Completion Report

Project Number: 33167 Loan Number: 1785-SAM(SF) December 2009

Samoa: Small Business Development Project

CURRENCY EQUIVALENTS

Currency Unit – tala (ST)

At Appraisal At Project Completion (31 October 2000) (30 September 2008)

ST1.00 = $0.267 $0.373 $1.00 = ST3.742 ST2.680

ABBREVIATIONS

ADB Asian Development Bank ANZ Australia and New Zealand Banking Group BDS business development service CBS Central Bank of Samoa DBS Development Bank of Samoa DSL Data Services Limited EA executing agency IA implementing agency IFC International Finance Corporation MCIL Ministry of Commerce, Industry and Labour METI Matuaileoo Environmental Trust Incorporated MFF microfinance facility MJCA MOF

Ministry of Justice and Courts Administration Ministry of Finance

MOU memorandum of understanding MSE MWCSD

micro- and small enterprise Ministry of Women, Community and Social Development

NBS National Bank of Samoa NGO nongovernment organization NPF National Provident Fund NZAID New Zealand Agency for International Development PCR project completion report PMU project management unit PO participating organization PPER project performance evaluation report PPSA Personal Property and Securities Act PSC project steering committee RRP report and recommendation of the President SBDF Small Business Development Fund SBEC Small Business Enterprises Centre SBLGS Small Business Loans Guarantee Scheme SCB Samoa Commercial Bank TA TCR

technical assistance technical assistance completion report

VCF venture capital fund WIBDI Women in Business Development Incorporated WIBF Women in Business Foundation

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 30 June. FY

before a calendar year denotes the year in which the fiscal year ends, e.g., FY2000 ends on 30 June 2000.

(ii) In this report, "$" refers to US dollars unless otherwise stated.

Vice-President C. L. Greenwood, Jr., Operations 2 Director General S. Hafeez Rahman, Pacific Department (PARD) Director R. Keith Leonard, South Pacific Subregional Office, PARD Team leader M. Melei, Country Specialist, PARD Team member V. Narayan, Assistant Project Analyst, PARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA i MAP v I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 7 D. Disbursements 8 E. Project Schedule 8 F. Implementation Arrangements 9 G. Conditions and Covenants 10 H. Related Technical Assistance 10 I. Consultant Recruitment and Procurement 11 J. Performance of Consultants, Contractors, and Suppliers 11 K. Performance of the Borrower and the Executing Agency 12 L. Performance of the Asian Development Bank 12

III. EVALUATION OF PERFORMANCE 12

A. Relevance 12 B. Effectiveness in Achieving Outcome 13 C. Efficiency in Achieving Outcome and Outputs 13 D. Preliminary Assessment of Sustainability 13 E. Sociological and other impacts 14

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 15

A. Overall Assessment 15 B. Lessons 16 C. Recommendations 17

APPENDIXES 1. Project Framework 18 2. Project Outputs 23 3. Detailed Project Costs: Appraisal Vs Actual 36 4. Disbursements: Appraisal Vs Actual 37 5. Project Implementation Schedule 40 6. Status of Compliance with Loan Covenants 46 7. Overall Assessment 50

BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Samoa 1785-SAM(SF) Small Business Development Project Government of Samoa Ministry of Finance SDR 2.697 million (equivalent to US$3.5 million at the time of appraisal) 1128

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

31 July 2000 10 August 2000 12 October 2000 13 October 2000 21 November 2000 6 March 2001 4 June 2001 8 June 2001 1 31 August 2006 30 September 2008 3 1.5 % 32 years 8 years Not applicable

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9. Disbursements a. Dates Initial Disbursement

24 July 2002

Final Disbursement

14 May 2009

Time Interval

82 months

Effective Date

8 June 2001

Original Closing Date

31 August 2006

Time Interval

62 months

b. Amount (US$) Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount Canceled

Net Amount Available

Amount

Disbursed

Undisbursed

Balance

01 Loan Guarantee Scheme

1,100,000 2,832,134 495,93

2

2,336,202 2,336,202 0

02 Small Business Development Fund

800,000 99,010 1,668

97,342 97,342 0

03 Pilot Microfinance Facility

300,000 389,673 (2,312)

391,985 391,985 0

4A Consultants-PMU Office

361,049 373,879 177,98

3

195,896 195,896 0

4B Consultants-Others (MIS XPRTS, Auditors)

300,000 86,206 47,963

38,243 38,243 0

05 Equipment and Vehicle

145,000

145,173 10,544

134,629 134,629 0

06 Interest 99,416

138,156 69,083

69,073 69,073 0

07 Unallocated 394,535

0

Total 3,500,000 4,064,230 800

,860

3,263,370 3,263,370 0

10. Local Costs (Financed) - Amount ($) $330,524 - Percent of Local Costs 10.13% - Percent of Total Cost 6.8%

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C. Project Data

1. Project Cost (US$) Cost Appraisal Estimate Actual

Foreign Exchange Cost 2,603,528 2,932,846 Local Currency Cost 1,860,472 1,865,024 Total 4,464,000 4,797,870

2. Financing Plan (US$) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 964,000 1,534,500 ADB Financed 3,400,584 3,194,297 Other External Financing 0 0 Total 4,364,584 4,728,797 IDC Costs Borrower Financed 0 0 ADB Financed 99,416 69,073 Other External Financing 0 0 Total 99,416 69,073

ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component (US$)

Component Appraisal Estimate Actual Loan Guarantee Scheme 1,500,000 3,160,900 Small Business Development Fund 1,000,000 128,962 Pilot Microfinance Facility 301,000 397,495 Consultants-PMU Office 564,600 653,611 Consultants-Others (MIS XPRTS, Auditors) 348,100 52,422 Equipment and Vehicle 150,000 187,026 Interest 99,416 69,073 Unallocated 500,884 Total 4,464,000 4,649,488 The RRP included $400,000 equity investment sourced from OCR for the proposed Venture Capital Fund (VCF). The VCF was cancelled in February 2007.

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4. Project Schedule

Item Appraisal Estimate Actual Date of Contract with Consultants July 2001 March 2002 Completion of Engineering Designs Civil Works Contract Date of Award Completion of Work Equipment and Supplies Dates First Procurement Last Procurement Completion of Equipment Installation Start of Operations Completion of Tests and Commissioning Beginning of Start-Up Other Milestones 5. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 30 November 2000 to 31 August 2009 Satisfactory Satisfactory D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Fact-Finding 15-20 May 2000 2 12 d, g Appraisal 31 Jul – 8 Aug 2000 5 35 b, c, g Inception 10–19 Apr 2002 1 10 g Review 04–15 Nov 2002 1 12 g Review 03–09 Jun 2003 1 7 g Review 10–16 Nov 2003 1 7 g Country Portfolio Review 25 Apr–01 May 2006 2 7 b, g Review 05–08 Sep 2006 1 4 g Country Portfolio Review 12–20 Feb 2007 2 9 b, g Review 19–23 Feb 2007 1 5 g Review 25–29 Jun 2007 1 5 g Review 01–04 Apr 2008 1 4 g Review 28 Jul–04 Aug 2008 1 8 g Project Completion Review 13 – 24 Jul 2009 1 10 g a a - engineer, b - financial analyst, c - counsel, d - economist, e - procurement consultant or specialist, f - control

officer, g - programs officer.

Inte

rna

tion

al D

ate

line

P A C I F I C O C E A N

Fagaloa Bay

S o u t h P a c i f i c O c e a n

N o r t h P a c i f i c O c e a n

C o r a l S e a

PhilippineSea

Falealupo

Sataua

Falelima

Safotu Fagamalo

SafuneSamalaeulu

Puapua

Tuasivi

Faga

Salelologa

Palauli

SatupaiteaTaga

Salailua

Satapuala

Leulumoega

Mulifanua

Manono-uta

Faleolo Airport

Malua FaleulaVaiusu

LauliiFusi

Solosolo

Falefa

Saoluafata

Lepa

Lotofaga

SalaniPoutasi

Uafato

Lalomanu

Tiavea

Siumu

Lefaga

Falelatai

APIA

Asau

SOLOMONISLANDS

FEDERATED STATES OFMICRONESIA

K I R I B A T IPAPUA

NEW GUINEA

NAURU

MARSHALL ISLANDS

VANUATU

INDONESIA

A U S T R A L I A

REPUBLICOF THE

FIJIISLANDS

TUVALU

TONGA

SAMOACOOK

ISLANDS

PACIFIC REGION

REPUBLICOF PALAU

Manono

Apolima

U P O L U I S L A N D

S A V A I I I S L A N D

102550

100

200300

150

National Capital

Microfinance Facility Clients

Village

International Airport

Road

River

International Boundary

Boundaries are not necessarily authoritative.

Small Business LoansGuarantee Scheme

SAMOA

SMALL BUSINESSDEVELOPMENT PROJECT

(as completed)

0 5 10 15

Kilometers

N

09

-3111

HR 171 30'Wo

171 30'Wo

172 40'Wo

172 40'Wo

14 00'So14 00'So

13 30'So13 30'So

0o0o

170 00'Wo

170 00'Wo

150 00'Eo

150 00'Eo

20 00'So20 00'So

20 00'No20 00'No

I. PROJECT DESCRIPTION

1. Small and micro business enterprises in the informal sector underpin economic and social development in the rural villages and urban areas of Samoa, providing most of the cash income earned by more vulnerable families. Since 1996, the Government of the Independent State of Samoa (the Government) had undertaken an extensive process of economic reform and liberalization to allow the private sector to become the main engine of growth and wanted the benefits from such growth to reach the villages and more vulnerable families. It recognized that there were barriers to the growth of micro- and small enterprises (MSEs) and sought assistance from the Asian Development Bank (ADB) to address these barriers. A small-scale technical assistance project identified the barriers and proposed a project to support development of the MSE sector.1 The goal of the Small Business Development Project (the Project)2 was to generate income and employment in the MSE sector by improving access to credit and business development services and improving the business environment by addressing outstanding policy issues. The Project comprised four components and was approved together with an equity investment in a Samoa Venture Capital Fund (VCF). The project framework is in Appendix 1. 2. Expansion of the Small Business Loans Guarantee Scheme (SBLGS). This component supported an existing and almost fully committed scheme initiated by the New Zealand Government through the New Zealand Agency for International Development (NZAID) under which individual guarantees to entrepreneurs are underwritten by funds held in trust by the Central Bank of Samoa (CBS) and interest earned is reinvested in the fund or used to cover any defaults. The Project expanded the scheme to provide ‘second tier’ credit guarantees for up to five years for existing businesses needing to borrow larger amounts (up to ST50,000) to move into a second phase of expansion. The SBLGS is promoted and managed by the Small Business Enterprises Centre (SBEC) and is available both to its clients and those of other participating organizations (POs). The output expected from this component by year 5 of the Project was that guarantees totaling ST3.9 million would be issued to assist 180 start-up enterprises, 400 tier one enterprises (defined as borrowing between ST5,000 and ST20,000) and 12 second-tier enterprises (borrowing in excess of ST20,000), resulting in the creation of 730 new jobs. 3. Establishment of a pilot microfinance scheme. This component established a revolving fund to finance projects prepared by the Women in Business Foundation3 and other POs. The fund was to be established in the CBS and managed for at least two years by the Development Bank of Samoa (DBS). DBS was to train and support selected POs to enable them to manage the microfinance portfolio themselves at the conclusion of the two-year pilot period. The criteria for the POs included the requirement that they operated a savings mobilization scheme. The outputs expected from this component by year 5 of the Project were that: (i) at least 300 loans averaging ST3,000 would be issued, leading to the creation of 300 SMEs with 900 beneficiaries; (ii) at least 250 members of POs would have regular savings averaging ST50; and (iii) at least two POs would receive funds from DBS for on-lending. 1 ADB. 1999. Technical Assistance to Samoa for Small Business Development Project. Manila. 2 ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and

Technical Assistance Grant for the Small Business Development Project and a Proposed Equity Investment in a Venture Capital Fund. Manila.

3 The Women in Business Foundation was renamed as Women in Business Development Incorporated (WIBDI) soon after the Project began and this name and acronym is used throughout the report.

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4. Enhancement of Business Advisory Services. This component established a Small Business Development Fund (SBDF) to provide a secure source of funding for business development services (BDS) provided by nongovernmental organizations (NGOs) to meet the needs of MSE operators. The fund was to be held by the Government and invested, with the capital replenished annually throughout the Project to fund the activities of SBEC, Women in Business Development Incorporated (WIBDI) and other accredited POs to enhance the prospects of achieving the project goal. The funding needs were to be based on medium-term work plans from accredited POs. The providers were expected to recover a portion of their costs directly from clients. The SBDF was also to be used by SBEC to contract accredited providers to provide training and business advice to MSE entrepreneurs. The outputs expected were that: (i) SBEC would provide loan monitoring and business support on a quarterly basis to at least 180 new start-up businesses and 404 existing businesses; (ii) SBEC would train an average of 200 persons annually; and (iii) WIBDI would provide loan monitoring and business support on a quarterly basis to at least 50 new clients annually. 5. Development of Policy and Infrastructure. This component comprised the evaluation, review and adoption of specific policies in support of the MSE sector, and the creation of a credit reference facility (more commonly known as a credit bureau). The outputs expected were that: (i) a new company law would be promulgated; (ii) a registry of chattels would be updated, facilitating the use of chattels as collateral; (iii) court procedures for debt recovery would be streamlined making it more attractive for banks to offer loans; (iv) a new credit bureau would be established to facilitate credit checks; and (v) a working group on customary land issues would be established and legislative changes would be promulgated to improve economic use of customary land. 6. Establishment of the Samoa Venture Capital Fund. This additional equity investment comprised a proposal (which was still to be finalized at the time of loan approval) to establish a VCF to fill the gap in Samoa for undercapitalized businesses seeking equity and quasi-equity venture capital funding of less than $100,000. The facility was to be 100 percent equity-financed, with shareholders envisaged to be the International Finance Corporation (IFC), ADB, DBS, National Provident Fund (NPF) and Australia and New Zealand Banking Group (ANZ). The VCF was expected to offer loans to entrepreneurs as its primary form of support rather than equity, although it was also expected to be able to use equity and other quasi-equity instruments. A fund management company was to be established to operate the VCF under a management contract and to be funded for the first three years by aid agencies. The output expected by year 5 of the Project was that the VCF would be established and functioning.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

7. The expected impact and outcome of the Project were highly relevant both at appraisal and at completion. The Government wanted to support the MSE sector to broaden access to the benefits of its economic reforms. The 2000-2001 Statement of Economic Strategy called for assistance and training for small enterprise operators in urban and rural areas and for improvement in the business environment to benefit all business operators.4 ADB’s poverty

