World Bank Document...BHMC - Bangladesh Handicraft Marketing Corporation BSCIC - Bangladesh Small and Cottage Industries Corporation CI - Cottage Industries ... SUBJECT: Project Completion

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 6766

PROJECT COMPLETION REPORT

BANGLADESH

SECOND SMALL SCALE INDUSTRY PROJECT

(CREDIT 825-BD)

May 6, 1987

Industrial Development and Finance DivisionSouth Asia Projects Department

This document has a restricted distribution n%nd may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authcrization.

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ABBREVIATIONS AND ACRONYMS

BHMC - Bangladesh Handicraft Marketing CorporationBSCIC - Bangladesh Small and Cottage Industries CorporationCI - Cottage IndustriesGOB - Government of BangladeshICD - Industrial Credit DivisionSCI - Small and Cottage IndustriesSSI - Small Scale IndustriesSSI I - First Small Scale Industry ProjectSSI II - Second Small Scale Industry ProjectSSI III - Third Small Scale Industry Project

CURRENCY EQUIVALENTS

At appraisal, the Bangladesh Taka (Tk) was officially valued atTk 15.50 to the US dollar. Currently, the external value of the Tk is fixedin relation to a basket of reference currencies, with the US dollar servingas intervention currency. In November 1986, the official exchange rate wasabout Tk 30.30. In this report the following rate is used, which is theaverage exchange rate during project implementation.

US$1 = Tk 18.30Tk 1 = US$o.0546

FISCAL YEAR (FY)

GOB : July 1 - June 30BSCIC : July 1 - June 30Commercial Banks: January 1 - December 31

FOR OFFCA^L USE ONLYTHE WORLD BANK

Washington, DC 20433U.S A

Offmle M O.tevCOG..AWOp.atmm Evt

May 6, 1987

MEMORANDUM TO 'HE EXECUTIVE DIRECTORS A1lD THE PRESIDEN

SUBJECT: Project Completion Report on Bangladesh - Second Small ScaleIndustry Project (Credit 825-BD)

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on Bangladesh - Second Small Scale Industry Project (Credit825-BD)" prepared by the South Asia Projects Department. Under the modifiedsystem for project performance auditing further evaluation of this project bythe Operations Evaluation Department has not been made.

Attachment

This document has a restricted distribution and may bX, ed by recipients only in the performanceof their official duties. Its contents may not otherwise be disclos without Worid Bank authoriation.

FOR OFFICIAL USE ONLY


BANGLADESH - SECOND SMALL SCALE INDUSTRY PROJECT

(CREDIT 825-BD)

TABLE OF CONTENTS

Page No.

Basicgh ata Shet......... ........................................ ii

I . INTRODUCTION 1.............. ... 1

II. SECTORAL BACKGROUND ...... ... 2

A. Economic Setting 2B. The Industrial Sector 2C. Financial Environment .. .......... 3D. Small Scale Industries Sector . 4

III. PROJECT DESCRIPTION .... ........ ........... . 4

A. Origin 4B. Project Objectives 5C. Project Components . 7

IV. PROJECT IMPLEMENTATION 7...*.......... .7

A. Subloan Component 71. Preparatory Work 72. Subproject Appraisal 93. Supervision and Collection Performance 94. Reporting Performance ............... 10

B. Technical Assistance Components .... 111. SSI Promotion and Extension Services 112. Cottage Industry Component 12

V. PROJECT IMPACT 3 ............... 13

A. Institution Building 131. Nationalized Commercial Banks .... 132. Bangladesh Small and Cottage Industries Corporation.. 15

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Page No.

B. Subproject Financing .. ................................. 161. Subloan Characteristics ............................. 162. Subproject Characteristics ......................... 173. Economic Impact of Subprojects Financed ............. 18

VI. ROLE OF IDA ............. , ......... 19

VIl. CONCLUSIONS AND LESSONS LEARNED ...... .,,.............. 20

ANNEXES

1 Projected and Actual Cumulative Disbursements ......... 222 Characteristics of Subprojects Financed ............... 233 Cumulative Collection Performance of Participating Banks 254 Portfolio Classification According to Operating

and Repaying Status .......... ... ................ ... 26

ATEACHMENTS

1 Comments from Bangladesh Bank ....... .................. 272 Comments from Sonali Bank ............................. 31



(CREDIT 825-BD)

PREFACE

This report reviews the implementation of the Second Small ScaleIndustry Project (Credit 825-BD) in Z-tladesh. It assesses the performanceof the main project implementing agencies, namely, the two nationalizedcommercial banks, Janata Bank and Sonali Bank, and the Bangladesh Small andCottage Industries Corporation (BSCIC), and discusses the economic impact ofthe small and cottage industry (SCI) subprojects financed. The US$7.0 mil-lion credit was approved on June 8, 1978 and was declared effective onSeptember 15, 1978. By April 4, 1985, the day of the last disbursement,US$4.85 million had been disbursed. The undisbursed amount of US$2.15 mil-lion was cancelled on June 28, 1985. A third lending operation for SCI wasapproved on September 16, 1980 and closed on December 31, 1986. This ProjectCompletion Report was prepared by the Industrial Development and FinanceDivision of the Projects Department, South Asia Regional Office, based ondata prepared by Janata and Sonali Banks and BSCIC. Some information wasalso provided by the Office of Foreign Aided Projects Audit, Government ofBangladesh.

