Need to improve the design and implementation of agricultural credit programs in the Sahel

Audit report consists of a review of seven project audits issued between 2/81 and 11/83. In virtually every case, the program has been ineffective. Project Paper descriptions of how the credit systems would work and their assessments of host government capability proved unrealistic; as a result, millions of A.I.D. dollars - provided without TA - were wasted. Further, the credit programs lacked financial viability, due in part to a 50% repayment default rate, the sale of commodities below cost, and the often inconsistent handling of interest rates. There was no evidence that downpayment requirements were enforced, and some projects heavily subsidized the sale of commodities, further hampering credit program success. Accounting was poor in all projects, largely due to a lack of skills, and none met Foreign Assistance Act (FAA) requirements. Inadequate controls were maintained over deposits and expenditures from the special credit fund accounts and over commodity sales and receipts. Lack of recordkeeping and problems in transmitting accounting information from the 20-50 decentralized project locations to the central location made accountability nonexistent. Also, inadequate internal controls hampered credit fund and commodity management. A.I.D. oversight also proved inadequate and Project Officers failed to perform their functions properly. Despite problems of understaffing and physical distance, someone must have visited the programs, and no one with a modicum of business sense could have done so without seeing the problems. Especially disturbing is the fact that failing Phase I programs were carried over into Phase II. Further, A.I.D."s failure to foresee the need for financial TA led to lack of an onsite management entity capable of reporting back on program implementation or of providing day-to-day guidance. A.I.D. has now suspended all funding to the credit programs until FAA certification requirements are fulfilled. It is recommended that the Assistant Administrator for Africa develop guidance for addressing the above problems.