4 Government of Samoa. 2000 – 2001 Statement of Economic Strategy.

3

reduction strategy5 highlighted the role of enterprise development in poverty reduction, while its assistance to Samoa emphasized private sector-led growth. The Project remains highly relevant at completion in addressing one of Samoa’s national goals in the Strategy for the Development of Samoa 2008-2012,6 namely private sector-led economic growth and employment creation. 8. The Project design was partly relevant, as it was ambitious in its scope by seeking to address all the key impediments in the MSE sector and other impediments affecting all business operators in Samoa. It was pioneering in that it sought to deal with issues that had not been tackled previously in Samoa and to use implementing agencies (IAs) with little prior experience with projects of this scale. Inevitably, its design was complex and, initially, it proved difficult to implement. Given the constraints and the need for cost-effectiveness, the overall design concept was sound. Perhaps as a result of its pilot nature, some of the design detail was not provided in the RRP and it was left to the Executing Agency (EA) and the Project Management Unit (PMU) to devise solutions during implementation. The complexity and pioneering nature of the Project was recognized at appraisal, but the judgment in ADB was that the potential benefits in terms of outcomes were worth the risk associated with a project of this nature. The formulation process was shaped by the preceding project preparatory TA project, which focused the Project on areas that are now recognized to have been of great relevance to the MSE sector and to business development overall. Although the formulation process entailed some engagement with stakeholders including the selected IAs, this appears to have failed to generate full ownership across all IAs. To this extent, the project preparatory TA may have under-estimated the risks associated with the project design. B. Project Outputs

1. Small Business Loans Guarantee Scheme

9. It was envisaged that 592 guarantees totaling ST3.9 million would be issued by SBEC by the end of year 5, the original closing date for the Project. At the end of FY2006, which was year 5 of the Project, 421 guarantees had been issued with a value of ST4.4 million. At completion in 2008, as a result of several reallocations of funds into this component, a total of ST11.4 million had been extended in guarantees to 853 enterprises, covering loans totaling ST15.8 million. A total of 504 of the guarantees (58%) were issued to new businesses, exceeding the target of 180 or 30% of the overall target total. The Project exceeded its targets for the number of guarantees issued, the percentage share going to new businesses, and the overall value, but the outputs were delayed. At completion, 18% of guarantees (by value) had been cleared and there were 624 current guarantees in force with a value of ST8.8 million. A total of 69 guarantees (8% of the number issued) had been drawn down and used when the loans were foreclosed and the value of these guarantees represented 5.5% of the total value of guarantees issued. At completion, 38% of the loans by number and 30% by value were in arrears, and the arrears represented 7.5% of the current loan balances. The recent trend in arrears is worsening, with a 50% increase in the number of loans in arrears in the nine months since the Project was completed. 10. The guarantees issued by the Project covered up to 80% of the loan value and were supported by term deposits that were invested in the participating banks. The original term deposits of ST6.4 million were used to support the 853 guarantees for ST11.4 million issued

5 ADB 1999. Fighting Poverty in Asia and the Pacific: The Poverty Reduction Strategy of the Asian Development

Bank. Manila. 6 Government of Samoa, 2008. Strategy for the Development of Samoa: 2008 – 2012.

4

over the life of the Project. The value of the term deposits was ST7.0 million at the closing date and ST8.7 million at 30 June 2009. In addition to these term deposits, there is a savings account which is used to provide immediate access to funds without breaking term deposits in the event of foreclosures. The current balance in the savings account was ST153,188 in July 2009. The total funds available in support of the guarantees are consequently ST8.8 million, which is equivalent to 100.6% of the current value of guarantees in place. 11. An estimated 1,763 new jobs were created under this component against a target of 682. Women occupied about 39% of the new full-time jobs created and about 44% of the total 3,079 jobs provided. The number of new full-time jobs created per enterprise ranged from 1 to 5.9 with an average of 2.1. An independent assessment of the impact of SBLGS loans reported an average employment of 2.52 operators (family members predominantly) and 3.29 employees for each SBEC client. The overall impact of the Project, with 853 clients assisted, would be to provide employment for 2,150 family members and 2,806 employees. The annual wages paid to employees would be about ST22 million. The net impact of the loan was estimated to be ST1.75 for every ST1.00 lent.7 Using this ratio, the overall net benefit from the ST15.8 million lent to clients under the Project is estimated to be ST27.7 million. 12. At the time of the PCR mission, the Ministry of Finance (MOF), the Government, and the participating banks were strongly supportive of the continuation of the SBLGS. SBEC commissioned a review of the legal structure of the SBLGS at the end of the Project,8 and this legal review recommended changes to the memorandum of understanding (MOU) governing all guarantees. The MOF is examining this and other recommendations in the legal review. In addition, the Government has indicated its support for improvements in the governance and management of SBEC as recommended in the Nimmo-Bell report. The Government has committed to provide at least ST150,000 per year for the next two years, and NZAID is currently finalizing its support for SBEC over the next two years in line with the recommendations in the Nimmo-Bell report. Appendix 2 provides details of all the Project’s outputs.

2. The Microfinance Facility

13. The Project provided $300,000 to establish a revolving fund in CBS, which was to be managed by DBS as a microfinance facility (MFF). Disbursements into the MFF were to be via an imprest account and governed by a memorandum of agreement amongst MOF, CBS and DBS. During implementation, it was agreed that all the funds would be transferred to DBS under a subsidiary loan agreement between CBS and DBS, which was prepared in mid-2003. This loan was converted into a revolving fund in DBS at project completion. Although outputs were delayed substantially, the Project exceeded its target (minimum of 250 loans) by providing 681 microfinance loans with an aggregate value of ST875,550. The average value of the loans was ST1,286 and the majority (44%) of the loans were used to support agriculture, with others supporting manufacturing, retail, handicrafts, flea markets, footstalls and fishing. Almost 93% of these loans were issued in the last year of the Project when the Ministry of Women, Community and Social Development (MWCSD) became involved, introducing 635 clients. Under the MWCSD, the loans were provided to small groups associated with the women’s committees that were themselves associated with the traditional village council. To date, there have been no defaults, no loans are in arrears and, consequently, there have been no foreclosures of these

7 Review of the Samoan Small Business Enterprises Center (SBEC). Final Report, December 2008. Nimmo-Bell and Company Ltd. 8 Schuster, Ray. 2008. Legal Review of the Small Business Loan Guarantee Scheme.

5

loans. By 31 March 2009, the MWCSD component of the MFF was operating in 27 villages (14 on Upolu and 13 on Savaii) servicing 143 groups with 783 members. 14. Earlier in the Project, WIBDI had introduced a total of 46 clients, whose loans totaled ST201,900. These loans averaged ST4,389 and were used to support projects with clearly established markets such as vegetable gardens, bakeries, small shops, handicrafts and particularly fine mats. All loan recipients received prior training in business management and often some technical training. By 31 March 2009, 34 of the WIBDI clients were still repaying their loans with a current loan balance of ST83,596, and 16 of the 34 were in arrears. All recipients of microfinance loans have saving schemes in operation. 15. It was envisaged that at least two organizations would be accredited to on lend microfinance in addition to WIBDI, but this was not achieved. An environmental NGO known as Matuaileoo Environmental Trust Incorporated (METI) was accredited under the Project, but did not provide loans to its clients. Lending from the MFF was, therefore, restricted to WIBDI and DBS, which became accredited in June 2006. This component exceeded all its targets other than the number of participating organizations operating. However, this apparently satisfactory outcome was only achieved as a result of the performance of the new participating organization, MWCSD, in the last year of the Project. The sustainability of this operation has yet to be demonstrated.

3. Small Business Development Fund

16. Under the Project, ADB was to provide an initial investment of $160,000 and the Government $40,000 to establish the SBDF, with this sum to be invested to provide income to purchase support services from participating BDS providers. It was intended that ADB and the Government would provide a further $200,000 per year to replenish the capital in the fund. In total, four BDS providers (DBS, SBEC, WIBDI and METI) were accredited and received support during the Project. Instead of establishing a fund, the original allocation was placed in an imprest account and the PMU made payments for selected business development services provided by SBEC and WIBDI. Under these restrictive arrangements, the total withdrawals from the SBDF were $97,342, or about 12% of the expected allocation of $800,000. SBEC operated out of one office in Apia on Upolu and one in Salelologa to service clients on Savaii. During the last year of the Project, SBEC relocated its office in Apia to provide more room for training and better facilities, which has contributed to a higher overhead costs for SBEC. SBEC provided 6,684 follow-up advisory visits to its clients, which exceeded its targets. The high demand for support to clients placed considerable stress on SBEC’s staff of four and resulted in the need to restrict processing of new applications for several periods during implementation. SBEC and others are concerned that the heavy workload has restricted the time available for each visit and compromised the quality of the support provided. In addition to the advisory service visits, SBEC provided training to 2,178 clients through 116 courses during the Project, and WIBDI and METI also provided training. In total, the Project provided support for 305 business training courses involving 5,079 existing or intending small business operators.

4. Policy Development

17. The Project was intended to help create a better environment for small businesses by addressing five key areas that were regarded as major obstacles to small business development. Most of the inputs into this component were provided under the associated

6

technical assistance (TA) project.9 Under the Project itself, funds were used to support these initiatives with workshops, study tours and short-term consultancies. 18. The Project supported efforts by the Government to update the existing company law. This support included funding for (i) a fact-finding mission in 2006 to investigate options for the establishment of a register of companies, and (ii) consultative workshops with stakeholders as part of the final preparation of the draft that was presented to Parliament. As a result of these and other initiatives to improve the legislation, there have been various amendments to the Company Law Act 2001 and the amended legislation is now fully operational. 19. The Project sought to establish a register of security interests in motor vehicles, since this was the most common form of chattel security likely to be accepted by the banks. Work started on this activity under the associated capacity building TA, but, subsequently, it was decided that all chattels should be registered and that a comprehensive act was needed to cover all personal property and securities and to establish a register of all personal property. A working group tasked with the development of a Personal Property and Securities Act (PPSA) prepared much of the draft legislation, and responsibility for finalization of the PPSA was passed to Ministry of Commerce, Industry and Labour (MCIL) in 2006. The Government plans to establish the PPSA, as indicated by its inclusion in the latest Strategy for the Development of Samoa,10 and MCIL advised that they hoped to complete the work by the end of 2009. ADB will continue to support the completion of the PPSA under the Private Sector Development Initiative program. 20. The Project design framework included an output relating to enforcement of security in response to a recommendation in the project preparatory TA to review the laws and procedures relating to debt recovery and dispute resolution. Under the associated capacity building TA, the legal specialist developed recommendations for improvement of the procedures in 2005, but was unable to complete consultations with stakeholders. At the end of the Project, a local legal expert was engaged to update the report and to finalize consultations with the judiciary and the Ministry of Justice and Courts Administration (MJCA). The project steering committee (PSC) endorsed his report and recommendations, and proposed that a working group be established by June 2009 to finalize outstanding issues. In July 2009, the MJCA reported that action had been taken to improve debt recovery by streamlining court procedures, reassigning responsibility for some tasks from judges to court administrators and by enabling small claims to be determined in a lower court. It is expected that these changes will substantially improve debt recovery procedures and provide lenders with more confidence in assisting small business operators. 21. The RRP (para. 83) envisaged that the Project would establish a database system for a credit reference facility (a credit bureau) and that a credit bureau would be set up in the private sector. The IA for this activity was to be the credit bureau itself, representing the interested commercial banks (RRP para. 101). A consultant under the capacity building TA found that the facility could be commercially viable as a stand-alone company, and a local consulting firm recruited in August 2003 confirmed its likely financial viability. This activity appeared to have been successfully completed when, in 2005, the company Data Services Limited was launched to operate as a credit bureau. However, Baycorp NZ, which was to provide data hosting services, withdrew from the scheme, as did some of the investors, and the

9 ADB. 2000. Technical Assistance to Samoa for Capacity Building of Financial and Business Advisory Intermediaries Project. Manila. (TA3549-SAM approved for $500,000 on 31 October). 10 Government of Samoa, May 2008. Strategy for the Development of Samoa 2008–2012.

7

parties decided not to proceed. Although there is still no credit bureau operating in Samoa, CBS advised that the Government is considering options to re-instate a credit bureau using a regional facility. 22. The Project also supported the Government’s efforts to make it easier to lease customary land. The consultants under the capacity building TA submitted a report on the first phase of this work in January 2006 with an associated action plan. Cabinet appointed a high level task force to further this initiative and ADB provided a follow-on TA project to support the task force.11 The PMU served as the secretariat to the task force and the Project also supported a study tour and various stakeholder consultations to assist in the finalization of the recommendations to Cabinet. The taskforce report recommends a combination of legal and administrative changes designed to facilitate the use of customary land for economic development. The Government has made it clear that it intends to proceed with the recommended changes and ADB is considering providing further support for this initiative under a new TA project currently being processed for approval in 2009.

5. The Samoa Venture Capital Fund (VCF)

23. The VCF was established after a considerable delay in 2005 when the first payment of $0.8 million was made to the VCF by shareholders. As a result of extensive publicity, there was a great deal of interest in the VCF among local business operators. A total of 51 applications were received, but 40 of these were referred to SBEC since they were relatively small. Of the remaining 11 inquiries, 10 were rejected and one passed through the due diligence process but was subsequently rejected by the fund manager. The fund and the fund management company were terminated when the shareholders decided not to proceed with the VCF in February 2007. C. Project Costs

24. At completion, the Project is expected to cost about $4.65 million against $4.46 million estimated at appraisal, a slight cost increase of four percent largely caused by the extension of the Project from five to seven years. At appraisal, ADB financing was estimated at $3.5 million equivalent (78% of the total cost). At completion, ADB financing is estimated at $3.26 million equivalent or 67% of the total, necessitating a partial cancellation of $795,030. The Government financing at appraisal was estimated at $964,000 equivalent or 22% of total project cost. At completion, Government financing is estimated at $1.53 million equivalent.12 The low utilization of ADB financing, as well as the excess Government financing, was due to (i) the low utilization of the SBDF, the PMU and Other Consultants allocations, (ii) full financing by the Government of the new contract of the project manager following a renewal because of the project extensions, (iii) full financing by the Government of costs associated with the Customary Land Task Force, including the comprehensive public consultations as well as overseas study tours,13 and (iv) completion of the majority of the policy component activities under the capacity building TA. A number of reallocations were made from underutilized components, principally from the SBDF to the SBLGS to cater for the increased demand. Details of the project costs are presented in Appendix 3. 11 ADB. 2005. Technical Assistance to Samoa for Promoting Economic Use of Customary Land. Manila. (TA4712-

SAM approved for $300,000 on 22 December). 12 Provisional counterpart financing figures were provided to the mission by the Aid and Debt Management Division of

the Ministry of Finance. 13 The Customary Land Taskforce was established under TA4712-SAM, the follow-on TA to the work on customary

land reforms which started under the Project.

