval 11/18/80 11/18/80Loan Agreement 01/09/81 01,09181Effectiveness /02/81 09/14/81Final Subproject Submission 06/30/83 -Closing Date 06130/84 06/30/87Borrower Government of LiberiaFiscal Year of Borrower 07/1-06/30 07/1-06/30Executing Agencies:

Line of Credit National Bank of LiberiaTechnical Assistance National Investment Commission

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MISSION DATA

Month/ No. of No. of Date ofYear Weeks Persons MaDweeks Report

Identification 06178 3 2 6 09/78Preparation I 12178 2 4 8 01/79

II 02179 0.4 1 0.4 04/79Appraisal 05/79 2 3 6 07/79Post-appraisal 12179 0.4 1 0.4 01/80Review of Status I 06/80 0.4 1 0.4 06/80

w a II 06/81 0.2 1 0.2 06/81

Total 8.4 21.4

Supervision I 06/82 1.1 1 1.1 07/82II 02/83 1 2 2 n.a.III 03/83 0.4 1 0.4 07/83IV 02184 0.7 2 1.4 03/84V 07/84 1 1 1 07/84VI 02/86 1.4 2 2.8 03/86VII 11/86 0.4 1 0.4 11/86

Total 6.0 9.1

n.a. - not available.

CUMULATIVE CREDIT DISBURSEMENTS(US$ million)

FY 82 83 84 85 86 87

Appraisal 0.80 1.96 3.21 4.00 - -Actual 0.17 0.24 0.59 1.25 2.11 2.84Actual as Z Appraisal 21.25 12.24 18.38 31.25 - -

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STAFF TS

FY 7 73 01 ft " 66 e ft

Prefe1r ton 0.4 12.0 - - - - - - - - - - 12.4

Approaisl - 7.7 20.2 - - - - - - - 27.9

Noptlatlon - - 0.2 8.8 - - - - - - - - 9.5

Sup.r'lelon - - - S.? 7.9 9.2 7.0 0.6 22.4 9.8 - - 79.0

PCR - - L _ - _ - - . 10.0 11.5

To" l 0.4 19.7 20.4 9.0 7.9 9.2 T.0 0.0 22.4 9.J 1.5 - 182.1

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RIGHLIGHTS

The Govternment of Liberia was the recipient of the SDR3.2million credit, the main objectives of which were tot (a) develop anappropriate institution that would provide the necessary assistance toentrepreneurs in planning and managing their investments; and (b) encouragelocal financial institutions to increase their support of local businesses(para. 4.01-4.02). The credit was approved by the Board in November 1980,became effective in September 1981 and, in effect, closed as of June 1987.

The business environment in Liberia deteriorated substantiallyduring the project's implementation period as the country witnessed seriouseconomic, financial and political turmoil (para. 2.01-2.02). Changes inpersonnel brought about uncertainty in the civil service and publicagencies and critical delays in project implementation. The ProjectAnalysis Department in the National Bank of Liberia (NBL), responsible formanaging the credit component, was not established until January 1984. Thetechnical assistance component was to be implemented by the LiberianDevelopment Corporation (LDC). The Government disbanded LDC in September1979 and created National Investment Commission (NIC) with a broad mandateof coordinating investment policies in the country. Although NICimmediately set up a Small and Hedium Enterprise (SME) Department, it hadnot reached the operational level required to implement the technicalassistance component of the project by the time the Credit becameeffective. As a result, implementation of the project was off to a veryslow start.

The slow implementation was compounded by frequent and longsuspension of disbursements to Liberia by the Bank Group. The closing datewas extended three times. By the original closing date (June 30, 1984),only 15? of the credit had been disbursed (Annex VII ). 71? of the creditwas disbursed by the final revised closing date (June 30, 1987). Thebalance ic now in the process of being cancelled.

The project's achievements were mixed. The line of credit andtechnical assistance helped develop indigenous private sector enterprisesin a country that had done very little, until the time of the project, tosupport local enterprises. The project contributed to institution buildingof the NBL, NIC and participating financial institutions, especially theSmall Enterprises Financing Organization (SEPO). The institutional supportsystem provided rhrough NIC forged complimentarity between industrialextension services and project finance. Technical assistance, after -t wasredesigned, appeared to have been a useful and appreciated service. Themost important elements of NIC's technical assistance were in connectionwith the selection of machinery and training of entrepreneurs in accountingprocedures. An apex lending arrangement and an institutional supportsystem have been established and need to be consolidated further andsupported by the Bank when Bank Group operations in Liberia are resumed.

The objective of encouraging local financial institutions toincrease their support of local businesses was achieved only partially.Eleven financial institutions were expected to participate in the project;

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only three actually took part (one of them reluctantly). None of theci-wnercial or foreign banks operating in Liberia participated in theproject. SEP0, which did not exist at the time of appraisal, was the mostactive participant in the project and is likely to continue to give strongsupport to the small and medium-scale enterprises (SMEs). Eighty-six SMEs(compared to 74 projected at appraisal). 922 of them being small scaleenterprises (SSEs), benefited from the line of credit. Difbursements forSSE subloans exceeded appraisal estimates by 682 while disbursements form3dium-scale enterprise subloans fell below appraisal estimates by almost902. About 292 of the SMEs were in agriculture related industries; 28S inservice industries; 21Z in wood industries; and 62 in other industries.The enterprises were expected to generate 662 jobs at an average cost ofabout $5,000 per job.

IDA supervision missions were fairly regular except in 1985 whenthere was none. They contributed to developing short range revised workprograms and implementation schedules de¢ite prevailing problems in thecountry.

All the three financial institutions that participated in theproject are faced with high loan default rates. Aging of the arrears is abig problem. As of September 30, 1986, loan repayments due to theinstitutic,ns in arrears of six months or more as a percent of total arrearswere as followst SEFO 972, LBDI 79Z, and ACBD 892 (Annex VI). Financialperformance of the subprojects is not very good. About 402 of the subloansunder Credit 1076 were in arrears of six months or more, accounting forabout 802 of the total amount in arrears as of the above date. However,the enterprises funded under the project contributed to Liberia's economyin terms of value added and job creation.

Overall, performance of the Borrower was poor. The ProjectPolicy Analysis Department was not established until late into the life ofthe project and it was not fully staffed when established. Budgetaryappropriations to NIC were insufficient in most cases leading to somepositions not being filled. The NBL did not furnish to the Bank certifiedcopies of financial statements and annual audit reports for 1986 and 1987.

The following conclusions and lessons can be drawn from theproject's experiences

(a) The credit was granted at a time when the Liberianinstitutions were not ready to operate a relatively complexSME financing scheme. In retrospect, a technicalassistance program to prepare NIC, the NBL's CreditGuarantee Scheme and a financial institution, like SEFO, toadequately perform their functions under a future creditprogram would have been more appropriate;

(b) The willingness of commercial and development banks toparticipate in this type of lending arrangement should beassessed more critically during appraisal. Perhaps aslower disbursement rate would have been projected had it

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been determined at appraisal that only three out of elevenpotential financial institutions would participate in theproject;

(c) Given the scarcity of skilled huran resources in countrieslike Liberia and to avoid duplication, Bank technicalassistance should be integrated with ongoing technicalassistance programs funded by other donors wheneverpossible;

(d) Including training in simple business skills, such assimple book-keeping techniques for entrepreneurs, iscritical to the success of lending to small-scaleenterprises (para. 4.07). and

(e) While suspension of Bank Group disbursements for non-payment of earlier loans and credits is necessary, it has aserious impact on ongoing projects and adds toimplementation difficulties and adverse performance.

LIBERIA


SMALL AND MEDIUM-SCALE ENTERPRISE PROJECT

CREDIT 1076-LBR

I. INTRODUCTION

1.01 In 1978, the Government of Liberia requested the Bank to explorethe possibilities of establishing a technical and financial assistanceprogram for small and medium-scale enterprises (SMEs). A Bank sectormission was followed by consultants' studies, including a comprehensivesurvey of SMEs in the country. A project concept developed duringdiscussions with the Government. The project was appraised in May, 1979and approved by the Board on November 18, 1980. At the time of appraisal,Liberian Bank for Development and Investment (LBDI) was and still is themajor source of term financing in Liberia. The project was to complementLBDI's Bank-supported assistance to medium and large-industrial projects bymaking available to LBDI and other financial intermediaries financial andtechnical resources which were suited for smaller enterprises.

1.02 The credit had two primary objectives: (a) to develop anappropriate institution that would provide the necessary assistance toentrepreneurs in planning and managing their investments; and (b) toencourage local financial institutions to increase their support of localbusinesses. The pvoject would thus support the Government's effort tobroaden the industrial base and increase local participation and employmentin industrial activities in the country.

1I. THE ENVIRONMEN

A. Economic Background

2.01 Liberia's overall economic and financial position deterioratedsubstantially during the project's implementation period. GDP andconsumption per capita declined significantly, while public and privateinvestment fell sharply. These developments were due to a marked drop inproduction, a significant deterioration in terms of trade, a major erosionof financial discipline, and a loss of internal as well as externalconfidence that led to a large outflow of carital and skilled manpower.Private and official capital inflows dried up. while arrears on externaldebt service rose sharply. The US dollar notes, the legal tender inLiberia, virtually disappeared from circulation and Liberian coins,officially at par with the US dollar, were exchanged against the dollar ata substantial discount in the parallel exchange market.

2.02 Real GDP (at 1981 prices) is estimated to have declined at anAnnual average rate of 1.2 S during the period 1981-86. The major cause of

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this poor overall growth performance was the substantial decline in thevalue added of the iron ore sector, which declined at an annual averagerate of 5.5? over the period. A sharp compression of imports and a tightliquidity situation adversely affected the manufacturing, trade,traasportation, and construction sectors. While the agricultural sectorovezall experienced a modest positive average growth rate, the subsectorsshowed generally mixed performance. The rubber subsector had some modestgains in output, especially during 1983-84; recorded output of coffee andcocoa fell s)-',Jly; rice production recorded some modest growth, but at arate substan.dally lower than the 3.42 annual average growth in population.The sustained decline in real GDP resulted in nearly a 20? fall in GDP percapita over the period. 11

2.03 A substantial shift in the structure of the economy occurredduring the period as a result of the different growth rates experienced bythe various sectors. The relative share of the iron ore sector in GDPdeclined from 122 to 9?, continuing a trend that began in the mid-1970swhen the sector contributed an average 272 of GDP. The agricultural sector,boosted in part by the recovery in rubber production,increased its relativeshare from 27? to 322 (compared with 122 in 1975). The share of governmentservices fell from about 172 to 152 while that of forestry (mainlylogging) increased slightly from 5 to 6Z. 2/ The manufacturing sector'sshare remained steady at about 72.

2.04 Preliminary estimates show that real GDP declined by about 12 in1987 as a result of a further fall in iron ore output, poor performance ofcocoa and coffee, and manufact -ing and service sectors which continued toexperience liquidity and foreign exchange difficulties. Economicperformance in 1988 was not expected to be any better than in 1987.

B. The Industrial Sector

2.05 Liberia's industrial sector, consisting of mining,manufacturing, construction, electricity and water, accounts for over 20Zof GDP (Table 2.1). Mining is dominated by iron ore while manufacturing iscentered around import substitution activities. There has been asubstantial decline in the value added of the iron ore subsector (para.2.02). Sawn timber and plywood are the only significant manufacturedexports. Large-scale manufacturing enterprises are few and centered almostexclusively on import substitution. They are mainly owned by foreigners.Medium-scale enterprises are engaged largely in the production of food andrelated items, household furniture and woodwork, block making and auto

I/ The extent of the decline in value added in some sectors is probablyoverstated by official GDP statistics. It is believed that asubstantial amount of unrecorded transactions take place, especiallywith respect to cocoa, coffee, and diamond sectors.

2/ The share of the forestry sector is likely to be underestimated as itis believed that a significant portion of logging activity andexports is unrecorded.