Comments received from the Borrowers have been taken into accounc infinalizing the report and are reproduced as Attachments 1 and 2.

This project has not been audited by the Operations EvaluationDepartment.

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(CREDIT 825-BD)

BASIC DATA SHEET(Amounts in US$M)

CREDIT STATUS

As of February 1987Original Disbursetd Cancelled Repaid Outstanding

Credit 825-ED 7.00 4.85 2.15 0.00 4.85

CUMULATIVE CREDIT DISBURSEMENT

FY79 FY80 FY81 FY82 FY83 FY84 FY85

ti) Planned 0.75 3.35 6.05 7.00 7.00 7.00 7.00(ii) Actual - 0.26 2.50 3.64 4.00 4.49 4.85

Percentage of(ii) over (i) 0 8 41 52 57 64 69

OTHER PROJECT DATAActual

Board Approval 06/08/78Credit Agreement 06/16/78Effectiveness 09/15/78Credit Closing 09/27/84

Borrower People's Republic of BangladeshExecuting Agencies Sonali Bank, Janata Bank. and Bangladesh

Small and Cottage Industries Corporation

Project ComponentsSubloans US$6.52 millionTechnical Assistance US$0.48 million

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(CREDIT 825-BD)

MISSION DATA

Month Number of Number of Staff Date ofYear Weeks Persons ieeks Report

Appraisal 8/77 3 4 12 05/26/78Supervision 7/78 3 1/2 3 10 1/2 09/14/78Supervision 6/79 2 1/2 3 7 1/2 07/24/79Supervision 8/79 1 1 1 09/21/79Supervision il/79 2 1 2 NASupervision /a 2/80 2 1/2 4 10 08/13/80Supervision 7i 7/81 1 1/2 1 1 1/2 09/14/81Supervision 6/82 2 2 4 NASupervision 11/82 1 1 1 NASupervision 8/83 2 2 4 10/27/83Supervision /c 8/84 2 2 4 09/01/84.3upervision 5/85 2 1 2 NACompletion 10/85 1 1/2 3 4 1/2 11/30/86

/a Part of appraisal of 8SI III.7T Supervision missions from here on were for both SSI II and IIJ-Tc Part of preappraisal of SSI IV.

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STAFF INPUT(manweeks)

FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY85 FY86 Total

Preparation 1.0 1.0Appraisal 24.0 24.0Negotiations 6.0 6.0Supervision _ 18.0 13.0 1.5 4.0 1.0 4.0 6.0 4.5 52.0

Totals 1.0 30.0 18.0 13.0 1.5 4.0 1.0 4.0 6.0 4.5 83.0

FOLLOW-ON PROJECT

Third Small Scale Industry Project, Credit 1065-BD, approved on September 16,1980 in the amount of SDR 26.7 million (US$35 million).



(CREDIT 825-BD)

HIGHLIGHTS

1. Credit 825-BD, which financed the second SSI project in Bangladesh,was designed taking into account the lessons learned from the first SSIproject (Credit 353-BD). The roles of institutions providing financial andttchnical assistance to SSI needed to be clarified and rationalized. Theinstitutions themselves needed assistance to improve their capability toperform their respective functions effectivelv. Finally, lending criterianeeded to be sharpened to ensure the financing of economically sensible SSIsubprojects.

2. Accordingly, the second SSI project aimed at achieving the followingspecific objectives: (a) to introduce reforms in the institutional frameworkfor assisting small and cottage industries (SCI) by strengthening institu-tions and redefining their roles; and (b) to provide finance for fixedinvestments and permanent working capital requirements in the establishment,expansion, balancing and modernization of viable SCI subprojects, and fortechnical assistance. In practical terms, the institut!onal objectives ofthe project meant rationalizing the institutional set-up by assigning thefinancing role to the banks and the technical assistance role to theBangladesh Small and Cottage Industries Corporation (BSCIC), the governmentagency responsible for SCI promotion. The project also included technicalassistance for these institutions to build their capability to play theirroles effectively (paras. 3.04-3.06).

3. Overall, the project objectives were only partially achieved. Theproject was able to delineate the roles between the banks and BSCIC, afterthe agreed transition period, but BSCIC gave up its financing role veryreluctantly and only for IDA funds. Up to now, BSCIC still attempts toregain its previous role in SSI financing by proposing new financing schemesfor support by GOB and other donors and by trying to influence the Governmentto reverse the arrangements initiated under the project (paras. 5.06-5.08).Since its major concern has been in regaining its former role in financing,BSCIC only half-heartedly carried out its assigned tasks in promotion andextension. Thus, the impact of the promotion and extension services com-ponent on SSI development was marginal (paras. 4.13-4.20).

