Final evaluation of the small farmers' organization strengthening project

Final evaluation covers progress since the interim evaluation (in 1989) through 5/92, about a year and a half before the PACD. The Financial Development Fund (FDF), created as the project's implementing agency, proved an effective vehicle for dealing with small farmer organizations. However, the FDF's legal and organizational status continue to be problematic. It is recommended that ownership of the FDF continue to be vested completely with the Honduran government, but also, to avoid politicization, that FDF be removed from the trusteeship of BANADESA and be established as an independent trust managed by a private institution. It is also recommended that: (1) FDF charge market interest rates and fees for prerparing financial stabilization plans; (2) emphasize management improvement; and (3) undertake changes to ensure its sustainability, including assuming the roles now played by the TA team and focusing on cost-recovery and sound financial management. Activities with agricultural cooperatives and their second level organizations were slow at first, but accelerated during the last year. Efforts to improve management capabilities were especially successful, largely because project assistance was linked to the co-ops' acceptance of specific reforms. The greatest weakness has been in analysis of co-ops as part of the agribusiness system. Nonetheless, the strategy in the coffee sector has worked much better, not only because of the project's systematic treatment of the sector, but also because of its focus on an area (quality improvement) where co-ops have a comparative advantage. The follow-on project should continue focusing on management development, and also focus resources on economically competitive co-ops -- even to the point of letting unsuccessful ones fail. The strategy of developing UNIOCOOP as a wholesaler of services should be more fully developed. The credit union (CU) component correctly identified and significantly helped redress the key constraints facing CU's -- poor management skills and financial policies and reluctance to invest in fixed assets. However, the project lacks the entrepreneurial perspective to help CU's participate and succeed in an open and competitive world and thus ensure their long-term survival. Once all 42 CU's have been evaluated for their participation, the financial stabilization program should be closed with great fanfare to make clear that the bailout phase is over. The follow-on project should retain the major CU activities virtually unchanged, but should eliminate operating support for FACACH, the implementing organization for this component, and thus make FACACH look to its affiliates for its long-term survival; profitability criteria should guide all relationships between FACACH and participating CU's. The replacement of DIFOCOOP (the Direccion de Fomento Cooperativo) by IHDECOOP (Instituto Hondureno de Cooperativas) in 1988 was initially a positive event, as IHDECOOP had greater autonomy and more secure funding. However, while it retains a competent staff, IHDECOOP's situation has deteriorated sharply in the past 2 years. Even at its best, its professional and financial resources allowed it to audit only about 10% of the co-ops under its jurisdiction, and it could not even fill all the requests for audits from co-ops willing to pay; in addition, its role as a supporter of cooperative development undermined its will to enforce its own audit recommendations. IHDECOOP should end its monopoly on external audits of co-ops and reorient itself to an oversight function, while ensuring that the results of such audits be made available to any interested parties, especially members and creditors. In the follow-on project, the FDF should provide training for IHDECOOP auditors, while also providing matching grants to cooperatives to purchase external auditing services.