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D. Disbursements

25. The delayed start to the Project and subsequent slow implementation were reflected in disbursement delays, as indicated in Appendix 4. By end-2005 (Year 5 of the Project), total disbursements for the Project were only 21% of the appraisal estimate. Efforts were made to address the slow disbursement by reallocating loan proceeds and by seeking to find alternative POs for the MFF component. At project completion, the total disbursements of $3,263,370 represented 93% of the appraisal estimate. The disbursement schedule in the RRP was unrealistic given the pioneering nature of the Project. At the start of the Project, there were irregular withdrawal applications from the imprest account, owing largely to the delayed implementation, which meant that it took considerable time to reach the required withdrawal threshold. However, in the latter part of the project, because of increased demand for the SBLGS, the Government requested an increase in the imprest account ceiling from $331,500 to $500,000. The small scale of the Project with no large contracts also meant there was little scope to improve disbursements. Had the SBDF been implemented as planned with an annual allocation into an investment fund, the disbursement performance would have substantially improved. E. Project Schedule

26. The Project was substantially completed by 30 September 2008 with a total delay of about 31 months.14 The start of the Project was delayed about nine months as a result of the complex design and difficulties that the EA and the IAs experienced in understanding and managing the components and dealing with the numerous stakeholders. The lack of draft MOUs between the parties led to delays while these were drafted by the TA consultants. 15 The appointment of the project manager was delayed, and the PMU was finally established in April 2002, 10 months after effectiveness. The SBLGS commenced soon afterwards with strong demand and expectations, and the first guarantee was extended by SBEC in July 2002. Thereafter, the SBLGS operated largely to schedule apart from periods where SBEC stopped accepting new applications in order to focus its support on existing clients. 27. The MFF component remained behind schedule for the entire Project. There was a delay of 24 months from effectiveness while the subsidiary loan agreement with DBS was finalized. Subsequently, WIBDI was reluctant to extend loans until they were certain that clients were fully trained and that markets had been secured for the products. WIBDI found that it was over-extended and so the Project provided a project officer to assist in March 2003. The first MFF loans were not issued until early 2004 and MFF implementation continued at a very slow pace, improving only marginally after METI and DBS became accredited as participating organizations. This situation remained almost to the end of the Project, but in April 2008 MWCSD started operating as a PO and there was a dramatic upsurge in loans granted. 28. Implementation of the SBDF remained behind schedule for the duration of the Project. Although the POs started using the SBDF, the conditions imposed on the fund by the PMU were highly restrictive and the uptake was low. Consequently, the funding allocated to the SBDF was reallocated to other components. The schedule for implementation of activities under the policy component was also delayed, and most policy initiatives required further follow-up work, which was only completed at the end of the Project. The delays led to three extensions of the Project’s

14 The original estimated completion date was February 28, 2006. 15 MOUs were required for the SBDF, the SBLGS and the MFF involving MOF, CBS, WIBDI, DBS and the

commercial banks participating in the SBLGS.

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closing date in an effort to complete planned activities. The loan account was closed on 30 June 2009, nine months after the Project's physical completion and three years after the original loan closing date. The delay in closing the account resulted from delays in the liquidation of the imprest account and the finalization of disbursements. The project implementation schedule is presented as Appendix 5. F. Implementation Arrangements

29. The implementation arrangements for the Project generally followed those proposed at appraisal, with the exception of the SBDF and the subsidiary loan for the MFF. The Executing Agency was the Treasury Department, later re-named the Ministry of Finance (MOF). The Chief Executive Officer (CEO) of MOF was the chair of the Project Steering Committee (PSC), which comprised high level representatives of all the key ministries and agencies. The PSC generally operated effectively throughout the Project but with some exceptions. It reportedly became less effective after it was enlarged, as its broadened agenda was not relevant to all members. Also, during the latter part of the Project, some meetings were delayed owing to travel and other commitments of the Chair. Although a subcommittee of the PSC was to have been established to oversee the SBDF, this subcommittee appears not to have operated and the oversight of the SBDF was left to the PMU. The PMU was largely responsible for the collection, collation and analysis of the Project’s performance monitoring data and for reporting both to the PSC and to ADB. This workload necessitated the recruitment of an additional project assistant for the PMU, which was treated as a minor change in scope when approved in July 2002. 30. The IA for the MFF was DBS, as envisaged at appraisal. The Women in Business Foundation, later renamed as Women in Business Development Incorporated (WIBDI), was appointed as the initial PO. Soon after WIBDI began operations, it was recognized that it did not have the capacity to cope with the additional workload, and ADB agreed to support a project officer as a further minor change in scope in December 2002. Despite this additional support, WIBDI was reluctant to use the MFF at the rate expected, and the DBS and subsequently METI were accredited as POs. DBS did advance the MFF, introducing a number of clients, but METI was not effective in this capacity. In April 2008, during the last six months of the Project, the Ministry of Women, Community and Social Development (MWCSD) became involved in the provision of microfinance and WIBDI largely stopped operating in this field. 31. SBEC was the IA for the SBLGS and the participating organizations were the commercial banks (ANZ, Westpac, National Bank of Samoa and later Samoa Commercial Bank) and DBS. The only PO accredited to provide business advice, monitoring and training to SBLGS participants was SBEC. Two other POs, WIBDI and later, METI, provided training to their own clients. Throughout the project, the SBLGS experienced high demand, and hence, a number of reallocations were made from unallocated and other categories to cater for this. 32. Implementation of the policy component was largely driven by the PSC and PMU, rather than by the Department of Trade Commerce and Industry (later merged with MCIL) as envisaged at appraisal. At appraisal, the IA for the work on the chattel registry and the related Personal Properties and Securities legislation was to be the Justice Department, which was later renamed as the Ministry of Justice and Courts Administration (MJCA). In fact, this activity became the responsibility of MCIL since the companies division of MJCA was transferred to MCIL and linked with the work on the finalization of the company law and company register. The IA for the credit bureau was to be the commercial entity established to operate the facility.16

16 Loan Agreement Schedule 6, para 14.

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Although a company was formed (para. 21), it was subsequently disbanded, and the PMU and the consultants served as the IA for this activity. Activities associated with the economic use of customary land were largely driven by the taskforce established by the Cabinet and supported by the PMU. The policy initiatives related to debt recovery were not clearly documented at appraisal, and the lack of a designated IA for this policy initiative made it difficult to finalize this element and to put in place the required policy changes. 33. The VCF was to be established as a two-tiered structure comprising the fund itself and a fund management company. After considerable delays, both these entities were established and operated briefly, but not as envisaged at appraisal. An initial allocation of $800,000 was made by the shareholders to the VCF in February 2005. The fund management company (Pacific Capital Venture Partners) was to have included staff seconded from the DBS and the National Provident Fund, but this did not take place. The fund and the fund management company were terminated when the shareholders decided not to proceed with the VCF. 34. Overall, the implementation arrangements for the Project were complex and presented major challenges to all the agencies involved. While they eventually proved adequate to generate most of the Project’s intended outputs, their complexity and the lack of clearly defined operating arrangements meant that the PMU had to play a major and ongoing role in ensuring the cooperation and effective participation of the many IAs. It seems likely that the under-utilization of the SBDF contributed to the capacity constraints experienced by SBEC throughout the Project and these constraints remain at completion. Similarly, the failure to transfer responsibilities for ongoing monitoring of the Project’s future achievements to other agencies will jeopardize the prospects for effective evaluation of the Project. G. Conditions and Covenants

35. Project implementation was delayed in part because there were no templates for memoranda of understanding and in part because the participation of the Secretary of Justice in the national election delayed receipt of legal opinion on the Project. The covenants included in the loan agreement were relevant and adequate, although the covenant dealing with customary land (LA, Schedule 6, Para. 17 (ii)) was possibly too prescriptive in requiring that a pilot scheme be implemented in a designated area. The majority of the covenants were fully complied with during implementation. Compliance was delayed in the case of audited accounts, which were submitted late each year. Compliance with the covenant relating to company law was delayed about six years. The covenants relating to the establishment of security over personal property and reform of land law are still being addressed. The covenant requiring the establishment of an agency to manage the credit reference bureau was initially complied with, but is no longer being complied with since the agency has been disbanded (para 21). The covenant requiring POs to develop and submit fully costed medium-term work plans was partially complied with in that the PMU developed its own guidelines for reimbursements from the SBDF (para. 40). The requirement that the PMU develop an operating project performance monitoring system and transfer this to another agency (DTCI) was only partially complied with in that the project database is no longer operational. Appendix 6 provides details of compliance with covenants. H. Related Technical Assistance

36. A capacity building TA was approved together with the Project to build the capacity of financial and business advisory intermediaries. The TA aimed to support the Project by strengthening the capacities of the key POs for the Project's credit components. The TA also supported ongoing efforts to improve the legal and regulatory environment for the private sector.

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The Technical Assistance Completion Report (TCR)17 rated the TA as partly successful. It noted that the TA inputs were provided satisfactorily; however, because of ongoing capacity issues in the POs, particularly SBEC, there were continuing concerns over the quality of SBEC’s portfolio management and a growing number of nonperforming loans. The TCR also noted that a number of the policy component activities are still to be completed; however, the TA has been successful in initiating actions that, when completed, will significantly improve the business environment in Samoa. I. Consultant Recruitment and Procurement

37. The loan provided funds to engage a project manager and a systems and information specialist.18 The project manager was to be appointed for the duration of the Project, which was expected to be five years. The project manager’s initial contract was intended to end on the original completion date for the Project, which was February 2006. Project funds were utilized to meet the costs of this initial contract, but when the Project was extended the project manager’s contract was renegotiated, and the Government met the costs of this extension from its own budget for the remainder of the Project. This appears to have been an oversight on the part of the Government as these costs were eligible for payment under the loan. 38. The Project provided for a systems and information specialist for 12 months intermittently over three years to: (i) develop a client database for SBEC and WIBDI; (ii) establish an updated chattels registry; (iii) establish a central credit reference facility; and (iv) design and implement a project monitoring database. A local company was contracted to provide support for the development of the project monitoring database, but the activities related to the chattels registry and the credit reference facility were addressed by the capacity building TA. Although considerable effort was made to establish a project monitoring database, the system in place in July 2009 was no longer functional and contained little data. In addition to these planned technical assistance inputs, the Project also engaged local consultants to finalize the work on debt recovery and to review the legal status of the SBLGS (para. 12). 39. All procurement under the Project was carried out by the PMU in accordance with ADB’s Guidelines for Procurement and no significant problems were encountered. Recruitment and engagement of consultants was in accordance with ADB’s Guidelines on the Use of Consultants. The Government did not seek ADB approval for the extension of the contract for the project manager; as a result, the cost of this extension was met by the Government and not funded using loan proceeds (para. 24). There was no evident shortcoming in the contract extension procedure but rather it was an oversight by the Government not to have sought reimbursement of this significant cost. J. Performance of Consultants, Contractors, and Suppliers

40. The performance of the project manager was satisfactory and generally in accordance with the terms of reference. He was judged to have been particularly effective in supporting the consultants under the capacity building TA and in providing support for both the PSC and the customary land taskforce. His work in relation to project monitoring appears to have been less effective in that (i) no project baseline survey was conducted, and (ii) the project monitoring database was found to be incomplete and no longer in use at the time of the PCR mission. The 17 ADB. 2009. Technical Assistance Completion Report on Capacity Building of Financial and Business Advisory

Intermediaries in Samoa. Manila. 18 Para. 105 of the RRP refers to these two consultants and a small business development expert, but the terms of

reference for consulting services (Appendix 7) refer only to the project manager and the systems specialist.

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project manager assisted the POs in developing their capacities and, where appropriate, noted shortcomings in their reporting and performance in his quarterly reports. His administration of the SBDF was based on guidelines that he had developed and which had been approved by the PSC and ADB. In retrospect, these guidelines appear to have been more restrictive than was intended at appraisal. K. Performance of the Borrower and the Executing Agency

41. The borrower and the EA generally performed satisfactorily in meeting their responsibilities under the Project. The delay in initiating the Project was partly due to slow establishment of the PMU by the EA, but the complexity of the Project was also a contributing factor. The PSC was strongly supported by the EA and operated effectively throughout the Project. Although some disbursement delays were caused by MOF directly funding some eligible expenses itself before using the imprest account, these delays did not influence the rate of implementation of the Project. The borrower made appropriate use of loan funds with two exceptions. First, the SBDF was underutilized and was not invested as planned to create a secure source of revenue to support business development service providers. This situation seems to have arisen because of a misunderstanding between ADB and the borrower, particularly the PMU, on the intended use of the fund. Second, the borrower financed much of the cost of the PMU itself rather than using loan proceeds as intended. At appraisal, it was recognized that a PMU was needed to deal with the day-to-day management of the Project given the existing demands on the EA, and this assessment proved accurate. The project manager and staff of the PMU became the major beneficiaries of much of the capacity building under the associated TA, and when the PMU was disbanded at project completion, this institutional capacity was dispersed. As EA for most of the current development projects in Samoa, the MOF is now a capable agency with a heavy workload. It will be important to ensure that it maintains the capacity to monitor the impact of the Project so that the results can be used to guide future support for the MSE sector. SBEC management and staff also benefited from capacity building under the associated TA, particularly in relation to business advisory and training services, but it is widely recognized that more capacity development is required. Overall, the performance of the borrower and EA is rated satisfactory. L. Performance of the Asian Development Bank

42. Responsibility for supervision of the Project over its life was shared across three staff members and three regional offices, but this does not appear to have caused significant difficulties or inconsistencies. The Project received adequate supervision throughout and issues were dealt with quickly and effectively. Some of the early delays were associated with a lack of clarity in the implementation arrangements, but this was largely the result of the design phase. Better management of the handover from project design to implementation may have avoided some of the issues associated with the MOUs and utilization of the SBDF. Overall, the performance of ADB is rated satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

43. Overall, the Project is rated relevant. The Project is judged highly relevant in terms of the Project’s alignment with both Government’s and ADB’s objectives both at appraisal and at completion. At the time of appraisal and at completion, the Government was seeking to broaden the impact of its economic reforms so that the benefits would be more evenly distributed

