RURAL FINANCIAL SERVICES AND MARKETING PROGRAMME … · Value Chain Development for Rural Poverty Reduction — aims at the mapping and pro-poor management of competitive commodity

RURAL FINANCIAL SERVICES AND MARKETING PROGRAMME 2012 ANNUAL REPORT

Loan Agreement no.758-MD

Developed by: CONSOLIDATED UNIT FOR THE IMPLEMENTATION OF IFAD PROGRAMMES IN MOLDOVA

CHISINAU, 2013

MINISTRY OF AGRICULTURE AND FOOD INDUSTRY OF THE REPUBLIC OF MOLDOVA CONSOLIDATED UNIT FOR THE IMPLEMENTATION OF IFAD

PROGRAMMES

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RURAL FINANCIAL SERVICES AND MARKETING PROGRAMME - 2012 ANNUAL REPORT

TABLE OF CONTENTS: PAGE

1. INTRODUCTION 4

2. PROJECT PERFORMANCE EVOLUTION: PHYSICAL AND FINANCIAL PROGRESS 4

2.1. Financial Progress Summary 5

2.2. Physical Progress Summary by components 6

3. DETAILED IMPLEMENTATION PROGRESS BY COMPONENTS 7

Component 1: Value Chain Development for Rural Poverty Reduction 7

Component 2: Rural Financial Services 12

Component 3: Pro-poor Market Derived Infrastructure 25

Component 4: Programme Management 26

4. PROJECT PERFORMANCE EVALUATION 28

4.1 Outcome indicators measured under VCD component. 28

4.2 Outcome indicators measured under RFS component. 28

4.3 Outcome indicators measured under MDI component. 29

ANNEXES:

Annex 1: Classification of financed investments by type of activity 31

Annex 2: Classification of financed enterprises by size 32

Annex 3: Classification of financed investments by scope 32

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ABBREVIATIONS AND ACRONYMS

CLD Credit Line Directorate CPIU-IFAD The Consolidated Unit for the Implementation of IFAD Programmes GRM Government of the Republic of Moldova IFAD International Fund for Agricultural Development LLC Limited Liability Company MAFI Ministry of Agriculture and Food Industry MDI Marker Derived Infrastructure MoF Ministry of Finance NBM National Bank of Moldova PFIs Participating Financial Institutions RFS Rural Financial Services RFSMP Rural Financial Services and Marketing Programme SCAs Savings and Credit Associations SCRRM State Commission for Registration of Plant Varieties SMEs Small and Medium Entreprises VCD Value Chain Development

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1. INTRODUCTION

1. This report has been developed by the CPIU–IFAD in accordance with the article IV, section 4.02 (Progress Reports) of the Loan Agreement no.758-MD, and reflect the evolution of the programme’s implementation performance achieved during 2012 compared with the planned programme’s activities to be implemented during the given year and the cumulative progress from the programme start comparing to Appraisal Report figures.

2. Rural Financial Services and Marketing Programme (RFSMP), the fourth IFAD’s intervention in the Republic of Moldova, became effective in February 2009 and is scheduled for completion in March 2014. IFAD has allocated USD 13.2 million for the implementation of the programme’s activities. By the end of 2012 the programme has been operational for 46 months.

3. The goal of RFSPM is to reduce rural poverty in Moldova thought creating enabling conditions for the poorer and poorest members of the rural society to increase their incomes through greater access to markets and employment. The project is implemented through the following four components: Value Chain Development for Rural Poverty Reduction — aims at the mapping and pro-poor management of competitive commodity and services value chains with actual or potential strong linkages to the target groups, i.e. poor rural people, thus, offering best opportunities for rural poverty reduction in the context of rural market economy under development in Moldova, and for promotion and compliance with the international quality standards for those products within the given value chains. Rural Financial Services — to provide access for small rural-based entrepreneurs to mid and long term financial services. Pro-poor Market Derived Infrastructure — aims at elimination of infrastructure bottlenecks which inhibit increasing participation of commercially oriented small farmers and economically active poor in prioritized value chains, through competitive contributory grants for investment in public infrastructure. Programme Management — provides support to CPIU–IFAD responsible for financial control, work planning and budgeting, project monitoring and evaluation, procurement and administration.

2. PROJECT PERFORMANCE EVOLUTION: PHYSICAL AND FINANCIAL PROGRESS

4. In 2012, the fourth year of implementation, the programme continue through its activities to improve the participation and employment of the poor in income increasing activities related directly and indirectly to development of Moldavian horticulture value chain.

5. From the Programme start till the end of 2012, 77% from the total Programme’s implementation period has elapsed, with a disbursement rate of 71% (see table 2). Thus, the disbursement factor of the above mentioned period is 0.93 that figure out a satisfactory Programme implementation process, both physical and financial aspects. At the same time, this result point to the existence of some impediments, due to that fact that the disbursement factor has decreased comparing to the end of previous period (see chart 1).

Chart 1: Evolution of RFSMP disbursement factor

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2.1 FINANCIAL PROGRESS SUMMARY

6. The total amount of expenditures related to all activities implemented under the Programme during the 2012 represented USD 4 537.0 thousands, including USD 3 088.2 thousands from IFAD funds (see table 2 for details). Thus, the amount of total Programme expenditures represents 112% from its 2012 total budget (see table 1).

Table 1: 2011 Plan vs. Actual Figures, by financier (USD 000)

2012 IFAD GRM Beneficiaries PFIs Total

Loan Grant Total

Plan 2 801.9 156.0 2 957.9 290.4 564.0 247.1 4 059.4

Actual 2 969.4 118.8 3 088.2 41.0 1 161.3 246.5 4 537.0

Actual/ Plan (%) 106% 76% 104% 14% 206% 99% 112%

7. The total amount of expenditures related to all activities implemented under the Programme during February 2009 – December 2012 represented USD 17 494.6 thousands. In the same period IFAD has disbursed USD 9 430.4 thousands or 71% total initial allocation (see table 2 for details).

Table 2: Initial Allocation vs. Actual Figures, by financier (USD 000)

2009-2012 IFAD

GRM Beneficiaries PFIs Total Loan Grant Total

Initial Allocation 12 715.0 534.0 13 249.0 1 430.0 2 743.0 1 538.0 18 960.0

Actual Cumulative 9 054.5 375.9 9 430.4 147.8 7 032.1 884.3 17 494.6

Actual Cumulative/ Initial Allocation (%)

71% 70% 71% 10% 256% 57% 90%

8. IFAD proceeds. To implement the activities under the Programme during 2012 from IFAD resources has been allocated the amount of USD 2 957.9 thousands that represent 22% from initial allocation. Actual expenditures in 2012 from IFAD funds represent USD 3 088,2 thousands or 104% or the plan, the main part being disbursed for investment activities, i.e. Re-financing & Capital Investment and Civil Works (see table 3).

Table 3: IFAD proceeds by category of expenditures (USD 000)

Category of expenditures

Plan Actual Actual / Plan Actual Cumulative

Loan Grant Loan Grant Total Share,

% Loan Grant Loan Grant

Re-financing & Capital Investments

1 700.0 0.0 2 063.3 0.0 2 063.3 67% 121% 0.0 5 574.5 0.0

Equipment & Supplies 5.0 0.0 1.0 0.0 1.0 0% 20% 0.0 6.5 0.0

Technical Assistance & Training

230.8 156.0 67.0 118.8 185.8 6% 29% 75% 202.4 375.9

Civil Works 686.0 0.0 672.7 0.0 672.7 22% 98% 0.0 2 926.6 0.0

Operating Costs and Management

180.1 0.0 165.4 0.0 165.4 5% 91% 0.0 344.5 0.0

Total 2 801.9 156.0

2 969.4 118.8 3 088.2 100% 106% 76% 9 054.5 375.9

2 957.9 104% 9 430.4

9. The same trend is specific for the disbursement of IFAD proceeds under the Programme components; thus, under two main Programme’s components related to investment activities, i.e. RFS and MDI, have been disbursed 92% from IFAD proceeds (see table 4 for details).

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Table 4: IFAD proceeds by components (USD 000)

Components Plan Actual Actual / Plan Actual Cumulative


% Loan Grant Loan Grant

Value Chain Development 220.0 12.0 58.4 3.2 61.6 2% 27% 27% 163.6 155.5

Rural Financial Services 1 706.8 90.0 2 063.8 83.7 2 147.5 70% 121% 93% 5 588.3 169.7

Market Derived Infrastructure

690.0 0.0 680.8 0.0 680.8 22% 99% 0% 2 948.7 0.0

Programme Management 185.1 54.0 166.4 31.9 198.3 6% 90% 59% 353.9 50.7

Total 2 801.9 156.0 2 969.4 118.8 3 088.2 100% 106% 76% 9 054.5 375.9

2 957.9 104% 9 430.4

10. It is worth to mention that the disbursement under the RFS component by the end of 2012 has exceeded the budgeted amount, that show an increasing interest for financing under the programmes, especially from micro-entrepreneurs (SCAs members).

