Small farmer coffee improvement

The evaluation covered the period 1/84-1/86. Most objectives will be accomplished by the project"s 1986 end. With the loan discounting system through the Central Bank working well and three private and one public bank participating, credit is flowing to farmers ahead of target (although at a considerably slower pace in 1985, possibly due to funding limits), and farmers are accepting the technical recommendations of the extension service, which has received considerable formal and informal training (although of varied quality, due to the lack of someone in direct command of training). The completely renovated coffee plots are generally in excellent condition, and production is generally much higher than anticipated. Some farmers, however, are producing below par and are expected to cause problems when the collection of loan principal begins in early 1986. A recent study shows that the return to farmer investments for complete renovation, for which the majority of loans have been made (loans for partial renovation and for establishing coffee nurseries are also available), ranges from 16% to 72%, for an average of 33%. The Honduran Coffee Institute (IHCAFE) has administered the project in a stable manner and now needs to integrate the project into its operations, e.g., by clearly defining lines of authority, improving information flow, and dealing with the persistent problem of the timely availability of seed. The TA team has been significantly strengthened since the last evaluation, but links with regional institutions, especially with PROMECAFE, are not yet well defined. Major lessons learned are: (1) the importance of supplementing credit with technical recommendations; (2) the necessity of continually improving intra- and extra-institutional communication and coordination; and (3-4) the feasibility of incorporating private financial institutions into a small farm credit system and of using paratechnicians (recently added to the extension service) for direct farmer contact. Action decisions are to expand the project and in doing so implement the evaluation"s recommendations, with all of which the Mission concurs. IHCAFE will request funding for internal management and financial audits. These audits (which will likely be conducted by IQC and host country contract mechanisms, respectively) would address some recommendations which fall outside project implementation, but are still important to project success. The evaluation"s findings regarding project beneficiaries will be studied in detail in order to provide more complete information on this subject, which is currently being addressed by two long-term contractors.