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geographically to rural areas and demographically to more vulnerable families. The focus on loan guarantees and microfinance was likely to assist in this regard. It was also seeking to provide a supportive environment for the private sector generally, and the efforts to address long-standing policy issues were likely to help bring this about. Similarly, the Project was and is now relevant and appropriate to ADB’s strategy for Samoa with its combined emphasis on private sector support and poverty alleviation. In terms of the extent to which the Project formulation was based on a sound assessment of capacity and of the likely constraints to the achievement of outcomes, the Project is judged to be relevant. In terms of the appropriateness of the design and the adequacy of the inputs, the Project is judged to be partly relevant. B. Effectiveness in Achieving Outcome

44. Overall, the Project is rated less effective. The SBLGS is rated effective since it met or exceeded its targets. It cannot be judged highly effective at this stage since about 30% of the loans (by value) are in arrears and about 6% have been foreclosed. The MFF is judged to have been effective because it has exceeded its targets, although this was almost entirely in the last year of the Project. This makes it difficult to assess the likely longer term effectiveness of the microfinance loans. The remaining two components are judged to have been less effective. The SBDF has been under-utilized while SBEC, WIBDI and METI have struggled to build the capacity to ensure their longer term sustainability. Whilst the business advisory support and training targets set under this component have been exceeded, this was largely the result of the unexpectedly large demand for the SBLGS. A recent review of SBEC reported (and the mission can corroborate) the general concern among the participating banks on the quality of the business advisory services provided by SBEC. In view of these concerns, this component is rated as less effective, particularly since the failure to establish the SBDF means that there is no secure funding to assist SBEC and other BDS providers in improving their capacities. Finally, the policy development component is judged to be less effective since it has not fully achieved its expected outcomes. While it has initiated promising work in all areas, apart from the company law and customary land, other policy matters await further action and support. C. Efficiency in Achieving Outcome and Outputs

45. The Project is judged to be less efficient based on an assessment of the efficiency of the processes used in implementing the Project. These processes were not efficient, as indicated by the delays, underutilization of some of the loan categories such as the SBDF, communication difficulties among key agencies including with ADB, and slow disbursement of the loan proceeds. No economic analysis of the whole project was carried out at appraisal and none has been attempted at project completion. An analysis of the SBLGS carried out as part of a review of SBEC did, however, indicate a favorable benefit cost ratio for that component of the Project (para. 11). D. Preliminary Assessment of Sustainability

46. Overall, the sustainability of the Project is judged to be less likely. The sustainability of the SBLGS is judged to be likely based on the strong demand for the scheme and the fact that SBEC is likely to continue to operate (para. 12). Each of the participating banks indicated their interest in continuing the scheme provided the present shortcomings in the MOU and SBEC monitoring are addressed. The sustainability of the MFF is judged to be less likely. This is based on the concern expressed by many local observers that the borrowers may not be receiving sufficient training and follow-up support to ensure that the loans are used to generate income. There are further doubts concerning saturation of markets and the lack of income earning

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opportunities at the village level, but these cannot be assessed at this stage. Partly offsetting these concerns, it is clear that there is strong demand for microfinance, and the recent performance of MWCSD seems to have demonstrated that it is able to effectively support microfinance projects. The sustainability of the SBDF is unlikely since the Project has ended and the fund was never established. Nonetheless, the business advisory and training services will be continued, but these will have to be financed by contributions from the Government, which will require an ongoing commitment that may be difficult to sustain when there is pressure on the budget. The sustainability of the policy work is judged to be less likely since it depends on further external assistance and follow-up action by the Government. At this stage, the prospects for such responses seem good, but it would be premature to rank the sustainability of these policy improvements as likely until there is evidence that the necessary work is underway. E. Sociological and other impacts

47. The Project has had a significant and beneficial impact. The SBLGS enabled 853 small business operators to borrow more than they would otherwise have been able to do as a result of the guarantee process. The loans have been used for a wide variety of small businesses, which have expanded the services and goods available in rural villages and in urban areas. Most of those loans have helped establish profitable and sustainable small businesses and have provided employment for over 3,000 people with over 1,700 of these being new jobs. Importantly, most of those involved in the SBLGS have developed a better appreciation of what it takes to run a successful business. Some borrowers have moved to the next tier of lending and others graduated to the normal lending channels of the commercial banks. The training and business advisory services provided by SBEC to more than 2800 small business operators provides a foundation for future growth of small business operators, particularly at the village level. This is likely to help address income inequality in Samoa over the medium term. Five of the loans were used to establish successful medical clinics, which surprisingly were not viewed as a reasonable business risk by the commercial banks because of the borrower’s inability to provide security. The microfinance component ended strongly despite performing poorly against targets during most of the Project. Even this poor performance in terms of loans issued needs to be viewed in context because it did have some positive impacts on many villages. In particular, the work of WIBDI in developing niche markets for products such as virgin coconut oil and organic produce now seems to be expanding. The MWCSD approach, working exclusively with women’s groups that are part of the traditional village women’s committee, is performing well at project completion. As with the SBLGS, positive feedback was received from members that participated in the microfinance scheme. Members expressed improved self respect giving them confidence to undertake more ambitious projects. Another common message is that many of the benefits from the SBLGS and the microfinance loans extended beyond profits: for some of the more vulnerable participants, the cash income earned enabled them to send children to school whereas previously this was beyond their reach. Finally, a small portion of some loans was used to provide additional accommodation over shops or to improve facilities in both the commercial venture and the house. 48. Although the policy component was characterized by a general failure to complete all the actions needed to deliver policy outcomes, it nonetheless started a momentum that will have a significant impact on the business environment in Samoa. The high level customary lands task force has already been successful in breaking down suspicion about the alienation of customary land and in encouraging those with bona fide claims to the land to move forward with ideas of leasing customary land. Although the credit bureau did not eventuate, it has led to strong support for such a bureau and it now seems likely that one will be established. This along with

15

streamlined processes for recovering debt and better methods of registering interests in vehicles and other chattels will provide confidence and support to the private sector at all levels. 49. The Project has had no adverse environmental impacts according to the Ministry of Natural Resources and the Environment. SBEC training courses outlined the need to consider environmental impacts in developing business plans and its business advisors had a checklist to ensure that there were no adverse impacts. Almost all of the loans were widely dispersed and did not lead to locally significant impacts. One of the eco-tourism projects sought to conserve the green sea turtle as an attraction and worked in conjunction with the tourism authority to ensure adequate safeguards for the turtles. Several loans were used to upgrade toilet facilities particularly for beach fales,19 thus reducing the potential for pollution. 50. The Project had a positive gender impact. About half the participants of the SBLGS were women and almost all the microfinance was provided to women’s groups. The gender impact went far beyond numbers; almost all the businesses were family businesses with wife and husband both contributing according to their particular capabilities. A high proportion of businesses were sustained by the income earning capacity of an employed spouse, often the wife, who may also be a teacher or nurse, but also the husband who may have paid employment elsewhere.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

51. Overall, the Project is judged to be partly successful as per Appendix 7. However, a successful rating is warranted given that (i) the Project largely achieved its expected impact and outcome, (ii) the components that worked, actually worked very well, and (iii) it is the nature of a project trying out new ideas to expect a degree of failure. The Project was an innovative and comprehensive initiative seeking to encourage Samoans to start up or expand existing small businesses as a means of generating additional income, particularly in rural areas. By expanding the loan guarantee scheme it provided scope for small business operators to take the next steps in business development. In directly supporting 853 small business operators with loans and providing training to over 2,800, the Project has provided a major boost to the small business sector. The microfinance component struggled to find its niche for most of the Project, but at completion there are grounds for confidence that it too can have a lasting beneficial impact by assisting individuals operating through small groups to expand their businesses. The policy initiatives fell short of delivering their expected final outcome, but they have proved to be effective in generating follow-up actions that seem likely to generate significant improvements in the business environment. The momentum generated in the efforts to encourage greater economic use of customary land has been notable in this regard. 52. The associated proposed equity investment by ADB to provide capital for a Venture Capital Fund proved unsuccessful when the fund was closed after determining that it was unlikely to be financially viable. In attempting to provide a comprehensive approach, the Project was perhaps unnecessarily complex and difficult to implement, reflecting its pilot nature. The implementation arrangements proved challenging, in part because there were seven IAs, several with no previous exposure to a project of this size or to ADB procedures. The complexity and the lack of clearly defined implementation processes contributed significantly to the substantial delays that the Project experienced. Some potentially highly beneficial aspects of the

19 Beach fales refer to tourist accommodations built like the traditional Samoan houses.

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original project design, such as the SBDF, were lost over the period between appraisal and implementation. Disappointingly, despite a well-designed monitoring framework being developed at appraisal, no baseline data were obtained and the database of project outputs developed for the Project is largely unpopulated. Given that this was a pilot project, this represents a lost opportunity to learn from an innovative effort to support small businesses in Samoa. B. Lessons

1. Design Considerations

53. The lessons include the following: • There is value in conducting thorough project preparation during design to take into

account existing capacities of the EA and IAs. This could include conduct of an EA Procurement Capacity Assessment.

• Pilot projects with complex implementation arrangements need to include detailed draft operating agreements and will require higher levels of ongoing monitoring and support.

• A phased approach to implementation starting with the SBLGS, followed by the MFF, and then the policy elements, may have proven helpful.

• Working with NGOs requires that attention be given to ensure shared common ownership of the expected procedures and outcomes.

• When a project deals with difficult policy issues using consultants, it is important to ensure that there is an agency to champion the recommendations after the consultants have withdrawn.

• In a small economy, efforts to increase the size of a project to improve processing efficiency may broaden the project’s scope beyond the capacity of the borrower to manage it efficiently.

• There is merit in pilot projects of this nature, since it was only by attempting to implement this Project that the Borrower was able to find the means to progress to a number of otherwise intractable issues including the provision of microfinance using the commercial banks.

2. Implementation Issues

54. It was appropriate that the Project was initially guided by a PMU; however, to improve sustainability after the project and to reduce costs, it would have been preferable if each IA had taken responsibility for monitoring the Project’s outputs and impact in collaboration with the Aid and Debt Management Division of MOF. 55. The failure to implement the SBDF concept meant that SBEC was unable to obtain the resources needed to operate at full efficiency and effectiveness. This contributed to a need for SBEC to seek other sources of funding, although SBEC itself has added to its operating costs through rental of a more expensive office.

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C. Recommendations

56. Future Monitoring. The following monitoring is recommended:

• MOF should confirm appointment of a project officer to monitor outputs and impacts relating to SBLGS/SBEC and resurrect the database system established under the Project.

• DBS should make use of the database that has been established in MOF as part of the Project as a basis for monitoring future outputs and impacts.

• MOF in collaboration with SBEC, DBS and MWCSD should monitor the longer term socioeconomic impacts of the SBLGS and MFF activities and the cost of microfinance to help decide whether to continue with or refine these activities over the longer term.

57. Covenants. The covenants agreed were appropriate and should be maintained in their

current form. 58. Further Action or Follow-Up. The following actions should be taken by MOF:

• Modify the existing SBLGS MOU, as appropriate following an internal review of the legal framework for SBEC and the SBLGS (para. 12).

• Facilitate implementation of the recommendations for SBEC arising out of the Review of the Small Business Enterprise Centre dated December 2008.

• Ensure that action is taken to follow-up on the recommendations from Cabinet in relation to its review of the Borrower’s Project Completion Report.

• Investigate the scope for additional assistance from ADB’s Private Sector Development Initiative for the outstanding policy improvements and the establishment of a credit bureau.

59. Timing of the Project Performance Evaluation Report (PPER). If conducted, the PPER should be carried out after at least one year to allow time for data to be gathered on the impact of the project at the village level. In this instance, given the late implementation of a number of components, a PPER could usefully look in more depth at the impacts of components judged to have been successful by the PCR mission.

PROJECT FRAMEWORK

Design Summary Performance Indicators/Targets Monitoring Mechanism Assumptions and Risks

Goal Income and employment generation in the micro- and small enterprise (MSE) sector, particularly targeting vulnerable groups and the rural sector

• Minimum of 700 direct income and

employment opportunities created through the loans guarantee scheme

• Survey to be

conducted • National Accounts

Statistics

• General economic and policy

climate conducive to business growth will continue to exist

Objectives and Purpose MSE growth through improved availability of financial and non-financial business development services

• Minimum 180 new MSEs started through the

guarantee scheme • Minimum of 400 existing enterprises diversify

through the guarantee scheme

• Project monitoring

and evaluation questionnaires

• Review Missions

• General economic and policy

climate conducive to business growth will continue to exist

Outputs 1. Expand small loan guarantee

scheme Improved access to capital cost and working capital financing by MSEs

• Guarantees totaling ST$1.1 million by end of

year 5 to 180 start-up enterprises resulting in 540 new positions being created

• Guarantees totaling ST$2.4 million issued by end of year 5 to 400 existing “tier one” businesses resulting in 130 new positions being created

• Guarantees totaling ST$0.4 million issued by end of year 5 to 12 “second tier” existing businesses resulting in the creation of 60 new positions

• Project reports • Quarterly reports of

SBEC to the PSC • Review Missions

• SBEC will be adequately

resourced through the SBDF to monitor, train and advise clients

• SBEC will have a focused approach, placing increased emphasis on the creation of new employment opportunities rather than on training per se

2. Establish a pilot microfinance scheme

New microfinance product targeting microenterprises through eligible participating organizations is established within the Development Bank of Samoa (DBS) Improved savings mobilization among micro-enterprise entrepreneurs

• Minimum 50 new microfinance loans averaging ST$3,000 each are issued by end of year 3, resulting in 50 new enterprises being created with 150 direct beneficiaries obtaining increased income earning potential

• Minimum 250 microfinance loans averaging ST$3,000 each are issued by end of year 4, resulting in 250 new micro-enterprises with 750 direct beneficiaries obtaining increased income earning potential

• Minimum 250 members of participating

• Reports of DBS and

WIBF to PSC • Project reports • Review Missions

• DBS staff is trained in

microfinance • Participating organizations will

be adequately resourced through the SBDF to promote the microfinance scheme, and provide training and advisory support to micro-entrepreneurs

• There is an effective demand

18 A

ppendix 1

Appendix 1

19

Design Summary Performance Indicators/Targets Monitoring Mechanism Assumptions and Risks Transfer of loans portfolio to participating organizations meeting performance measures agreed to in the memorandum of understanding (MOU)

organizations have regular savings averaging ST50 each by end of year 4

• Minimum of two participating organizations receive funds from DBS for retail on lending

for savings products • At least two participating

organizations exist that would meet eligibility criteria

3. Small Business Development Fund The SBDF is established and functions

• SBEC provides regular loan monitoring and

business advice support on a quarterly basis to a total of 180 new start-up businesses and 404 existing businesses during the 5 years of the project