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repair. Most of them are either wholly foreign-owned or have very limitedLiberian participation. Small-scale enterprises are generally Liberianowned and controlled. Economic activities in this sector include block-making, garment-making, carpentry and upholstery. Petroleum products(refinery) account for about two-thirds of manufacturing value added. Theremainder is accounted for by food products, beverages, cement and cementblocks, and chemical products. The bulk of m_=ufacturing activities occurin Monrovia. There are few large firms located up-country except thoseassociated with forestry and agricultural enclaves. Firms with more than50 e-ployees are found mostly in the food, wood and furniture, and chemicalindustries.

2.06 The manufacturing sector grew at a rate of about 121 in realterms in the late sixties and early seventies. Growth of the sectorstagnated from the mid-1970's as import-substitution possibilities werefull, exploited. The sector's performance started declining from thebeginning of the eighties. Performance during the eighties has beenadversely affected by liquidity problems that generally characterized theperiod, the slowdown in major productive sectors. and the general erosionof business confidence. Liquidity and security of collateral problems haveforced banks to restrict access to credit and foreign exchange. There hasbeen, however, some small increase in the number of enterprises in lightindustry operating under duty-free concession and incentive contracts.Capacity utilization is very low, labor productivity continues to fall, sudshortage of skilled labor persists.

2.07 The main issues in the sector are how to attract investment insmall and medium-scale enterprises, rehabilitate existing private andstate-owned enterprises, and increase capacity utilization. Given limitedcapital availability, skills and management capability and in order tostimulate output and employment in the sector, the Government adopted astrategy of promoting SMEs and set up a Small and Medium-Scale EnterprisesDepartment within the National Investment Commission. The worseningeconomic situation has not allowed the Government to focus attention onsome of the measures introduced earlier to promote the sector.

C. The Financial Sector

2.08 Liberia's financial system consists of the National Bank ofLiberia (NBL), eight commercial banks, one development bank, two financeand trust companies, and a number of insurance companies, cooperatives, andcredit unions. A National Social Security scheme has been in existence forsome time, although it is reported to be only partially operational. TheNBL, established in 1973 with the IHF assistance, is a quasi-central bankwhose primary functions are to supervise overall banking activities,perform clearing house operations, extend credit to the Government andbanks, and regulate currency supply. It does not have the mandate to issuebanknotes, but issues Liberian coins. Its capacity to extend credit to theGovernment is limited to the amounts it can borrow from abroad and obtainfrom the commercial banks, and to the amount of Liberian coins issued. TheNBL's capacity to intervene as lender of last resort is very limited due tothe lack of its own resources. Five of the eight commercial banks are

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branches or wholly owned subsidiaries of foreign banks. Two of theremaining three are publicly-owned, representing 43Z of the total bankingsector's assets in the mid-1980s. The third, the Bank c. Liberia, has beenin the process of liquidation since 1981. Minimum interest rates ondeposits and maximum lending rates are regulated by the Government.

2.09 Inadequate demand-management policies, a series of externaleconomic shocks, and domestic political upheavals combined to destabilizethe financial system in the early 1980s, leading eventually to a nearbreakdown of the monetary and banking system. Net claims on Governmentincreased by 3402 between June 1980 and December 1986. The ratio of netclaims on Government to domestic credit rose from 36Z in June 1980 to 752in December 1986, while claims or, public corporations increased by 40?between June 1981 and December 1986. Claims on the private sector,traditionally the main channel for commercial bank credit, declined by 55Zbetween June 1980 and June 1983 as a result of depressed macroeconomicsituation and uncertain legal status of commercial lending collateral.These claims increased only by 6.22 between June 1983 and December 1986.Outstanding credit to the private sector remained well below the levelbefore 1980. Relative shares of domestically-oriented sectors such asmanufacturing, construction, transpoL -, and public corporations incommercial bank credit fell substantially, as did the shares of trading,hotel and restaurants. Agriculture's relative share increased slightly,mainly as a result of a significant rise in credit given to the rubbersector. These developments were a reflection of the increasing liquidityand foreign exchange shortages created by the disappearance of US dollarnotes from circulation, and the concentration of commercial bank operationson foreign exchange generating activities. Data for the first quarter of1988 show that these trends are continuing.

2.10 There has been a fundamental change in the structure of themoney supply since the early 1980s. The ratio of coins in circulation tobroad money (excluding US dollar notes) increased from 10 in 1981 to 32?by end of 1986. On the other hand, deposits declined by 11? between June1980 and June 1982. There was a slight improvement in the depositsituation in the subsequent years, but the structure of depositsdeteriorated significantly during the period. The ratio of quasi-money tobroad money declined from 43Z in June 1981 to 282 in December 1986 and theshare of time deposits in total deposits fell from 161 to 12? during theperiod.

2.11 Increasing issuance of government checks against inadequatebalances has created difficulties for the interbank check-clearing systemsince late 1984. Since these checks could not be cleared at the NBL,commercial banks involuntarily accumulated excess reserves at the NBL. Thecheck-clearing system eventually broke down as commercial banks becameincreasingly reluctant to cash or accept deposit checks drawn on the NBL orother banks to conserve available cash resources. This increasedcompartmentalization of the financial system and reduced financialintermediation. There were significant improvements in the operations ofthe check-clearing system during 1987 88 (following signing of a tripartitememorandum of understanding between the Ministry of Finance, the NBL, and

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commercial banks). but developments in monetary and credit aggregatesreflected for the most part a continuation of trends apparent in previousyears.

2.12 The role of commercial banks in the country has progressivelychanged during recent years. Banks are now largely operating as foreignexchange dealers and trade financiers, a function achieved partly at theexpense of their traditional role of financial intermediaries. This moveled to a significant improvement in commercial banks' reportedprofitability during 1986 and 1987. However, the increase in reportedprofits appears to have been partly due to some major banks (especially thetwo publicly owned banks) not setting aside sufficient loss reserves andoverstating their actual interest income. Thus, the Liberian financialsystem remains fragile and susceptible to disruptive developments. TheGovernment is reviewing various options aimed at strengthening the bankingsystem, including recapitalization of locally owned banks and setting up ajoint commercial banks' self-supporting fund to deal with temporaryliquidity crises.

III. NATIONAL BANE OF LIBERIA AND PARTICIPATING FINKANCIAL INSTItUTIONS

A. National Bank of Liberia

(i) Ownership

3.01 The National Bank of Liberia (NIL) is wholly owned by theGovernment of Liberia which, under the NBL Act 1974 Sections 6 (2) and 7,is responsible for (a) maintaining the bank's paid-up capital by issuingfrom time to time non-negotiable and non-interest bearing securities,which, in the judgement of the Board of Directors of the bank, arenecessary for preserving the paid-up capital from any impairment; and (b)financing any excess of the ordinary expenses over the regular income ofthe bank.

(ii) Nature of Operations

3.02 Under Section 4 of the NBL Act 1974, the NBL is to regulate theavailability of money, promote monetary stability, exchange conditions anda sound financial structure conducive to the balanced growth of the economy(see also para. 2.08).

(iii) Financial Performance and Condition

3.03 The NBL's audited income statemente and balance sheets for theperiod 1981-85 are given in Annex I and Annex II, respectively. The bankshowed a consistent though modest profit for the years 1981 through 1985with the exception of 1982 when it made a substantial loss. Profit as apercentage of total assets increased from 0.04S in 1981 to 0.702 in 1985.Administrative expenses fell from 0.75Z of total assets in 1981 to 0.492 in1983 and then rose to 0.562 in 1985.

3.04 Assets of the NBL consist of foreign assets and loans advancedto the public sector and the private sector. The value of assets almostdoubled between 1981 and 1985. The increase in NBL's assets has beenfinanced principally from external borrowing, particularly the DMF credit.The massive increase in assets during the period under review has also beenfinanced by increasing the volume of coins in circulation.

(iv) NBL as the Anex Institution

3.05 The NBL was the implementing agency for the line of creditcomponent of the project. The Government onlent the credit component tothe participating financial institutions (PFIs) through the NBL which actedas the apex institution. The NIL established a Project Analysis Departmentand assigned full-time staff to manage the line of credit. The departmentwas set up very late. in January 1984, and was not fully staffed.

(v) Credit Guarantee Scheme

3.06 The NBL established a Credit Guarantee Scheme in 1978 in aneffort to encourage commercial banks to lend to Liberian entrepreneurs.The guarantee initially covered 66.23Z of the amount of the loan indefault, but was increased to a maximum of 802 to compensate adequately thelenders for the lack of collateral which is a major obstacle to access tocredit for small enterprises. Enterprises wholly owned by Liberians andrequiring loans below L$100,000 were elig4ble for the guarantee. Since thescheme was established only in 1978, its track record was too short toallow easy identification of possible weaknesses at the time the projectwas appraised. The experience of the NBL's staff in operating a creditguarantee system for small-scale enterprises was limited to the very fewoperations under the existing scheme.

I. Participating Financial Institutions

3.07 At the time of appraisal, eleven financial institutions wereexpected to participate in the apex lending scheme. However, given thedeteriorating economic climate in Liberia during the period, none of thecommercial or foreign banks operating in the country participated in thescheme. Only three PFTh, Agricultural and Cooperative Development Bank(ACDB), Liberian Bank for Development and Investment (LBDI) and SmallEnterprises Financing Organization (SEFO), participated.

(i) Atricultural and Cooperative Development Bank

3.08 The ACDB was established in November 1976 with the objective of(a) providing short, medium and long-term credit to individual farmers,either directly or through cooperatives, (b) promoting the development ofagricultural enterprises and rural industries, and (c) providing technicaladvice and assistance to individual farmers and cooperatives. ACDB'sinitial subscribed capital of L$2.25 million was held by the Government(95?) and the Liberian Produce Marketing Corporation (5%). By 1985 ACDB'sstated capital had increased to L$3,378,900 and the shareholders were the

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Government (96.2X), Liberian Produce Marketing Corporation (3.1Z), LiberianNational Federation of Cooperative Societies (0.6?), and Liberia CreditUnion National Association (0.1S). It had accumulated capital surplusamounting to L$3,257,686 by 1985.

3.09 At the time of appraisal senior management of the ACDB wasconsidered fairly competent. Due to its presence in rural areas, thebank's participation in the project was considered to be important for thedevelopment of rural industries.

3.10 ACDB's balance sheets, income statements and selected financialratios for the period 1984-86 are summarized in Annex T1. ACDB showed asubstantial increase in assets in 1985 with total assets increasing fromL$15.3 million in 190l to L$36.0 million in 1985. This was achievedprimarily by the incrZase in demand deposits from L$5.9 million in 1984 toL$18.4 million in 1985. As a result, the debt/equity ratio increased from2.2 in 1984 to 4.3 in 1985. During the same period, the reported netincome increased from L$502,000 to L$896,000. This was due to lowerprovisions for loan losses. Provisions of LS1,411,000 were made in 1984 ascompared to L$l,198,000 in 1985. As a result of the higher reported netincome in 1985, the return on equity increased from 102 in 1984 to 172 in1985. Administrative expenses increased to L$2.3 million in 1985 fromL$2.0 million in 1984; however, expressed as a percent of total assets,they declined from 13S to 62 due to the sharp increase in total assets in1985. The stockholders' equity improved from L$4.831 million in 1984 toL$5.972 million in 1985. Increase in equity was relatively less comparedto the increase in the risk assets. Consequently, the ratio of *riskassets' to equity declined from 100s40 to 100:19.

3.11 ACDB was able to attract increased deposits during the period.Total deposits increased from L$9.399 million in 1984 to L$23.071 millionin 1985, an increase of 145Z. Demand deposits tripled from L$5.945 toL$19.108 million while savings deposits increased from L$2.791 million toL$3.130 million and time deposits increased from L$0.662 million to L$0.833million.

3.12 The bank faced liquidity problems during the project'simplementation period mainly because in the context of Liberia, it isdifficult to convert short-term loans into cash in the short run. Alsoclaims on the NBL are unlikely to be converted into cash in the short runbecause of peculiar shortage of cash in the economy. On the other hand,short-term obligations represented potential demand for cash in the shortrun.