11. In the reporting period the CPIU-IFAD has taken measures in order to improve to disbursement of loans. The CPIU-IFAD staff has organized in 21 rayons information seminars on program components and services provided. On seminars were delivered Power Point presentations and distributed promotional materials. Totally on information seminars participated 1.264 agriculture producers, which are potential clients of the IFAD program (see annex 4). Other 69 rural entrepreneurs have been informed about the Programmes opportunities under training sessions organized by ACSA.

12. It is worth to mention that in May 2012, CPIU-IFAD has requested from IFAD several amendments to the RFSMP Financing Agreement, namely: (i) participation of the financial institutions in delivering credit resources to SCAs; (ii) revision of the ceiling under the sub-component 2,a; (iii) inclusion of agricultural activities outside the approved horticulture value chain among eligible activities. At the end of June, IFAD has considered favorable the proposed amendments, except the inclusion of agricultural activities outside the horticulture value chain. This new conditions have ensured more efficient disbursement of funds to SMEs and micro-entrepreneurs.

2.2 PHYSICAL PROGRESS SUMMARY BY COMPONENTS – ACTUAL OUTPUT INDICATORS

12. This section present the output indicators per components achieved during the entire project implementation period:

Value Chain Development for Rural Poverty Reduction

166 training sessions held;

14 international study tours;

7 international experts visits arranged;

4 101 people trained, including 290 women;

12 new varieties (crops) tested and registered;

1 platform of innovations established.

Fig.1: Training session on high-tech machinery.

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Rural Financial Services

567 loans disbursed, including 490 contracted by SCAs members;

USD 5 573.3 thousands - disbursed amount financed business plans; 57 training sessions for capacity building

held; 127 PFIs’ credit officers trained; 797 SCAs’ employees trained.

Fig.2: Modern greenhouse.

Pro-poor Market Derived Infrastructure

Fig.3: Road construction process.

30 infrastructure investment projects financed;

USD 2.9 million total grant amount;

42 271 beneficiaries, including 2 582 SMEs and small farmers, 39 661 individuals and 28 public authorities;

41.99 km water supply system constructed;

14.0 km rehabilitated/ constructed road;

8.20 km pipe that irrigate 649.47 ha farm land.

3. DETAILED IMPLEMENTATION PROGRESS BY COMPONENTS

3.1. Value Chain Development for Rural Poverty Reduction

13. The component aims at support of the integrated development of Moldovan horticulture value chain for reduction of rural poverty. Its main objective is to increase participation and employment of the rural poor in income increasing activities arising directly and indirectly from an improved horticulture value chain.

14. IFAD Proceeds. For implementation of VCD component during 2012 from IFAD resources has been allocated the amount of USD 232.0 thousands, including USD 12.0 thousands grant resources. The amount of expenditures related to activities implemented under the component during 2012 represented 27% from the planned amount (see table 5).

Table 5: IFAD proceeds under VCD component (USD 000)

Programme component Plan Actual Actual / Plan

Loan Grant Loan Grant Loan Grant

Value Chain Development 220.0 12.0 58.4 3.2 27% 27%

Total 232.0 61.6 27%

15. Implemented activities. According 2012 AWP&B during the reported period within the component continued the implementation of actions regarding the best practices on vegetable and fruits production.

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16. Introduce and test innovations and technologies. (A1.1) CPIU-IFAD in collaboration with the Ministry of Agriculture and Food Industry (MAFI), the State Commission for Registration of Plant Varieties of the Republic of Moldova (SCRRM) has diversified the list of new varieties included in the Register of Plant Varieties of Republic of Moldova. Based on the requests of small farmers, referring the existing in Moldova too short number of varieties on some vegetables species, it was decided to facilitate testing and registration of new varieties and hybrids, with following official registration and promotion for transfer into the technology. As a result, CPIU-IFAD has signed a collaboration contract with SCRRM for testing and registration of 12 varieties of 11 species of vegetables, such as: Lettuce, Parsley, Watermelon, Dill, Garlic, Horseradish, Spinach, root-stock for Watermelon, Winter radish.

17. All new varieties were tested in 3 climate zones, accordance to the international methodology for testing and registration of Fig. 4: Kohlrabi variety Karist F1 on the testing plot varieties.

18. In December 2012 the SCRRM has decided to register tested cultivars into the Register of Plant Varieties of Republic of Moldova, edition 2013. This activity is of high importance and will have and impact especially on small farmers, which are specialized in production of vegetables for local fresh market. Farmers can not register the cultivars by themselves due to high costs and too strong legal procedures. New registered varieties will allow farmers to import seeds and to grow high yield cultivars. As well registration of this varieties will permit growers to obtain the quality certificate for the respective cultivars which open access of frames to commercialize products through retail stores. As a result, starting from 2013, farmers will beneficiate from access to the markets of certified products which as consequence will diversify and increase their incomes.

19. In February 2012, CPIU-IFAD has organized a visit to Kiev, Ukraine in order to participate at the international exhibition “InterAgro” and „AgroAnimal Show”. The group of visitors was comprised of growers, IFAD loan beneficiaries, members of farm associations and federations from Republic of Moldova. During the exhibition, the members had the chance to get familiar with the latest inventions in agricultural technologies and techniques from Ukraine and other 46 countries participating at the exhibition. There were presented over 4000 exhibits representing entire production, processing and storing circles of agricultural production, along with machinery and equipment used in livestock. 20. The event has been attended by 7 persons, representatives from several associations and professional federations from the agricultural domain from Republic of Moldova. High interest and motivation of the members of the work group can also be identified through their initiative to share the travel costs and namely the costs of the accommodation daily allowances. Thus, participants’ contribution represented 22% from the total cost of activity.

21. Of a higher interest for the Moldovan representatives was exhibited the machinery and equipment for Mini-Till and No-Till technologies. After returning from the exhibition, the CPIU-IFAD has supported logistics and delivery of seminars and roundtables in order to disseminate the information acquired to a larger number of persons interested and other members of the farm associations.

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22. Increasing crop production profitability over the complete cycle of production, storage and marketing of the latest achievements in the field, was the starting point in the implementation of subcomponent „Field days on demonstrations of innovations in horticulture.”

23. During 2012, by CPIU-IFAD specialists were organized numerous meetings with farmers, industry associations and scientists to select the most relevant innovations in agriculture, i.e with Fruit Growers Association of Moldova "Moldova Fruct" has been demonstrated and promoted on farm agricultural meteorological stations.

24. The CPIU-IFAD in cooperation with Producers and Exporters Association of table grapes has promoted the technology of re-grafting vines. While optimizing costs for planting new vineyards with grapes oriented to consumer demands - this method claims to be one of the most effective. The essence of technology is already renovating existing plantations don’t have the planned potential to produce or outdated varieties with varieties that have an increased commercial value and high efficiency of production. As a result of technical assistance provided to growers by CPIU-IFAD in collaboration with APESM the end of 2012 were re-grafted 12 ha of vineyards.

25. In December 2012 as result of cooperation with the National Federation of Agricultural Producers from Moldova “AGROinform",Agricultural Competitiveness and Enterprise Development Project (ACED), "Millenium Challenge Corporation”, “USAID”,” Swedish Cooperative Centre”, was organized a regional conference of fruit producers under the title "the development of fruit - innovative technologies and market trends." At the event has participated with presentations experts from Romania and Ukraine. The event was attended by the Minister of Agriculture, representatives of all projects operating in the agricultural sector, representatives from the World Bank, representatives of the associations, farmers, scientists, media, etc. The Conference has been attended by 147 participants (24 women).

26. In the reporting period CPIU-IFAD has facilitated Participation of fruit growers to Moscow’s 21st International Exhibition Food & Drinks “World Food”. Participation to this exhibition it is justified, because Russian market still remains as one of the most attractive and accessible markets for the commercialization of Moldavian fruit and vegetables products. Relevant example is: At the present exports of apples and apple derivatives in Russian market are channeled at 90% of total apples exports. Participants have got accounted with the most updated innovations from the horticultural domain, study of the necessities and demands of the consumers as well as possibilities to interact with colleagues from the same domain. It is important to mention that this visit organized in partership with three institutions: CPIU-IFAD, Association of Fruit Producers “Moldova Fruct” and USAID/ACED project. Participant farmers exhibited their products in a common stand under a common trademark. The success of participation to the exibition was visible right from the start. Moldova’s stand had a role of a “courier” of all the fruit producers from Moldova. As result many contracts were signed (over 30 at the exhibition); impressive quantity of products exported (700 tones) which proves the correctness of the decision to support this activity by CPIU-IFAD.

27. To facilitate the interest of small producers in applying innovations to their production process, only seminars and informational sites are not enough. The farmers often do not have access or cannot use these opportunities and as result, the application of innovations by small farmers remains an unattainable dream, and quality of production remains low and is unable to compete in the retail market. In these circumstances, publications, promotional materials and other advertising sources are the most accessible and effective source of information.