• SBEC delivers training to an average 200 persons per annum

• Women in Business Foundation (WIBF) provides regular loan monitoring and technical and social training on a quarterly basis to at least 50 new loan clients per annum

• Project quarterly

reports • Audit reports • Review missions

• There is an effective demand

for business advisory services

4. Policy and Infrastructure Development

Regulatory environment for small businesses is improved Use of chattels by the banks is increased Enforcement of security is improved Credit checks are facilitated Economic use of the customary land is improved

• New company law is promulgated • Updated chattels registry • Streamlined court procedures for debt

recovery • New credit reference facility established in

private sector • Working group on customary land issues is

established and legislative amendments promulgated as necessary

• Project reports • TA consultants report • Copies of legislation

and proceedings of the working group meeting

• Review missions

• There is sufficient political will

to implement the proposed legal and regulatory changes

• There is sufficient interest among financial institutions to participate in the facility

• Resistance to changes related to the economic use of customary land

Design Summary Performance Indicators/Targets Monitoring Mechanism Assumptions and Risks

5. Establish the Samoa venture capital fund

Access to venture capital is improved

• VCF is established and functioning

• VCF reports • Review missions

• There is effective demand for

venture capital • Rates of return may prove

unattractive for the investors in the VCF

• Experience in venture financing is limited

Activities/Inputs 1. Expanded Small Loans Guarantee

Scheme - Finalize MOU between PSC and SBEC on terms and conditions - Amend MOUs between SBEC and participating financial institutions to reflect two-tiered guarantee facility - Recapitalize the SBEC small loans guarantee scheme - Recruit staff - Improve database and complete training - Promote SBLGS

• MOUs finalized by end 2nd quarter year 1 • Technical assistance for database fielded,

report submitted to PSC and SBEC, modifications completed and implemented by end of year 1

• Default loans limited to 10 percent

• Project reports • Quarterly reports of

SBEC to PSC • Review Missions

• SBEC will provide training to

average 200 persons per year converting into 100 new loan clients

• SBEC will aggressively seek new clients

• South Pacific Project Facility (SPPF) will provide support for feasibility studies for larger scale projects

• Staff attrition might reduce SBEC's effectiveness to adequately monitor

2. Establishment of a new microfinance facility for microenterprises

- Finalize MOUs between PSC, DBS, and participating organizations for terms and conditions of the scheme - Finalize operational systems and procedures between DBS and WIBF - Install databases and complete training - Participating organizations promote microfinance product with loan amounts between ST$1,000 - ST$5,000

• MOU between CBS and DBS, documented

and signed by 2nd quarter, year 1 • 1 eligible participating organization signs MOU

and is participating in scheme by end of year 1 • 2 eligible participating organizations sign MOU

and are participating in scheme by end of year 4

• TA is fielded, report submitted to PSC/participating organizations by 3rd quarter year 1

• Reports of DBS and

WIBF to PSC • MOUs between DBS

and participating organizations

• Signed MOU between PSC, DBS, and participating organizations

• Project reports • Report of TA to PSC

• Participating organizations will

aggressively promote scheme • Loan defaults limited to 10

percent by value over life of project

• Improved availability of microfinance will act as an added incentive to increase the number of savers and the level of savings achieved by WIBF clients

20 A

ppendix 1

Appendix 1

21

Design Summary Performance Indicators/Targets Monitoring Mechanism Assumptions and Risks

- Commence coaching of new members in savings mobilization - Review of loans portfolio performance by DBS, participating organization and PSC - Transfer loan portfolio to participating organizations

• Databases installed and operational by 4th quarter year 1

• 1000 new leaflets designed, printed and distributed by end of year 1

• Two participating organizations receive funds from DBS for retail on lending

• Commitment by the participating organizations to assist in the management of the loan portfolio to minimize defaults

3. SBDF - Finalize the MOU - Establish subcommittee - Annual funding of the principal - Finalize eligibility criteria for participating organizations - Promote the SBDF - Establish monitoring systems - Project management unit (PMU) to negotiate contracts with successful applicants - PMU allocates funds quarterly - Monitor the performance of the BDS

• 2 medium-term work plans of SBEC and

WIBF approved, funded and commence delivery by 4th quarter, year 1

• PMU designs, documents, and installs monitoring systems by end 3rd quarter year 1

• MOU between PSC and government agencies finalized by PMU by end of 3rd quarter year 1

• Project quarterly

reports

• Business development

services (BDS) will have the capacity to prepare and submit proposals

4. Policy and infrastructure development

-Systems TA to design and establish chattels database - TA to review and recommend changes to streamline court procedures and jurisdictions - TA to establish credit reference facility - Define parameters in consultation with PFIs - Establish working group on customary land issues

• TA is fielded, report received by PSC and

recommendations implemented by 2nd quarter year 2

• TA is fielded, report received by PSC, and policies and legislation changes are implemented by 4th quarter, year 2

• TA is fielded, report submitted to PSC by 1st quarter, year 3

• Legislation, if needed, is enacted by 2nd quarter, year 3

• Project report • Review missions • Project quarterly

reports • Report of the TA to

PSC • Project reports • Report of TA to PSC • Report of TA to PSC • VCF Reports • Review Missions

• Banks will have increased

confidence in the revised chattels registry

• Justice department will be adequately resourced to manage chattels registry

• Streamlining the court procedures will result in lower debt recovery costs for banks

• PFIs see value in sharing information needed for the facility to operate correctly

Design Summary Performance Indicators/Targets Monitoring Mechanism Assumptions and Risks

- TA on customary land legislation and valuation to recommend revisions to existing legislation and draft new legislation - Recommend revisions to existing registration procedures for customary land leases - Develop a system of valuation that is recognized by the PFIs - Promote use of customary land

• New credit reference facility (first stage) is

completed and implemented smoothly by 3rd quarter, year 3

• TA is fielded, report received by PSC by 3rd quarter year 3

• Review is completed by end of year • Legislation is amended by the end of the

Project

• Potential conflict between

bank and client privacy requirements

• Land leases are accepted as security among financial institutions

• Potential conflict between bank and client privacy requirements

5. Samoa Venture Capital Fund - Finalize expressions of interest by

ADB and others to invest in the fund - Establish legal entity of the VCF - ADB invests in fund - VCF promoted

• MOU finalized by end 2nd quarter year 1 • ADB investment of $400,000 by end 3rd

quarter year 1 • Shareholders commit $1.6 million share

capital, and inject $480,000 at beginning of first year of VCF for seed capital

• Project reports • Reports of the VCF • Review mission

• Investors will place more

emphasis on the economic rationale for investing

• Willingness of existing financial institutions to provide complementary financing facilities

22 A

ppendix 1

Appendix 2 23

PROJECT OUTPUTS

A. Small Business Loans Guarantee Scheme

1. Guarantees Issued

1. Under the Project it was envisaged that 592 guarantees totaling ST3.9 million, would be issued by the end of year 5, the original closing date for the Project. At the end of Fiscal Year (FY) 2006, which was year 5 of the Project, 421 guarantees had been issued with a value of ST4.4 million. At completion in 2008, as a result of several re-allocations of funds into this component, a total of ST11.4 million had been extended in guarantees to 853 enterprises covering loans totaling ST15.8 million. The average guarantee was ST13,413 representing 74% of the average loan of ST18,507. A total of 504 of the guarantees (58%) were issued to new businesses, exceeding the target of 180 or 30% of the overall target total. Thus, the actual number of guarantees issued and their value exceeded the targets, but the outputs were delayed. The Project exceeded its targets for the number of guarantees issued, the percentage share going to new businesses, and overall value. Table A2.1 provides details. At completion, 18 % of guarantees (by value) had been cleared and there were 624 current guarantees in force with a value of ST8.8 million. Some 2 % of these guarantees were for loans less than ST5,000, 20 % were for loans between ST5,000 and ST20,000, 72 % were for loans between ST20,000 and ST50,000 and 6 % were for loans in excess of ST50,000. The guarantees were provided by SBEC for loans issued by four commercial banks and DBS as indicated in Table A2.2.

Table A2.1 Guarantees Issued by Business Status

September 2001 – June 30 2009 Total Guarantees Issued Cleared Current Guarantees

Business Status Value (ST) Share No. Percent of total value

Value (ST) No.

New 6,578,163 58% 504 13% 5,224,433 384

Existing 4,850,049 42% 349 24% 3,538,879 240

Total 11,428,213 853 18% 8,763,312 624

Source: Derived from data provided by SBEC

Table A2.2 Value of Guarantees Supporting Loans Issued by Banks (As at June 30 2009)

Participating Banks

Total Value (ST)

Percent Total Number of

guarantees issues

Cleared as share of total

value

Value of Current

Guarantees (ST)

Number of Current

Guarantees

ANZ 4,397,181 38% 288 27% 2,991,824 186

DBS 3,536,465 31% 302 14% 2,877,464 233

NBS 633,382 6% 55 31% 354,320 29

SCB 1,707,024 15% 136 3% 1,524,824 115

Westpac 1,154,160 10% 72 9% 1,014,880 61

11,428,213 853 8,763,312 624

Source: Derived from data provided by SBEC

24 Appendix 2

2. Status of Loans Guaranteed

2. At the time of the PCR mission (July 2009), a total of 160 guarantees (19% of the total issued) valued at ST2.0 million (18% of total value of the guarantees issued) had been cleared; and the 624 guarantees in place with a value of ST 8.8 million covered loans of ST12.2 million. A total of 69 guarantees (8% of the number issued) had been drawn down and used when the loans were foreclosed and the value of these guarantees was ST623,024 (representing 5.5% of the total value of guarantees issued).

Table A2.3. Small Business Loan Guarantee Accounts (Status at Completion June 30, 2009)

Cleared Guarantees

Current Guarantees Foreclosed Guarantees

Total Guarantees Issued during Project

Participating Banks

No. Value No. Value No. Value No. Value ANZ 83 1,183,91

7 186 2,991,8

24 19 221,440 288 4,397,1

81 DBS 48 504,498 233 2,877,4

64 21 154,504 302 3,536,4

65 NBS 18 196,582 29 354,32

0 8 82,480 55 633,38

2 SCB 4 56,000 115 1,524,8

24 17 126,200 136 1,707,0

24 Westpac 7 100,880 61 1,014,8

80 4 38,400 72 1,154,1

60 Total 160 2,041,87

7 624 8,763,3

12 69 623,024 853 11,428,

213 Source: SBEC records as reported by SBEC and collated by the mission. 3. The Borrower’s PCR reported a total of 157 loans in arrears with a value of payments in arrears of ST289,758. This represented 27% of the then existing accounts and 3% of the loan value as of September 30, 2008. 20 By June 30, 2009, 236 out of the 624 loans that were then current were in arrears, representing 38% of the total number of loans. The current value of the arrears was ST705,692, representing 7.5% of the current loan balances. The total value of the loan balances for the loans in arrears was estimated to be ST3.6 million, which represents about 30% of the total value of all current loans.21 If all borrowers with loans in arrears were to default on payments, the value of the guarantees that would need to be utilized would be ST2.9 million, representing 33% of the ST8.8 million in current guarantees in place. Almost 47% of the loans in arrears are 91 or more days overdue and these arrears totaling ST592,820 represent 84% of the current value of arrears. Table A2.4 provides details. The 50% increase in the number of loans in arrears between September 2008 and June 2009 is a cause for concern. The rate of increase in the value of arrears (143%) and in the loan arrears as a percentage of current loan balances (150%) indicates the need for urgent attention by SBEC and the participating banks.

20 Annex 3 of Borrower’s PCR. 21 These estimates of the value of the loan balances for loans in arrears are based on data provided by SBEC for its

risk factor which represents the guarantees which are calculated to be 80% of the value of loans in arrears.

Appendix 2 25

Table A2.4. Accounts in Arrears (Status at June, 2009)

Item Westpac ANZ DBS NBS SCB TOTALS Number in Arrears 42 49 61 15 69 236 Arrears in Amount (ST) 287,370 145,707 96,513 35,569 140,431 705,592 Arrears as percent of Loan Balances 21.0% 4.8% 3.20% 12.6% 8.7% 7.5% Arrears as percent of Guarantee 26.5% 4.7% 3.5% 10.6% 9.1% 8.0% Risk Factor: (ST)¹ 680,096 731,984 694,649 122,960 682,447 2,912,138 AGE OF ARREARS 30 Days and Less 8 14 27 7 28 84 Value (ST) 6,154 6,442 8,956 5,401 13,502 40,457 31-60 Days 2 4 6 2 15 Value (ST) 2,152 6,403 4,525 670 1,699 15,449 61-90 Days 1 2 7 12 22 Value (ST) 678 3,731 10,395 21,287 36,091 91 or more Days 30 29 20 7 24 110 Value (ST) 278,385 129,131 72,536 29,498 83,268 592,820 Source: Data from SBEC. Note 1. Risk factor is 80% Loan Balances in arrears.

3. Phasing of the Issue of Guarantees

4. The phasing of the issue of guarantees, the clearing of loans and the foreclosure of loans are indicated in Table A2.5 together with the current status of the guarantees issued in each year. 22

Table A2.5. Phasing and Current Status of the Issue of Guarantees (As of June 30, 2009)

Item 2002 2003 2004 2005 2006 2007 2008 2009 No date Given Total Guarantees Issued

Current 44 61 29 40 162 143 85 19 25 608

Cleared 53 33 12 24 16 12 5 4 159

Foreclosed 11 14 2 4 17 8 6 7 69

Total issued

108 108 43 68 195 163 96 19 36 836

Value of Loans Issued (ST Million)

Current 0.76 1.28 0.51 0.75 3.14 3.04 1.55 0.42 0.49 11.93

Cleared 0.91 0.52 0.20 0.40 0.38 0.16 0.07 0.17 2.83

Foreclosed 0.15 0.17 0.03 0.06 0.21 0.59 0.07 0.03 0.77

Total 1.82 1.97 0.74 1.21 3.73 3.26 1.69 0.42 0.69 5.53

Source: Derived from data provided by SBEC to mission.

22 The total value of loans issued is less than the actual because the data provided by SBEC were incomplete

covering only 836 loans, not 853 as reported elsewhere.