(ii) Liberian Bank for Develolment and Investment

3.13 The LBDI was established in 1965 with the assistance of IFCwhich subscribed 25? of the initial L$1.0 million capital. Its sharecapital was increased to L$S5.0 million in 1976, of which L$3.6 million waspaid as of December 1978. The Government, IFC and a number of privateLiberians together own 50.4t of LBDI's shares, the remaining being held bya number of private foreign companies and financial institutions. Under

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its charter, LBDI finances productive enterprises in manufacturing,agriculture, transportation, tourism and services. It can make loans, takeequity participations, issue guarantees and underwrite stock issues. TheWorld Bank has granted three lines of credit to LBDI since 1972 amountingto US$12 millLon. Assistance of the Bank Group has enabled LBDI to developinto a strong and sound financial institution which plays a major role infinancing enterprises of all sizes. LBDI Board. chaired by the Minister ofFinance, consists of eight members representing Liberian interest (3), IFC(1) and foreign shareholders (4). LBDI is organized into three maindepartments: Projects, Finance, and Internal Audit and Control.

3.14 LBDI's investment and financial position were sound at the timeof appraisal. Its financial performance in the mid-1980s is summarized inAnnex IV. As compared to SEFO and ACDB, LBDI is an experienced and better-managed bank. However, LBDI was a reluctant participant in the SME Projectdue to its access to other sources of foreign exchange (including threeDFC-type loans from the Bank) and disappointment with NBL's handling ofproject approvals and disbursements. LBDI's gross revenues declinedslightly between 1984 and 1985, from L$4.6 million to L$4.5 million.However, reported net profit showed a considerable increase from a negativeL$1.2 million to negative L$0.1 million due to higher provisions made forloan loses in 1984 compared to 1985.

3.15 The level of stockholders' equity was steady. Debt to equityratio and Orisk assets' to equity ratio were also steady at about 100:17and 100:20, respectively. 78S of LBDI's total assets in 1984 were in theform of loans and equity investments. The percentage fell to 762 in 1985.Long-term debt formed 642 of the long term resources in June 1986. Thus,some of the current and short-term loans were made out of long-termborrowings. Short-term borrowings were small. Sources of funds werebasically two: owners' equity and institutional long-term borrowings.There was hardly any volatility in the quantum of sources.

(iii) Small Enterprises Financing Organization

3.16 SEFO was set up in 1981 with the assistance of the NetherlandsDevelopment Finance Company (FHO) to develop and promote small-scaleenterprises in the country. As of December 31, 1985, paid-up capital wasL$628,601 and the shareholders were FMO (39.82), LBDI (40.6S), LiberiaFinance & Trust Company (3.92). Partnership for Productivity International(2.2S), ACDB (6.7Z), and National Housing and Savinge Bank (6.82). USAIDprovided L$500,000 as capital grant in 1985. SEFO seemed to be wellmanaged, had recruited some promising Liberian staff and enjoyed support ofthe FMO, LBDI and other Liberian institutions. However, it was veryinadequately funded. Its initial share capital was too small and the costof a large part of its external resources was very high.

3.17 SEFO's balance sheets, income statements and selected financialratios for the period 1984-86 are summarized in Annex V. Its financialcondition is poor. After provisions were made for loan losses, theshareholders equtity was negative in each of the three years. Operationallosses and loan loss provisions were financed from long term borrowings.

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Equity remained negative even when loan loss provisions were added back,indicating high operational losses. SEFO has not been able to fully deployavailable resources for lending, portfolio loans form only about 542 oftotal assets.

3.18 Atrears Problem. All the three PFIs that participated in theproject are plagued with arrears problem. The arrears situation as ofSeptember 30, 1986 and June 30, 1988 is presented in Annex VI. About SO,222 and 23Z of the loan balance was in arrears in the case of SEFO, LBDIand ACDB, respectively, as of September 30, 1986. In numbers, 47, 9, and21 of the loans given by SEFO, LBDI and ACDB, respectively, were in arrearsas of the above date. Aging of arrears is also becoming a serious problem.In value terms, 972, 792 and 891 of the loan arrears owed to SEFO, LBDI andACDB, respectively, were six months or more behind the repayment scheduleas of the above date. SEFO had 38 projects in-arrears of six months ormore; LBDI had 3; ACDB had 11. About 402 of the number of subloans underthe SHE Project were in arrears of six months or more, accounting for about802 of the total amount in arrears. The situation had gotten worse by June30, 1988. By that date, 47 out of 53, 6 out of 10, and 23 out of 25subprojects financed through SEFO, LBDI, and ACDB, respectively were inarrears. The age of arrears ranged from 1-56 months. In the case of ACDB,all the principal outstanding was in arrears. Further details are given inAnnex VI. Bank supervision missions emphasized the need for the PFIs tostep up their efforts in project supervision and loan recovery. The PPIswere attempting individually to revive the problem projects throughintensive technical assistance and restructuring of loans.

3.19 An increase in the interest rate spread to the PFIs was thoughtnecessary to compensate the PFIs for a higher than anticipated loan defaultrate arising from the economic recession that is still facing the country.The spread was increased from 5.52 to 10.752 in October 1986 by reducingthe lending rate from NBL to the PFIs. The PFIs needed to make provisionsfor higher than anticipated loan losses.

IV. THE PROJECT

A. Obiectives

4.01 The primary objectives of the project were:

(a) to develop an appropriate institution that would provide thenecessary assistance to entrepreneurs in planning and managingtheir investments; and

(b) to encourage local financial institutions to increase theirsupport of local businesses.

Thus, the project was expected to support the Government's efforts tobroaden the industrial base and increase local participation and employmentin industrial activities in Liberia.

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4.02 To achieve the above objectives, the project consisted of thefollowing components:

(a) Line of Credit (SDR 2.7 million) for the financing of small andmedium-scale enterprises (SMEs) through the PFIs as follows:

Mi) SDR 0.8 million to small-scale enterprises (SSEs),wholly owned by Liberians, with total fixed assets notexceeding L$50,000 at the time of application by theenterprise for a subloan, and with project investmentcosts not exceeding L$50,000; and

(ii) SDR 1.9 million to medium-scale enterprises (MSEs),wholly owned by Liberians, with total fixed assets notexceeding LS100,000 at the time of application by theenterprise for a subloan, and with project investmentcosts not exceeding L$l00,000.

(b) Technical Assistance to National Investment Commission (SDR0.310 million) for:

(i) strengthening of NICs capability to provide effectivepromotion and advisory services to SMEs including theestablishment of a project promotion and evaluationunit within NIC's SME Department and the provision ofextension services to artisans and SMEs;

(ii) review of the Investment Code to enable, among otherthings, SMEs to benefit from the investment incentivesprovided under the Investment Code;

(iii) follow-up of the SHE survey carried out by theUniversity of Liberia; and

(iv) provision of necessary technical assistance (TA) toSMEs.

4.03 The credit component, managed by NBL, was to be onlent to thePFIs at an interest rate of 9S per annum plus 1S for subloans eligible forguarantee under NBL's Credit Guarantee Scheme. The maximum maturity ofPPI's subloans would be 10 years, at an interest rate of 13.5 per annumincluding the fee for guarantee under the Guarantee Scheme. Interest rateswould be subject to review from time to time. The onlending rate to PFIswas reduced to 4.75S in October 1986 (para 3.19). Foreign exchange riskwas to be borne by the Government at no fee to sub-borrowers.

4.04 The project was expected to assist about 40 SSEs with individualloans averaging L$25,000, the bulk of these loans being in the L$5,000 to$10,000 range, and about 34 MSEs with individual loans averaging L$70,000.The project was also expected to help generate over L$4.2 million ofinvestments which in turn would create around 500 jobs at an average cost

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of about L$8,000 and below L$5,000 for MSEs and SSEs, respectively. Creditrequests prepared with or without RIC's help would be presented by thepromoter to a PFI of its choice. Credit approval would be theresponsibility of the PFI, subject, however, to NBL's approval and IDA'sapproval for refinancing.

B. Proiect Implementation

4.05 Implementation of the project was off to a very slow start.Because of political events in 1979 and 1980 and ensuing changes inconcerned agencies and personnel, the credit did not become effective untilSeptember 14, 1981, almost a year after Board approval. Very littleprogress was made for a period of two years mainly due to organizationalproblems at the NBL and NIC, and lack of interest by development andcommercial banks in participating in the project. Much slower c.vnitmentand disbursement rates than appraisal estimates made it necessary to extendthe credit's closing date three times to June 30, 1987. Annex VIIcompares the schedule of estimated and actual cumulative disbursements. ByJune 30, 1984, the original closing date, only US$0.59 million (152 of thetotal credit) had been disbursed. At the end of the first extended closingdate, June 30, 1985, US$ 1.25 million (312 of total credit) had beendisbursed. By the end of the second revised closing date, December 31,1986, US$2.11 million (53Z of total credit) had been disbursed. By thefinal closing date, June 30, 1987, US$2.84 million (712 of total credit)had been disbursed. There is still a balance of SDR237,476 in the SpecialAccounts to be accounted for. An undisbursed balance in t..e credit accountof SDR620,829 is now in the process of being cancelled.

4.06 Several factors accounted for the slow comiitment anddisbursement of the credit. The NBL did not have the necessary staff orexpertise to initiate the project. It was not until January 1984 when theNBL established a Project Analysis Department and assigned a full-timestaff to carry out effective implementation of the project. In September1979, the Government created NIC and dissolved the Liberian DevelopmentCorporation (LDC) which had originally been designated to implement the TAcomponent. By Credit effectiveness, NIC had not reachec. the operationallevel required to implement the SME project. Contrary to the expectationsat appraisal, the financial institutions were reluctant to participate inthe project due to (i) the perceived high risk involved in financing SSEs,(ii) the slow development of NIC's support services (the new management andstaff of NIC were inexperienced), (iii) the mistrust in the CreditGuarantee Scheme operated by the NBL (the Scheme established in 1978 hadguaranteed only a few credits), and (iv) NBL's inability to advancepayments under subloans which would be reimbursed by IDA. Given thedeteriorating economic climate in Liberia during the period, commercial andforeign banks operating in the country were not willing to participate inthe project. Only three financial institutions, LBDI, SEFO and ACDBparticipated; LBDI was a reluctant participant (para. 3.±4).

4.07 Project proposal preparation by NIC's SME Department was mostlybehind schedule. Two factors--the non-existence of business records of theclients who applied for assistance and the length of time it took for

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information regarding the enterprise to be extracted from them--contributedto this. Sometimes it was necessary for extension officers to reconstructrecords before preparation of financial statements could begin, an exercisewhich was often very time-consuming. Also, most of the small entrepreneurswere unable to make even a very modest equity contribution and lacked theentrepreneurial capabilities, like simple book-keeping techniques, thatwould ensure proper administration of their businesses. Many of them hadnever had access to bank credit before.

4.08 Implementation of the project was also adversely affected byundue delays in subproject processing both at the PFIs and at the N8L.Several factors contributed to such delays: PFIs shortage of experiencedstaff able to handle a large number of subprojects, inadequate record-keeping and documentation by PFIs, cumbersome procedures for approval anddisbursement by the NBL, and practice by the NBL to seek IDA approval ofall subprojects including those below "free limit." Most of theseshortcomings were resolved towards the end of the project implementationperiod.

4.09 Commnitment and disbursement of the credit were also slowed downby two long disbursement suspensions--February to September 1985 andFebruary to September 1986--that became necessary because Liberia was notmeeting its debt service obligations to the Bank Group. Furthermore,shortage of their own funds curtailed the ability of LBDI, SEF0 and ACDB todisburse smoothly against their loans to SMEs, exacerbating the impact ofthe suspension of IDA disbursements on the Liberian economy. Continuedeconomic difficulties made some potential investors postpone investmentdecisions reached earlier.