28. CPIU-IFAD based on national competition has selected five proposal for publications, which refer to promotion of innovations in agriculture. The following publication were contracted for development and printing:

"Storage and marketing fresh apples" - Practical guide for apple producers who intend to

market the product with added value during autumn and winter. This guide describes the entire

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storage cycle, from the work that needs to be done during the growing season and ending with the

work that needs to be done immediately before trading.

"Export of horticultural production" - A practical guide for export-oriented enterprises of

horticultural production. The publication contain information on export legislation, practical

stapes for to be made by the exporter, main export markets requirements for quality of the

products, food safety, packaging, etc.

"Table grape varieties grown in Moldova" - In an accessible, full content, are described

most demanded table grape varieties recommended for cultivation in the country. Along with the

description of varieties and biological characteristics of the work are given and specific growth

requirements for each variety. Also in this paper grape growers can find other information that

would allow establishment of modern plantations, with varieties that beneficiate from high

demand on markets.

“Vine re-grafting” a guide which promote technology of re-grafting old vine plantations. By implementing this technology growers can get some significant benefits. This method allows to

replace within two years the varieties in on growing plantations with those new varieties which market demanded. 29. "New technologies for storage and packing of horticultural products" - Increase the trading period, maintaining product quality during storage and distribution, reduce storage costs are just some of the benefits that can be obtained as a result of the implementation of innovative technologies: "Fitomag" 'Fresca' and 'DecoMagicBag " which are described in this publication. 30. National Technical Assistance. As a result of a national tender, was selected a group of local experts that would cover the requests coming from persons beneficiating from IFAD credit lines to provide specialized technical assistance in one of the 12 domains: Management/ marketing; Economics/Finance; Technologies of fruit production; Technologies of table grape production; Technologies of vegetable production in greenhouses and open field; Horticultural production processing technologies; Technologies for production of animal products; Technologies for processing of animal production; Post harvest technologies and cold storage (refrigerator); Plant protection systems; Veterinary services; Implementation of quality standards (ISO 22000, GlobalGAP, ISO 9001).

31. Total during the year were given specialized technical assistance to 12 IFAD loan beneficiaries. Post harvest technologies and cold storage was the most demanded assistance.. This fact shows an increased interest of the agricultural producers to participate in more value chains and their willingness to have greater power over the final price of the agricultural production sold.

32. Seminars, Trainings, Studies, Guides. In collaboration with a local service provider, were organized a series of seminars with the aim to demonstrate the increased efficiency of high-tech machinery used in the process of production of fruits and vegetables. Seminars have been organized in 4 regions of the country, being attended by 148 persons – agricultural producers, including 20 women.

33. The CPIU-IFAD has organized seven seminars under field conditions were have been demonstrated in operation machines and mechanisms for fruit and vegetable production. Total visitors during three seminars organized, were a total of 75 participants. (60 participants were initially planned).

34. At the request of MAFI and in collaboration with “CRPA-inspect” (institution for certification of the ecologic production), UCIP-IFAD has organized an international visit to Warsaw, Poland in order to participate at the 7th International Meeting on Processing and Marketing of Organic Products and Raw Materials. Due to the technical and financial support, was managed to point a set of performances that improved the image of Republic of Moldova and its ecologic agricultural products. Among the most sound accomplishments are:

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For the first time Republic of Moldova was designated as the winner of the first prize in the contest for the best ecologic product of 2012; As a result of the active participation, Moldovan manufacturers have promoted their products successfully and even managed to sign a set of contracts for the commercialization and export of eco-production including: (i) LLC “Heuvelland” Cheese - export contracts with Russian Federation, Turkey and Ukraine; (ii) * LLC “Cioara”, CAP “Aroma”- export contracts with Germany and Austria; Were signed cooperation agreements between the Ecologic Certification Institutions from Moldova (CRPA- inspect) with the similar structures from Croatia, Poland, Italy and Germany; The delegation from the Republic of Moldova managed to participate at different conferences and trainings on ecological topics, where the producers from other countries shared their experiences, difficulties and achievements, fact that increased the motivation of the local producers to reach higher levels of implication in this new for Moldova branch of agriculture.

35. 11 persons have participated to the event, including 4 organic producers from Republic of Moldova, employees of MAFI and Certification Institutions of the Ecologic Products and Agricultural Producers. It is with to mention that 44% from the total cost of activity has been covered by participants, which showed high interest on organized work-trip.

36. In collaboration with the Association of Producers and Exporters of Grapes of Moldova "APESM" in the wine growing areas of the country were organized four seminars that covered the following topics: "Preparing vine for winter.", "Reproductive material preparation for grafting" "machines and mechanisms for processing wine plantations." Seminars have been held in the form of theoretical and practical - with demonstrations in the field of how to prepare for winter and the agricultural equipment necessary for the efficient work of plantations. During the seminar, participants noted the usefulness and necessity of these types of seminars, and the need to develop informational materials that would reflect themes: Productive Grape Cultivar, protection methods and technologies to increase the efficiency of wine plantations. Seminars were held in November-December 2012 in the following localities: Svetlii (Gagauzia), Cahul, Cirpesti, Cantemir and CNVVC of Stauceni. Altogether in these seminars were trained 109 local producers of grapes, including 17 women.

37. APESM at the Annual Conference of the Association made public the following results: export of table grapes from the Republic of Moldova in comparison with 2010 increased by over 14%. The average price realization remained constant but the exports were re-directed to Europe (exports increased by eight times), indicating that the quality of table grapes in the country it is improving and growers can access new markets..

38. In November and December, in collaboration with the Association of Producers and Exporters of Fruits "MoldovaFruct" were organized a series of seminars aimed at training apple producers in Moldova, based on the most recent and effective methods of growing, storage and marketing. All seminars that took place during that period were attended together local experts and also international experts.

39. The seminar with generic "Modern technologies in apple production. Fruit “walls” and mechanical thinning." in the city Edinet for apple producers in the North of the country and in Chisinau, for the producers of the Centre and South regions. Training was delivered by local and international experts. Mr. Erik Brutenhuis international expert from the Netherlands has participated at the seminar with a presentation. At the seminars participated 65 apple producers. 40. The seminar "Using weather stations for early warning of disease and irrigation management. Weather stations network " was hold for fruit growers and aimed to promote technology with exploring the possibility of forming a network of weather stations throughout the territory of the Republic of Moldova. At the seminar participated international expert Mr. Gottfried Pessi -Austria. The seminar was attended by a total of 32 participants (including 2 women).

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41. The seminar "Technology of long term apple preservation" was hold for fruit growers with participation of international expert Mr. Evgeny Naicenco from Ukraine. At the seminar was discussed not only about storage technologies, but also about the technology of apple growing in order to improve the quality of fruits for long term storage. The seminar was attended by 32 growers. It should be noted that to the seminar participated for the first time fruit producers from Transnistria.

42. The CPIU-IFAD staff have offered assistances and consulted 320 visitors of the CPIU office, including 30 women and 95 for young entrepreneurs. To over 200 people were offered support and consulting services by telephone (including to 48 women). In the reporting period were made 54 visits to IFAD beneficiaries.

43. It is worth to mention, that because of drought that has swept the country in this year which has caused a drastic decrease of harvested production, the international technical assistance (i.e. (i) training activities for vegetable growers who supply processors with raw materials; and (ii) training activities for greenhouse producers on modern technologies;) has been postponed for the next year. 44. As result during the year 2012, the following results have been achieved in this sub-component:

Indicators Plan Actual

Number of international study tours 3 3

Number of famers trained 300 604

Number of seminars and round tables 24 20

Field days for demonstration of machines, varieties and other innovations 15 4

Platform of innovations 1 0

New varieties (crops) tested and registered 10 12

3.2. Rural Financial Services 45. Rural Finance Services is the main programme component and aims to provide access to appropriate, sustainable, mid and long term financial services to small rural-based entrepreneurs.

46. This objective of RFS component is attained through the activities under its four sub-components: sub-component 2(a) - proceeds will be directed through commercial banks to supporting small scale commercial farmers to finance investments in production of horticultural commodities;

sub-component 2(b) – proceeds will be directed through Rural Finance Corporation for micro loans to poor on- and off-farm rural entrepreneurs for income generating activities;

sub-component 2(c) – proceeds will directed to processing/marketing enterprises, operating in horticultural value chains, which are likely to generate employment opportunities and increase incomes of small farmers’ households.

sub-component 2(d) - support in capacity building of the Financial Institutions participating in the programme implementation - 64 thousand USD.

47. Target Group. The RFS component has two groups of beneficiaries: i) small and medium enterprises, for which loans are channeled through commercial banks, approved by Steering Committee for participation in the program, and ii) SCAs members for which loans are available through RFC acting as a wholesale financial institution for channeling to SCAs, as retail institution.

