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LESSONS:

Rural Credit and Savings Project

sector: Finance | country: Cambodia

Factors – such as the pace at which nongovernment organizations (NGOs) would become licensed, existing funding cost, liquidity position of the eligible borrowers, prudential regulations the Rural Development Bank (RDB) would have to observe, and RDB’s limited capacity in credit expertise and risk management – affected the demand for the credit line.

Many reforms required for a project of this scope are of an institutional nature, therefore the time, resources, and conditions needed for the huge task of reforming both RDB and target NGOs were easily underestimated. The timeliness of consensus building, leadership development, and development of the technical skills needed to engineer and manage the changes that were expected to occur as a result of this Project did not coincide with the fast disbursing tranche design of the loan.

There was a perceived weakness, on the ADB side, in the technical monitoring and supervision of the Project since project management responsibilities changed hands six times over the life of the Project. Given that relationships with the implementing agencies cannot be built overnight, it can only be expected that each time a new project officer was brought on board at a different stage of the project cycle, the focus was on routine administrative monitoring for contract compliance rather than proactive troubleshooting and assistance in shaping and providing timely remedial action.

There are dangers that inappropriate credit may make some subborrowers poorer. This is because, if the subborrowers cannot repay the loan through no fault of their own, they will have a debt that they did not have before the licensed financial institution (LFI) tried to help them.

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