4.10 The NBL had not yet fully understood its role as an apexinstitution, often getting bogged down with cumbersome procedures anddebate vis-a-vis the PFIs. In order to solidify trust with PFIs and buildup its role as an apex institution, the NBL needed to strengthen itscapabilities to: assess the eligibility of financial institutions forparticipation in apex lending schemes, develop guidelines and criteria forevaluating the financial performance of PFIs, assist PFIs in upgradingtheir project appraisal and supervision systems, and develop guidelines and--ocedures for subproject processing and loan disbursements. The NBL.tarted giving priority to strengthening the above functions only towardsthe end of the project.

4.11 The system of monitoring initially practiced by the ProjectAnalysis Department (now Development Finance Department) of the NBL was notconsistent with the role of the NBL as the apex lending institution. Thedepartment, instead of monitoring the qtuality of the loan portfolio of thePFIs, attempted to monitor the performance of the subprojects which wasbasically a function of the PF1.. The PFIs felt that the NBL wasunnecessarily interfering in their operations. Moreover, the NBL did nothave the staff to monitor individual subprojects funded under the project.The practice was stopped following discussions with an IDA supervisionmission. However, the NBL still maintains that divorcing it completely

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from monitoring the performance uf the subprojects did more harm to theoverall performance of the project.

4.12 The Credit Agreement w&s amended on July 22, 1983 to establish aSpecial Account from which the NBL could disburse funds in favor ofapproved subprojects and later be replenished by IDA upon receipt ofrequired documents. The Special Account assisted in expediting the flow offunds to approved subprojects. In light of tight liquidity facing thePFIs, the NBL also decided in 1986 to make available to each of the threePPIle L$50OOO, from its own resources, on a revolving basis to enable themto make di-bursements to tlEe approved subprojects until refinancing wasmade available by the NBL from the Special Account under the credit line onsubmission of appropriate documents by the PFIs. The scheme seems to haveworked well.

4.13 In the course of project implementation, there seemed to se someconfusion on whether financing working capital was allowed under theCredit. There was no provision to this effect in the Credit and ProjectAgreements and the Borrower requested an amendment to make working capitalfinancing eligible for the purpose of utilizing idle capacity. Despite theabsence of this provision in the Agreements, many subloans requiringfunding of working capital were approved since 1983. On October 29, 1986these Agreements were amended to reflect the original intention ofassisting in the provision of working capital as outlined in the SAR.

4.14 During project implementation, there was a realization thatthe TA planned for NIC during appraisal was inadequate in relation to NIC'sactual requirements. It was also realized that SEPO, which had not comeinto existence at the time of appraisal, also needed TA in projectappraisal and supervision. The TA component was thus expanded in March1984; it would continue assistance to NIC for project identification/preparation work but would also include TA to SEFO. The revised TAcomponent was finally combined with a similar ongoing UNDP project forproviding extension services to small-scale enterprises through NIC. UNIDOwas appointed the implementing agency of the combined UNDPIIDA-funded TAproject since UNIDO staff were already working with NIC's SME Department todevelop extension services. Combining the two programs resulted inimproved project coordination and implementation. USAID also approved a"Small and Medium Enterprises Development Support Project" implemented bySEFO over the period 1984-89.

4.15 inadequate coordination between TA and project finance was oneof the causes of delays in the processing of subproject approvals. NICinvested considerable time and effort in identifying and preparingsubprojects, but most of these seemed to have been found unsuitable forfinancing by the PFIs. For example, by July 1984 NRC had prepared andsubmitted 80 subprojects to PFIs, but only 20 of them had been approved bythe PFI. The redesigned TA to NIC improved the quality of subprojectsprepared by NIC in the later years of project implementation.

4.16 In the earlier years of project implementation, NIC was able toprovide intensive extension services only to those entrepreneurs whose

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projects were prepared by NIC contrary to the objectives of the project.This was corrected when it was pointed out during IDA supervl,sion missionsthat extension services ought to be provided to all entrepreneurs financedunder the project. Some projects received only technical assistance fromNIC.

4.17 Overall, technical assistance appears to have been a useful andappreciated service to SMEs. The most important elements of NIC'stechnical assistance were In connection with the selection of machinery andtraining of entrepreneurs in accounting prrcedures.

C. Compliance with Credit Covenants

4.18 While most of the credit covenants were complied withsatisfactorily, others were not met fully. Under the Credit Agreement theBorrower was required to make adequate annual budgetary appropriations toNIC to carry out the TA component of the project. Budgetaryappropriations to NIC were insufficient in most cases mainly due tofinancial constraints facing the Government. The NBL was also to furnishto IRA, not later than six months after the end of NBL's fiscal year,certified copies of the financial statements and annual audit reports. IDAdid not received such statements and reports for the years 1986 and 1987 inspite of reminders to NBL. NIC was required to furnish to IDA not laterthan six months after the closing date or other agreed date, a report onthe execution of the TA component of the project. The NBL was to prepare aProject Completion Report within six months following the last withdrawalfrom the Credit Account. Both NIC and NBL did not meet their obligations.NIL was obligated to furnish all such information as IDA shall reasonablyrequest concerning the credit component of the project. The Borrower wasalso required to cause NIC to provide to IDA information concerning the TAcomponent. The Borrower, NBL and NIC did not respond in time to a requestand a subsequent reminder to furnish to IDA additional information to beused in preparing the Project Completion Report. Some information wasfinally received from the NBL and participating institutions and this hasbeen reflected in the report.

D. Utilization of the Credit

4.19 The following is a comparative table summarizing appraisalestimates and actual disbursements of IDA funds following reallocations inthe course of project implementation:

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Appraisal ActualEstimates Disbursements

Cateaory --------------SDRs--------

(a) Line of Credit

SSE Subloans 800,000 1,345,787MSE Subloans 1.900.000 194.870

Sub-total 2.700,000 1,540,657

(b) Technical Assistance

Project Promotion and Preparation 190,000 625,078Recruitment and Training(Extension Services) 120,000 60,687

Vehicles and Equipment 25.000 25,253Sub-total 335,000 711,018

(c) Refund PPF Advance 165,000 90,020

Cd) Special Accounts - 237,476

To be Cancelled _ 620.829Total 3.200.000 3.200.000

4.20 Characteristics of Subiroiects. SDR1.5 million financed a totalof 86 subprojects (L$3.5 million in total investments) compared to 74subprojects projected in the SAR. Of this amount SDR1.3 million went to 79(40 projected in the SAR) small-scale enterprises and SDR0.2 million wasfor 7 (34 projected in the SAR) medium-scale enterprises for fixedinvestments and permanent working capital. The average subloan size wasSDR17,914. A total of 662 jobs were expected to be created at an averagecost per job of approximately L$5,300: 574 jobs at an average of LS5,000per job for small-scale enterprises and 88 jobs at an average of L$8,000per job for medium-scale enterprises. About 67Z of the number ofinvestments and 602 -f the Credit amount was for expansion projects, ascompared to 262 of th. number and 312 of the Credit amount for newprojects. The remaining 72 of the number and 8S of the amount were forrehabilitation projects. The large majority of investments were located inand around Monrovia and the Montserrado County, which includes Monrovia.Annex VIII provides a detailed listing of the projects financed under thecredit.

4.21 Sectorally, there was close to an equal division in the number ofinvestments for agriculture related industries (292 of total number, 302of the Credit amount for subloans, SDR451,958) and service industries (282of total number, 312 of Credit subloans, SDR473,821). The remainder wasdivided between wood related industries (212 of the number, 202 of Creditamount for sub-loans, SDR304,297), agro-industry (152 of the number, for

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131 of Credit amount for sub-loans, SDR194,501), and other sectors (61 ofthe number and 62 of Credit, SDR91,312). Annex IX provides further detailson the project cost distribution.

4.22 Of the SDR1.8 million approved for 86 subldans SDRO.3 millionremained undisbursed. Another sixteen subloans, totalling SDR408,481, wereapproved but no disbursements made. Eight other subloans were cancelled.

4.23 Performance of Subproiects. The Government of Liberia did notprovide IDA with adequate actual data on subproject performance under thisCredit (see para. 4.18). Back-to-office reports and supervision reportshad to be used to present an idea of the performance of the sub-projects.

4.24 Although project evaluation and analysis were generally preparedas required by IDA, supervision exercises showed that there were manydeficiencies in the early stage of the sub-project cycle. For example,common deficiencies in some of SEFO's project proposals included thefollowingt the quality of information given in project analysis wassuspect because information was tailored to suit IDA criteria leading toover- or under-financing; assessment of the projected level of investmentcosts for fixed and/or current assets were unrealistic and not based oncompetitive quotations from various suppliers; assumptions were made thatequity in the form of existing assets and/or proposed assets were financedfrom the owner's resources rather than acquired on credit. which was thecase for some subprojects; distorted demand/sales forecasts were used sincedemand/sales projections were based on derived demand; vital assumptionsrelating to projected price/cost levels were not carefully examined; athorough study of the relevant technology to be used for the project wasnot conducted leading to unnecessary increase in debt servicing and largeoperating costs resulting from high idle capacity; the use of net income inrelation to repayment of loans, increase in equity and personal consumptionof the borrower was underestimated if not completely ignored; checks on thecharacter and reputation of the project sponsors were also insufficient.This resulted in a number of subprojects not performing as expected.

4.25 In January 2, 1985 it was reported that of fifteen subprojectsmade by SEFO siz were classified as sick enterprises. SEFO's collectionefficiency worsened from 432 in September 1984 te 27? in December 1984.The reasons given were liquidity problems, protracted default in debtservicing, decline in sales orders, large idle capacity, and lack ofresources to buy raw materials. Another report dated October 20, 1986indicated that NBL had funded nine sick projects in April 1985, whichincreased to 19 by December 1985, indicating an increasing trend inindustrial sickness. Although no formal study had been conducted to findthe causative factors, sickness was generally attributed to economicdifficulties, liquidity crises, scarcity and high cost of foreign exchange,reduction in the purchasing power of people. and low levels of private andpublic sector investments. Additionally, it was also noted that afterprojects had been approved and disbursements made there was very littlesupervision, monitoring and follow-up on these projects by theparticipating banks. Inadequate transportation facilities was acontributing factor to poor supervision practices.

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4.26 In a supervision report of April 1986 the following observationswere made for projects on a sector basist for poultry, it seemed Monroviahad reached market saturation with new enterprises having difficultysurviving in a very competitive industry. It was recommended that no moreapprovals be given for new projects in this sector if they were insideMonrovia but rather emphasis be placed on rehabilitating existing poultriesby providing technical assistance and working capital financing. In thewood processing sector inadequate and unreliable sources of electricity tooperate power tonls and weak market conditions were the main problemsfacing this industry. Further lending to this sector if the firm was inthe Monrovia area was not recommended. For the service sector, firms werefound to be weak in marketing their services and required more financingfor capital investments and working capital for spare parts. Enterprisesin the rice milling sector seemed to be doing well in terms of theiroverall financial condition and profitability. Many firms indicated theirinterest in expanding into buying paddy rice and milling their own rice forsale in addition to providing rice milling services to others.

4.27 Other problems experienced by entrepreneurs related to theinstallation and operation of machinery brought about by the unavailabilityof spare parts and lack of maintenance services. Considerable delay in thedelivery of raw materials was yet another problem area.

V. CONCLUSIONS AND LESSONS LEARNED

5.01 Achievement of the project objectives, as outlined in para 4.01,was mixed. This was really a pilot project to a country which had donevery little, until the time of the credit, to support indigenousentrepreneurs. While the line of credit and technical assistance providedunder the project helped develop indigenous private sector enterprise inLiberia, the project fell short of expectations in several areas.

5.02 As a first apex project in the country, Credit 1076 contributedsignificantly to institution building of the NBL, NIC and participatingfinancial institutions. A Project Analysis Department was established inthe NBL to manage the credit component of the project. The institutionalsupport system provided through NIC forged some complementarity betweenindustrial extension services and project finance. In the process a numberof schemes were designed or strengthened in the areas of projectidentification and promotion, subsector studies to identify investmentpriorities, regional surveys to identify potential entrepreneurs and growthcenters, portfolio reviews of PFIs to chart out rehabilitation programs forproblem projects, increased rigor in project appraisal and supervisionsystems, and reform of the Credit Guarantee Scheme and industrialincentives. Technical assistance appeared to have been a useful &ndappreciated service. The most important elements of NIC's technicalassistance were in connection with the selection of machinery and trainingof entrepreneurs in accounting procedures. The Borrower's request andIDA's approval to expand the technical assistance component of the project

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and combine it with an ongoing UNDP project made a significant contributionto the success of the technical assistance. By integrating IDA's technicalassistance with ongoing technical assistance programs duplication isavoided and demand on scarce human resources to implement parallel programswith similar objectives is reduced.