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48. For the intermediation of the financial services, initially were approved 6 commercial banks (Moldova-Agroinbank, Moldindconbank, Energbank, Eximbank-Gruppo Veneto Banca, Banca Sociala, Victoriabank) and Rural Finance Corporation as a wholesale financial institution for the implementation of sub-component 2(b). 49. In 2012 the disbursement of funds has been suspended to Eximbank-Gruppo Veneto Banca, as it

failed to meet the prescribed eligibility criteria set by the subsidiary loan agreement. The bank ended the years 2009 and 2010 with losses in the amount of 204 million lei, the quality of loan portfolio was affected. To note that the PFIs activity within the Programme’s framework and it’s matching the eligibility criteria is quarterly followed by the CPIU-IFAD.

50. Financial institutions that have met all eligibility criteria have unlimited acces to financial resources of the programme and recorded for 2012 the following performance, by the number and amount of the loans:

Table 6: Loan Disbursement by PFIs (USD 000)

PFIs Name IFAD funds, year 2012 PFIs funds

Number Amount % Amount %

1 Moldova Agroindbank 5 314.2 15.2 57.1 15.2%

2 Moldindconbank 4 385.6 18.7 68.1 15.0%

3 Banca Socială 1 100.0 4.8 17.9 15.2%

4 Victoriabank 1 127.5 6.2 22.5 15.0%

5 Energbank 2 300.0 14.5 79.5 20.9%

6 Rural Finance Corporation //SCA 348 836.0 40.5 1.4 0.2%

Total 361 2 063.3 100.0 246.5

51. Over the last 12 months, there has been a significant increasing in the disbursement of programme incremental credit to Rural Finance Corporation //SCA, due to training activities organized under the programme for SCAs, which help to develop the knowledge of financing the investment activities, to assess the medium term lending risks.

52. PFIs Resources. According to the Financing Agreement the commercial banks are required to provide at least 15% of their own funds for each loan. This condition does not refer to RFC/SCAs financing, therefore no contribution is required from RFC/SCAs, as financial institutions. The total value of PFIs own proceeds extended to SMEs financed amounted to USD 245.1 thousand, that represent 16.6% to total loan amount provided in 2012 to programme loan beneficiaries. To mention that an amount of USD 1.4 thousands were provided by SCA as a co-financing of two investments.

53. The PFIs funds are issued on bank terms and conditions and may be different from those of IFAD. The largest part of banks funds, 80.8%, is issued for the period of up to 24 months (see details in table 7 from below). For co-financing the investments under the programme the banks are using the deposit funds, which are mostly (84% to total deposits), shot term (up to 12 month).

Table 7: The loan terms issued from banks funds. (USD 000)

Loan term Number of

loans % PFIs funds %

up to 12 month 7 38.5% 79.8 32.4%

> 12 to 24 month 5 38.5% 116.5 48.4%

>24 to 36 month 2 15.4% 26.3 9.9%

>36 to 48 month 0 0.0% 0.0 0.0%

>48 to 60 month 1 7.7% 22.5 9.3%

Total number 15 100.0% 245.1 100.0%

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54. Interest rate. The interest rate the banks apply to own fund varies between 12.5% and 15.75%, which is roughly equal to average rate on the banking system (in 2012 it has varied between 11.6% and 14.23%). On programme loans it has been applied the interest rate of 9% that is calculated based on National Bank of Moldova base rate on long terms (over 5 years) credits, which is 5%, and bank margin equal to 4%. The difference between the interest rate on programme loans and own banks funds is justified, as the loan term differs. 55. Loan Beneficiaries Contribution. As per programm conditions SMEs have to contribute a minimum of 20% of the total investment project cost applied from their own resources. The SCAs beneficiaries have to contribute to the financing of investment with at least 10% from the total investment cost. The loan beneficiaries contribution can be in cash or in kind and may be the payment of taxes, employee salaries, purchase of working capital necessary for investment, other. In 2012 loan beneficiaries have co-financed its investment with the amount of USD 987.8 thousands or 30% from total amount invested in rural entrepreneurship financed under RFSMP. At the same time, the amount of beneficiaries’ contribution exceed two times the planned figure (see table xx) due to the fact that the loan amount disbursed and share of own contribution is greater than plan. It is worth to mention that USD 975.2 thousands or 98% from total of beneficiaries’ contribution has been provided in cash and only 2% in-kind. The large amount of beneficiary’s contribution is generated by the higher needs of working capital mostly for agricultural production activities.

Table 8: Total investment cost by sources of financing (USD 000)

2012 IFAD Beneficiaries PFIs Total

Loan Grant Total

Plan 1 700.0 0.0 1 700.0 441.2 247.1 2 388.3

Actual 2063.3 0,0 2 063.3 987.8 246.5 3 297.6

Actual/ Plan (%) 121.4 0 121.4 223.9 99.8 138.0

56. It is worth to mention that 39% from the total loan amount disbursed under the component in 2012 has been absorbed by rural micro entrepreneurs - SCAs members, the disbursed amount has exceeded 2.8 times the amount planned for entire year. For the processing activities have been disbursed 37% more than planned amount, while the resources disbursed under the financing of small producers has reached only 22% (see table 9). The PFIs contribution is less than planned amount, due to deviation of loan amount disbursed within sub-components, especially the higher request of micro loans by micro entrepreneurs - SCAs members, for which the PFIs co-financing is nor requested.

57. To increase the disbursement for producers (sub-component 2a), CPIU has requested from IFAD to increase the ceiling of loans disbursed to horticultural producers from USD 50.0 thousands to USD 150.0 thousands which is more suitable for such investments. At the end of June, IFAD has considered favorable the proposed amendment that would ensure more efficient disbursement of funds to SMEs and micro-entrepreneurs.

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Table 9: IFAD proceeds under RFS component (USD 000)

RFS sub-components Plan Actual Actual / Plan


% Loan Grant

Financing of small producers (SMEs) 600.0 - 129.1 - 129.1 6% 22% -

Financing of rural micro entrepreneurs (SCAs members)

300.0 - 836.0 - 836.0 39% 278% -

Financing of processing/ marketing companies (SMEs)

800.0 - 1098.2 - 1098.2 51% 137% -

PFIs capacity building, including:

- business plan development - PFIs training

6.8 90.0

0.3

83.7 84.0 4% 4% 93%

Total 1 706.8 90.0

2063.6 83.7 2147.3 100% 121%

93%

1 796.8 120%

58. IFAD proceeds. For the implementation of activities under the RFS component, in 2012, from IFAD funds have been used an amount of USD 2147.3 thousand, including USD 83.7 thousands from IFAD grant resources. An amount of USD 2063.3 thousand were disbursed for loans and USD 84.0 thousands for capacity building of PFIs and business plan development assistance. The IFAD contribution to the total component cost represents 64%.

Table 10. Total RFS component cost by financiers (USD 000)

2012 IFAD

Beneficiaries PFIs Total Loan Grant Total

Plan 1 706.8 90.0 1 796.8 441.2 247.1 2 485.1

Share by financiers, % 72% 18% 10% 100%

Actual 2 063.6 83.7 2 147.3 987.8 246.5 3 381.6

Share by financiers, % 64% 29% 7% 100%

59. Total cost of RFS component. With the above-mentioned contributions from commercial banks and client beneficiaries, and with IFAD-funds, the total costs of the RFS component is USD 3 381.6 thousands, or 36% more than plan.

60. On-lending activities. During the year 2012, a total of 361 loans amounting to USD 2 063.3 thousands were disbursed, representing 121.4% of the planned amount. A significant increasing in the number of loans issued in 2012 is due to high demand for micro-loans disbursed through SCAs (for details see table 11).

Table 11: On-lending activities by types (USD 000)

Type of activity Plan Actual Actual/plan, by number

Number Amount Number Amount

1 Production Facilities ( s/c IIa) 15 600 2 129.1 13.3%

2 Processing Facilities (s/c IIc) 11 800 11 1 098.3 100%

3 SCAs - Agriculture activities 80 300

323 767.9 375%

SCAs - Non-agriculture activities 25 68.1

Total 106 1 700.0 361 2 063.3 340%

61. As shown in chart 1, there has been a significant increasing in the disbursement of loans, from 104 loans in 2011 to 367 in 2012, or 3.5 times more. CPIU-IFAD has made efforts to analyze this large number of applications and to finance it. To note that 348 loans representing 96% from the total number of loans provided during the year have been contracted by micro-entrepreneurs.

