LOAN COMPLETION REPORT OF LOAN #527-L-054 FOR SUPERVISED AGRICULTURAL CREDIT-EARTHQUAKE ZONE

THIS USAID LOAN COMPLETION REPORT COVERS THE ENTIRE PROJECT FROM 7/25/72 TO 10/31/74. THE EVALUATION WAS BASED ON DISCUSSIONS WITH AGRICULTURAL DEVELOPMENT BANK (AGBANK) OFFICIALS, VISITS TO SEVERAL SUBPROJECTS, SELECTIVE REVIEW OF SUB-BORROWER CARDS AND FILES, AND REVIEW OF AGBANK DOCUMENTS. THE LOAN FUNDS WERE TO PROVIDE MEDIUM-TERM CREDITS AND TECHNICAL ASSISTANCE TO SMALL AND MEDIUM FARMERS, EITHER FARMING INDIVIDUAL PLOTS OR ORGANIZED INTO ASSOCIATIVE ENTERPRISES, IN ORDER TO REPLACE CAPITAL LOSSES AND RESTORE THE DISASTER-VICTIMIZED PRODUCTION CAPACITY OF THESE UNITS. IN THIS RESPECT, THE LOAN HAS BEEN SUCCESSFUL. MOST SUB-LENDING OCCURRED IN THE COASTAL AREAS OF AGRARIAN ZONE III (TRUJILLO, CHIMBOTE AND CASMA) AND AGRARIAN ZONE IV (HUACHO, HUARAL AND LIMA). SPECIFIC SUB-LOAN ACTIVITIES INCLUDED: HOUSING, BRIDGE, AND RIVER DEFENSE (RE)CONSTRUCTION; PLANTING PEACH TREES AND GRAPE VINES; AND PURCHASING FARM MACHINERY, FERTILIZERS, INSECTICIDES, AND CATTLE. ALL $5 MILLION IN LOAN FUNDS WERE DISBURSED. THE MAJOR PROBLEMS ENCOUNTERED INCLUDED VERY LATE RESOLUTION OF A DUAL ADMINISTRATION PROBLEM INVOLVING THE MINISTRY OF AGRICULTURE AND THE AGBANK, RESULTING IN HIGH DEFAULT RATES. MANY PARTICIPATING SMALL FARMERS RECEIVED LITTLE OR NO ADVICE FROM EXTENSION AGENTS BECAUSE OF MANPOWER SHORTAGES AND TRANSPORTATION DEFICIENCIES. RAPID CHANGES IN THE LAND TENURE SYSTEM BROUGHT ABOUT BY THE AGRARIAN REFORM OFTEN PRECLUDED GRANTING OF CREDIT, WITH THE MOST RECURRENT INSTANCES INVOLVING THE LACK OF LEGAL STATUS OF THE APPLICANT. FINALLY, AGBANK SUB-LOAN CONTROL AND AUDITING PROCEDURES AND PRACTICES WERE OFTEN DEFICIENT. A DETAILED REPORT HAS BEEN SUBMITTED TO THE AGBANK OUTLINING SPECIFIC MEASURES TO CORRECT THESE DEFICIENCIES. AN ESTIMATED 5,500 FARM FAMILIES DIRECTLY BENEFITTED FROM THE CREDIT PROGRAM, SIGNIFICANTLY EXCEEDING INITIAL PROJECTIONS OF 3,500. THIS WAS MADE POSSIBLE BY THE GREATER RELIANCE ON GROUP LENDING THROUGH ASSOCIATIVE ENTERPRISES THAN PLANNED.