5.03 The objective of encouraging local financial institutions toincrease their support to local business was partially fulfilled. Onlythree financial institutions (albeit one reluctantly) participated in theproject and none of the commercial and foreign banks operating in Liberiaagreed to participate. It was also only SEFO that demonstrated itswillingness to lend its own generated funds to SMEs.

5.04 The project's economic impact cannot be evaluated without actualdata on the sub-projects performance, net value added and the employmentgenerated by these sub-projects. The data provided by the Borrower was notadequate for this kind of evaluation.

5.05 Project performance was poor in a number of areas. Implement-ation was untimely and extended almost twice as long as projected atappraisal. The credit was granted at a time when Liberian institutionswere not ready to operate a relatively complex financing scheme. There wasinsufficient local management capabilities, considerable delay inestablishing a key body, the Project Analysis Department at the NBL, and,when this had finally been set up, it was inadequately staffed due tobudgetary constraints. NIC faced similar problems with staffing alsobrought about by the lack of adequate annual appropriations. As a result,and inspite of three extensions of the closing date, the IDA Credit was notfully disbursed (SDR620,829 remained undisbursed) and no disbursements weremade for 16 approved subloans. A technical assistance program tostrengthen NIC, NBL and its Credit Guarantee Scheme, and SEFO would haveproved beneficial.

5.06 The poor performance of subprojects in loan repayments was partlydue to the worsening macro-economic environment and inadequate supervisionon the part of the PFIs. Financial condition of the PFIF worsened.

5.07 IDA supervision missions contributed to developing short-rangerevised work programs and implementation schedules despite prevailingproblems and constraints. Without these suggestions, performance of theproject could have been much worse. The long general suspensions ofdisbursements to Liberia by the Bank Group also contributed to the slowprogress in project implementation.

5.08 The establishment of the Special Account proved very beneficial.It improved the flow of funds to the Pu1s.

5.09 The experience under the project shows that there is a need toassess critically the willingness of comercial and development banks toparticipate in this type of lending arrangement. Perhaps a slowerdisbursement rate would have been projected had it been determined at

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appraisal that only three out of eleven potential financial institutionswould participate in the apex scheme.

5.10 While suspension of Bank Group disbursements for non-payment ofearlier loans and credits is necessary, it has a serious impact on ongoingprojects and adds to implementation difficulties and adverse performance.

5.11 The project's achievements, especially in the area of capacitybuilding, are sustainable if there is an immediate follow-up operation tosolidify the achievements.

LIBERIA

SMALL AND MEDIUM SCALE ENTERPRISE PROJECT - CREDIT 1076-LBR


INCOME STATEMENTS OF THE NATIONAL BANK OF LIBERIA, 1981-1985 a/

(L$)

Period ending December 31 1981 1982 1983 1984 1985

IncomeInterest Income 7,307,635 3.696,553 9,717,550 18,788,654 17,902,002Other Operationg Income 1,099,797 1,631,784 1X127,131 1.191,665 1,422.923

Total Income 8.407.432 5,328,337 10,844,681 19,980,319 19,324.925

ExpensesInterest Expenses 5,449.736 3,566,649 5,119,291 13,090.064 11.514,576Provision for Doubtful Accounts - 1,866,560 73,343 30.793 -

Director's Fees & Expenses 10,600 28,000 28,000 28,000 30.500Employee Remuneration 1,173,148 1,285,563 1,413,917 1,567,987 1,668,020Currency Shipment Expenses 358,699 460.097 387,762 393,050 583,388Depreciation 147,345 204,984 193,940 248,233 245.323Other Expenses 1,179,149 1,584,180 1,897,745 1,948.159 2,457,536

Total Expenses 8,318,677 8,996,033 9,113,998 17,306,286 16,499,343

Profit/(Loss) 88,755 (3,667.696) 1.730,683 2,674.033 2,825,582

Transfer/AppropriationGovt. of Liberia DisbursementAccount - (3,667,696) - - _

General Reserve 26.626 - 519,205 802,210 847,675Special Reserve 62,129 - 1,211,478 1,871,823 1,977,907

Total 88,755 (3,667.696) 1,730,683 2,674,033 2,825,582

a/ Audited Accounts.

LIBERIA

SMALL AND MEDIUM-SACLE EW?FRPRISE PROJECT - CREDIT 1076-LBR


BALANCE SHEETS OF THE NATIONAL BANK OF LIBERIA, 1981-1985 -a

1981 1982 1983 1984 1985

ASSETSConvertible Currencies 5,359,352 5,531,618 20,03e,573 2.062,112 1,453,592IMF Holding of SDRs 1,259,379 7,593 - 27.883 27,883Time Deposits with Local Banks 509,324 509,324 509,323 490,033 419,325Claims on Agencies & Local Banks 959,909 980,176 1,836,048 395,059 1,475,237Loans & Advances 26,009,398 33,249,142 33,163,533 27,415,063 26,280,537Advances to Govt. (Net) 510.951 44,970,055 108,438.894 150,733,626 175,361,733IW Quota Contribution 5,988,187 5,988,187 10,260,642 10,260,642 10,260,642Govt. Securities 152,607,119 183,541,674 183,541,674 183,541.674 183,541,674Other Assets 9,744,090 12,805,627 10,141,881 2.297,966 2,142,455Fixed Assets 1,538,516 1,561,510 1,579.987 1,750,153 1,708,554

Total Assets 204.486.225 289,144,906 369,510,SS6 3,-3.974,211 402,671,628

LIABILITIESDeposits & Current Accounts 32,190,783 44,849,159 57,538,361 58.019,309 73,421,019Liberian Coins in Circulation 12.503,480 18,328,251 21,431,303 30,505,601 50,997,342IMF Gen. Resources Acc. & SDRs 135.568.786 194,755,100 239,859,523 246,538.878 222,691,326Loans & Advances from Foreign Banks 10,025,277 7,152,766 18,641,420 4,000,000 _Other Liabilities 3.091,295 6,037,145 5,632,484 5,784,178 10.3!8,310

Total Liabilities 193,379,621 271,122,421 343,109.091 344,847,966 357,467,997

Credit Guarantee Fund 507,987 441,654 318,534 319,439 207,144Revaluation Reserve 3,582,060 10.564,274 17,335.691 22.385,533 30,749,632Shareholders' Equity 7,016,557 7,016,557 8,747,240 11,421.273 14,246,855

Total Liabilities, CGP,Rev. Reserve & Equity 204,486,225 289,144,906 369,510,556 378,974,211 402,671,628

a/ Audited Accounts.

- 22 -

ANNEX IIIPage I of 2

LIBERIA

SMALL AND MEDIUM-SCALE ENTERPRISE PROJECT - CREDIT 1076-LBR


SUMMARIZED BALANCE SHEETS, INCOME STATEMENTS AND SELECTED FINANCIALRATIOS OF THE AGRICULTURAL AND COOPERATIVE DEVELOPMENT BANKI 1984-86 a/

(a) Summarized Balance Sheets

Dec. '84 Dec. '183 June '86-------------L$ million…------…----

ASSETS

Cash 0.117 0.192 0.364Due from NBL 1.058 8.311 13.572Due from Other Banks 1.692 2.842 -Loans & Advances (Net of LLP) 10.877 19.073 23.380Other Assets 1.024 1.198 1.825Premises & Equipment 0.528 2.637 0.585

Total Assets 15.296 32.253 39.726

LABILITIES

Stockholders' Equity 4.831 5.972 6.222Deposits 9.399 23.071 24.184Other Liabilities 0.0 0.0 9.022 blAccounts Payable 1.066 2.739 0.298Due to Banks 0.0 0.471 0.0

Total Liabilities 15.296 32.253 39.726

- 23 -ANNEX IIIPage 2 of 2

(b) Summarized Income Statements

Dec. '84 Dec. '85 June '86_-.-------L- mllion-------------

INCOME

interest on Portfolio 1.933 2.104 1.307Commission 2.198 2.373 1.800Other Income 0.272 0.310 0.224

Total Income 4.403 4.787 3.331

EXPENSES

Interest Ezpense 0.414 0.311 0.163Salaries & Wages 0.982 1.100 0.550Provision for Loan Losses 1.411 1.198 0.0Other Expenses 1.094 1.282 0.743

Total Expenses 3.901 3.981 1.456

Net Income 0.502 0.896 1.875

(c) Selected Ratios

1984 1985

Debt/Equity 100:46 100:23Risk Assets (Portfolio)/Equity 100:40 100s19Return on Equity 10? 172Interest Coat of Funds 0.042 0.01SInterest Yield 17.772 11.03SInterest Spread 17.732 11.022Loan Loss Provision/Portfolio (cumulative) 16.83S 15.13SRisk Assets/Equity 100:54 100:42Cash Holdings/Deposits 1.24Z 0.83SLong-Tenm Sources/L.T. Loans 91? 100?

a/ 1984 and 1985 accounts are audited; 1986 accounts are unaudited.bI Includes Reserve for doubtful items ($3.462m), Net Profit ($1.79m),

Managers' Checks Outstanding ($1.024m) and Cash Collateral (1.920m).

- 24 -

ANNK IVPage 1 of 2

LIBERIA



SUMMARIZED BALANCE SHEETS, INCOME STATEMENTS AND SELECTEDFINANCIAL RATIOS OF THE LIBERIAN BANK FOR DEVELOPMENT AND INVESTMENT,

1984-86 a/

(a) ;umuarized Balance Sheets

Dec. '84 Dec. '85 June '86--------- L$ million…--_-______

ASSETS

Cash & Bank Balances 0.0 2.302 0.929Current Maturity of Portfolio Loans 7.869 7.432 7.432GOL Loan - Current 3.275 4.450 3.091Accrued Income & Debt Balances 4.032 5.573 6.189Portfolio Loans 9.851 9.896 11.413Equity Investments 1.948 2.003 2.003GOL Loan 1.425 0.0 1.425Property & Equipment 1.711 1.626 1.704Other Assets 1.214 1.198 0.398

Total Assets 31.325 34.480 34.584

LIABILITIES

Shareholders' Equity 5.013 4.902 5.075Long-Term Debt 20.652 22.470 21.776Current Maturities of L.T. Debt 2.494 2.764 2.764Short-Term Borrowing 0.744 0.935 0.919Accrued Esp. & Misc. 2.240 3.409 4.050Balance on Current A/C 0.182 0.0 0.0


-25-

ANNEX IVPage 2 of 2

(b) Sumuarized Income Statements

Dec. 684 Dec. '85 June '86-----------eL$ million.------__,

INCOME

Interest on Loans 2.558 2.451 1.619Commitment Fee, Comuission, etc. 0.504 0.478 0.063Interest on COL Loan 0.720 0.587 0.225Interest on Deposits 0.025 0.0 0.0Rent 0.189 0.181 0.073Other Income 0.606 0.824 0.023

Total Income 4.602 4.521 2.003

EXPENSES

Interest & Charges 1.822 1.733 0.889Salaries & Wages 1.119 1.083 0.485Loan Loss Provisions 2.363 1.333 0.0Other Expenses 0.454 0.484 0.456

Total Espenses 5.758 4.633 1.830

Net Incomel(Loss) (1.156) (0.112) (0.173)

Sc) Selected Ratios

Dec. '84 Dec. '85 June '86

Debt/Equity 100:19 100:17 10017Risk Assets (Portfolio)/Equity 100:20 100:21 100:20Return on Equity Negative Negative 3.42Interest Yield (including Coumitment

Fee) 15.522 14.782 15.041Interest Cost of Funds 7.622 6.62Z 7.002Interest Spr,ead 7.902 8.162 8.042Loan Loss Provision/Portfolio

(cumulative) 14.591 17.79? -Long-Term Sourcess L.T. Debt 100:64 100l 50 100l 68

a/ 1984 and 1985 accounts are audited; 1986 accounts are unaudited.