4. The project assisted the banks in building their capability forproject lending by organizing small industry departments within the banks, bytraining staff in appraisal and supervision, and by developing appropriatesystems and procedures for loan processing, procurement and disbursement,loan administration and end-use monitoring. As a result, the banks have

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created some capacity for project appraisal and loan processing(paras. 5.01-5.05). However, they have not yet developed sufficientcapability for project supervision and loan collection. The collectionperformance of the banks has not reached a satisfactory level and has onlymarginally improved over time. The proposed fourth SSI project was droppedfrom the lending program since the banks could not achieve minimum collectiontargets, which were conditions for negotiations (paras. 4.08-4.10).

5. Despite these weaknesses, the banks were able to finance 175 SSIunits and 760 CI units, only a little fewer than the appraisal estimates of200 and 1000 units, respectively. These projects resulted in investmentsof about Tk 130 million (US$7 million). The SSI investments generatedemployment for about 3,150 persons at a cost per job of about US$2,000. Thecottage industry subprojects are estimated to have generated 2,000 part-timejobs at a cost per job of about US$100. These economic benefits, however,are clouded by a possible adverse impact on income distribution and overallfinancial discipline arising from the poor repayment of subloans. About 601of the subborrowers are considered to be wilful defaulters who are notrepaying their loans despite operating reasonably profitable businesses(paras. 5.10-5.18).

6. In summary, the project results have been mixed. The lendingcomponent has resulted in some economic impact by generating employment,output and some exports, but with possible negative social side effects oncredit discipline and income distribution. Institution building objectiveswere partly achieved within the banks but hardly in BSCIC. The delineationof roles between BSCIC and the banks was achieved but has continued to bechallenged by BSCIC.

7. Specific lessons learned under the project include the following:

(a) Among the financial institutions in Bangladesh, the large commercialbanks appear to be the right channels for a broad-based lendingprogram for SSI, considering their wide branch network, their tradi-tional banking relationships with industry and commerce and theirresource mobilization capability. However, for them to become effec-tive in this activity, they need to strengthen their staff through anon-going training program, reduce staff turnover to retain theexpertise developed, and improve their project supervision andcollection procedures (para. 5.05).

(b) Beyond institution building aspects for the commercial banks, theGovernment needs to address the problem of credit and financialindiscipline among borrowers through clear and consistent policy,determined support for the financial system in enforcing contractsand an efficient legal systew. Unless these basic problems of thecredit environment are resolved, the viability of lending programsas well as financial institutions themselves will be undermined(para. 2.06).

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(c) The lesson to ba learned from IDA's relationship with BSCIC is quiteobvious. Unless there is clear agreement with the implementingagency and consequent strong commitment by it to its role, no legalcovenant will ensure acceptance of roles and effective projectimplementation according to the objectives spelled out at appraisal(para. 5.08).

(d) Supporting marketing activities by government corporations inBangladesh, such as BHMC, should be avoided since government policiesand procedures make it difficult for government operations to respondefficiently to rapid market developments; it might be more difficult,but more fruitful, to develop mechanisms to assist the private sectorin this area. This approach would also conform with current govern-ment policy of expanding the role of the private sector in industrialactivity (para. 4.20).



(CREDIT 825-BD)

I. INTRODUCTION

1.01 In June 1978, IDA aoproved a credit of US$7.0 million in support ofthe Second Small Scale Industry Project (SSI II) in Bangladesh. The project,which was appraised in August 1977, aimed at (i) reforming the institutionalframework for SCI development by redefining roles and strengtheninginstitutions, and (ii) providing finance for fixed investments and permanentworking capital for SCI unitsg and for technical assistance. The Credit wasdisbursed until April 4, 1985, after a two-year extension, but only US$4.85million, or 70% of the Credit was utilized. Although the Credit was fullycommitted by August 1983, only 70% of the total was finally disbursed due tothe depreciation of the Taka over the project life, lack of serious commit-ment on the part of some subloan applicants, lack of attention by .he par-ticipating banks in cancelling their subloans and replacing them with otherapplications and lack of interest by BSCIC in completing the components forSCI promotion and extension.

1.02 A total of 175 small scale industry (SSI) units and 760 cottageindustry (CI) units were financed which resulted in total investments ofabout US$7.0 million and direct employment of about 3,150 full time and 2000part time workers at a fixed cost per job of about US$2,000 and US$100,respectively. The average subloan size for SSI units was US$26,000 comparedwith the maximum allowable amount of US$110,000, indicating that adequateattention was given to smaller units. Many of the subprojects are based onindigenous or locally fabricated inputs. A third of the subprojects arelocated in the main districts of Dhaka and Chittagong but the remaining twothirds are quite evenly distributed among the other 16 districts. The lend-ing program, however, suffers from a very poor collection performance, withabout 60% of subborrowers suspected to be willful defaulters.

