DFC EVALUATION IN SELECTED CARIBBEAN LDCS

(DFC) which finance economic development projects. This special evaluation covers the period through 2/79 and is based on a contracted evaluator's visits to selected DFC's and inspection of their records. The author concluded that the weakness of the DFC's as loan guarantors and administrators was clearly demonstrated. Two factors were held responsible: the host government's perception of the DFC's role; and the DFC's perception of their clients. Regarding the first factor, most governments lacked agricultural and industrial development plans and subsequently regarded the DFC's as being a substitute, not a supplement for such planning. Also, since DFC's generally have access to foreign funding sources, host governments attempted to gain control of these institutions in order to have access to their resources. This action was taken by some governments without first establishing clear policy objectives. DFC's, in essence, became the political and personnel instruments of host government leaders. Since the DFC's dealt with foreign funds, the absence of a local financial stake in DFC operations facilitated the misuse of funds by the governments. The officials responsible for administrating the funds had no compulsion to apply rigorous lending criteria to the projects. The author recommends that distinct policies and operational guidelines should be drawn up by the host governments, and that the cooperation of the latter in enforcing these giudelines must be secured. Operationally, the DFC's should recognize first, that applicants with the greatest probabilities of success are those with previous success at the technological level anticipated in the new project; and second, that new projects should be developed slowly so that the technical process can be absorbed by the participants. The author notes that the DFC's may need assistance for loan appraisals, preferably from governments and international lenders.