Since the mid 80s, IFAD’s driving force in The Gambia has been in funding rural micro-finance projects. Linked closely with rural finance, is IFAD’s support to the expansion of agricultural production through technological transfer. Together, they would enhance household food security through income diversification in a country where agriculture accounts for 40% of GDP. In this two-pronged approach, IFAD’s Rural Finance and Community Initiatives Project (RFCIP) supported the already established network of village banks – banks that were owned and managed by the community they served – to include a portfolio of agricultural initiatives and rural finance.

Village banks ensured that villagers had a secure place to keep their savings and ended their dependence on moneylenders. At the outset of the project, there were 37 village bank networks named VISACAs, out of which 32 were fully operational. Building on this network, the project supported further outreach and implemented 126 mini-agricultural projects including the digging of new wells, the construction of cereal banks, sheds, latrines and market stalls, and the establishment of vegetable gardens –targeted at existing village level groups (kafos). Today, 62 VISACAs operate throughout the country with a total membership of about 35,000, 40% of which are women.

Overall, the expansion of the VISACA system has resulted in a growing professionalism in the country’s microfinance sector and the creation of a new microfinance department within the Central Bank. The project’s impact on the agricultural sector, however, was modest, largely because of the scattered nature of its activities and future interventions in The Gambia will require a radical rethink to maximise overall project impact.

Key recommendations arising out of this evaluation include:

 Investment in rural finance and agricultural services need to be tied in The Gambia. Strong project designs must then ensure active follow through to enable synergies to occur. IFAD should also consider other established rural microfinance approaches, especially the group lending approach.

 Self-sufficiency must be a clearly stated objective in the medium term. In achieving sustainability, VISACAs need to restrict lending initiatives to the founding village, focus on fewer but realistic objectives, and be given incentives to mobilise savings, administer loans and balance their books without outside support.

 Supervision missions of rural finance projects must include a microfinance expert. In the case of RFCIP, seven of the nine missions did not. A further weakness of the supervision process, which was carried out directly by IFAD as part of the Direct Supervision Pilot Programme, was the rapid turnover in CPMs (four in five years).

Microfinance and agriculture in the same boat?

The integration of microfinance and agricultural initiatives was the core design feature of the project, but this feature did not materialize in practice. Only half-a-dozen project sites out of 130 enjoyed project support for the village banks or VISACAs as well as a menu of agricultural interventions. Project design also envisaged that VISACAs would mobilise savings and supply the credit while agricultural activities would create new opportunities and provide new skills. However, targeting for both components was imprecise.

In practice, new VISACAs expanded throughout the country but agricultural activities only aimed at two provinces. The objective of nationwide coverage by VISACAs within six years was, in fact, unrealistic and this design feature concealed a host of problems. In addition, VISACAs systematically failed to reach the poorest households in any given village as collateral was required. However, while on one hand it discouraged access to financial services by the neediest, on the other, the networks did not bring about a credible sanctioning system to control delinquency. Collateral-free group guarantee of credits would have mitigated these problems.

Project design was also at fault in restricting the rural finance approach to singular lending while the group lending approach in The Gambia has already seen some success. The project could have added this option into its approach. Agricultural initiatives in areas such as poultry farming, vegetable gardens, cassava multiplication and findo cultivation, need to ensure that the entire value chain is addressed, especially to find ways of overcoming problems of processing and marketing of the produce, as well as establishing and spreading current marketing practices.

Sink or Swim!

The project has not succeeded in instilling the urgent need for self-sufficiency in the VISACAs with these networks acting as if funding by IFAD and NGO service providers would continue indefinitely. In many instances in the project, even simple day-to-day operations are still carried out by the NGO facilitators. In addition, loan delinquency is on the increase, due mainly to the expansion of the customer base beyond its natural limits. In general the evaluation found the VISACAs were marred by both weak governance and no system for incentives. No compensation was given to the VISACA cashier or to the management committee, neither was remuneration offered to NGO facilitators based on the performance of the portfolio.

Further reflection on the choice of the partner agencies in the country, in view of the specific skills and experience required for rural finance sustainability, should also be considered. The project should look to the example of the Credit Union network overseen by the National Association of Cooperative Credit Unions, where poorly performing unions are disaffiliated.

Direct Supervision at the Helm

As one of the 15 projects for which IFAD has undertaken supervision directly, the RFCIP attracts particular attention with regard to the quality and effectiveness of its supervision. Despite regular missions and prompt reports, the overall impression is of a supervision process which missed important shortcomings in project design and subsequent implementation weaknesses. Successive supervision missions failed to spot that a gradual shift in emphasis was taking place in terms of the main focus of the project.

The rural finance component, designed as the central axis of the project and accounting for around two-thirds of the budget, was progressively sidelined during the latter years of the project, with the Farmer Partnership Fund – a grant-based development fund – becoming the main focus of activities. However, supervision reports show that VISACAS are still treated as being at the heart of the project. These weaknesses appear to have been overlooked by the supervision missions, for two reasons. Firstly, the excessive turnover in Country Programme Managers and their sporadic participation in the field, and secondly, the failure to recruit a microfinance expert for all but the last two supervision missions added to the project’s shortcomings.

Further information
The interim evaluation, The Gambia, Rural Finance and Community Initiatives Project, Report #1643-ET, April 2005, Office of Evaluation, IFAD, Via del Serafico 107, Rome 00124, Italy.