Mid-term evaluation of the feasibility studies cost-sharing program

Midterm evaluation covers the period 9/82-5/85 and is based on document review, site visits, and interviews with key personnel and participants in Pakistan, Costa Rica, and Malawi, where over half the approved studies were conducted. The program is not ready to be replicated and needs further development on a pilot scale. On the positive side, the implementation structure and procedures were adequate for the program's size. Over 300 requests were answered on a timely basis, over 75 files were opened, correspondence was exchanged in 42 cases, and of the 17 studies approved, 16 were carried out. However, permanent financing has not taken place in any of the 16 approved projects and, of these, 7 are known to have been abandoned by the sponsors. Further, administration of the program from Washington hindered communication with LDC entrepreneurs and opened the door for consultant-driven studies. Eligibility criteria were not always clear to applicants nor to the Mission personnel handling private sector initiatives. Communications with the field were uncertain and character and management verification were difficult. Finally, the program operated in relative isolation from local financial institutions. No completed feasibility study was taken to a local bank by the Bureau for Private Enterprise (PRE). Prior commitments by financial institutions were usually weak or missing altogether. Several conclusions were drawn. (1) The program is not serving LDC entrepreneurs and should be redesigned to stress small, incremental studies in 2-3 countries with active private sectors. (2) The program is inconsistent with established business practices and so does not meet the needs of private sector clients. It should be administered by intermediate credit institutions (ICI's) in each country. Loan origination from PRE's Office of Investments should not be a prime program objective. (3) There is a real demand for feasibility study and investment brokerage assistance, but it is not being met. USAID's should play a direct role in designing feasibility study programs tailored to country conditions, and should help participating ICI's expand investment banking activities. Program experience shows that: (1) a Washington-based administrative structure is inappropriate for a program targeting LDC entrepreneurs; and (2) the program's design was more suited to the investment style of donors and other governmental organizations than the needs of the private sector. In the redesign of this and similar programs, the information needs of and procedures used in the private sector need to be more carefully considered.