Abstract
Final evaluation of a matching grant to ADRA International to develop a replicable micro-finance lending program, based on the village banking model, for small-scale, female entrepreneurs in Peru. The evaluation covers the period 10/96-3/00 vs. a PACD of 9/00. Progress has generally been satisfactory. The project has established an effective village banking program in urban Cuzco and peri-urban Lima. It has also developed a financial management system and a comprehensive loan tracking and management system both in both headquarters and ADRA/Peru. The Global Electronic Monitoring System (GEMS), an important expectation, is not fully in place, though a number of GEMS elements have been developed in ADRA's Central Office (ADRA/CO). Effective operational and training systems have been developed by both ADRA/CO and ADRA/Peru. ADRA/CO's Economic Development Office helped ADRA/Peru develop and annually revise an operations manual for the village bank program. The Start-Up Manual in ADRA/CO pulls together training materials used in Peru and capable of further use in launching new programs. The Micro- finance Business Planning Guide contains the basic planning and assessment tools for use by ADRA country offices in evaluating the feasibility of micro-finance programs. Finally, the Microfin Projection Model has been adapted from the World Bank (CGAP) model and is used currently in strategic planning in Peru. It can be extended to other country contexts on demand. The 3-year target of 55% operational sustainability was surpassed by 10/99, when ADRA reported 56.5% coverage of its operating costs. Since then, however, economic conditions in Peru have worsened, resulting in the closing of many banks; as of 1/00, the level of operational sustainability is 44.4%. The aggravation of the recession in Peru is attested to by other village-banking programs and by the USAID Mission. The program's institutional sustainability was to be ensured through the creation of an autonomous financial entity, originally assumed to be an EDPYME (Entity for Small and Micro Enterprises), the only form of micro-credit institution officially chartered by the Peruvian government. While an application for EDPYME status was made in 1998 and accepted in 1999, ADRA/Peru has not yet decided on the structure it wishes to adopt. The Peruvian model has been replicated by many ADRA country offices, though not through ADRA/CO partnerships with these offices. ADRA/CO is seeking to extend its direct involvement in new program development through partnerships with other ADRA recipient countries. On the other hand, through the ADRA Professional Leadership Institute (APLI), ADRA/CO has extended network training in microenterprise finance and development and institutional business planning worldwide through regional workshops in early 1999 in Costa Rica, Kenya, Peru, and Thailand; the course is also offered at Andrews University in the United States. In addition to other state-of-art materials, the basic planning and assessment tools developed under Matching Grant IV are used in this course. Progress in establishing the independent financial entity at ADRA headquarters seems to have been stalled early on in the grant. Capacity-building activities have led to the creation of a small but dynamic unit in ADRA/CO that is seen as a harbinger of wider organizational change. The bottom-line rigor required by micro-finance programs is clearly recognized by other sectors. Although it is too early to see major changes in ADRA/CO, systems thinking and the concept of self-sufficiency are now common. In creating a village banking program in Peru, ADRA/CO has had to develop training programs; adopt operational systems; design appropriate tools for financial management, loan tracking, and portfolio projection; and generate a process for strategic planning. Most of these tools can be used or replicated in other ADRA countries. ADRA/Peru's improved capacity to deliver a cost-effective, micro-credit program is best evaluated by examining the service delivery program itself. This is why attention must be paid during evaluation to field operations, the loan tracking system, strategic planning process and outcomes, training materials, and personnel quality.