Private development bank

Mid-term evaluation is based on document review and interviews with TDB and project staff. It covers the period 1984-87. TDB has met, and, in many cases, exceeded basic project goals and assumptions. TDB is extending credit to a wide variety of private enterprises which are earning foreign exchange and creating new employment. Over $70 million in foreign exchange earnings and over 2,000 new jobs are projected over the life of existing TDB loans. TDB is also a limited but effective force in the local market, since it finances new businesses that would not be eligible for credit from traditional sources. However, TDB performance projections are compromised by a number of factors, including (1) the high internal cost of extending credit; (2) the high local cost of funds rates, and (3) the need for TDB to further define its market niche and actively pursue credits and other financial services. While TDB is in acceptable financial condition for the short term, it has a cost structure that is entirely too high for the revenue it takes in. If the supply of low-cost (5%) A.I.D. funds were interrupted, TDB would show weak financial performance in the long term with low return for shareholders. Significant changes are necessary in its cost and/or revenue structures to ensure financial viability over the long term. In addition, TDB"s level of past due loans and the inherent risk involved in development credit show that, despite a professional staff and thorough accounting procedures, additional staff are required to ensure proper monitoring of disbursed loans and investments. Four recommendations are made. (1) TDB should seek out all opportunities to increase revenues and decrease costs as a percentage of average earning assets. (2) Two staff members should be hired for the Project Analysis and Loan Administration Group. (3) TDB should try to find in-house solutions to hurdles arising from A.I.D. regulations or standardized operational methods. (4) USAID/J should review its own goals to resolve the apparent contradiction in the desire for institutions like TDB to engender "development" while at the same time becoming viable, self-sustaining organizations without donor assistance. The Mission comments that many of the recommendations have already been put into practice, and that TDB has begun to make loans to less risky enterprises in order to cut appraisal costs. TDB has also introduced lease financing and a fee-generating TA service.