26 Appendix 2

4. Small Business Loan Guarantees and Term Deposits

5. The status of the SBLGS loan guarantees and term deposits supporting the guarantees in the five participating banks is indicated in Table A2.6. The term deposits were invested in the participating banks on the basis of the interest rate offered by those banks and was not tied in any way to the value of guarantees issued by the participating banks. The original term deposits of ST6.4 million were used to support the 853 guarantees for ST11.4 million issued over the life of the Project as indicated in Table A2.3. The value of the term deposits was ST7.0 at the closing date and is currently ST8.7 million, as indicated in Table A2.6. In addition to these term deposits there is a savings account which is used to provide immediate access to funds without breaking term deposits. The current balance in the savings account was reported to be ST153,188 in July 2009. The total funds available in support of the guarantees are consequently ST8.8 million, which is equivalent to 100.6% of the current value of guarantees in place.23

Table A2.6. Status of Small Business Loan Guarantee Term Deposits (Status at June 30 2009)

Participating Banks Item ANZ DBS NBS SCB Westpac

Total

Original term deposits 2,606,146 783,500 2,097,307 922,444 6,409,397 Total term deposits September 30, 2008

2,922,286 894,692 2,232,894 970,573 7,020,445

Term deposit June 30, 2009¹ 3,178,823 1,097,340 2,767,159 1,618,462 8,661,784 Savings account 153,188 153,188 Total funds available 8,814,972 Term deposits and savings as percent of current guarantees

100.6

Source. Term deposits September 30, 2008 from Borrower’s PCR (Annex 4) which noted that these figures were provisional. Term deposits as at July 2009 as reported by MOF to the mission.

5. Jobs Created

6. The estimated number of new jobs created under the Project was 1,763, which exceeded the target of 682 new jobs by 159% as indicated in Table A2.7. The figures were based on the estimates provided by the Impact Assessment Survey as presented in the PMU Monitoring Report (March 2008). The estimates were derived from a sample survey of 104 loan guarantee recipients and then grossed up to derive an estimate for the 853 guarantees issued under the Project. The breakdown by sector is also based on the Impact Assessment Survey. The total number of jobs is an estimate of full-time equivalent jobs and includes both full- and part-time workers and family workers. The gender breakdown suggests that women occupied about 39% of the new full-time jobs created and about 44% of the total 3,079 jobs provided. The number of new full-time jobs created per enterprise ranged from 1 to 5.9 with an average of 2.1.

23 The data provided by MOF indicate the value of the term deposits at the time of the most recent transfer and in

most cases the deposit would have accrued interest, which has not yet been included in the total value of the term deposits.

Appendix 2 27

Table A2:7. Jobs Created by Sector Number

Sector New Full Time Jobs

Full Time Jobs per enterprise

Female New Full Time Jobs

Total Number of Jobs

Retail 262 1.7 139 563 Manufacturing 328 1.9 57 538 Tourism 336 5.9 205 445 Flea Market 90 1.2 41 189 Service Sector 246 2.0 98 410 Handicrafts 41 1.3 25 112 Fishing 33 1.3 8 82 Food and Beverage 115 2.0 33 180 Music 41 1.7 25 75 Transport 148 3.6 16 167 Agriculture 33 1.0 0 136 Other 90 1.6 33 182 Estimated Total jobs Created 1,763 2.1 681 3,079 Total Number Target 682

Source: Mission estimates derived from Impact Survey and SBEC Reports 7. An independent assessment of the impact of SBLGS loans reported an average employment of 2.52 operators (family members predominantly) and 3.29 employees for each SBEC client.24 It also reported average total wages paid per client of ST25,544. Using these figures, the overall impact of the Project with 853 clients assisted would be to provide employment for 2,150 family members and 2,806 employees. The annual wages paid to employees would be about ST22 million.

6. Benefits from the Loan and Guarantee

8. The survey carried out by Nimmo-Bell indicated that the average client received a loan of ST24,000 guaranteed to an average of 70 percent, and that these businesses provided additional annual income (after expenses) to the owners of ST61,000. This additional income was attributed to the loan, and the loan was only granted as a result of the guarantee issued by SBEC. The net impact of the loan was estimated to be ST2.51 for every ST1.00 lent for those clients that were surveyed. Since the clients included in the survey were larger than average, the Nimmo Bell analysis assumed an overall ratio of 1.75 between the size of the loan and the annual net benefit. Using this ratio, the overall net benefit from the ST15.8 million (para. 1 above) lent to clients under the Project is estimated to be ST27.7 million. 9. The benefit cost ratio for the investment in the SBLGS was estimated by Nimmo Bell to be 3.06 when the total contributions from donors (ADB and NZAID) and from the Government were taken into account over the period from 1994, when the NZAID support began, to 2024. This benefit cost ratio is based on the assumption above that the annual net benefit from the loans provided is ST1.75 per ST lent. 24 Review of the Samoan Small Business Enterprise Center (SBEC). Final Report. December 2008. Nimmo-Bell &

Company Ltd.

28 Appendix 2

7. Status of SBLGS at Completion

10. At the time of the PCR mission, MOF indicated that the Government was strongly supportive of the continuation of the SBLGS, and the participating banks also indicated their support. The banks and SBEC were, however, anxious to resolve some anomalies and uncertainties relating to the MOU governing the use of guarantees. SBEC commissioned a review of the legal structure of the SBLGS at the end of the Project25 and, amongst other matters, this legal review recommended that there should be only one form of MOU for all guarantees rather than the situation that had existed during the Project, where there was one form of MOU for the guarantees supported by ADB and another for guarantees supported by the NZAID project. MOF has advised that it is examining this option and other recommendations in the legal review. 11. The Government has also indicated its support for improvements in the governance and management of SBEC, as recommended in the Nimmo-Bell report. The improvements being considered include: a smaller board with a skill-based selection of directors; greater management focus on support for existing clients rather than new clients; engagement of a consultant business advisor to guide SBEC management; and training to improve record keeping, accounting and cash management. The analysis of the current financial situation for SBEC also indicated the need for ongoing external support for at least two years. The Government has committed to provide at least ST150,000 per year for the next two years, and NZAID is currently finalizing its support for SBEC over the next two years in line with the recommendations in the Nimmo-Bell report. B. The Microfinance Facility 12. The Project provided $300,000 to establish a revolving fund facility in CBS (para. 74 of the RRP) which was to be managed by DBS as a microfinancing facility (MFF). Disbursements into the MFF were to be via an imprest account (para. 106 of the RRP) and to be governed by a memorandum of agreement amongst MOF, CBS and DBS (para. 137 of the RRP). During implementation, it was agreed that all the funds would be transferred to DBS under a subsidiary loan agreement, which was prepared in mid-2003. DBS was the IA for this activity and initially Women In Business Foundation (WIBF), later re-named Women In Business Development Incorporated (WIBDI), and DBS itself handled applications for microfinance. In 2002, the PSC agreed to a request from WIBDI to support a project officer, since the additional workload associated with the Project was beyond the capacity of WIBDI. This constituted a minor change in scope, since this was not envisaged as part of the Project. In the last year of the Project, the Ministry of Women, Community and Social Development (MWCSD) became involved in the provision of microfinance, and WIBDI largely stopped operating in this field as part of the Project. At the conclusion of the Project, the subsidiary loan agreement between CBS and DBS was terminated and converted into a revolving fund in DBS. MOF allocated a total of ST1.0 million into this fund at the commencement of the Project and has included a further ST1.0 million to replenish the fund under the FY2010 budget.

1. Loans Issued

13. Although outputs were delayed substantially, the Project exceeded its target (minimum of 250 loans) in terms of loans issued by providing 681 microfinance loans with an aggregate value of ST875,550 over the period to loan closing. Almost 93% of these loans were issued in 25 Legal review of the Small Business Loan Guarantee Scheme. Ray Schuster. September 2008.

Appendix 2 29

the last year of the Project when MWCSD became involved. The average value of the loans was ST1,286 and the majority (44%) of the loans were used to support agriculture, followed by manufacturing (15%), retail (8%), handicrafts, flea markets and foodstalls (each 6%), and fishing (5%). The average loans were smaller than the ST3,000 envisaged at appraisal. 14. Under the MWCSD, the loans were provided to small groups associated with the women’s committees that were themselves associated with the traditional village council or fono. The women’s committee formed small groups of five to ten members with common interests. Each member borrowed as an individual, but the group collectively undertook to meet the repayments of any member if they were unable to do so for a period. At the time of the PCR mission, the interest rate charged was 18%, except that any late payment was charged 20%. Prior to becoming eligible to borrow under the scheme, all members were required to complete training in cash management and basic business management as provided by DBS. To date, there have been no defaults, no loans are in arrears and consequently there have been no foreclosures of any of these MWCSD loans. After all members in the group have successfully repaid their initial loans under this scheme, they are able to increase their borrowing from ST1,000 to ST2,500 per member. 15. At Project Completion, the MWCSD component of the MFF was operating in 24 villages (14 on Upolu and 10 on Savaii) dealing with 143 groups with a total of 783 members.26 The total value of loans issued was ST886,350 and the current loan balance ST458,213. The pipeline of potential new members, each of whom had been trained, was 189. 16. Up until 2009, 46 loans with a total value of ST201,900 were provided to clients identified by WIBDI. These loans averaged ST4,389 and were provided to families with whom WIBDI had been working for some years. They were mainly used to support projects with clearly established markets comprising vegetable gardens, bakeries, small shops, handicrafts and particularly fine mats. All loan recipients received prior training in business management and often some technical training. At Project Completion, 34 of these loans was still being repaid with a current loan balance of ST83,596. It was reported that 16 of the 34 current loans were in arrears with a current loan balance of $19,162.

2. Savings Mobilization

17. The WIBDI had a standard requirement that its members establish and operate a regular savings account and about 500 members of WIBDI had such accounts. Similarly, under the Project, all recipients of microfinance loans were required to establish and operate a regular savings account and all 783 members of groups supported by MWCSD have saving schemes in operation. Members taking out first tier loans of about ST1,000 typically make a minimum weekly payment of ST25, of which ST10 is directed into a savings account and ST15 into loan repayment and interest. The total savings of members of the MWCSD groups was ST177,739 or ST227 per member.27 A similar savings scheme was also introduced under the SBLGS at the suggestion of the PSC.

26 Data provided to the mission by DBS, referring to achievements to the end of March 2009. Three members had

repaid their loans and 780 members were repaying their loans. 27 This understates the savings per member because members who have repaid their loan may no longer have

savings accounts.

30 Appendix 2

3. Retail on lending

18. It was envisaged that at least two organizations would be accredited to on lend microfinance in addition to WIBDI, but this was not achieved. The charitable trust Matuaileoo Environmental Trust Incorporated (METI) was accredited in August 2004. Despite being accredited, it did not subsequently engage in retail on lending. Lending from the MFF was therefore restricted initially to WIBDI, but DBS became accredited in June 2006. There was no other retail on lending.

4. Overall Achievements

19. Table A2.8 summarizes the operation of the MFF, comparing the appraisal estimates with actual achievements at Project Completion. This comparison indicates that the component exceeded all its targets other than the number of participating organizations operating. However, it is important to note that this apparently satisfactory outcome was only achieved as a result of the performance of the new participating organization, MWCSD, in the last year of the Project. The sustainability of this operation has yet to be demonstrated. Further details of the overall achievements are presented in Table A2.9. The distribution of loans by sector is indicated in Table A2.10.

Table A2.8. Operations of Microfinance Component (ST) Item Appraisal Estimate Actual at Completion Percent of Target

Number of loans approved 250 681 272 Value of loans issued (ST) 750,000 875,500 117 Savings mobilized (ST) 12,500 177,739 1422 Direct beneficiaries (No.) 750 2,043 272 Number of POs on-lending 2 1 50

Source: Derived from data supplied by DBS and PMU records.

Table A2.9. Status of Microfinance Accounts (Status at March 31 2009)

Participating Organizations Total Item WIBDI MWCSD

Total clients with current loans 34 780 814 Villages on Upolu 14 14 Villages on Savaii 10 10 Total groups operating 143 143 Value of loans approved 201,900 886,350 1,088,250 Current loan balances 83,596 458,213¹ 541,809 Current savings account balances N/A 177,739 177,739 Current arrears 19,162 0 19,162 Arrears as percent of current balance 23% 3.5% Number of accounts repaid 14 3² 17 Accounts foreclosed 0 0 0 Value of foreclosed accounts 0 0 Foreclosures as percent of current loan balances 0 0 0

Source: DBS reports, MWCSD and WIBDI and mission estimates. Notes: ¹ Current loan balances provided to mission by DBS. ² The loans for MWCSD were nearly all less than 12 months old and therefore not due for repayment by March 2009. However, three groups had repaid their loan.

Appendix 2 31

Table A2.10. Allocation of Microfinance Loans by Sector during Project (Number and Value ST)

2004 2005 2006 2007 2008 Item No. Value No. Value No. Value No. Value No. Value Agriculture 29,900 293 307,650 Fishing 10,000 32 33,600 Handicrafts 10,000 40 42,000 Manufacturing 1 5,000 98 102,900 Retail 1 5,000 14,000 2 5,000 2 9,000 44 46,200 Tourism 1 5,000 9 9,450 Flea Markets 1 5,000 5,000 1 1,500 39 40,950 Foodstall 1 5,000 1 79,000 2 3,500 19 19,950 Coconut Oil 5,000 1 1,050 Other 1 5,000 1 5,000 2 4,000 58 60,900 Total approvals 6 30,000 33 157,900 7 14,000 2 9,000 633 664,650 Sources: Development Bank of Samoa.

C. Small Business Development Fund 20. Under the Project, ADB was to provide an initial investment of $160,000 and the Government $40,000 to establish the Small Business Development Fund (SBDF), with this sum to be invested to provide income to purchase support services from participating business development service (BDS) providers. It was intended that ADB and the Government would provide a further $200,000 per year to replenish the capital in the fund. Although three BDS providers (SBEC, WIBDI and METI) were accredited, only SBEC and WIBDI received support during the Project. Instead of establishing a specific fund, the original allocation was placed in an imprest account and the PMU made payments for specific business development services provided by SBEC and WIBDI. Under these restrictive arrangements, there was very limited use of the allocation. The total withdrawals from the SBDF were only $97,342 or about 12% of the expected allocation of $800,000.

1. Support for business advice and monitoring from SBEC

21. The Project provided some reimbursement to SBEC for part of its work in training, monitoring and supporting small business operators, including those who were recipients of loan guarantees. SBEC operated out of one office in Apia on Upolu and one in Salelologa to service clients on Savaii. The Savaii office was also shared with WIBDI and was available for use by METI if required. Both the SBEC offices included facilities for conducting training courses in addition to a vehicle and office equipment and furniture. During the Project, a vehicle was provided to assist METI with its activities under the Project. During the last year of the Project, SBEC relocated its office in Apia to provide more room for training and better facilities; however, this has contributed to a higher overhead costs for SBEC. 22. SBEC was required to provide advice on a quarterly basis or more frequently to an expected 180 new start-up businesses and a further 404 existing businesses. Since the number of clients for the SBLGS exceeded those envisaged, SBEC provided a level of support to its clients that exceeded its targets as indicated in Table A2.11. A total of 6,684 follow-up advisory visits were made by SBEC advisors during the Project. The high demand for support to clients placed considerable stress on SBEC’s staff of four and resulted in the need to restrict processing of new applications for several extended periods during implementation. (This is evident in the phasing of guarantees as indicated in Table A2.5). SBEC and others are concerned that the heavy workload has restricted the time available for each visit and compromised the quality of the support provided.

