Japanese ODA Loan

Ex-Ante Evaluation
1． ProjectCountry: People's Republic of Bangladesh
Name of the Project: Small and Marginal Sized Farmers Agricultural Productivity
Improvement and Diversification Financing Project
Loan Agreement: June 16, 2014
Loan Amount: 9.930 billion yen
Borrower: The Government of the People’s Republic of Bangladesh
2． Background and Necessity of the Project(1) Current Status and Issues in the Agricultural Development Sector in Bangladesh
Agriculture is a key sector in Bangladesh, accounting for about 17% (2012) of thenation's GDP, and employing about 45% (2012) of the labor force. Arable land
accounts for about half of the nation’s total land area. In recent years, Bangladesh has
achieved 190% (2011) in annual utilization ratio of its cultivated area and an almost
100% (2012) food self-sufficiency ratio, due to initiatives taken to promote theintroduction of high-yield varieties, irrigation, and boro rice cultivation during the dryseason. In order to meet the growing demand amidst the intensive utilization of land
and the decrease of arable land area, it is critical to improve the productivity of arable
land as well as crop diversity, by encouraging introduction of high-yield crops and thecultivation of crops with higher market value. In Bangladesh, small and marginal
farmers account for approximately 80% (2008) of all farmers and about 50% (2008) of
the country’s total crop cultivation, but despite their dominant position, there is unmet
potential for improving productivity of arable lands and the diversification of crops.
This is mainly due to the limited access to finance for purchasing agricultural
machinery and materials, and lack of sophisticated agricultural techniques, making
cultivation of new crops, high-yield crops, or introduction of these machines andmaterials a difficulty.
In response, the Government of Bangladesh have expanded its agricultural
productivity improvement and crop diversification loans under guidance of its central
bank. There is a huge gap (about 347.0 billion taka) between the the national
agricultural financing demand (about 512.0 billion taka as estimated by the central
bank in 2014) and the total supply of agricultural finance (about 166.0 billion taka in2013), the unmet demand acutely significant for the small and marginal farmers. Infact, bank institutions supply 90% of the agricultural finance, which could not be
accessed by the small and marginal farmers due to the requirement of collateral.
Microfinancing Institutions (MFIs) on the other hand have long played a leading role
as a provider of financial commodities in agricultural villages. However, MFIs havefocused on small and complementary loans, targeting households, small commercial

enterprises, or home-based manufacturing, and their mandate has not been focusedon providing financial commodities (with examination periods, financeable amount,and payment methods) that satisfy the agricultural production cycles (planting,harvesting, and cultivation).
(2) Development Policy for the Agricultural Development Sector in Bangladesh andPriority of the Project
As the nation's primary development strategy, the 6th Five-Year Plan
(2011/2012–2015/2016) and the National Agriculture Policy (2009) define theresearch, development, introduction, and promotion of high-yield variety seeds,improvement of farming techniques, increases in frequency of cultivation with theintroduction of irrigation, and cultivation suitable for different soil environment. The
Agriculture and Agricultural Village Financing Policy Program (2012) announced by
the Central Bank of Bangladesh (Bangladesh Bank) identified the tasks of improving
agricultural productivity in collaboration with MFIs. Therefore, this plan is in line withthe program.
(3) Japan and JICA’s Policy and Operations in the Agricultural Development Sector inBangladesh
JICA Country Analytical Work for Bangladesh (April 2013) and the Japan’s Country
Assistance Program for Bangladesh (June 2012) identify "overcoming socialvulnerability" as a priority issue, and "agriculture and rural development" as adevelopment theme. From the perspective of poverty reduction and resolving regional
disparities, the assistance policy for the development theme identifies the following
implementation items: (1) further improvement of agricultural productivity in response
to future population growth and (2) reinforcement of food security throughdiversification and production of products with higher added value. This project is thus
consistent with Japan’s and JICA’s aid policies and analyses. Major assistanceprovided recently to the country is listed below:·Loan assistance projects: The Small Scale Water Resources Development
Project (SSWRDP, 2007), South-Western Bangladesh Rural DevelopmentProject (2010, and Northern Bangladesh Integrated Development Project(2013)·Loan assistance projects: The Project for the Provision of Portable Steel
Bridges on Upazila and Union Roads (I: 2005, II: 2006, and III: 2007) and theProject for Improvement of the Capacity of Public Food Storage in the People's
Republic of Bangladesh (2012)·Technical Cooperation projects: Capacity Development Project for Participatory
Water Resources Management throughIntegrated Rural Development (2012-2017)(4) Other Donors’ Activity
The Asian Development Bank (ADB) has supported funds and agricultural

