Interim evaluation of the financial sector development project (no. 940-0014)

Interim evaluation covers the period 1/89-9/90. Progress in the four project components -- strategic planning, TA, R&D, and dissemination of information -- has been mixed. the strategic planning component, a comprehensive diagnostic framework for conducting financial sector assessments has been developed, and assessments have been conducted in 9 of 10 targeted countries. Use of the entire diagnostic framework has proven difficult and time consuming, however, and the contractor has been allowed to use sections of the framework to conduct partial strategic assessments. This is consonant with the interests of most USAID Missions, which are more interested in addressing specific financial issues than conducting broad strategic assessments. So far, follow-up TA has been limited to one country. TA services have been the most widely used and well received of the project"s components. While this has not resulted from the strategic planning activities as planned, the shortfall has been more than made up for by widespread demand from Missions and A.I.D./W Bureaus and offices. In all, 29 short-term TA interventions have been provided in such areas as stock and bond markets, bank regulation and supervision, credit guarantees, training for the financial sector, and credit subsidies. Some areas covered by the assistance, notably privatization, go beyond the scope of the present project, however, and should be left to other A.I.D. projects. The R&D component has not met expectations. The objective of publishing four journal-quality monographs per year has not been achieved; the contract has been amended to require annual production of eight reports of high technical quality relating to project interventions. The main problem seems to be the inability of A.I.D./W and the contractor/subcontractor to agree on a research agenda, partially because of limited A.I.D./W and Mission interest in financing research. Nonetheless, three research projects have been completed and one is underway. One of the completed studies served as the basis for two additional TA study projects. Information dissemination could be improved. While a semi-annual project newsletter has been prepared as required, its usefulness to Missions is questionable. Conferences have been conducted as planned, but their high cost has not been justified by its contribution to project objectives. Finally, contacts with other donors have primarily been limited to the field. Overall, while much quality work has been done, the project has not attained the coherence and effectiveness envisaged for it. There are several reasons for this. The use of buy-ins, while increasing Mission interest in the project, has also limited the influence of A.I.D./W (PRE) and the contractor on the selection of project activities. Also, promotion of project services by A.I.D./W and the contractor has been limited. A principal recommendation is that PRE reallocate the funds budgeted for R&D and information dissemination into a coherent dissemination, education, and promotion effort targeted at 15-20 countries.