- 26 -

ANNEt VPage 1 Qf 2

LIBERIA

SMALL AND MEDIUM-SCALE ENTERPRISE PXOJECT - CREDI? 1076-LBU


SUMMARIZED BALANCE SHEETS INCOME STATEMENTS AND SELECTEDFINANCIAL RATIOS OF THE SMALL ENIERPRISES FINANCING ORGANIZATION,

(a) Summarized Balance Sheets

Dec. '84 Dec. '85 June '86---------…L$ million ---- …-----

ASSETS

Cash & Bank Balances 0.239 0.481 0.387Current Maturities of Loans 0.363 0.601 0.565Accrued Income & Debits 0.105 0.174 0.231Portfolio Loans 0.318 0.396 0.452Equipment 0.074 0.060 0.056Pre-operational Expenses 0.159 0.105 0.079

Total Assets 1.259 1.817 1.770_ _

LIABILITIES

Shareholders' Equity (0.268) (0.075) (0.239)Long-Term Debt 1.448 1.782 1.862Current & Other Liabilities 0.079 0.110 0.147


- 27 -

ANNEX VPage 2 of 2

(b) Sumarized Income Statements

Dec. '84 Dec. '85 June '86-L_____._--LS million------------

INCOME

Interest on Portfolio 0.137 0.218 0.089Interest on Deposits 0.011 0.014 0.011Currency Gain (unrealized) 0.031 0.0 0.0GOL Grant O.OZI 0.082 0.018

Total Income 0.200 0.314 0.119__ _m-

EXPENSES

Interest & Charges 0.092 0.097 0.056Salaries & Vages 0.244 0.272 0.187Currency Loss (unrealized) 0.0 0.193 0.0

Loan Loss Proiisions 0.132 0.026 0.0Other Expenses 0.148 0.126 0.034

Total Expenses 0.616 0.713 0.277

-_

Net Income/(Loss) (0.416) (0.401) (0.158)-

(c) Selected Ratios

Dec. '84 Dec. '85

Debt/Equity Negative NegativeRisk Assets/Equity Negative NegativeReturn on Equity Negative NegativeInterest Cost of Funds 6.352 5.442Interest Yield 20.002 21.862Interest Spread 13.652 16.422Loan Loss Provision 20.882 13.122Risk AssetsiEquity Negatio, NegativeLong-Term Sources/L.T. Loans 100:21 100:22

al 1984 and 1985 accounts are audited; 1986 accounts are unaudited.

- 28 -

ANNEX VI

LIBERIA



PARTICIPATING FINANCIAL INSTITUTIONS.1. ARREARS SITUATION AS O SEPTEMBER 30. 1986

(a) Small Enterprises Financin& Ortanization (SEFO)

Months in Number ct Loan Balance ArrearsArrears Projects _ LS -LS

0 - 2.9 8 91,544 9,513 2.63 - 5.9 1 16.007 1,292 0.46 & above 38 623.318 350,485 97.0Total 47730869 361.290 lOC.O

(b) Liberian Bank for Development and Investment (LBDI)

Months in Number of Loan Balance ArrearsArrears Proiects LS . L$ z

O - 2.9 5 175,055 6,400 11.13 - 5.9 1 21,483 5,623 9.76 & above 3 67,652 45.861 79.2Total 9 264190 100.0

(c) Agricultural and Cooperative Development Bank (ACDB)

Months in Number of Loan Balance ArrearsArrears Projects L$ LS Z

O - 2.9 8 123,730 3,928 4.53 - 5.9 2 S.4,105 5,628 6.56 & above 11 202.990 77.251 89.0Total 1 3-70,825 86.807 100.0

2. ARREARS SITUATION AS OF JUNE 30. 1988

Months No. of Lonn Principal Interet ItersetIn Proj3ets Principal In In Charg"

PP! Arrears in Arrears OutstandlU Arrears Arrears Capitalized

SUFO 1-s6 47 out of 58 714,014.00 470,76L.00 203,69l. 19,185.58LBDI El 11-44 6 out of 10 225,658.38 216,080.48 54,478.62 20,a82.72ACDO 18- 28 out of 25 220,694.ao 285,594.81 112.561.C2 o.eoTotal 1-56 70 out of 88 1.160I 461.68 @07.584.74 870,721.24 80,488.26

gl The situation as of igust 81, 190.

- 29 -ANNEX VII

LIBERIl

SMWLL AND MEDIUM-SCALE ENTERPRISE PROJECT - CREDIT 1076-LBR


SCHEDULE OF ESTIMATED VS ACTUAL CUMULATIVE DISBURSEMENTS(US S MILLION)

Fiscal Appraisal S of Z ofYear Estimate Actual Estimate Total Credit

1982Sept. 1981 .20 .0 0 0Dec. 1981 .36 .11 31 3Mar. 1982 .56 .15 27 4June 1982 .80 .17 21 4

1983Sept. 1982 1.08 .20 19 5Dec. 1982 1.36 .22 16 6Mar. 1983 1.66 .24 15 6June 1983 1.96 .24 12 6

1984Sept. 1983 2.26 .26 12 7Dec. 1983 2.56 .33 13 8Mar. 1984 2.91 .59 20 15June 1984 3.21 .59 18 15

1985Sept. 1984 3.51 .86 25 22Dec. 1984 3.76 1.00 27 25Mar. 1985 4.00 1.25 31 31June 1985 4.00 1.25 31 31

1986Sept. 1985 - 1.25 31 31Dec. 1985 - 1.49 37 37Mar. 1986 - 2.11 53 53June 1986 - 2.11 53 53

1987Sept. 1986 2.11 53 53Dec. 1986 2.11 53 53Mar. 1987 2.84 71 71June 1987 2.84 71 1

tA ND M PEIt SI T1WRISE PFROt (Cr-1076-LUR)

FPWltJ CSLT XE REPW

Sub-Projct Financed undr the crd

MAS uten. (Solt) Teot Projected Proj.------------ - ----- _- ------- PFt Project Value b. Projected Lae -

of subproj. Diesbtrtd l Toue i.t.t Peancing cost Alde of Co/JT a/b ?;e 1 bios 2/

Proj. t a". Sub-b)orroer'.s lb" sete Prouc Aount Aet Amount (LII) (LO) (IJ) J1b (Ls).. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ --- ----- _._____ -_______.__ ____----- _ --- -_ --------- _----- ----- __- -____ -__ -____ -_ -___._

I A-I PsIIeewIole Pith Proe Ago-leduisky Pk i roce;sein 25,0112 a 25.002 4.890 60.910 26.470 8 6,64 61 U

2 £4 Wayside fteprie AgriCulture livestock produ-tion 18.864 6.406 24.760 26.000 52.780 ne 5 ttO 1W.6 E aa A-£ Libeloan Rral Water 0 v Sovice pw tre* r 12.712 5.910 I11.22 18.810 295 12,776 6 s ,eo0 5E a

4 A-( robal Eaet Arcwllture lveetouck redactien 21. 0 21.8o 7 21,60 87,660 n .e a 12.162 a U

S A-7 ? arey RIe C.1ti II Aer.-lndetry rice aI ag 10,6062 1.49 12.879 12.U 4 Me"4 MM 7 2.792 a u

0 K4nneth Sr.. Woodoct Wood-related lad. furn.ture Manfcturinge 1U.09 2,784 16.682 16.80 81.0t0 12,580 6 G,1 a U

7 A-£ hr.. betrpriae la Srvices nor vile aevicee 16,660 2,881 19.211 19.406 26,870 18,264 a 5,174 a U

O A-l0 Rotais. Billbord S9rices Jdr_tasmet to1.47 0 10.478 10.000 21.S8 26.50 7 8.019 a U

* A-12 John M. Jacea Parm Agculture, poultr for, 19.672 0 19.6n2 22.075 2S.894 a e. 4 8.724 a R

tO A-18 Zedru Redwood Furiture Wood related lad. furaiture maufacturinw 19.442 24,790 44.240 42,426 62,194 .e 8 17,t86 a U

tl £14 rem o Zne.t Slevices t .o"e0er 22s,6 2o.1121, St.910 49.684 01,e61 177. 100 U S1.M W U

2 w-1et Point Charcol Eat. vWow related ;od. charelmg eaufcturing 14.892 1,8915 1l.227 17.,0 24,210 1S.1160 a 0,92 E U

is 0-4 Now tbeeequoi Furniture Ws Wood related l. furnlture nnsfoturing 14,267 92o 16,187 16.6S0 23,2 16,670 8 4,724 a U

14 6-8 Afant Peraitur Co Wood rslt.d lad. furniture maufecuriag 39.141 0 89.341 8o Il2 a 8.061 n .. 6 10.70 Id4 Uto 6-7 Lee Steel Coastrc. S.-. other cesnt bLlor _nfscturino 1S,647 0 15.47 1.0O 22.660 13.10 7 8.269 a U

as 9-9 £.i. akpee Woodook vood relateS lad. furaiwre _eswuacturfn e .,17 10,660 19.675 21,2ro 46.50 14U,S70 4 11.680 a U

17 8-10 Slolmn .terprim Servicee motor vehil scl rviesn 10,972 6,240 19.220 21.40 41.620 21,0810 6 6 , E U

10 6-12 lOtuho-Ju a Co. Wood relatsd lad. foralture meafactrieg 20.09 0 20.860 20.890 84.490 17.020 7 4,9e7 E U

to 6-18 ,. rI.0 Cae Juice Oieti 1arj, Afre-$nduer cane jules produetion 26.80 4 0 28,894 24.060 51,490 26.180 24 2,14S a RS0 6-14 Faysb 1i tim Gore"g ServIce" m.er vehicleaservicee 20,0 ?.62 26.6 81,484 40.664 27,948 7 s,7 E U

21 n -1 H she Wooden S Indetr Ie Center Wood Ar6latd led. furnlitre a_ facturlng 16.96 0 16.2o 1,6560 2a,760 12.66 a 3.590 a U

22 6-17 Wclder Ca Jhlcoe Disti Iry Agrio-indatry cane juice productIon 22.741 709 28.450 2S,000 8s.210 19,180 20 1,911 ri UI28 -16 AT Oodwork s-u WOd reated Ind. furniture o_nfsotwring 14,06 0 14.6 1s.10 22,o90 12,N70 7 8.264 E U

24 639 let Close lnt'l Dseti S..lrn Isrulce bewat eevic 1S,2t 0 18.218 15.847 29,899 n.. e 4,900 E U

26 6-20 Tab A Tetroae Agriculture Pehory 26.906 0 26,906 26,000 40,690 U,6O 7 6.661 I Rt

26 8 -21 soked Turkey "Du" AgrJ-ledustry emoed st production 10,142 0 15.142 17.420 37,970 16l,20 6 *.8 a u

27 8-22 J.e. Whlt. a Son Olet4l.,ry Agro-Industry cane diti11ery 16.997 0 6."?7 16,4016 26.427 10.177 m 6 .2 S U I

29 6-25 C;tw 1auer;al Coeur * Wo related lad, furniture aenefacturne 28,1t 0 2,664 25.484 56644 18.460 12 4t,t7 E U

29 6-2 toan Electrical Works. Inw. Service lec.* plumbiag, on". aervic,e 26.746 0 26.745 24.621 46.,0 26.094 6 7,640 U u

ft0 16526 R;eill Charosi lndatrj Woo relatd ind. charcoal production 18,544 0 16.644 14.926 19.U05 21.644 10 1.61 a U

*1 6-217 Ln;lfe l.orcere Co *eVic" ester vehicl, ear*ices 21.66 0 21.46n 24.06 86.410 26,264 a 4,480 U U