technologies targeting small and marginal farmers in the country's western parts,
aiming to improve agricultural productivity and diversify crops. The Food andAgriculture Organization of the United Nations (FAO) and the Danish International
Development Assistance (DANIDA) have provided technical support to small andmarginal farmers, including production improvements (mechanization, spread oftechnologies, irrigation development, and equipment and devices), disease and insectcontrol, high-quality seeds, and surface stream water management.
(5) Necessity of the Project
Enhancing MFIs’ ability to provide loans for agricultural activities and supporting thespread of agricultural technologies to small and marginal farmers will significantly
improve agricultural productivity and diversity. The MFIs play an important role infinancing small and marginal farmers. This project aims to improve small and marginal
farmers’ access to financial services through a two-step ODA loan. Therefore, the aimof the project satisfies the development policies of the Government of Bangladesh aswell as the support policies of the Japanese government and JICA. Consequently,
JICA's support for this project is highly necessary and relevant.
3． Project Description(1) Project Objectives
The objective of the Project is to increase agricultural productivity and diversity ofthe small and marginal sized farmers of Bangladesh by financing agricultural loans
and providing agricultural training services to farmers through MicrofinanceInstitutions, thereby contributing to the sound development of agricultural financeand the agricultural sector of Bangladesh.
(2) Project Site/Target Area
Throughout Bangladesh(3) Project Description
1) Agricultural Productivity Improvement and Diversification Financing Project for
Small and Marginal Farmers: Loans are provided to finance the small andmarginal farmers’ activities aimed at contributing to agricultural productivity
and diversification of crops through Participating Microfinancing Institutions(PMFIs). The Bangladesh Bank lends funds to PMIs in taka at an interest rateequivalent to or lower than the official bank rate with a maximum two-year
repayment period. PMFIs then lend funds to small and marginal farmers intaka at an interest rate of 20% or lower, with a repayment period of threemonths to two years (including grace period of one to six months).
2) Consulting services Monitoring related to the screening of PMFIs, guidance inagricultural techniques, and support for project progress.
(4) Total Project Cost
Total Project Cost: 10.805 billion yen (Yen Loan Amount: 9.930 billion yen)(5) Project Implementation Schedule
Planned between June 2014 and December 2019 (total of 67 months) Projectcompletion is defined as completion of provision of the two-step loan.
(6) Project Implementation Structure1) Borrower: The Government of the People’s Republic of Bangladesh
2) Executing Agency: The Bank and Financial Institutions Division, Ministry ofFinance (Note that the actual project is executed by the Bangladesh Bank as
entrusted by the Ministry of Finance.)3) Operation and Maintenance System: The project is executed by theBangladesh Bank as entrusted by the Ministry of Finance.
(7) Environmental and Social Considerations, Poverty Reduction, and Social
Development
1) Environmental and Social Considerationsi.
Category: Cii.
Reason for Categorization: The Project is classified category C inaccordance with JICA Guidelines for Environmental and Social
Considerations (April 2010). There is no significant negativeenvironmental and social impact caused by the Project both during theconstruction and operation phases.
2) Promotion of Poverty Reduction: The project provides agricultural loans at alow interest rate and longer repayment period to small and marginal farmers
while providing guidance in agricultural techniques, thereby contributing topoverty reduction.
3) Promotion of Social Development (e.g. Gender Perspectives, Measures toPrevent Infectious Diseases Including AIDS, Participatory Development,
Consideration for the Handicapped, etc.): MFIs which have been actively
involved in promoting accessibility of women to financial services (more thanhalf of MFI borrowers are women) are selected, thereby enhancing access ofimpoverished women to agricultural financing.
(8) Collaboration with Other Schemes and Donors: N/A(9) Other Important Issues: In order to support agricultural productivity improvements
and crop diversification from the perspectives of policy and institutions, a technicalcooperation is scheduled for implementation via the Department of AgriculturalExtension (DAE).
4． Project Benefits(1) Quantitative benefits
1) Evaluation Indicators (Operation and Effect Indicators)

Indicators (unit)

Baseline

Target (2021)(2014 actual)(two years aftercompletion)

Loan collection ratio (%)

n.a.

98% or higher

Ratio of women borrowers (%)

n.a.

50% or higher

Survey is conducted on*Agricultural gross profit per farming

actual figures from theIncreased by 30% orhousehold (taka/ha/year)

previous year whenmoreproviding sub-loans.
*Per-area crop yields for each main crop
(Kg/ha)*Variety of agricultural products produced
per household (number of varieties/year)

Same as above

Increased by 20% or
moreSame as above

Increased by two varieties

n.a.

200,000 or more

Total agricultural training participants(persons)*The number of borrowing farmers is in the tens of thousands of households. Therefore, samples areused to checking indicators for target farmers.

2) Internal Rate of Return (IRR)
The IRR could not be calculated since sub-projects could not be identified.
(2) Qualitative benefits
Enhancing agricultural finance and developing the agriculture sector.
5． External Risk Factors and Risk Control
Natural disasters including massive floods
6． Lessons Learned from Past Projects(1) Results of Evaluations of Similar Past Projects
In the ex-post evaluation of the Poverty Alleviation Microfinance Project for Sri Lanka,
it was evaluated that, implementation of various social activities in addition toproviding finance, such as educational campaigns, training, and capacity-building(including consultation) are critical to ensuring the efficiency of the project.
(2) Lessons for the Project
Based on the lessons learned above, PMFIs in the Project provide not only to small
and marginal farmers but also agricultural technique training programs that help
improve agricultural productivity and diversify crops.
7． Plans for Future Evaluation(1) Indicators for Future Evaluation:
1) Loan collection ratio (%)2) Ratio of women borrowers (%)3) Agricultural gross profit per farming household (taka/ha/year)

4) Per-area crop yields for each main crop (kg/ha)5) Variety of agricultural products produced per household (number ofvarieties/year)6) Total agricultural training participants (persons)(2) Timing of Next Evaluation: Two years after completion