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Chart 1: Number of loans disbursed during years 2009-2012

62. SMEs financing. For SMEs financing, in 2012, the amount of USD 1 227.3 thousands has been disbursed that represent 88% from the total amount planned for SMEs financing. The amount has been absorbed by 13 SMEs, including 3 peasant farms and 10 LLCs. During the last years, the investments in agriculture have moved from production to processing, storage/marketing. Thereby, the demand of financing in cold storage/ marketing is higher than in production of agricultural commodities. In 2012 the amount of USD 943.3 thousands has been invested in cold storage/ marketing of horticultural production, USD 155.0 thousands in processing facilities and only USD 129.1 thousands in viticulture/fruit growing (see chart 2 and annex 1).

Chart 2: Share by type of activities financed (SMEs)

63. In the lending process special attention is given to micro and small enterprises. Based on classification of enterprises by legislation, in 2012, in micro and small enterprise development has been invested the amount of USD 1 187.2 thousands or 97% and only USD 40.2 thousands or 3% in medium enterprise (see chart 3 and annex 2).

Chart 3: Classification of financed enterprises

Classification of financed enterprises by size

Classification of financed enterprises by size & number of enterprises

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64. Analyzing data of classification of financed enterprises by size and the number of employees within these companies we can conclude that the largest number of people is hired by medium enterprises (about 50 persons per enterprise) followed by small enterprise (about 20 persons per enterprise). In micro enterprises only the members of family are self-employed. It is noteworthy that financing the medium and small enterprises can ensure employment in rural area, which generates income for poor people.

65. Under the programme, in 2012, the amount of USD 234.7 thousands or 19% has been invested with the purpose to diversify enterprises’ activities, thus the entrepreneur is reducing the risks related to agricultural activities. During the last years the agriculture in Moldova has suffered due to natural calamities; however the agricultural SMEs are still sustainable and continue to expend the business. The amount of USD 723.6 thousand or 59% have been used for extension of existing business (see annex 3). To mention that new business are launched too and the amount of USD 269.0 thousands or 22% has been invested with programme support.

66. Repayment rate. Based on PFIs reports regarding the performance of programme beneficiaries, the arrears of principal and interest for all PFIs loans of more than 30 days is 0,1% that brings the repayment rate to 99.9%.

67. Micro-entrepreneurs financing through SCAs. As it has been mentioned above, 348 loans or 96% from the total number of loans provided during the period under review were contracted by micro-entrepreneurs (members of SCAs), that have absorbed the amount of USD 836.0 thousands, or 2.8 times more that it was planned. The total number of loans contracted by micro-entrepreneurs has been disbursed through 48 SCAs, of which 34 SCAs with ‘A’ license that representing 71%. The SCA with ‘A’ license are more active in lending activity as they, according to the Low, has not the right to accept savings from their members and are totally dependent of external loans, while the SCA with ‘B’ license have savings deposits that can be used for crediting the members.

68. Most of micro-entrepreneurs-SCAs members, ie 66% from the total number of financed micro-entrepreneurs, have applied to the programme funds for extension of their business. All this entrepreneurs have an experience in business more than 5 years and the business they are doing is sustainable and in growing. 20% of micro-entrepreneurs have contracted the loans for diversification of existing activity as an action to mitigate the risks that entrepreneurs faces. The favorable conditions and terms of programme assistance has encouraged 14% of micro-entrepreneurs to contract loans for launching a new business (see chart 4 and annex 3).

Chart 4: Classification of financed micro-entrepreneurs by scope

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69. According to the programme conditions micro-entrepreneurs-SCAs members may apply for financing of on- and off-farm income generating activities. Nevertheless, the largest share of loans 93%, were disbursed for development of agricultural activities. The financial resources were used for procurement of small agricultural equipment, animals, seedling for plantation of small orchards, materials for construction of tunnels for vegetable growing. In the category of non-agricultural activities the largest part of funds were used for trade (see chart 5 and annex xx).

Chart 5: Share by type of activities financed (micro-entrepreneurs)

70. The afford–referenced indicators prove that loans aimed for investment activities under RFS component are properly targeted to the originally defined target group, having a direct positive impact on supported rural farmers.

71. Repayment rate. Based on RFC report on programme beneficiaries performance, at the end of 2012, the arrears of principal and interest for all SCA loans of more than 30 days is zero that brings the repayment rate to 100%.

72. Collateral by SCAs. Poor households are mostly financed by SCAs, however they still face difficulties to access loans due to the need to provide collateral. According to the SCAs credit policy, the loan amounting USD 30 thousand does not require collateral. From the 348 loans disbursed by SCAs, 329 loans (94%), averaging USD 2,4 thousand, were disbursed without any guarantee by the borrower and 19 loans (5.4%), averaging USD 5,5 thousand, were disbursed against collateral valued at 128% of the loans value.

73. Credit Guarantee Fund (CGF). With the objective to facilitate access to MFI financing by the poor and alleviate the problems encountered from the lack of sufficient collateral, IFAD has commissioned a study on a ‘Credit Guarantee Fund for Savings and Credit Associations (SCAs) lending activities’, concluded that there is a need for CGF and proposed that CGF should be established as an integrated part of ODIMM’s (Organization for Small and Medium Enterprises Development) credit guarantee and other financing operations. During the 2012 CPIU performed the activities as described below: (i) The study on a ‘CGF for SCAs lending activities’ and draft of implementation manual was disseminated to MoF, MAFI, NCFM, ODIMM, RFC and CASCA for comments and proposal; (ii) In order to discuss the comments and proposal made to study all the parties were invited by CPIU to participate in a round table. The proposals and draft of CGF implementation manual have been agreed by parties with the proposed changes;

(iii) The feedback to the study and implementation manual was as follow: • The Ministry of Economy and NCFM supported the recomandation to establish the CGF within the ODIMM, as the organisation has experience in guarantee scheme (it assists SMEs with access to financing through an individual guarantee scheme since 2007) and there is not need to create a new fund, moreover the implementation costs will be minimized.

• The Ministry of Finance comments have refered to the legislation and in discussions have not seen the necessary changes to existing ligislation.

• It was proposed by the Ministry of Finance to exclude MoF from the shareholders list, due to fact that the CGF will be managed by the MAFI, as the lead agency, throught CPIU-IFAD.

(iv) Under the programme an amount of USD30.0 thousand is foreseen for the establishment of the CGF, but has not been allocated funds for initial Indemnity Fund. The Indemnity fund that ODIMM has cannot be used for ‘CGF for SCAs lending activities’, as it has special destination. In order to make the

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CGF operational, the Ministry of Finance (MoF) requested IFAD to reallocate from other category an amount of USD250.0 thousand for initial Indemnity Fund;

(v) As soon as amendment for funds reallocation is sighed the Subsidiary Agreement will be signed between the MoF and ODIMM.

74. Capacity Building Activities. The objective of this activity is to provide support through capacity building activities to Financial Institutions participating in the Programme implementation, these being commercial banks and Rural Finance Corporation specialists and SCAs staff, and to eligible loan applicants on business plan development. 75. PFIs capacity building. In accordance with the planned activities for 2012, in February, CPIU-IFAD has organized a study tour, in Verona, Italy, for representatives from 6 PFIs selected under RFSMP, and namely: Moldova-Agroindbank, Moldindconbank, Victoriabank, FinComBank, Energbank and Banca Sociala. The study tour has been also attended by the representative of MoF/CLD and one producer. The scope of this activity aimed at strengthening commercial banks’ understanding of the advantages of lending the value chains players.

76. During the study tour, with the purpose to: (i) identify financial products that would satisfy lending requirements for all value chain participants; (ii) identify the advantages and disadvantages, constrains of financial products related to value chain activities; (iii) linkages between the parties, a range of meeting and visits have been organized to:

financial institutions:

• BANCA POPOLARE DI VERONA • BANCA VALPOLICELA • BANCA POPOLARE DI VICENZA

producers/ processors cooperatives:

• COOP Aposcaligera • Cantina Sociale di Negrar • Coldiretti-farmers association • Consorzio FIDI- insurance agency for

farmers market cooperatives:

• Packing house -Frutta C2 di Villafranca • Market- Verona Mercato • Fruttital di Verona company

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Meeting with representatives of: • SACE Group – financial services and

insurance for local and foreign companies. A company from Moldova, Cimislia rayon, has got an insurance service to buay equipment from Italy.

• Agro-food sector support agency – support to associations/cooperatives regarding production, sale / export, new technologies, alternative energy sources ... (training on subsidies, fundraising by companies)

Fig. 6&7: Moldovan delegation during the meetings and visits organized under the study tour

77. As a result the following directions have been identified for further analysis by PFIs: Contract farming is most acceptable financial product for producers and processors - to develop such product PFIs have to monitor the compliance of sale contacts that are attached to the loan application files, work closely with client on advantages identification of contact farming;

In the process of client monitoring the branches use a technological data sheet for cash flow estimation and repayments evaluation; monitoring based on technological data sheet is a good procedure of risks evaluation during the loan term;

Cooperatives as an organizational form have a lot of priorities related to access of finance, price of procurements and sales, etc. PFIs’ branches have actively provided information on advantages of cooperation. Based on such organization form, as cooperative, can be developed contract farming system.