1.03 In the course of project implementation, the problem of overlappingfunctions between the Bangladesh Small and Cottage Industries Corporation(BSCIC) and the participating nationalized commercial banks, Janata andSonali, was resolved when the banks were made fully responsible for the SSIlending function, 14 months past the date of effectiveness, and BvCIC wasdirected to focus on promotion and extension services. BSCIC, however, gaveup its credit function only reluctantly and has made repeated attempts toinfluence policy to regain its credit sanctioning function. Institutionbuilding objectives of the project were only partially achieved for the banksdue to high staff turnover but hardly at all for BSCIC due to the basicdisagreement about its role as proposed under the project. Credit indis-cipline among borrowers, resulting in high arrears, has undermined theviability of this lending program.

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II. SECTORAL BACKGROUND

A. Economic Setting

2.01 During the Second Five-Year Plan period (FY81-85), Bangladesh hadto cope with several adversities, most of which were beyond the country'scontrol. In the first two years of the Plan period, Bangladesh's terms oftrade deteriorated due largely to the decline in jute export prices and tohigh oil import prices. At the same time, aid inflows decreased in realterms, requiring cutbacks in public inve3tment. In addition, in FY82,drought conditions reduced agricultural output and incomes. In FY83,agricultural production recovered significantly due to more favorableweather conditions and increased use of agricultural inputs; but most non-agricultural sectors, especially industry, remained depressed, largely due toan unavoidable reduction in private disposable income, consequent on theGovernment's far-reaching adjustment measures in the FY83 budget in responseto the deteriorating economic and financial situation.

2.02 Economic performance in FY84 and FY85 were again affected by severefloods which caused large foodgrain losses and necessitated large foodimports. On the positive side, FY84 witnessed a gradual recovery in thenon-agricultural sectors, which accelerated in FY85. Industry, inparticular, rebounded sharply from the weak performance of the precedingyears due to further liberalization and privatization measures, easier accessto imports during a period of less restricted foreign exchange resources,increased output of non-traditional exports (especially garments) andincreased demand generated by a sharp expansion of private credit. Given itsformidable structural constraints and its high vulnerability to nationalcalamities and adverse external developments, the achievement by the economyof an average growth of about 4% p.a. during the Second Five-Year Plan periodis remarkable.

B. The Industrial Sector

2.03 The manufacturing sector in Bangladesh is small and accounts forabout 12% of GDP and 8% of total employment. The most important subsector istextiles which include jute, cotton, and synthetic textiles and contributeabout a third of industrial value added. Next come food processing (25%) andchemicals (20%). Between FY79 and FY85, manufacturing value added grew atabout 5% p.a., with growth accelerating in FY84 and FY85. Higher growth inthe last two years has been mainly in the food processing, paper, chemicals,basic metals and mach;nery subsectors. Progress in industrial developmenthas been mainly with respect to import substitution, particularly infertilizer, steel and pharmaceuticals manufacture. Export development hasbeen significant almost exclusively only in garment manufacture as East Asiancompanies located themselves in Bangladesh which up to recently was exemptfrom textile quotas.

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2.04 Industrial growth during the Second Five-Year Plan period, and par-ticularly in the last two years, can be attributed to increased internal andexternal demand for manufactured goods, the expansion of financing for theprivate sector and the initial policy reforms embodied in the New IndustrialPolicy. These reforms respond to GOB's strategy of promoting the role of theprivate sector. Over a hundred public enterprises were divested. Investmentapproval procedures were relaxed and price control mechanisms were removed insome instances. The trade and industrial incentive regime is undergoingreview and foreign exchange and import restrictions were liberalized throughthe operation of a large secondary foreign exchange market. The mostimportant task facing Government is to ensure that the growth momentum ismaintained and enhanced by ensuring that sufficient investment funds are madeavailable and allocated to the most eff4cient activities. This entailsresolving the problem of credit indiscipline (para. 2.06), further reformingthe system of protection and tariffs and pursuing greater efficiency ofpublic sector enterprises.

C. Financial Environment

2.05 The financial system in Bangladesh is relatively underdeveloped inrange and diversity of instruments and institutions. The Bangladesh Bank,the central bank, regulates the system but the Government plays the dominantrole not only in policy formulation but also in ownership of financialinstitutions and, consequently, in their management. Four nationalizedcommercial banks dominate the financial sector controlling about 65% of totalassets. Other important players are 8 private domestic banks, 7 foreignbanks and four development banks, three of which are government-owned. Otherfinancial institutions include an investment corporation, one housing financecompany, three insuirance companies, a relatively inactive stock exchange andpost office savings banks.

2.06 The system has performed satisfactorily in deposit mobilization, withdeposits growing atI18X p.a. in the past five years; in increasing credit tothe private sector in response to the change in Government policy; and inproviding finance for industry in terms of traditional working capitalfacilities and fixed capital loans. The financial system, however, isexperiencing a deep financial crisis caused by a high level of non-performingassets and, in the case of development banks, precipitated by very poor loanrecovery performance. A recent Banking Commission Report estimates thatoverdues amount to about 25% of total advances of the public financialinstitutions.