32 Appendix 2

Table A2.11 Small Business Enterprise Center Advisory Support Data for Fiscal Years 2003 to 2008

Item FY03 FY04 FY05 FY06 FY07 FY08 Part FY09

Total

SBEC Advisors 4 4 4 4 4 4 4 SBEC clients 350 400 460 700 870 942 Clients/advisor 236 Advisory visits 1,017 1,424 962 945 990 898 448 6,684 Sources: SBEC Records & Nimmo Bell Review of SBEC December 2008.

2. Training of small business operators

23. SBEC provides training to all SBLGS clients prior to receiving guarantees and also provides follow-up and on-going training to its clients as indicated in Table A2.12. In addition to the training indicated in Table A2.11, SBEC provides other forms of specialized business training on demand on a fee-for-service basis. SBEC provided training to 2,178 clients through 116 courses during the Project.

Table A2.12 Small Business Enterprise Center Training Courses Numbers of courses and Numbers trained

Item FY03 FY04 FY05 FY06 FY07 FY08 Part FY09

Total

Start your business

11/212 4/121 3/56 4/87 14/292 17/299 7/119 60/1186

Advanced SYB

1/18 2/36 2/28 3/83 2/32 1/10 11/207

Marketing & Finance

1/14 3/51 2/26 1/11 ¼ 8/106

Customer Follow-up

1/7 2/12 1/9 1/8 5/36

Customer Service

4/84 6/119 6/92 4/78 3/65 6/136 3/69 32/643

Total 16/303 14/284 15/244 13/227 21/451 26/471 11/198 116/2178 Sources: SBEC Records & Nimmo Bell Review of SBEC December 2008.

24. While much of the training was conducted by SBEC, WIBDI and METI also provided training under the Project, as indicated in Table A2.13. In total, the Project provided support for 305 business training courses involving 5,079 existing or intending small business operators.

Table A2.13 Other Small Business Training Courses Numbers of courses and Numbers trained

Item FY03 FY04 FY05 FY06 FY07 FY08 Part FY09

Total

WIBDI Handicrafts

1/30 73/864 1/9 2/24 6/80 7/338 90/1345

Coconut oil 2/20 16/164 18/184 Small Business 9/89 11/192 6/66 26/347 Organic 2/12 16/94 9/135 1/15 28/258 Other 5/94 6/104 11/198 Total WIBDI 8/136 98/1047 27/440 8/90 9/115 23/502 173/2330 METI Life Skills 1/5 11/500 12/505 Virtues Training

1/28 3/38 4/66

Total METI 10/143 4/43 11/500 16/571 Sources: SBEC Records & Nimmo Bell Review of SBEC December 2008.

Appendix 2 33

D. Policy Development 25. The Project was intended to help create a better environment for small businesses by addressing four key areas that were regarded as major obstacles to small business development. Most of the inputs into this component were provided under the associated technical assistance (TA) project.28 Under the Project itself, funds were used to support a number of these initiatives with workshops, study tours and short-term consultancies.

1. New Company Law

26. The Project provided support for Government efforts to update the existing company law. Such support included funding for (i) a fact-finding mission in 2006 to investigate options for the establishment of a register of companies, and (ii) consultative workshops with stakeholders as part of the final preparation of the draft law that was presented to Parliament. As a result of these and other initiatives to improve the operations of the legislation, there have been various amendments to the Company Law Act 2001, and the amended legislation is now fully operational. One of the immediate benefits of the new company law is that registration of companies has been greatly simplified, and the process now takes as little as one day.

2. Use of chattels as security

27. Under the Project, it was envisaged that a register of security interests in motor vehicles would be established, since this was the most common form of chattel security likely to be accepted by the banks. Work started on this activity under the associated capacity building TA, but, subsequently, it was decided that all chattels should be registered and that a comprehensive act was needed to cover all personal property and securities, and to establish a register of security interests to extend to all personal property. A working group was formed in October 2004 and tasked with the development of a Personal Property and Securities Act (PPSA) with assistance from the legal specialist from the capacity building TA. The working group comprised MCIL as chair, the Attorney General's office, MJCA, and MOF and included representatives of the private sector. The working group and consultant prepared much of the draft legislation, but work was suspended in order to determine the form and nature of the security register. Responsibility for finalization of the PPSA was passed to MCIL in 2006. 28. Although the Government is committed to the need to establish the PPSA, as indicated by its inclusion in the latest Strategy for the Development of Samoa29, there has been little progress made by MCIL in finalizing the arrangements for the register, which is a pre-requisite for completion of the draft PPSA. The mission was advised by MCIL that they hoped to complete the work by the end of 2009, but the Attorney General's office also advised the mission that considerable work would be required to put the draft PPSA into a consistent and completed form and that, at this stage, the AG office had not been directed to commence such activity. Arrangements are now being considered to support the completion of the PPSA under ADB’s Private Sector Development Initiative program.

3. Streamlined debt recovery procedures

29. Although not mentioned specifically in the RRP, the Project design framework included an output relating to enforcement of security. This was a response to a recommendation in the

28 TA 3549-SAM. Capacity Building of Financial and Business Advisory Intermediaries Project. 29 Government of Samoa, May 2008.Strategy for the Development of Samoa 2008 – 2012.

34 Appendix 2

project preparatory TA to review the laws and procedures relating to debt recovery and dispute resolution. The aim would be to reduce both the cost and delays for the parties involved and also the inefficient use of over-extended judicial resources. Under the associated TA, the legal specialist reviewed the situation and developed a series of recommendations for improvement of the procedures in 2005. It was intended that there would be further consultations with the judiciary and other stakeholders, but this proved difficult to arrange owing to tight timeframes for both the consultant and the various stakeholders. As a result, apart from some minor improvements in the debt recovery procedures undertaken as part of the Institutional Strengthening Project of the Ministry of Justice and Courts Administration (MJCA), no substantive action was taken on the report’s recommendations. In an attempt to finalize the report at the end of the Project, the Project engaged a local legal expert to review and update the report and to finalize the consultation with members of the judiciary and the MJCA. This report was submitted in February 2009 after the Project had been completed. It substantially endorsed the original recommendations and recommended that certain matters still needed consultation with the judiciary and MJCA. 30 The PSC endorsed the recommendations and proposed that a working group be established by June 2009 to finalize outstanding issues. The working group was to be chaired by an Assistant CEO of MJCA and its members were to include representatives of MOF, AG office, Police, Samoa Law Society, Samoa Institute of Accountants, Bankers’ Association, Samoa Chamber of Commerce and a member representing the MSE sector. MJCA was to provide a secretariat to support the working group. The working group was to report to the CEOs of MJCA and MOF and to the Chief Justice. 30. In July 2009, the MJCA reported that action had been taken to improve debt recovery by streamlining court procedures, reassigning responsibility for some tasks from judges to court administrators and by enabling small claims to be determined in a lower court. It is expected that these changes, combined with the benefits of improved court facilities expected to be created by the move to a new court building in early 2010, will substantially improve debt recovery procedures and provide lenders with more confidence in assisting small business operators.

4. Establishment of credit bureau

31. The RRP (para. 83) envisaged that the Project would establish a database system for a credit reference facility (a credit bureau) and that a credit bureau would be set up in the private sector through the commercial banks, DBS and the National Provident Fund (NPF). The IA for this activity was to be an independent agency (the credit bureau itself) representing the interested commercial banks (RRP para. 101). A consultant under the capacity building TA carried out a feasibility study in 2002 and found that the facility was needed and could be commercially viable, particularly if a debt collection service was also included in its operations. It recommended the establishment of a credit bureau to be operated by a stand-alone company.31 A local consulting firm was recruited to review the international consultant’s report in August 2003 and further refined the financial model, indicating that likely returns were satisfactory. With support from the PMU and the consultants, this activity appeared to have been successfully completed when, in 2005, the company Data Services Limited (DSL) was launched to operate as a credit bureau. 30 Specifically, these comprise: (i) addressing issues associated with the enforcement of warrants of committal; (ii)

making available additional judicial resources by re-assigning responsibilities to lower levels within the judicial system; and (iii) improving public awareness of the remedies available to creditors to recover debt, including bankruptcy law and penalty interest rates.

31 Final Report. Feasibility of a credit reference facility for Samoa. Vinstar Consulting. November 2002.

Appendix 2 35

32. DSL’s six shareholders comprised five local investors and a NZL-based consulting group. Subsequently, Baycorp NZ, which was to provide data hosting services, withdrew from the scheme and was replaced by a company formed from ex-staff members of Baycorp. Some of the investors decided to withdraw at this stage, being concerned that the loss of the widely recognized credit specialist Baycorp would jeopardize the viability of the bureau. Despite considerable efforts to resurrect the scheme, the parties eventually agreed not to continue. The borrower’s PCR reported that DSL was de-registered, but MCIL reported that this was not the case. Although there is still no credit bureau operating in Samoa, CBS advised that the Government is considering options to re-instate a credit bureau including the possibility that a regional facility may be established. IFC is leading the discussion to establish a regional bureau to be hosted in the Fiji Islands. This has received a positive response from the central bank and commercial banks in Samoa.

5. Facilitation of use of customary land

33. The Project also supported the Government’s efforts to make it easier to lease customary land. The consultants under the capacity building TA submitted a report on the first phase of this work in January 2006 with an associated action plan.32 The report recommended, among other things, that: (i) improvements be made in the lease application process, (ii) the restraint on non-titled Samoans entering into leases for agriculture be removed; (iii) clarification be provided that leases could be used as a basis for a mortgage; and (iv) that efforts be made to inform the public of their rights to lease customary lands. Following consideration of this report, the Cabinet appointed a high level task force to further this initiative. ADB provided a follow-on TA project to support the task force.33 The Project’s PMU served as the secretariat to the task force and the Project also supported a study tour and various stakeholder consultations to assist in the finalization of the recommendations to Cabinet.34 TA4712 prepared a Program Implementation Plan (PIP) for customary land reforms which recommended a combination of legal and administrative changes designed to facilitate the use of customary lands for economic development. The PIP goes beyond the leasing of customary land and also recommends other means by which customary land could be used for income generation. The Cabinet’s response to the PIP's recommendations made in relation to the Borrower’s PCR indicates that the Government intends to proceed with the recommended changes. ADB is considering providing further support for this initiative under a new TA project currently being processed for approval in 2009. E. Samoa Venture Capital Fund 34. The Samoa Venture Capital Fund (VCF) was established after a considerable delay in 2005 when the first payment of $0.8 million was made to the VCF by shareholders. As a result of extensive publicity, there was a great deal of interest in the VCF among local business operators. A total of 51 applications were received, but 40 of these were referred to SBEC since they were relatively small. Of the remaining 11 inquiries, 10 were rejected and one passed through the due diligence process but was subsequently rejected by the fund manager. The fund and the fund management company were terminated when the shareholders decided not to proceed with the VCF.

32 Report for Cabinet on Economic Use of Customary Land. Vinstar Consulting. January 2006. 33 TA4712-SAM. Promoting Economic Use of Customary Land for $300,000 approved in December 2005. 34 Report on Economic Use of Customary Land Phase 2.

36 A

ppendix 3 DETAILED PROJECT COSTS: APPRAISAL VS ACTUAL

Appraisal Actual

Categories Foreign Local Total Foreign Local Total Exchange Currency Cost Exchange Currency Cost Small Business Loans Guarantee Scheme 1,100,000 400,000 1,500,000 2,336,202 824,699 3,160,901 Guarantee Fund 1,100,000 400,000 1,500,000 2,336,202 824,699 3,160,901 Small Business Development Fund 800,000 200,000 1,000,000 97,342 31,620 128,962 Pilot Microfinance Facility 300,000 1,000 301,000 391,985 5,510 397,495 Revolving Fund 300,000 300,000 391,985 1,119 393,104 Promotion Cost 1,000 1,000 - 4,391 4,391 Project Management Unit 361,049 203,551 564,600 195,896 457,715 653,611 PMU Director and Manager 341,049 123,951 465,000 195,896 355,366 551,262 Travel expenses 20,000 55,000 75,000 - 76,679 76,679 Review and Periodic PSC, PMU Meetings 24,000 24,600 - 25,670 25,670 Customary Land Expenses - - - - 148,380 148,380 Other Consultants 300,000 48,100 348,100 38,243 14,178 52,422 DTCI Staff Contribution 2,100 2,100 - - - Database, Office for Credit Reference Facility 33,400 33,400 - - - Office Rental for Credit Reference Facility 12,600 12,600 - - - MIS International Consultants 130,000 130,000 - - - International Consultants 120,000 120,000 - 10,669 10,669 Auditing Requirements 50,000 50,000 38,243 3,510 41,753 Equipment and Vehicles 145,000 5,000 150,000 134,628 52,397 187,026 Computer Systems 33,000 33,000 8,038 2,742 10,780 SBLGS vehicle 20,000 20,000 23,068 1,787 24,855 MFF vehicle 20,000 20,000 23,068 146 23,214 Vehicle and Office supplies 72,000 5,000 77,000 58,070 47,722 105,792 Savaii Centre vehicle 22,384 22,384 Interest 99,416 - 99,416 69,073 - 69,073 Unallocated 394,535 106,349 500,884 - - - Total Project Cost 3,500,000 964,000 4,464,000 3,263,370 1,386,118 4,649,488

DISBURSEMENTS: APPRAISAL VS ACTUAL

Table A4.1: Project Disbursements: Appraisal vs. Actual

Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total

1 Small Business Loans Guarantee Scheme 320,000 300,000 300,000 300,000 300,000 - - - - 1,520,000

Actual - 294,279 108,477 165,561 125,758 685,118 944,458 837,249 - 3,160,900

2 Small Business Development Fund 200,000 200,000 200,000 200,000 200,000 - - - - 1,000,000

Actual - 4,895 35,456 8,149 2,597 14,110 3,072 38,369 22,314 128,962

3 Pilot Microfinance Facility 321,000 - - - - - - - - 301,000

Actual - - 302,238 - - - - 3,272 91,985 397,495

4A Project Management Unit 187,320 132,320 189,820 132,320 189,820 - - - - 831,600

Actual - 58,308 31,389 132,773 56,378 159,112 157,997 199,316 6,718 801,991

Policy, Infrastructure and Institutional Strengthening 84,100 38,600 65,800 11,300 11,300 - - - - 211,100

Actual - - - - - - - - - - 4B Other Consultants - - - - - - - - - -

Actual - - 1,473 28,514 9,250 5,092 7,324 768 - 52,422

5 Equipment and Vehicle - - - - - - - - - -

Actual - 76,107 3,433 8,733 3,980 11,239 50,051 33,483 - 187,026 6 Interest 9,432 14,459 20,276 24,988 30,261 - - - - 99,416 Actual - - 5,324 8,644 10,494 12,447 19,129 13,035 - 69,073

7 Unallocated - - - - - - - - - - Actual - - - - - - - - - - Contingency 135,108 82,815 93,683 80,823 88,460 - - - - 480,889 Actual - - - - - - - - - -

8 Venture Capital Fund 120,000 - 80,000 80,000 120,000 - - - - 400,000 Actual - - - - - - - - - - Total Appraisal 1,376,960 768,194 949,579 829,431 939,841 - - - - 4,864,005 Total Actual - 433,589 487,789 352,375 208,457 887,118 1,182,031 1,125,492 121,017 4,797,867

Sources: ADB and Government of Samoa (Aid and Debt Management Division, Ministry of Finance).

