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LESSONS:

Viet Nam: Tea and Fruit Development Project

sector: Agriculture, Natural Resources, and Rural Development, Finance | country: Viet Nam, Socialist Republic of

The Independent Evaluation Department (IED) is in agreement with the lessons presented by the project completion report (PCR). The project highlights the importance of charging market interest rates to farmers for loans. Market-oriented interest rates promote the financial sustainability of participating financial institutions (PFIs) and the efficiency of subprojects financed by the sub-loans. Experience with the project shows that farmers were able to repay their loans at market rates of interest and increase their productivity. On the other hand, high and quicker repayment caused PFIs to be able to provide more frequent and larger loans than planned.

In addition to the lessons learned, the project showed that credit alone without technological improvements will not produce the desired improvements in farm technology. This outcome was made possible by the strong public-private partnership. Farmers and entrepreneurs were able to use borrowed funds from commercial sources and apply the modern technology that was provided by the public sector to improve the efficiency of their farms and enterprises.

Furthermore, quantifying impact using a more rigorous impact assessment methodology was not part of the project design and budget. This component would have been very helpful since the project was designed to assist the government in raising farm income and the value of agricultural production through the development of tea and fruit. As stated in the report and recommendation of the President, the project was envisioned to have a direct and indirect poverty reduction impact.

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