78. MFIs capacity building. To ensure a stable and sustainable microfinance system development and strengthening the capacity for SCAs development in Moldova, in December, CPIU-IFAD has organized a study tour, in Dublin, Ireland (the most relevant country with similar experience in Microfinance to those in Moldova and wide network of credit union) for representatives from RFC, SCAs, NCFM, Central Association of SCAs, ODIMM, MAFI and MoF on “Microfinance: products and services, performance management”.

79. The study tour was assisted by Irish League of Credit Union Foundation ( ILCUF) that organized a rage of visits and meetings with different organisations, agencies involved in microfinancing, within which were discussed the following topics:

Microfinance and social enterprise in Ireland ;

Government ‘role in social/microfinance; Cooperative and credit union movement in

Ireland; ICOS (apex body for cooperatives) and

cooperatives; Regulation of financial/microfinance sector

in Ireland; ILCU (apex body) and credit unions; Guarantee Scheme and Loans Protection; Credit Union monitoring and regulation;

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It has been organised field visits and meetings with credit unions management staff and members of:

Bailieborough credit unions (Cavan)

Ballyragget credit unions (Kilkenny).

80. As a result of the Study tour the participants noted the following three things they have learned:

insurance of SCAs members savings and the members themselves (in Moldova does not exist such type of insurance) assure both members and as well as SCAs from different risks;

structure, role and activity of APEX organization gives a wide range of services to SCAs at

favourable conditions;

regulatory framework is coordinated by all parties involved in the system.

81. Is worth mentioning that at the annual meeting of SCAs, RFC and Central Association of SCAs (CASCA) it was discussed the experience from Ireland and some activities were included in the plan for 2013:

at CASCA- (i) mobilization of liquidities and development of lending products for members; (ii) setting-up a unit for providing IT services;

at RFC – make amendment to the statute to launch insurance services for members.

82. SCAs capacity building. At the beginning of the year, the Programme has continued training activities related to training for staff of SCAs (eligible for financing under IFAD-funded programmes) on:

business investments financing (procedures and requirements under IFAD-funded Programmes), strengthening legal competence in documenting of secured loans;

application of computerized records management system and internal control in SCAs.

83. In the second part of the year, based on needs identified in the previous training and on request of NCFM, the staff of SCAs was trained on:

basics of using ‘Evida’ software;

amendments and completions of SCAs Law approved on 03.05.2012.

84. Under the business investments financing sessions a total number of 59 persons have been trained, i.e. directors, councils, accountants out of 43 SCAs, who have not benefited from training during 2011. From the total number of trained participants 49 persons were representatives from 37 SCAs with A license and 10 persons from 6 SCAs with B license.

85. Given the fact that SCAs have to report to the National Commission for Financial Markets electronically, the Programme has focused on a special training session for SCAs staff on computerized accounting records, keeping and preparing for electronic reporting to the National Commission for Financial Market. Moreover, the training strengthens the internal control system of the SCAs.

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86. Under this activity the total number of 48 administrators (directors and accountants) from 30 SCAs has been trained, of which 38 persons from 23 SCAs with A license and 10 persons from 7 SCAs with B license.

Fig.8&9: SCAs staff training sessions.

87. Based on requests received from SCAs financed under the RFSMP and using ‘Evida’ software for automated tracking of credits, assets and interest-bearing liabilities, in November-December 2012, CPIU in collaboration with RFC have organized training for 49 administrators from 29 SCAs on “basics of using ‘Evida’ software”.

88. The training served as a starting point for SCAs who plan to start working with ‘Evida’ software and those who are already implementing it, therefore the topics and participants were separated for beginners and for users and have included:

evidence of assets, liabilities and shareholders;

record of financial products and fund by financiers;

clients records and contracts;

track of loan repayment and payments;

export / import data, link to other systems (1C) and reporting ;

89. To be noted that in this activity RFC, as a co-financier of the activity, has provided the training room equipped with the computers.

90. As a result of this training activity were organized eight training sessions for 20 new users of ‘Evida’ soft and 29 persons who are implementing it. Only SCAs that have applied for financing under the programme have been trained on this subject.

91. The necessity and quality of the training were highly appreciated by participants, as shown in the chart from below, based on assessment questionnaire. It has been mention by participants the necessity of a repeated training over a period of time, including updates and changes.

Chart 6: How useful do you consider the session you attend?

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92. In the context of approval on 03.05.2012 the amendments and completion of the Law on SCAs no. 139-XVI dd. 21 June 2007, as well as to ensure fostering capacity for SCAs development in the Republic of Moldova, the National Commission for Financial Markets requests to support training of managers and accountants of SCAs with license A and B on ‘Practical application of amendments of Law on SCA’.

93. Training topics have been developed based on proposals of the National Commission for Financial Markets and have included the following subjects:

Application of new provisions of Law on SCAs no. 139-XVI dd 21 June 2007, approved on 03.05.2012;

Stage of legal procedure of applying to the court for outstanding loans recovery;

Peculiarities of the accounting evidence of SCAs activity;

Application of prudential norms provisions of SCAs;

Application by the SCAs of cash registration machines and control over the cash flow;

Training of SCAs staff to obtain qualification certificate.

94. The training activity were held from 11 to 27 December 2012, under which were organized 13 seminars for 249 persons from 198 SCA, from which 134 SCAs with A license and 64 SCAs with B license. Reported to the total registered number of SCAs, the participation rate was 89% of SCAs with A license and 91% with B license. Some of SCAs could not participate due to weather conditions in December.

95. Based on questionnaires analysis and the active participation of participants throughout the training sessions it can be concluded that SCAs training have a very positive impact on SCA leaders and such activities need to be organized and future training topics would be developed on need basis.

96. The participants have mentioned that seminars offer them an opportunity to exchange experiences with colleagues on different aspects. This is evident from the replies of participants in the questionnaire to assess the training activity.

Chart 7: How useful do you consider the organization of this training?

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Chart 8: How important do you consider the topics discussed at the event?

97. It is worth to mention that during the 2012 year, all SCAs which applied for financing under the programme were trained at least in one topic. 98. Studies. In order to improve SMEs financial assistance and for extension of access to financial resources of the Program it has been agreed to conduct a study on situation and trends of agriculture credit market. The study was done in January-March by JV “Business Intelligent Services” LLC and includes the data on situation, trends, constraints and recommendations on credits in agriculture.

99. Study findings would be presented at a working meeting to be attended in September 2012 by the representatives of the IFAD, MoF, MAFI, NBM, commercial banks - partners in implementation of the IFAD-funded programs, etc. Moreover, the recommendations would be taken into consideration on design of a new IFAD project. 100. Support for business plans development. According the RFSMP conditions the Programme provide support for business plans development only for applicants under sub-component 2(a), consist of a 100% IFAD-funded support, for loans of not more than USD 20 000, and a maximum 70% IFAD-funded support, for loans of more than USD 20 000. Business plans for loans under sub-component 2(b) is not mandatory; and business plans for loans under sub-component 2(c) are paid for by the applicants themselves.

101. The support is offered to SMEs, only under the sub-component 2a, through consulting companies accredited within the Programme for provision of related technical assistance. At the beginning of the year 9 companies have been selected and accredited for provision of assistance for business plan development. In the first half of 2012, 13 business plans have been develop, 11 plans for processing activities and 2 for producers. In the context that Programme conditions accept the financing of business plan only for producers, just 2 enterprise beneficiated from Programme service.

102. As result of the implementation of activities during year 2012 were recorded the following achievements:

Activity plan / actual

Study tour–training CB on value chain related financial products 15 / 10 participants

Study tour–training MFI on microfinance: products, performance management

0 / 10 participants

Training for SCAs- business investment financing/ strengthening legal competence

180 / 59 participants

Training for SCAs – amendments and completions of SCAs Law 0 / 198 participants

Training for SCAs - application of computerized records management system and internal control

388 /48 participants

Training for SCAs- Application of computerized records management system and internal control in SCAs ‘basics of using ‘Evida’ software

0 / 49 participants

Total training activities 583 /374 participants (64%)

Financed business plans 15 /2 plans

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103. Gender Aspect of the Component. The Programme is implemented on demand base and at the design stage have been not envisaged some specific activities to influence the gender aspect. However, the women participation is 65% in the training activities and cca 33% related to business financing, both from the participatory point of view at business administration and direct financing.

3.3: Pro-poor Market Derived Infrastructure

104. The MDI component aims at elimination of infrastructure bottlenecks which inhibit increasing participation of commercially oriented small farmers and economically active poor in prioritized value chains. This component implies adjustment of competitive contributory grants for investment in public infrastructure to enable and enhance private sector investment and activities in rural areas.

105. IFAD Proceeds. For implementation of MDI component during 2012 from IFAD resources has been allocated the amount of USD 690.0 thousands loan resources. The amount of expenditures related to activities implemented under the component during 2012 represented 99% from the planned amount (see table 12).

