Impact evaluation of Panama"s rural cooperative development loan

Impact evaluation covers period 11/74-6/81 and is based on survey data and site visits. The project was very successful. A Revolving Loan Fund (RLF) was established to provide credit to RC farmers, and institutional development was promoted by providing RC"s with agronomic technical assistance, management subsidies, training, and other services. For a detailed account of project outputs as well as shortfalls, see the abstract of the attached PES (PD-AAI-683). A survey of 24 of the 46 RC"s benefitting from the project indicated that assets increased by 119%, savings by 96%, profits by 81%, and patronage refunds by 35%. Moreover, rural households were able to capture otherwise unobtainable yield and income opportunities (e.g., fertilizer and insecticide use increased, and traditional farmers were able to undertake small livestock operations). Other significant but unexpected benefits also resulted. The creation of the RLF for exlusive use by RC"s helped reorient Panamanian Government policy away from its prior emphasis on group farms, enabled RC"s to demonstrate their viability, and resulted in RC"s becoming the Agricultural Development Bank"s preferred borrowers. Greater unity and cooperation among credit, consumer, and agricultural RC"s was fostered and in turn lead to the establishment of the Autonomous Cooperative Institute (IPACOOP) and the passage of a National Cooperative Law. However, the project in fact may have been too successful in that it awakened a demand for credit among RC farmers which far exceeds the present supply of loanable funds. With this in mind, it is recommended that in a fixed follow-on project: (1) the RLF be expanded by $6 million; (2) borrowers be required to provide a 20% rather than 10% share capital subscription on loans; (3) the commerical debt of COAGRO (the agricultural RC federation) be refinanced on a matching basis up to $3 million; (4) successful RC"s in each region be provided subsidies to assist smaller, weaker RC"s; and (5) IPACOOP continue to be strengthened in the areas of audit, training, supervision, and support of RC"s.