82 -0 Tictey Pulwtr Pamr Ariewlture peultry fte 16.78 0 16.76 19,119 26.619 n.*. a a.,06 A U

as 6-81 8 add Poul"trae Ar.icltura pooltlr fare 9.76 4,96 14.770 14.606 29,87 n.. 8 9,6, 6 R U

84 6-82 Ante Powlt For Aericulture poultry fare 1,671 16.216 84.779 84.664 451.64U a.. 6 7.611 a U

as 6-8 Doun;. COsersosi Sinees mad rploted mrd. chercel production 7.67" 0 7M .27" 18.16 ne - 18.10 w W U

as 6-84 Jay Poultry Foar Arieututwr poultry fare 12.3 1.06 10.18 10.262 27.846 s 4 6.912 E u

07 6-8 aEy Poultry Pare Agriculture poWul fare 18,518 2,9691 21.6102 21,686 84.674 s 8a 11.866 a

66M 6- Slt O n erpries Agriceutre Cattle raising 4.8s7 0 46.887 80.000 69.60o na. 12 7.468 W U

e -7 Vincent Co. Proj 01her. peroleua prod. distributioe 66.920 0 16,620 40,000 60,.e6o a.. lb 3.920 U U

40 86-St hroene Mldg 1nduetr<7 Srvices et c leal lasteltatlon 21.767 4 22,4C0 22,6126 4,S76 80,6891 7 4997 N u

41 9-69 ennise a 0;ls_ tno Agriculture vloe teel- prcti 22,069 0 22,018 25,600 32.740 386.41 1o 8.276 I u

42 9-40 benes Wood Induestry Wood related md. caekat asfacturiag 21.641 2.8 24.,29 24,m 61.722 22.6 t 10 5.12 e a4S 641 8 Iy' bt.rprie Inc. Service garbage leallectlon 86,992 0 8,992 S.9 49,964 C.. 12 4.164 R U

44 -42 Henry Cper Rubber Pare Agrclture rubber production 10,626 0 1O.6 11,410 67,692 n.. St 1.110 a U

46 6-6 sak Rie W is ll Aro-laduatry tice allliag. refinti" 12,m2 0 12.277 18,410 21.440 n.. 6 38.576 E U

46 6-44, Wa_cae 9kery Agr-induery kry 16U,0 7.616 25.662 26.60 47.564 n.*. 17 2,796 a U

47 6-46 thIl Ulectrical Sign Othrs leectic l els* preduction 12,622 2,072 14,894 18,884 20.981 n.. 9 2,826 a U

46 6-6 Orlwse * FPaily Piggery Agriculture piggery 22,721 0 22.721 24.610 87.066 *.e. 4 9,267 a U

49 6-47 slack lird Eaterprem Services reeuroat 4,641 1.1226 26,061 26,000 42.1U n.S. 7 6,0206 u

60 6FZ-46 #abe Worepool pd ltd lad, furnitute mAufCturina 0.670 1.271 7?.41 7,616 17.489 aa. 6 9 6 U

at 6i-4 I- W Cnter Wood rtleed led, furniture anfacr 4in6 2,4.s6 2.8 16,864 18,961 82.279 a.e. 11 2,984 E U

S2 6-60 Kipl-e Ce FPare Aericulture can prodctien 17.112 (2,961) 141,1 18U,71 26.486 as. 2 1,3220 N Uas 65 O aniel Joe Aice Pore Agroindustry rice productien and elMing 16.607 4.997 21.60 20,010 385.4 na. e 89 US E a64 t-Sf WI II_m Powultry Fare Asgiculture pu"Itry fare 16,8Ut J,8n 24,79 2.0669 47.037 a S 9.407 a RfSs 6-64 fonrovia Auto Workehep Srvices vehicle srce, ad repair 19,487 8.267 22.694 12,162 88.182 na. 7 , 169 U U

B6 £-66 ould Poultry Agriculture poultry fare 7.46 4,289 11,826 11,269 16,t07 n3 S,60t2 M u

57 8-s6 atl Poultry Pare Agriculteur PoI try fae 6.766 1,966 10,706 10,668 16,011 n 4 4,508 M U

a6 6-69 arace Rooster Vill*a* Agriculture p rouy fare 61.266 8.194 16,462 15.0f1 26,879 na. 4 6.670 A U

s5 6-60 Jartoe Pis Pan Agriculture uetry 13,86Y 3,661 17.119 17,228 28.9?47 n,. 8 ,962 t U

60 6-61 J Jac.k £w.a Agriculture p1gry 19.148 1,621 25.6N4 26.124 40.$15 a a. 8 23.480 H a

BOA S.,hloc. (MRt) Total Projoectd Proj.--------------.------------- flP Project Vale. "D. Projected -

or Db.roe Fir lwria Tot i Picin Ct ded Cot/Jb Tym if tios 2/

Proj. No. sb-borrocert lIacN Sector product AuOt Amowt Aemsb (18 (LA) Ja) ba (LO)-. -------- _ _____ ----------- _._ ------ ------ ___. -... ---- ..--.- ----- - ------- --.------ ____._._._._. ------- ------ ____ -____

81 342 Iat' I abery Agtro-l"adetry balkery 9,201 1.81011 14.809 14.750 32.272 24.000 12 2.6,13 U U32 6-6 Ze & #m_ Carge, Swevic" eoDls il o srice 7879 .187 10.566 10.741 1s.2 12.461 a 8.246 a u

4 144 UBS obnolstery Sho wood reolted imd. foraitere muwccturias 6.9 917 7.01? 7.4o6 13.00 7.91, a 4.3.* a u

94 34 bout Enter0rieee Services restoeerea 13.017 0 18.07 19,000 25,6411 19.228 6 4.11121 a i8 8-" P.". WilIism stock Pectery Other bloi Jdieribetio moteor 12.654 0 12,641 1e.49o 2S.167 R.s. 6 3.E9 6 U

6l 6-0 "Maio Kindler Care Servies dy Core cater 4.7J 4,197 8,913 9.40 18. ?g 7.30 5 ac011 e u

S7 3-8 Softy icae Nillay Aar*-ledusy pi"e mill 7J,t21 a 7J,21 .000 i2a,310 u.r4 J 4.1Oa a U

so 1 -70 oJ a pi rot Cle Blakery Aro.desr batery § ,068 749 9.02 10.425 17,666 7.225 4 4,41 01 U

9 lb-72 Walker Oil Pal1 Plaestetiom Aere-lAetr pal iell prodction 3,580 2.,S1 8.301 7,171 29.248 8.088 4 7,49 a 8

70 3-78 Famr ieee Pam prod Agriculture pigger 81.049 14.~9 19.189 22.707 40.7812 12.343 8 13.894 a U71 9-74 LAP Notcher Agriculture poult fore 2S0.01 1,3 25.1 25.00 S0 60 .7S5 4 14.8S0 a U71 l-78 08 Pilgtry Agriculture pigery 18.0 48 1U8,496 18,012 25.652 18,177 3 0.621 a U

73 31-77 Kamr. latcurasb bit. Services reetereet 4.4311 1.250 5,867 7,000 16,040 6.840 a 8,6 G U74 3-76 Pa leh Tooba WanD related ied. foraitur meutacturiro 3.0* 10,7 13.4t4 1U.313 27.6 12.U84 10 2.71 a 1

75 379 A=bo Egoe Agriculture productiom of eGgp 25.97? 8.218 29,00 10.11) 45.9 s.*c. 2 22.96 .

76 3-60 Vapo. Service. ite Vehicle cervices 41,472 (29.472) 12.000 18.000 44.60 ste. 8 14.80 a .C

7? 3-02 Ladeyl Optical Sewvices optical evice U8,5 6.61? 20.200 2.000 4.517 D.. S 10.98 ..

78 643 Sugervi C4ooeututafe Services onamltieg A traisieg eervice 18,578 1.299 16,878 28u 80,407 O.c. S 0.10.102 a .

79 1-84 Treloptics Services optical cervico1 4.25 1.100 18.61S2 2 0.000 48.88 R.e. a 7.259 a a...

s0 1-A-1 Liberia Ibritime Corp. Services ehipping 78.878 0 78,876 76.183 182.414 n.m. 18 S.4"? a Uoo g--l twS of* et Others ice *cuee prod 14.069 0 14,009 14,108 27.s20 t .S. 5 .04 e U

82 2-04 Leareacs bitterPer ftriculture ratter *.0dwelcefte 22,597 0 22,87 24,729 142.824 e.c. 8 S 8,959 a A

a8 2-3-7 Hoew Ibieteamae Dign A Cnoecteu. Wand related led, furniture eenufaCuwrisg 42,209 6,919 81.1181 84.811 27.815 ft.e. 28 90.6 it 3

04 2-3-10 T73dm Treepmort oervices t4eetetioS wvicse 88.818 8,187 40.000 80,000, 75.79 M a. 25,57 a uS6 1-2 pnd ro Fre . *es an s Aci. 8/ Agriculture 24,62 S

S41 11-11-18 Vapon evie vehicle ee.vices 8,8.061 85.874 s9.80 80.000 108147 a.. 34.82 a .c

Totl 1.140.611 200.274 1,79.163 1.0l 8.44 *4.790 6.183 62 8,279

I/ T"yp: NW); ( i); R(habilileo)2/ Latios: U(rbqo)i R(vret)*/ kforti_o Oa this subproject nt availableO.*. - Onte aMt vailable

._ary 1169

ANNEX IX

LI3ERX

SMALL AND UIW ETWRPISE PR CT (Cr.W10LR)POJECT COZLETION REPORT

Cherateristice of Subprojet Financed under the Creit 1/

Ni. of Uf To, tal ~*t 1 T S ofF T?Al TtaofASctoral Distribution of Sub-Leans Proj. Number Sub1. o Sub-lo n Sub(-son) Su_ "no

Agro- Inustry 18~~~~~~2 581,6so 29 451,96 8Sert 24 229,916 2 4 4721 S1

vice is ,!! 3tood related industries 21 2 89 l 2 84 2Othre 5 6 1to,42 91,312 6

OS 190 1,862,86 7 1,515,8" 108

Actual Investment Cost Distribution

toLS29in ~~~ ~~~ ~~~12 14 11964 6 97,215 a.Me ,3 ~~~ ~~~ ~~~24 26 886484 21 M26's 22M;e 214 16 291,64 i 264,5i1UEiIL~~~~~~3i- 16~~~t 19 "819: 2) 89555 reit 18 817.9 261,466 176 9 3°G 86,, 2N 266,148 17

q6 100 1,862,866 199 1,615,669 16

ProjectOd PFI Len Distribution

6 9 66,49445,2as a" 7# 4u 831 704 jl It re5 9 1": 9 ~~~~149,979

8 4 182,269 ~~ ~~~~7 76,444535 10 ~~~1,062t88 10 1,615,889 100o

Projected Cost Per Job

Less than. L61.9 96 68 of 1,421,a6 76 1,1746,25 76L319,691RIO.9,We 14 10 89,66 16 279,5 i8

Over 1.629,9 8 4 11l,.89 0 66M9 4

86 169 1,662,66 169 1,515,669 169

Type of Project

Now ~~~ ~~~~22 26 522,6169 26 47622 31nsiltton 5T 67 1, 28,244 6s 912444 80

WM I ltation a ~ ~~ ~~~~~~~~~ ~ ~~~~~~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~ 7 187,1832 7 91126,668

65 169 1,802,685 169 1,516,689 6O9

Location 2/

Rursl 14 16 885245 124,9Urban 66 76 1, 157 74 1,134,890 __

79 98 1,716,492 92 1,899,796 92

1/ pldes on project - to not ave labl2/ txeades aIx proJ ta not *va table

January 1982

- 33 -~ANIZEX X C (1 OAGWRAL A OPERNTIVE DEVEWDLITBANK

I,1 ^~I CAU WACUO Wm

snx~~~m uuuua

_am m ~ ~ ~ ~~~OACD/CE 00-28 DARUUAie 1,9

oinas" some CC" 1FARN aUMafVGOUAMA. LCWA sWW - OWoviAO*NA. NINA couNW3MI4saAMr. KAiwi Nowick

O&M"SIL so= COUNtYXA3L M4VLN MIMMt

ACDS/CE0-007-12/'89 December 15. 19899

mr. Alexander NovickiChiefPolicy-based lendinqWorld Bank1818 H Street, N. W.Washinqton, D.C. 20433U. S. A.