Table 12: IFAD proceeds under MDI component (USD 000)

Programme component Plan Actual Actual / Plan Actual Cumulative

Loan Grant Loan Grant Loan Grant Loan Grant

Market Derived Infrastructure 690.0 0.0 680.8 0.0 99% 0% 2 948.7 0.0

Total 690.0 680.8 99% 2 948.7

106. For 2012 has been planned to finance 6 infrastructure projects. From 9 infrastructure projects proposed for final approval, 3 of them have refused the participation in the project, thus only 6 projects have been proposed for evaluation to Selection Committee. Finally, 5 infrastructure projects have been approved for financing during 2012 and 1 project has left in the waiting list.

107. Thus, during 2012 have been constructed 4.61 km of road (including 1.15 km of white road) and 7.045 km of water supply system; following villages have benefited from financing of infrastructure projects: Road – Susleni village, Orhei district; Vadul lui Isac village, Cahul district; Buteni village, Hincesti district, Vasilcau village, Soroca district; Water supply system – Alunis village, Riscani district.

108. During 2012, CPIU-IFAD has implemented under the MDI component the following activities: Provided support to elaboration of investment proposals for 9 infrastructure projects; Organized the Selection Committee Meeting; Sign grant agreements with 5 selected client-groups; Collected the beneficiaries contribution from all project selected for financing during 2012; Announced the procurement process for all selected infrastructure projects; Provided other consultations to client-groups related to investment project implementation; Provided the side supervision of 5 infrastructure projects related to the construction process.

109. Beneficiaries’ contribution. The implementation of infrastructure investment projects are implemented based on private-public partnership, which supposed besides the proceeds, allocated from IFAD resources a financial contribution of at least 15% from the total investment cost provided by Programme beneficiaries. During 2012, beneficiaries of the financed infrastructure projects have transferred its contribution for projects implementation totaling USD 169.5 thousands1.

1 The amount of beneficiaries contribution totaling MDL 2 053 thousands converted in USD at the average rate of the National Bank of Moldova related to the period January - December 2012.

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110. By the end of 2012, the construction of infrastructure projects from Susleni village, Orhei district, Vasilcau village, Soroca district and Alunis village, Riscani district have been finalized, while the construction of road from Vadul lui Isac village, Cahul district and Buteni village, Hincesti district has been stopped because of inappropriate weather condition and would be finalized in early spring 2013.

111. In June 2012, CPIU has launched the next call for submission of applications for financing of infrastructure projects in 2013. By the dead line for submission of the application 7th of September 2012 the CPIU-IFAD has received 20 applications for financing which have been evaluated and 10 out of them have been preselected for Qualification phase. For those projects have been developed prefeasibility studies, the technical-economic argumentation and has been ensured its external evaluation by an independent evaluator. The 10 preselected infrastructure projects have been proposed to the Selection Committee for final evaluation and approval for financing in 2013.

112. During 2012 were signed 5 Transfer Agreements between the CPIU-IFAD and Local Public Administrations (institution owner of the infrastructure), stating that the rehabilitated fixed assets is transferred to the balance sheet of the institution owner of the infrastructure:

Geamana, Anenii Noi - Water supply system – 0.32 km; Sarata Veche, Falesti - Road construction – 1.2 km; Dragusenii Noi, Hincesti - Road construction – 0.95 km; Manoilesti, Ungheni - Water supply system – 4.4 km; Bucovat, Straseni - Road construction – 1.8 km.

112. As result of financing of infrastructure investment projects during 2012, the following results have been achieved:

Plan Actual

Financed infrastructure investment projects 6 5

Direct beneficiaries of financed infrastructure investment projects Farmers/ SMEs

96 47

Indirect beneficiaries, including

Individuals 5 450 16 187

Local public authorities 6 5

3.4. Programme Management

113. In accordance to the Loan Agreement no.758-MD, the full management, coordination and responsibility for the project lies within the following institutions: The Ministry of Agriculture and Food Industry; The IFAD Programs Steering Committee; The Consolidated Unit for the Implementation of IFAD Programs in Moldova (CPIU-IFAD); The Credit Line Directorate – for the administration of the revolving Village Agricultural Revitalization Fund

114. The Ministry of Agriculture and Food Industry has the overall responsibility for the project implementation.

115. The IFAD Programs Steering Committee, established by the Government Decree and chaired by the Minister of Agriculture and Food Industry, represents the body of approval of the overall IFAD-funded operations in the country. The main responsibilities thereof are as follows: approval of policies and strategies ; approval of the financial institutions participating (PFIs) under the project; review of methodology of calculation of the reference rate and approval of the PFIs margin;

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review and approval of the annual work plans and budgets, and review and approval of the progress reports.

116. In 2012, the IFAD Programs Steering Committee has met twice; the agenda of the meetings has included the following topics for discussions, decisions and approval: 2011 Annual Progress Report and Budget Plan realization; Evaluation of performance indicators of Financial Institutions participating in the implementation of the program; Approval of the 2013 Annual Work Plan and Budget Plan; approval of new procedures for on-line submission of loan applications by the PFIs.

117. In 2012 has been initiated process of including in the composition of the IFAD Programme Steering Committee (IPSC) the representative of the National Commission on Financial Market (NCFM) which supervise micro crediting activities, including direct funding to B type SCAs.

118. The overall management of the project lies within the responsibility of the CPIU-IFAD, established by the Government Decree and specifications of the PIM, entrusted with responsibility for implementation activities coordination, including financial management, monitoring and evaluation. As of 31.12.2012 CPIU-IFAD comprises 12 employees, including the CPIU director, 10 specialists in charge of on-going IFAD-funded projects implementation; and one driver.

119. CPIU-IFAD has exercised its responsibilities in terms of: project implementation in technical and financial terms, as well as supervision of the overall activities thereof; procurement under the project’s components as per the 2012 AWPB; monitoring and evaluation of the project’s impact in compliance with the RIMS indicators and other additional indicators; preparation of progress reports; backstopping to the annual supervision and other IFAD missions, elaboration of the required information and organization of field trips and meetings with other donors; participate at different event with the purpose to inform rural entrepreneurs about the opportunities available under the programme; provide in-office consultation for interested persons.

120. During 2012, CPIU-IFAD has work on improvement of components’ management, with a special emphasis on development of Management Information System which includes all activities implemented under the Programme together with financial data (accounting database).

121. The Bids Opening and Evaluation Committee had 26 meetings, and as result CPIU has signed 48 contracts for procurement of goods, consulting and non-consulting services.

122. During 2012 the M&E unit has visited 30 financed SMEs (39% from total 74 financed) and 21 financed infrastructure projects (70% from total 30 financed).

123. During the reporting period CPIU-IFAD has spend USD 198.3 thousands for expenditures within the Project Management component, which it is 83 % to the annual plan. 124. In 2012 cost for Project Management component was 6% of the total Project costs, due to the fact that most expenditures for management were spend from RFSMP.

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4. PROGRAMME PERFORMANCE EVALUATION 125. After four years of programme operation, CPIU-IFAD has collected outcomes indicators with the purpose to assess if project activities have been successful in reaching their expected results and if programme beneficiaries initiatives were likely to be sustainable.

126. For collection of outcome indicators the M&E team has contacted: (i) 52 (81.2%) from 64 SMEs financed under the RFS component during 2009-2011 and eligible for impact evaluation, and has received data from 27 SMEs (51.9% from contacted); (ii) 19 (24.3%) from 78 SMEs direct beneficiaries of financed infrastructure projects eligible for impact and received data from 15 SMEs (78.9% from contacted); (iii) 113 (32.4%) from 348 SCAs loan beneficiaries and has collected data from 80 loan beneficiaries (70.7% from contacted); (iv) 23 (100%) of LPAs from villages that benefited from construction of infrastructure projects and received data from 19 (82.6% from contacted).

4.1 Outcome indicators measured under VCD component.

127. With reference to technical assistance provided under the Value Chain Development Component, the beneficiaries have reported the following indicators: (i) Table grapes producers have increased the by 2.8 times the volume of exported table grapes from 24 500 t to 70 000 t; (ii) The number of countries in which table grapes producers export has been doubled; (iii) Fruit producers have increased 15 times orchards area from 650 ha to 10 000 ha; (iv) Fruit producers have increased production volume by 50%, but the quality of production has increased only by 10% because of severe drought in 2012.

4.2 Outcome indicators measured under RFS component.

128. Results of financed SMEs. At the end of 2012 the interviewed financed enterprises2 have improved most of its financial indicators. These enterprises have reported (comparing to baseline results) the following evolution of main financial indicators: (i) average growth in total assets of 39.6%; (ii) average growth in equity of 91.6%; (iii) average growth in gross profit of 3.6%; (iv) the sales income has decreased with 22.3%; (v) the net profit has decrease with 70.3%.