Appendix 4

37

Table A4.2: Asian Development Bank Disbursements: Appraisal vs. Actual

Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total

1 Small Business Loans Guarantee Scheme 240,000 220,000 220,000 220,000 220,000 - - - - 1,120,000

Actual - 236,091 50,289 165,561 - 507,752 687,222 689,286 - 2,336,202

2 Small Business Development Fund 160,000 160,000 160,000 160,000 160,000 - - - - 800,000

Actual - 3,054 31,500 2,005 - 9,932 - 28,536 22,314 97,342

3 Pilot Microfinance Facility 320,000 - - - - - - - - 320,000

Actual - - 300,000 - - - - 0 91,985 391,985

4A Project Management Unit 146,210 91,210 147,210 91,210 147,210 - - - - 623,050

Actual - 23,150 - 99,474 - 35,938 2,482 28,134 6,718 195,896

Policy, Infrastructure and Institutional Strengthening 77,000 31,500 54,500 - - - - - - 163,000

Actual - - - - - - - - - - 4B Other Consultants - - - - - - - - - -

Actual - - - 28,514 - 2,853 6,876 - - 38,243

5 Equipment and Vehicle - - - - - - - - - -

Actual - 69,205 - 4,446 - - 33,403 27,575 - 134,629 6 Interest 9,432 14,459 20,276 24,988 30,261 - - - - 99,416 Actual - - 5,324 8,644 10,494 12,447 19,129 13,035 - 69,073

7 Unallocated - - - - - - - - - - Actual - - - - - - - - - - Contingency 114,126 61,957 72,118 59,444 66,895 - - - - 374,540 Actual - - - - - - - - - -

8 Venture Capital Fund 120,000 - 80,000 80,000 120,000 - - - - 400,000 Actual - - - - - - - - - - Total Appraisal 1,186,768 579,126 754,104 635,642 744,366 - - - - 3,900,006 Total Actual - 331,500 387,113 308,644 10,494 568,922 749,113 786,567 121,017 3,263,369

Sources: ADB.

38 A

ppendix 4

Table A4.3: Government Disbursements: Appraisal vs. Actual

Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total

1 Small Business Loans Guarantee Scheme 80,000 80,000 80,000 80,000 80,000 - - - - 400,000

Actual - 58,188 58,188 - 125,758 177,366 257,236 147,963 - 824,699

2 Small Business Development Fund 40,000 40,000 40,000 40,000 40,000 - - - - 200,000

Actual - 1,840 3,956 6,144 2,597 4,178 3,072 9,833 - 31,620

3 Pilot Microfinance Facility 1,000 - - - - - - - - 1,000

Actual - - 2,238 - - - - 3,372 - 5,510

4A Project Management Unit 41,110 41,110 42,610 41,110 42,610 - - - - 208,550

Actual - 35,158 31,389 33,299 56,378 123,175 155,515 171,182 - 606,096

Policy, Infrastructure and Institutional Strengthening 7,100 7,100 11,300 11,300 11,300 - - - - 48,100

Actual - - - - - - - - - - 4B Other Consultants - - - - - - - - - -

Actual - - 1,473 - 9,250 2,239 448 768 - 14,178

5 Equipment and Vehicle - - - - - - - - - -

Actual - 6,903 3,433 4,287 3,980 11,239 16,648 5,908 - 52,398 6 Interest - - - - - - - - - - Actual - - - - - - - - - -

7 Unallocated - - - - - - - - - - Actual - - - - - - - - - - Contingency 20,982 20,858 21,565 21,379 21,565 - - - - 106,349 Actual - - - - - - - - - -

8 Venture Capital Fund - - - - - - - - - - Actual - - - - - - - - - - Total Appraisal 190,192 189,068 195,475 193,789 195,475 - - - - 963,999 Total Actual - 102,089 100,677 43,730 197,963 318,197 432,919 338,926 - 1,534,501

Sources: ADB and Government of Samoa (Aid and Debt Management Division of Ministry of Finance).

Appendix 4

39

PROJECT IMPLEMENTATION SCHEDULE

2001 2002 2003 2004 2005 2006 2007 2008 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4

1

Policy and Infrastructure Development

1.1 Policy and Legislative

TA to evaluate and review policy needs

Revise policies and draft new policies

MSE functions integrated within DTCI

1.2 Chattels Registry

TA to update chattels registry

Establish database

TA review existing chattels legislation

1.3 Courts Procedures

TA to streamline court procedures

1.4 Credit Reference Facility

Define parameters for credit reference

Finalize MOU

40 A

ppendix 5

PROJECT IMPLEMENTATION SCHEDULE

2001 2002 2003 2004 2005 2006 2007 2008 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4

Establish national database

1.5 Customary Land Lease

Review legislation and registration

TA to develop valuation systems

TA conduct consultations

TA conduct study tour to Fiji Islands and NZL

2 Institutional Strengthening

2.1 Capability Enhancement

Institutional processes

Improve budget and planning skills

TA on database

Accreditation training

3 Pilot Microfinance Facility

3.1 Pilot Microfinance Facility

Appendix 5

41

PROJECT IMPLEMENTATION SCHEDULE

2001 2002 2003 2004 2005 2006 2007 2008 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4

Finalize operational systems

TA to establish database

Recruit and train staff

Establish revolving fund

(Establish sub loan)

Microfinance operational

3.2 Savings Mobilization

Commence savings mobilization

3.3 Microfinance Expansion

Midterm review

Refine targeting and outreach

Refine eligibility criteria

Expand scheme

4 Guarantee Scheme

4.1 Improve Access to Finance

42 A

ppendix 5

PROJECT IMPLEMENTATION SCHEDULE

2001 2002 2003 2004 2005 2006 2007 2008 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4

Finalize/amend MOUs

Recruit staff

Establish guarantee account in CB

TA to improve database

Staff training

Expanded scheme operational

5 Equity in Venture Capital Facility

5.1 VCF facility established

Coordinate MOU and EOI

Establish legal entity

ADB invests in fund

VCF operational

6

Small Business Development Fund

6.1 Funds established

43 A

ppendix 5

PROJECT IMPLEMENTATION SCHEDULE

2001 2002 2003 2004 2005 2006 2007 2008 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4

Subcommittee appointed

Capitalize SBDF annually

Finalize eligibility criteria

Evaluate annual funding requests

Establish monitoring systems

BDS provides training, etc

Evaluation of performance

7 Project Management

7.1 Establish PMU

Formalize PSC membership

Appoint project management unit

Establish PMU office

Formalize interdept arrangements

44 A

ppendix 5

PROJECT IMPLEMENTATION SCHEDULE

2001 2002 2003 2004 2005 2006 2007 2008 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4 Q1 2 3 4

Establish monitoring mechanisms/MIS

Project reviews

PMU operational and reporting

Coordinate project implementation

7.2 Project Monitoring

Determine information/data required

Develop survey methodology

Collect baseline data

Update data annually

Data analyzed and disseminated

Transfer responsibility to DTCI

1. RRP does not specify years. PCR has adopted 2001 and Year 1 Implementation as per RRP Actual Implementation

45 A

ppendix 5

46 Appendix 6

STATUS OF COMPLIANCE WITH LOAN COVENANTS

No. Covenant Reference in Loan

Agreement Status of Compliance

1. The Borrower shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to the Bank; (iii) furnish to the Bank, as soon as available but in any event not later than six (6) months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of this Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language; and (iv) furnish to the Bank such other information concerning such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. LA, Section 4.06 (b)

Completed.

Complied with, apart from delays in submission of audited accounts in all years.

2. Without limiting the generality of the foregoing, the Borrower shall furnish, or cause to be furnished, to the Bank quarterly reports on the carrying out of the Project. Such reports shall be submitted in such form and in such detail and within such a period as the Bank shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter. LA, Section 4.07 (b)

Completed.

Complied with.

3. Promptly after completion of the Project, but in any event not later than three months thereafter or such later date as may be agreed for this purpose between

Completed.

Complied with, Borrower’s PCR dated February 2009.

Appendix 6 47

No. Covenant Reference in Loan Agreement

Status of Compliance

the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by the Borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the Loan. LA, Section 4.07 (c)

4. Project Steering Committee TD, promptly after the Effective Date, shall constitute a Project Steering Committee (PSC). The Financial Secretary or the Financial Secretary’s nominee shall act as chairperson of the PSC. The PSC’s foundation members shall be the members of the advisory group set up during the formulation of the Project, and shall comprise representatives from TD, DTCI, CBS, DBS, the SBEC, WIBDI, SCCI, SAME, and the three commercial banks currently operating in Samoa viz. ANZ Bank (Samoa) Ltd., Pacific Commercial Bank Ltd., and National Bank of Samoa. The PSC shall meet at least once every three months and shall be responsible for the overall direction of the Project and for providing guidance to the Project Management Unit (PMU), particularly regarding coordination of activities between the various Project implementing agencies. LA, Schedule 6, Para. 2 (a)

Completed.

Complied with.

5. TD shall provide written notice to the Bank of the full composition of the PSC within 30 days of the Effective Date. LA, Schedule 6, Para. 2 (b)

Completed.

Complied with.

6. Project Management Unit TD, promptly after the Effective Date, shall establish a Project Management Unit (PMU) to be responsible for day-to-day execution of the Project and for coordinating the inputs of the various implementing agencies. The PMU shall also provide secretariat functions for the PSC and any sub-committees established by the PSC. LA, Schedule 6, Para. 3 (a)

Completed.

Complied with.

48 Appendix 6

No. Covenant Reference in Loan Agreement

Status of Compliance

7. The PSC sub-committee and the PMU shall cause the SBEC and WIBDI to submit fully costed medium-term work plans within three months of the Effective Date, detailing the proposed expanded range of services to be provided, with a full breakdown of the costs, performance measures and verifiable indicators associated with the delivery of those services. Costs shall be broken down into direct and indirect costs, with details of assets to be purchased, and any proposal for part-charging the client base. LA, Schedule 6, Para. 8

Completed.

Partially complied with, but delayed. Guidelines were developed by the PMU, endorsed by the Sub-Committee and finally approved by the PSC.

8. The micro-finance facility shall be administered as a revolving fund under terms and conditions laid down in the memorandum of agreement between CBS and DBS referred to in paragraph 8(a) (iii) (D) of Schedule 3 to this Loan Agreement. LA, Schedule 6, Para. 10

Completed.

Complied with, but modified with the agreement of ADB to establish a subsidiary loan rather than a revolving fund.

9. The Borrower shall cause DBS to provide appraisal support training to any participating organization that becomes involved in the micro-finance facility. LA, Schedule 6, Para. 11

Completed.

Complied with.

10. PART D – Policy and Legislative Reform Implementation of Part D of the Project shall be primarily enacted through TD with support from DTCI, the Department of Justice and the Office of the Attorney General. LA, Schedule 6, Para. 12

Completed.

Complied with, but under new agencies following public service restructuring as agreed with ADB during implementation.

11. The implementing agency for the upgrading of the chattels registries shall be the Department of Justice. LA, Schedule 6, Para. 13

Completed.

Complied with, but modified with responsibility transferred to MCIL when the companies section of MOJ was transferred to MCIL as part of public service restructuring in 2003.

12. The implementing agency for the new credit reference facility is expected to be an independent agency to be established by interested commercial banks; in that event the Borrower shall use its best efforts to facilitate the establishment of such a credit reference facility within the private sector by the commencement of

Completed.

Complied with initially, but agency disbanded

Appendix 6 49

No. Covenant Reference in Loan Agreement

Status of Compliance

year three of the Project. LA, Schedule 6, Para. 14

13. Without limiting the generality of Section 4.02 of this Loan Agreement, the Borrower shall provide adequate budget, starting with the 2001 budget, for the Borrower’s contribution to the Project. LA, Schedule 6, Para. 15

Completed.

Complied with.

50 Appendix 7

OVERALL ASSESSMENT

Criteria Assessment Rating Weight % Weighted

Rating Relevance Relevant  2.0  25  0.50 

Effectiveness Less Effective  1.5  25  0.38 

Efficiency Less Efficient  1.0  10  0.10 

Sustainability Less Likely  1.25  20  0.25 

Impact Significant  2.0  20  0.40 

Overall Assessment

Partly Successful 

  100  1.63 

Notes

(i) Relevance is the consistency of a project's impact and outcome with the government's development strategy, ADB's lending strategy for the country, and ADB's strategic objectives at the time of approval and evaluation of the design.

(ii) Effectiveness describes the extent to which the outcome, as specified in the design and monitoring framework, either as agreed at approval or as subsequently modified, has been achieved.

(iii) Efficiency describes ex post, how economically resources have been converted to results, using the economic internal rate of return, or cost-effectiveness, of the investment or other indicators as a measure and the resilience to risk of the net benefit flows over time.

(iv) Sustainability considers the likelihood that human, institutional, financial, and other resources are sufficient to maintain the outcome over its economic life.

(v) Overall assessment is the weighted average of the above criterias. (vi) All values are PCR mission’s judgments. (vii) Rating for sustainability derived using sub-criteria hence value is not 3.0. (viii) Weightings reflect the quality of the information available to make the assessment.

There was little information that would allow an assessment of efficiency owing to the absence of baseline data.