**_Sustainahility._** Information on the total volume of loans in arrears was not available. This analysis attempts to estimate these figures by providing information on the number of groups with loans in arrears as a percent of the number of groups of the number of groups with outstanding loans. Groups with arrears remained a small percent of remaind a smll perent o groups with credits through

**Table 26 P4K** Ar]rears **Rates**

|||**Cale**|**ndar**|**Year**||
|---|---|---|---|---|---|
|___|1991|**1992**|1993|**1994**|**1995**|
|Number of groupsXwitharrears<br>percent of groups with<br>ttdi l'|5.1|4.7|6.2|1o.5<br> <br>|18.7<br> <br>|
|ousanng oans<br>Volume of payments overdue<br>percent ofvolumc ofloans<br>outstandinlga|-|1.4<br>-i|<br>1.6|2.4<br> <br>8.|<br>17.4|

a/ Because BRI does niot write off P4K loans these figures lli overestimnate actual arrears.

1993. However, groups with arrears increased to 10.5 percent of groups with credits in 1994, and 18.7 percent in 1995. However, the above figures will overstate actual arrears rates because BRI does not write off loans in default. Payments in arrears were equal to about 7.4 percent of outstanding credits at the end of 1995. Figures for the first two months of 1996 indicate that arrears were likely be significantly higher that year. Disturbingly, arrears have increased every year since 1992, when groups with arrears accounted for 4.7 percent of total groups and payments in arrears were equal to 1.4 percent of outstanding credits (Table 26). The 1995 payment arrears rate is only slightly higher than that of PHBK. However, PHBK's rate (which also includes loans that are actually in default) has declined every year since fiscal 1993/94. Project data indicate that P4K's cumulative default rate since inception is probably about equal to that of PHBK-approximately 2.5 percent.

P4K's rising arrears rate is of considerable concern to program managers who are looking at ways of addressing the issue. This issue also appears to have contributed to a delay in plans to expand the program to fill-scale in 10 provinces currently participating in a pilot.

P4K is an ambitious program that provides a variety of services to borrower groups in addition to those that relate specifically to financial services. For this report, program expenditures have been allocated between financial services and all other activities. Financial services account for about 69 percent of total program costs.<sup>47</sup> The cost figures presented below are estimates of costs for financial services only. They include costs associated with program management, and with the Ministry of Agriculture's involvement in the project. They also include the implicit cost of the subsidy embodied in the low-interest loan IFAD provided to 13RI. To facilitate comparison with the PHBK program, they do not include BRI's direct costs of undertaking P4K lending activities.

> _47_ Financial services costs were estimated based on program organizers' estimates of the amount of time that management and field staff spent on a variety of tasks. Spending on general program-related overhead that could not be directly allocated was divided between financial services and non-financial services in the same proportion as these activities' shares of total non-overhead expenditures. Specifically, financial services accounted for about 69 percent of non-overhead expenses. Thus, these activities were allocated 69 percent of **total** overhead costs.

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