129. It is worth to mention that because of severe drought that had place in 2012 financed SMEs have reported that wheat production volume has decreased with 79% comparing to baseline period, corn production volume with 43% and a decrease of 27% in the volume of vegetables produced in open field.

130. A negative impact on financial indicators was caused by the introduction of a 12% tax on profit that has been established in 2012, that has influenced partly the reduction of net profit.

131. Through the investments financed during 2009-2011, 493 jobs have been created that represented 36% increase comparing to baseline data3. At the same time, the financed enterprises have reported growth of monthly average salary with 28.6% comparing to pre-credit period.

132. Results of financed micro-entrepreneurs (SCAs members). With reference to micro entrepreneurs financed under the programme through SCAs, the outcome indicators have been calculated based on a sample of 30% of beneficiaries, counting 80 out of 348 beneficiaries financed during 2009-2012.

2 Data obtained based on the interviews with 27 enterprises (42%) from 64 financed during 2009-2011, eligible for measuring outcomes. 3 1351 registered under the companies financed during 2009-2011 prior receiving the loan.

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133. According to the National Bureau of Statistics, in 2012, the disposable income per person per month was of MDL 2 164.8 (USD 178.7). Most of the farmer’s income from rural areas was from salaries, accounting 29%, from individual agricultural activity represented 19.1% and individual non-agricultural activities accounted 3.7% while social benefits and other incomes were at 23 and 24 % respectively.

134. As it is to be expected, most of IFAD SCAs loan beneficiaries have their incomes generated from agricultural activities. Based on M&E data, 55% of beneficiaries reported incomes generated by agricultural activities; 15% non-agricultural activity; 4% from salaries in agricultural sector and 6% salaries in non-agricultural sector. Additionally, about 34% of all respondents reported increase in the average yearly income, compared to the pre-credit situation. The average growth of income compared to pre-credit period was of 2.07%. At the same time, 45% reported a decrease in the income mainly due to the severe drought that was in summer of 2012, which had negative effects on the agriculture of Moldova, especially the field crops. The severe drought also had negative effects on the standard of living, forcing farmers to spend their previously accumulated savings in order to prepare for the 2013th agricultural cycle; 22.5% of monitored beneficiaries reported decrease in the standard of living and 55% of beneficiaries reported the same standard of living, as in the post-credit situation. Nevertheless, 22.5% of beneficiaries reported an increase in their standard of living, mainly because of the correct allocation of funds into high value products that beneficiated of a high demand on the market and were sold at prices higher comparing to previous years.

135. On the positive side was the increasing amount of remittances reported by 47.3% of beneficiaries, even it was used for consumption in 63%. This has the same tendency on the national level, where the amount transferred from people working abroad had a 3.5% increase, till the amount of USD 1 494.23 million transferred through banks.

136. The loan beneficiaries became more market oriented, 76% reporting availability of production for sale comparing to pre-credit period. A tendency for economies of scale can be identified among the SCA beneficiaries based on the fact that in 2012, 29% reported increase in possessed land, 68% same land owned and only 2.9% reported a decrease in the ownership of agricultural land.

137. In 2012, 56.25% of SCAs loan beneficiaries reported employment opportunities for people from the rural areas of 3.8 jobs created on average per financed business at an average of 49 days per year.

4.3 Outcome indicators measured under MDI component.

138. By the end of 2012 the SMEs – beneficiaries of financed infrastructure projects have reported significant increase of its financial indicators4 as follows: Total assets have increased by 2.3 times or with 131 percentage; Equity has increased by 1.6 times or with 69 percentage; Sales income has increased by 2.3 times or with 135 percentage; Gross profit has increased by 1.4 times or with 45 percentage; Net profit has achieved the level of 99% of the baseline, at the same time the same indicator calculated for beneficiaries of productive infrastructure (water supply systems and irrigation schemes) have increased the net profit value by 1.73 times or 73 percentage points. The average indicator has been influenced by results obtained by SMEs (beneficiaries of road projects).

139. It is worth to mention that the financial indicators reported by beneficiaries of productive infrastructure have increased comparing to baseline as follows: Total assets have increased by 6.7 times or with 572 percentages;

4 The indicators have been calculated as average per enterprise based on results provided by a sample of 15 SMEs beneficiaries of financed infrastructure projects during 2009-2011. The calculation has been made by comparing the 2012 results to baseline provided by enterprises.

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Equity has increased by 2.17 times or with 117 percentages; Sales income has increased by 2.06 times or with 106 percentages; Gross profit has increased by 1.9 times or with 97.2 percentages; Net profit has increased by 1.73 times or with 73.8 percentages.

140. At the same time the SEMs - beneficiaries of infrastructure projects have created 395 new jobs comparing to pre-financing period. The average wage paid by SMEs beneficiaries of road financed project has increased with 24.5% comparing to pre-financing period, while that paid by SMEs beneficiaries of water supply systems and irrigation schemes has increased with 120% comparing to pre-financing period.

141. The beneficiaries of productive infrastructure (water supply systems and irrigation schemes) have reported an increase of 76.5% of consumed water volume, an increase in worked land with 73.7% and an increase of irrigated fields with 88.2%, while the cost of 1m3 of water has reduced with 40% comparing to pre-financing period. As result, the vegetables production volume has increased with 193.7% and the production of grapes has increased with 194.9%.

142. It is worth to mention that 13 infrastructure projects or 52% from 25 financed during 2009-2011 have reported the extension of constructed infrastructure.

143. The total number of jobs created under SMEs beneficiaries under RFS and MDI components by the end of PY4 represented 75.5% (888) from appraisal target (1 175 new jobs).

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Annex 1: Classification of financed investments by type of activity: (USD ‘000)

Type of activity

Actual Actual Cumulative

Number Amount % Number Amount %

1 Processing Facilities 3 155,0 7,5 4 175,8 3,2

2 Collection/ cold storage /marketing 8 943,3 45,7 32 2 819,0 50,6

3 Viticulture/ Fruit growing 2 129,1 6,3 27 951,3 17,1

4 Vegetables production /greenhouses 0 0,0 0,0 8 305,0 5,5

5 Irrigation systems 0 0,0 0,0 1 25,5 0,5

6 Agriculture machinery 0 0,0 0,0 4 78,8 1,4

7 Agriculture activities / SCAs 323 767,9 37,2 449 1 095,4 19,7

8 Non-agriculture activities / SCAs 25 68,1 3,3 42 122,5 2,2

Total 361 2 063,3 100,0 567 5 573,3 100,0

(USD ‘000)

Type of activity

Actual Actual cumulative

Number Amount Number Amount

total inc.

SCAs total inc.

SCAs total inc.

SCAs total inc.

SCAs

1 Processing Facilities 4 1 157,5 2,6 6 2 175,8 6,0

2 Collection/ cold storage /marketing 23 15 945,8 2,5 48 16 2 819,0 3,9

3 Viticulture/ Pomiculture 16 14 150,3 21,2 53 26 951,3 55,6

4 Vegetables production /greenhouses 41 41 51,8 51,8 77 69 305,0 133,0

5 Irrigation systems 0 0 0,0 0 14 13 25,5 44,6

6 Agriculture machinery 0 0 0,0 0,0 11 7 78,8 11,5

7 Other agriculture activities / SCAs 252 252 323,2 323,2 316 316 1 095,4 474,2

8 Non-agriculture activities / SCAs 25 25 68,1 46,7 42 42 122,5 101,1

Total 361 348 1 696,7 448,0 567 491 5 573,3 829,9

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Annex 2: Classification of financed enterprises by size: (USD ‘000)

Classification according to the Low

Actual Actual Cumulative

Number Amount % of loan

amount Number Amount

% of loan

amount

micro entrepreneurs - SCAs members 348 836,0 40,5% 490 1218 21,9%

micro Number of employees - ≤ 9 pers. Net annual sales - ≤ 240,0 ths.USD

4 344,4 16,7% 39 1792 32,2%

small Number of employees - ≤ 49 pers. Net annual sales - ≤ 2000,0 ths.USD

8 842,8 40,8% 28 1815 32,6%

medium Number of employees - ≤ 249 pers. Net annual sales - ≤ 4000,0 ths.USD

1 40,2 1,9% 7 489 8,8%

large Number of employees - >250 pers. Net annual sales - > 4000,0 ths.USD

0 0,0 0,0% 3 259 4,6%

Total

361 2 063,3 100,0% 567 5 573,3 100%

Annex 3: Classification of financed investments by scope (SMEs) (USD ‘000)

Type

Actual

Number Amount % of loan

amount

Launching of new business 2 269,0 21,9%

Diversification of activities 4 234,7 19,1%

Expanding of existing business 7 723,6 59,0%

Total 13 1 227,3 100,0%

Documents

RURAL FINANCIAL SERVICES AND MARKETING PROGRAMME … · Value Chain Development for Rural Poverty Reduction — aims at the mapping and pro-poor management of competitive commodity