D. Small Scale Industries Sector

2.07 GOB currently defines an SSI unit as an industrial enterprise withup to Tk 5 million (US$165,000) in fixed assets, excluding land and

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buildings. I/ At the time of appraisal, an SSI unit was defined as anindustrial establishment with up to Tk 2.5 million (equivalent to US$160,000at that time) in fixed assets, including land and buildings. While thedefinition has hardly changed in nominal dollar amounts, the exclusion of thecosts of land and buildings in the definition has not totally compensated forinflationary effects so that, under the current definition, the coverage hasbeen reduced. Despite this reduction in coverage, SSIs are estimated tocontribute about 43% of industrial value added and provide full and part-timeemployment to about five million persons, or 82% of the industrial laborforce. Small enterprises account for over 20% of manufactured exports withgarments, leather and handicrafts being the major SSI export items. About425,000 units (including handlooms) comprise the sector and are distributedthroughout the country, although with heavy concentrations in and around theurban districts of Dhaka, Chittagong, Khulnat Comilla and Sylhet.

2.08 Small scale industrial activi-ty has been mostly in food processing,powerloom and handloom weaving, light engineering and wood products. Morerecently the manufacture of ready-made garments for export and pharma-ceuticals for the domestic market are acquiring importance. SSIs comparefavorably with large firms on efficiency measures in most subsectors in whichSSIs are active. In these major groups, SSIs have lower capital-labor ratiosand higher value added per unit of labor and capital cost. The data,however, on which these comparisons are made contain a significant margin oferror due to weak accounting and statistical practices; nevertheless theyindicate that SSIs compare favorably with large firms in financial andeconomic performance.

III. PROJECT DESCRIPTION

A. Origin

3.01 First SSI Project. In December 1972, a US$3 million IDA credit(Credit 353-BD) was made for the First Small Scale Industry Project (SSI I)in Bangladesh. The Credit, made right after Bangladesh's iIlependence,reactivated the Small Scale Industry Project in East Pakistan (Credit192-PAK), which had been approved in June 1970. No new appraisal report wasissued for Credit 353-BD since it was considered fundamentally the same asCredit 192-PAK, with objectives and institutional arrangements unchanged.

1/ There has been a recent revision in the definition of an SSI unit as"an industrial undertaking engaged either in manufacturing process orservice activities, within a total investment of up to Tk 15 million(US$495,000) and investment in machinery and equipment not exceedingTk 10 million (US$330,000) excluding taxes and duties." This new defini-tion appears not only to restore, but to expand somewhat, the coverage ofSSI compared with that at the time of appraisal.

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The US$3 million was provided to finance the foreign exchange requirements ofsmall enterprises and a consultant to assist the Bangladesh Small IndustriesCorporation (BSIC) in project appraisal. Under the project, BSIC, whichlater became the Bangladesh Small and Cottage Industries Corporation (BSCIC),a semi-autonomous government corporation under the Ministry of Industries,was responsible for screening, appraising and supervising subprojects, while,participating commercial banks were responsible for assessing creditworthi-ness of clients and disbursing and collecting subloans. Keeping in mind themajor changes in economic conditions, the industrial structure, and smallindustry institutions which took place after independence, the Credit, whichwas disbursed by March 1978, achieved only modest results due to overlappinginstitutional arrangements which resulted in conflicting responsibilities,vague accountabilities and friction between institutions. In addition, lackof focused subproject selection criteria resulted in the financing of highlyimport-dependent, capital-intensive subprojects located mainly in urban areasand concentrated in two subsectors, with marginal impact on employment,regional development and linkage with agriculture.

3.02 In 1975, the Bank made a conscious decision to increase lending tosmall enterprises since it was believed that the SSI sector had benefitedlittle from previous lending in support of industrial development. Earlierstudies showed that, in the absence oi explicit support programs, SSI'saccess to credit, technology and markets was not adequate enough. to allowthem to achieve their growth potential. Discussions in the Bank during the1975-77 period focused on how the Bank could help small and mediumenterprises overcome these handicaps. The discussions culminated with thepublication in February 1978 of a policy paper entitled, "Employment andDevelopment of Smal'l Enterprises," which laid down the formal basis for Banklending to small enterprises. SSI II was one of the first projects financedby the Bank in accordance with the policies laid down in this policy paper.

3.03 General principles in the policy paper as well as lessons learnedfrom Credit 353-BD were the basis for the design of the Second Small ScaleIndustry Project:. With the help of a consultant who looked into the specialissue of BSCIC's role, project appraisal was urdertaken in August 1977. TheUS$7 million credit, which was approved and signed in June 1978 and becameeffective in September 1978, was designed to provide both local and foreignfinancing to be more responsive to SSI needs, define subproject eligibilitycriteria more sharply to direct lending to economically desirable activitiesand initiate the process of delineating institutional responsibilities, withthe commercial banks (Sonali and Janata Banks) ultimately to be made fullyresponsible for credit operations and BSCIC to focus on the provision oftechnical and marketing services to SSI.

B. Project Objectives

3.04 As stated in the appraisal report, the objectives of the projectwere: (i) to introduce reforms in the institutional framework for assistingsmall and -ottage industries by strengthening institutions, redefining their

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roles, and initiating programs to tackle problems constraining SCIdevelopment; and (ii) to provide finance for fixed investment and permanentworking capital requirements of new, expansion, balancing and modernizationSCI subprojects, and for technical assistance.

