Evaluation : credit component; Upper Huallaga project, Peru

Special evaluation covers the period 1981-6/84 and is based on document review, field visits and interviews with project, bank, and co-op personnel. Project credit activities, which include both in-kind credit (crops and livestock) and short- and medium-term production credit, have functioned ineffectively or not at all, due to inappropriate lending policies, poor management, institutional weaknesses in the project itself, and lack of experience, particularly in implementing in-kind credit. Moreover, contrary to expectations, small farmer demand for credit has decreased - probably because coca eradication efforts have reduced farmers" income potential and thus increased their reluctance to assume debt. Emphasis in the credit program should be shifted toward financing agribusiness enterprises which can generate employment and increase microeconomic demand for the crops being substituted for coca. Credit should be provided to the Naranjillo Cooperative"s cacao processing plant and possibly to other proposed Naranjillo enterprises (coffee, plantain meal, citrus crops, and perhaps tea processing and/or marketing). BAP should be the lead institution for agribusiness credit, administering funds through BANCOOP and commercial banks (inclusion of the latter will help keep funds in the region). BAP provision of farmer credit should, however, continue to be supported; institution rebuilding efforts in this area should address policy and program issues, resource needs, and coordination with services provided by the National Agrarian University of the Jungle (UNAS), the Ministry of Agriculture, and the National Agrarian Research and Promotion Institute (INIPA). Training should be provided to INIPA agents (who currently lack understanding of BAP operations) to enable them to act as a link between farmers and the bank, and to BAP personnel, to help them translate formal bank procedures into language understandable by farmers. Further recommendations concern completion of land surveys and granting of certificates of land possession, documentation of credit funds, and experimental in-kind loans.