Small business II project, Honduras : midterm evaluation of the ASEPADE [Asesores para el Desarrollo] component

The evaluation covers the period 1988-2/92. Although ASEPADE has nearly met targets in loans made and jobs created, the institution's management deficiencies have impeded the development of the organizational structure and human resources needed to fulfill its obligations. There is no real separation of power between the Board and management, and authority is exercised in a highly personalized manner. Efforts to professionalize management through the appointment of qualified top management have failed, owing to the leadership's reluctance to permit independent decisionmaking. Financial and administrative procedures, while established on paper, are not carried out in practice. Follow-up and collection procedures have also been poor. As a result, portfolio performance is substandard, with loan delinquency rates exceeding 60% in one region (Choluteca) and probably in excess of 40% in total. Training programs have concentrated on administrative procedures rather than production and have been of limited effectiveness. With considerable difficulty, the project has installed a computerized management information system that can identify problems in the portfolio, but the system is rarely used. TA, although well designed, has been of limited impact, since ASEPADE directors are unwilling to accept necessary changes. As of 6/91, funds to ASEPADE have been suspended. It is recommended that no more funds be disbursed unless ASEPADE shows conclusive willingness to modify its organizational setup and practices.