3.05 Under the first SSI project, the SSI financing function was under-taken jointly by BSCIC and the banks. BSCIC performed project appraisal andsupervision while the banks were involved in assessing client creditworthi-ness and in disbursing and collecting loans. This arrangement was cumbersomeand resulted in overlapping responsibilities, institutional friction, delaysin loan processing and poor loan recovery performance. The second SSIproject aimed at delineating the roles of BSCIC and the banks by making thebanks fully responsible for the financing function and assisting BSCICredirect its efforts towards SSI promotion and extension services. Thisarrangement was expected not only to resolve the problem of overlap and theconsequient lack of responsibility and accountability but also allow BSCIC tofocus on technical assistance and build its capability in this area.

3.06 In order to direct lendirg away from subsectors which are import-dependent, capital intensive and burdened with over-capacity, and intosubsectors which are export-oriented, labor intensive and economicallyviable, several eligibility criteria were established for project selection:

(a) Exports. A subproject has to be a net foreign exchange earner withstrong assurances of export sales or local sales at competitiveprices.

(b) Local Raw Materials. At least 60% of the value of raw materials andother inputs were to be local with sufficient regional availabilityestablished during appraisal.

(c) Labor-Intensive Methods. Fixed investment per job created should notbe greater than US$3,000.

(d) Relative Efficiency. A subproject should have a profit and valueadded to fixed investment ratios at least as high as the averages forlarge-scale firms in the same product line.

(e) Capacity Utilization. A subproject should be expected to have a twoshift production schedule, taking into account markcts, raw materia'lavailability, and operations of other units in same subsector.

(f) Decentralization. Production sites should be located outside thecities of Dhaka, Chittagong or Khulna.

(g) Agricultural Links. A subproject should be related to agriculturalproductivity/earnings either in processing crops or providing inputsor services to agriculture.

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(h) The maximum amount of subloan should not exceed US$110,000, and thetotal size of the project should not be higher than US$160,000.

C. Project Components

3.07 To achieve the above objectives, the project had the followingcomponents:

(a) a credit line to Janata Bank and Sonali Bank for on-lending to SCIsto finance both local and foreign costs of subprojects, includingpermanent working capital, up to a maximum of 70% of the total sub-project costs (US$6.3 million); a special capital fund which wouldprovide part of the equity resources, up to 15% of project costs, incases in which the entrepreneur is unable to make the normal 30%contribution (US$200,000);

(b) a cottage industry component to provide credit, product developmentassistance and specialized extension services to producers of jute,cane and bamboo handicrafts (US$130,000); and

(c) assistance to BSCIC to improve its capability for SSI promotion andextension work (US$350,000).

3.08 The total project costs and financing plan were as follows:

IDA GOB/BSCIC Sponsors Total(In US$ Million)

Subloans 6.32 0.17 2.74 9.23Special Capital Fund 0.20 - - 0.20Cottage Industry Component 0.13 0.02 0.12 0.27BSCIC 0.35 0.15 - 0.50

Total 7.00 0.34 2.86 10.20

IV. PROJECT IMPLEMENTATION

A. Subloan Component

1. Preparatory Work

4.01 After the Credit became effective in September 1978, the next ninemonths were devoted mainly to establishing the SSI organizational structurewithin the banks, training of staff and developing appropriate procedures andtorms for subloan processing. By June 1979, the Industrial Credit Divisions(ICD) of the participating banks were nearly fully staffed except that bothbanks experienced difficulties in attracting project engineers. At thattime, there were many employment opportunities for engineers overseas, espe-

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cially in the Middle East. Also, engineers found it difficult to see them-selves integrated into the regular career stream of commercial bankers. Lackof engineers continued to plague both banks throughout the project life andwas reflected in weak technical appraisals of subprojects. A proposal bythe banks to hire engineers as consultants to assist in technical appraisalsand to train SrD officers in the process was not implemented due to lack offollow-up by the banks. Under SSI III, consultancy funds were provided forthis purpose, among others, but were not utilized again due to difficultiesin locating and employing suitable consultants.

4.02 Training of SSI officers of the participating banks started in late1978. Eight key officers of the ICDs were sent on an intensive on-the-jobtraining with commercial banks in India; this was completed in December 1978.Other SSI officers were sent to local training courses with the two localdevelopment banks and with local training institutes. Subsequent training ofother SSI officers in the ICDs as well as major branches was undertakenregularly and closely monitored through the banks' quarterly reports to IDA.A total of 70 bank officers were trained under the project. The provision ofstaff training under the project was therefore quite adequate. The generalstaffing problem was not due to lack of trained staff but due to the constanttransfer of trained staff out of the SSI operations of the banks.

4.03 During this preparatory period, the banks and BSCIC started promotingthe credit program among prospective SSI applicants. The banks resorted tonewspaper and radio advertising as well as direct contacts with chambers ofcommerce and industries in the main industrial centers. Brochures on thecredit program were prepared and distributed. A series of circulars weresent to the banks' regional and district branches to inform them of lendingpolicies and procedures, eligibility criteria, processing formats and pre-screening requirements. Promotion and advertising focussed especially onsmaller units with assets of less than Tk 1 million since the initialresponse was mainly for larger projects. The banks were required to ensurethat 401 of the credit went to smaller projects. At several points duringproject implementation, further processing of larger subloans had to beinterrupted to allow the required ratio to be restored.