Dear Sir:

We acknowledqe receipt of vour letter and copy of vourProiect Completion Report on IDA Credit 1076-LBR dated October18, 1989 and also vour request for comments.

Althouah we find vour report a verv Precise assessment ofthe scheme, we would like to make the followinq comments:-

1. Many of the, problems experienced bv the Schemecould have been avoided if the funds were chanelleddirectly to the PFIS, this way there would have beenareater Participation and iudicious use of funds.

2. Technical assistance in the line of trainina andloqistics must be considered if this Proaram is tobe continued. Monitorinq of rural proiects isdifficult and expensive, traininq of evaluation andappraisal staff in the PFIS should also be seriouslyconsidered.

3. The PFIS experienced a lot of problems in the inter-pretation of policies. There was a lot of chanqes inPolicy durinc the disbursement period. This affectedmany of the subloans and even caused a sponsor toabandon his approved sub-loans.

4. As much as the foreiqn exchanqe situation has affectedthis Proqram, much was not said on same in this report.80% of ACDB subloans were crushed directly as a resultof the foreicn exchanqe situation which adverselYaffected all the projects.

.../2

ANNEX X

- 3T4of 9

It is acqqested that since the loans were made inU.S. dollars same should be made available to Projects tosustain importation of vital inputs.

5. Deterioration in the mocro-economic environment coupledwith reduced purchasinq power and the lack of policy-based strateqy to promote local production were alsoresponsible for failure of the projects. The entireproject lacked supervision as the follow-up of loanswere left to the PFIS. Institutional arranqements forprovision of extension services, monitoring of progresswere absent. Another problem was insufficient localmanagement capabilities at the micro-level. In otherwords, most of the project sponsors lacked the technicaland managerial abilities as well as the endurance re-quired to convert assets into cash over the project life.Most local businessmen seem to have perference for fastmoney making ventures as opposed to term investments.

6. In Summary, a combination of foreign exchanqe scarcity,unprecedented inflationary trend as a result of theforeign exchange situation, marketing problems caused bythe lack of a policy-based strateqy to protect andpromote local producers are the main causes of projectfailure.

In our opinion, we think the report diagnosed the problemsand we trust that these issues will be considered in futureprorkams.

Very trulu yours,

erome M. HodqeACTING PRESIDENT

- 35 A:NEX X

Page 3 of 9

NA TIONAL BANK OF LIBERIABROAD STREETP.O0. Box 2045 TIL n2325

MONROVIA. LIBERIA ua7 22404R*__ NBL/DFD/091/'89 42w15

IMux- 44215CO N4ATSANI(

December 7, 1989

Mr. Alexander NowickiCHIEFPublic Utilities and Urban SectorsOperations Evaluation Department,The World Bank, 1818 H Street, N.W.Washington D. C. 20433U. Se A.

Dear Mr. Nowicki:

Referring to several telexes and other follow-up communications,we seriously regret the delay in forwarding the information requiredto complete the Credit 1076-LBR Project Report. Besides, we have alsoreceived your letter of October 18, 1989, with the attached draftProject Completion Report (PCR) of the Small and Medium-Scale Enter-prises Project.

We are also sorry for our inability to forward the requestedinformation on time. This was due to some breakdown in communicationsfrom our end. Nevertheless, we note with minor exceptions some of thecomments contained in the draft copy of the PCR sent to us. Prior tofinalizing the PCR, however, we would be pleased if you would take care-ful notice of the followings:

1. That the NBL had in no time second-guessed any matter ofappraisal and supervision of the PFIs as was stated inpara 4:08, page 12;

2. That we are in agreement with para 4:11, page 12, but thedecision (divorcing NBL completely from some ad hoc fieldhappenings) has done, in our opinion, more harm than goodto the project;

3. And that the name of the Project Analysis Department has nowbeen changed to Development Finance Department; please notethe change and reflect same within the PCR for consistencyat both ends.

Regarding the delayed documentation coupled with the fact thatthe PCR is still in its draft stage, we are forwarding to you the belowlisted documents for inclusion and completion of the report.

.../2

A4NEX X-36 - Page 4 of 9

I. IBDI

a, Project status report on SME loans

IIe ACDB

a. Project status report on SME loans

III, SEFO

a. Project status report on SHE loans

IV. NIC

a. NIC's view on the success of Technical Assistanceof IDA Credit 1076-LBR.

V. NBL

a. NBL's opinion, particularly on uti'ization and/orperformance of the IDA Credit 107 :LBR.

Kind regards,

Very truly yours,

S Wis FMANAGER

DEVELOPMENT FINANCE DEPARTMENT

CC: The Governor" Deputy Governor" General Manager" SEO/Research and Planning

ANN#X X37 - PageS of 9

SUCCESS OF TECUNICAL ASSISTANCE(IDA CREDIT LINE 1076 - LsR - SFMs PROJECT)

NIC's View

The technical assistance through the credit line was started mid

1981. It was later merged with UNDP/UNIDO Project - SME Development

during 1984 and terminated in November 1987. The main theme of the

combined technical assistance program has been institution building.

The concerned institutions are the National Investment Commission(NIC),

the Small Ehterprise Financing Organization (SEFO) and the Project

Analysis Department (PAD) of the National Bank of Liberia (NBL)

The priority area of the combined international support to the

NIC has been industrial extension service. By now the Small and Medium

,uterprises Department of the NIC is capable of independently assisting

SMEa in cost estimation, bookkeeping and management. Extension

service in the field of marketing personnel demand and competition is

also being rendered by national personnel trained through the combined

program. In the area of technical extension service, the NIC

technicians have acquired satisfactory know-how to serve metal working

and woodworking enterprises. There was a long delay in recruiting

an industrial enginer, but this has been done with the assistance of

the program; he is currently understudying the international expert

and is expected to operate independently by the end of the current

phase of the UNDP/UNIOD project.

As a result of the combined program, the NIC out work at all

stages pertaining to review of potential investment opportunities,

preparing product identification, area industrial development,

industry todernisation and planning and micro-and acro-eancil'arisation

reports. The basic techniques for entrepreneurship motivation have

also been acquired as a result of the program. The technique for

identification and outlining of policies and programs for promoting

SHEs has also been acquired by local NIC personnel. However due to non

availability of institutional credit facilities, progress in implementa-

tion and evaluation of programs and policies has been slow. Inspite

of various unfavourable external factors affecting the program, the

-38-Page6 of 9

eoaphsi on-the-job training as we3l as training at reputed institutions

abroad coupled with study tours has made the transfer of knowledge for

promoting healthy SMEs sector to the officers of the NIC a practical

reality.

SEFO's capability in appraisal and supervision of sub-projects

has been achieved. The institution is practically carrying out those

functions on its own.

The progress made towards achieving the objective of developing

Project Appraisal Department (PAD) of the NBL to perform the functions

of an apex lending institution of the Participating Financial Insti-

tutions (PFIa) and appraisal of the performance of the PFIs have been

established. Similarly a strategy for recycling the recoveries

received from the PFIs has been worked out, thanks to the combined

program, its implementation has yet to materialize. The PAD of the

NBL has been geared to take up all such activities and for that SXEs

Pblicy and Executive Committees have been established and have already

started functioning.

In conclusion, it might be stated that the technical assistance

in building up institutions for conceivins, designing, implementing

and evaluating policies and programs has been cost effective and

proven highly beneficial and has served the purpose for which it was

provided. However, the input needs go on changing with changing

pattern and status of development of the SMs. As such international

technical support remains a welcome gesture from our partners in

progress.

-39 - ANNEX XPage 7 of 9

THE OPINION OF THE NATIONAL BANK OF LIBERIA AS THE APEX INSTITUTIONABOUT THE SUCCESS OF THE CREDIT 1076-LBR AND IDA PERFORMANCE

The SME Scheme was concluded and came into effect on January 1, 1981. An

amount of SDR $3.2M ($4.OMM at the time) was earmarked to cover lending and

technical assistance to Small and Medium Enterprises. In late 1983, an initial amount

of $43,717.59 was disbursed directly to SEFO (Small Enterprises Financing Organization)

to finance such enterprises. The lending to SMEs did not come Into full operation

until mid-1984 following the creation of the Development Finance Department (then the

Project Analysis Section).

INSTITUTIONS INVOLVED:

The institutions involved in the overall administration (administrative

techeical and financial) of the scheme are (1) The National Investment Covmission

(NIC); (2) Agricultural and Cooperative Development Bank (ACDB); (3) Liberia Bank

for Development and Investment (LBDI); (4) Small Enterprises Financing Organization

(SEFO); (5) Ministry of Finance; (6) Ministry of Planning and Economic Affairs; and

(7) The National Bank of Liberia (NBL).

LEVEL OF PARTICIPATION:

Even though the NBL's Development Finance Department came into operation 1984,

prior efforts were made to have many financial institutions to participate under the

scheme. Only the indigenous institutions ACDB, LBDI, and SEFO, referred to as

Participating Financing Institutions (PPIs) responded positively to participate in

the scheme. It is our opinion that due to the lack of cooperation from the other

financial institutions, the utilization of the funds suffered a set-back. If more

institutions had participated faster utilization would have been realized.

../2

-40- A'NNEX XPage &-of 9

ALLOTZNT AND UTILZATIION:

In 1984, a Yknorandum of Understanding which allocated funds for lending

was effected between the National Bank of Liberia bpd the Participating

Financing Institutions. Under this memorandum, a total aiount of $2,009,000 was

alloted for the PFIs as follows:

PFI ACDB LBDI SEFO

Allotment $ 470,000 $ 739,000 $ 800,000

At the end of 1984, the PFIs committed a total of $1,175,337. This depicted

a good start and by the end of 1985, as a result of the PPIs performance, the

amount was re-alloted as follows:

PFI ACDB LBDI SEFO

Allotment $ 770,000 $ 361,951 $ 877,049.00

The level of participation and response from the PFIs in the first two

years were quite encouraging. The allotment was then increased and/or decreased

In 1986 as follows:

PI ACDB LBDI SEFO

Allotment $ 1,170.00 $ 638,000 $ 1,277,000

A major !actor consldered in allocating the funds was the level of comit-

ment by each PFI. The table below gives a further picture of the level of commit-

ment on an annual basis.

LEVEL OF COMMITMENT

P"I 1984 1985 1986 1987

ACDB $ 370,323 $ 667,508 $ 705,691 $ 638,455.17

LBDI 144,747 316,762 316,762 347,751.69

SEFO 660,267 727,477 918,017 867,477.19

..3

- 41 - ANNEX XPage 9 of 9

It was observed that at the onset of the full operation of the scheme, i.e.

the first two years of NBL's active involvement, the response of the PFIs in sub-

mitting subprojects was enthusiastic and is quite commendable.

However, the ban placed by the World Bank on disbursement to Liberia in 1986

and subsequently in series thereafter greatly hampered the utilization of the credit

line.

Through the technical assistance under the IDA/SME Scheme, the following

achievements were made possible.

1. Procedures for approval were streamlined

2. A uniformed format was developed for presentation of appraisal reports

3. NBL was granted approval limits for subprojects

4. An aaiount was opened to finance SHEs under the scheme

5. Working capital loan financing was made possible

.. An Information system was designed whereby quarterly statements of

disbursement, collection, and delinquent loans were provided by the "FIs.

It is observed that NBL's last approval of certain subprojects in reasonable

amounts prior to the closure of the Credit Line was not honoured.

NIC's performance continues to have a positive impact on the entire project,

particularly enterpreneurs. However, NIC's view as submitted is enclosed.

CONCLUSION

The credit line, while its overall objective of drawing down the fund was

not achieved; nevertheless it has fully served the intended purpose of providing

loanable funds to the SME sector, however, a good amount of the line was

unutilized. In future, it is hoped that such scheme be exempted from subsequent

World Bank country-wide bans.

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