4.04 Preparatory work in launching the credit program under the projectwas generally adequate. Despite the delay of about nine months in subloanprocessing due to the preparatory work, subloan processing quicklyaccelerated after that such that in a little over one year the subloancomponent was fully committed. The appraisal of SSI III was advanced andwas undertaken in February 1980 to ensure continuity with SSI II. Laterdevelopments, however, proved this expectation to be too optimistic as can-cellations and the local currency devaluation released previously committedfunds under SSI II. Due to lack of attention by the participating banks andthe availability of funds under SSI III, these funds were not recommitted tonew applications resulting in a large cancellation of 30% of the Credit.

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2. Subproject Appraisal

4.05 As envisaged at appraisal, two subproject appraisal procedures wereestablished, one for small subprojects with fixed assets of up to Tk 1 mil-lion (US$65,000) and another for larger subprojects with fixed assets aboveTk 1 million. For small subprojects the appraisal reports were simplifiedand were patterned after the commercial banks procedures for financialanalysis of loan applications. In addition, the banks had to use theeligibility criteria (para 3.06) in screening subprojects to ensure selectionof economically desirable investments. For larger subprojects, the appraisalreports were more detailed and were supposed to include economic analysis.

4.06 In general, the subproject appraisals by the participating,banks wereweak. Since many of the SSI officers were new to project appraisal methods,there was a tendency to generalize the approach according to the generalterms and conditions of the credit program. This was true especially withregard to subloan maturities, grace periods and capital structuring. Almostall subloans of Sonali Bank were given a standard maturity of 10 years and agrace period of 12 months, regardless of cash flow projections and thespecific nature of subprojects submitted. Similarly, Janata subloans weregiven a standard maturity of 12 years and a grace period of 36 months. Theminimum equity requirement of 30% was made the rule in most cases by bothbanks. There was also weakness in assessing existing capacity for a givenactivity, e.g., rice milling, especially in a given market area. Appraisalstended to quote national figures when the data requirement for decisionmaking was obviously for a given local market. There was also a tendencyto standardize the appraisal of the technology of a given activity.Fortunately, considerating the simple technological nature of most sub-projects financed, this did not develop into a serious problem.

4.07 Based on the most recent portfolio analysis of the banks in December1985, despite weaknesses in appraisal reports, the subprojects financed havebeen generally sound. Of the total 175 SSI subprojects financed, only eightwere operating with serious problems, 12 had been closed and two had beendelayed. The balance of 152 subprojects of 87% were operating profitabilitywithout problems or with minor, controllable problems. However, of these,110 were in arrears and were therefore considered to be willful defaulters(Annex 4).

3. Supervision and Collection Performance

4.08 More significant than weak appraisals were the weak procedures andsystem of project supervision and end-use monitoring of _he participatingbanks. While much attention was given to organizing the project appraisaland loan sanctioning process, hardly any attention was given to setting-upeffective end-use monitoring, project supervision and subloan collectionsystems. It was only much later in project implementation that concern overpoor collection performance by IDA supervision missions signalled to thebanks the need to strengthen this aspect of the lending program. Within the

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ICDs, the banks organized separate cells for project supervision. At thebranch level, the branch managers were made directly responsible for achiev-ing collection targets. Close coordination between the supervision cells andthe branches was maintained through visits by ICD officers to the branchesand by regular reporting by the branches on collection performance to theICDs.

4.09 In the beginning, the poor collection performance of the participat-ing bar.ks was mainly due to a lack of concern over the absolute amount ofarrears which was very small in relation to the banks' total portfolio, andan attitude that "eventually" these loans would be repaid (in the meantime,interest is compounded and penalties are assessed). This laid-back attituderesulted in unclear accountability for non-performance, with collectionsgiven low priority by branch personnel whose performance was assessed on thebasis of many other functions.

4.10 Since pressure started to be exerted on the banks by GOB to improveperformance in view of IDA actions in this regard, 1/ there has been somechange in attitude of upper management levels of the banks. Internal collec-tion target setting, frequent reporting and frequent visits to branches byICD staff have been used to impress on branch personnel the importance ofthis problem. The managements of the participating banks have started toconsider performance in this area as an important determinant for personnelreward or penalty (e.g, place of assignment). However, improvement has beenvery slow since borrowers, who have been used to sloppy collection efforts inthe past, have acquired bad habits and translating management resolve intobranch action is a slow process in Bangladesh. Collection performance hasonly slowly improved from a collection ratio of 24% in June 1984 to about 35%in June 1986 (Annex 3).

4. Reporting Performance

4.11 The DCA had required that the banks submit quarterly progress reportson subloan commitments, disbursements, recoveries, and arrears as well as onstaffing levels and training of staff. In general, the banks regularlysubmitted the required reports to IDA although usually about two months late.The reports contained the information as required but usually did not includeany analysis of the data given. Moreover, the reports were prepared somewhatperfunctorily to meet a requirement, rather than to be used as a managementtool to monitor project implementation, identify problems and proposesolutions. Thus, despite regular quarterly reporting, the reports were notused to identify the problem of cancellations of subloan applications andtheir replacement by new applications. This shortcoming was principally

1/ Improvement of collection performance was made a condition for theprocessing of the Fourth SSI Project and the Industrial Sector Credit andfor the extension of the closing date of SSI III.

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responsible for the large cancellation under the credit. The staffing andtraining reports were not used to identify the staff turno?er problems andpropose solutions. This was the main reason why the institution buildingefforts did not achieve as much as envisaged at appraisal. The report oncollection and arrears were hardly used to improve collection performance.

4.12 Audit reports of the banks were submitted regularly but usually aboutsix months late due to problems with auditors, the long approval proceduresand problems of printing. The audit reports which were prepared by theregular auditors of these banks were generally satisfactorily. However, onhindsight and in view of the poor collection performance of the banks underthe credit and the overall problem of credit indiscipline in the country, thereports could have signalled the potential liquidity and solvency problems ofthese banks. A financial sector studv is currently being undertaken inBangladesh to look into this problem, among others, more closely andconclusively.

B. Technical Assistance Components

1. SSI Promotion and Extension Services

4.13 Objectives. One of the objectives of the project was to reorientBSCIC to, and strengthen its capabilities in, SSI promotion and extension.The project provided consultancy funds to BSCIC to allow it to employ apromotion advisor for 12 months; an industrial engineer to assist and guideBSCIC in building up a unit to collect, analyze and publish information inmachinery and production processes suitable for SSIs i.k Bangladesh; andshort-term consultants (totally 24 person months) to assist in the prepara-tion of subsector studies, area potential studies and project profiles to beused in BSCIC's promotion and extension program.

4.14 Implementation. Under the project, BSCIC expanded its promotion andextension department at headquarters by converting it into a full-flegeddivision under a director and creating two separate departments within thisnew division, one responsible for promotion and the other for extension.BSCIC also prepared subsector and area potential studies as agreed and, onthe basis of these studies, prepared and published project profiles whichwere disseminated to private entrepreneurs. In spite of these useful steps,BSCIC, however, never moved from completion of these tasks into the develop-ment and implementation of a systematic promotion and extension program forwhich these tasks were only preparatory. Contacts with private entrepreneurswere done on an ad hoc basis and were principally with occupants of BSCIC'sindustrial estates, rather than a systematic effort based on the subsectorand area studies completed.

4.15 After an 18-month delay, BSCIC located and employed a promotionsadvisor for a 12-month period. Although he was highly qualified, especiallyin training of extension officers and in entrepreneurship development, BSCIChardly utilized his services. He was pla'ed in an office and practically

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forgotten. His recommendations, which were reviewed by an IDA supervisionmission and found to be relevant to BSCIC's needs, were ignored. His contactwith regional staff was limited by lack of a program to utilize his services.The impact of this advisor on BSCIC's promotion program was practically nil.BSCIC employed this consultant merely to comply with a project requirement,rather than to utilize his services in building up its promotion and exten-sion capability.

4.16 After a two and a half year delay, BSCIC employed the second advisorwho was supposed to assist in the training of extension officers. Thisoccurred, however, after BSCIC management hod changed and the new managementhad modified the priorities of the organi.ation. Under this management,cottage industries became a priority and Whe advisor was used to assist indeveloping a strategy for CI development. this advisor appeared to have moresuccess within BSCIC since he had access to BSCIC's management. However,right after the compLetion of his assignment, BSCIC's management andpriorities again changed and the advisor's recommendations for CI developmentwere set aside.

4.17 Aside from a numerical expansion of BSCIC's promotion and extensionstaff, the preparation and completion of some subsector studies, area poten-tial studies and project profiles and the employment of two advisors, one ofwhom was practically unutilized, the project component did not achieve whatwas envisaged at appraisal, namely, the development of an effective andsystematic promotion and extension program for SSI in support of the financ-ing program. Only US$84,000, or 24% of the US$350,000 IDA funds made avail-able for this component was utilized, indicating, in money terms, the non-completion of this component.

2. Cottage Industry Component

4.18 Objectives. The cottage industry component, which was to besupported by US$130,000 of IDA funding, consisted of assistance to thejute, cane and bamboo handicraft industry in market development, designconsultancy, training and extension services. Cottage industry units werealso eligible for financing under the subloan component and a total of 760 CIunits were financed with loans amounting to US$160,000 (paras 5.10-5.18).BSCIC, through its wholly-owned subsidiary, the Bangladesh HandicraftMarketing Corporation (BHMC), was also responsible for this component. BHMCis a public sector company actually engaged in the export trading of hand-icraft products but has a broader mandate of performing a catalytic role forthe promotion of private marketing agencies. The US$130,000 funding for BHMCconsisted of US$30,000 for market development activities and US$100,000 fordesign consultancy activities.

4.19 Implementation. Under the project, BHMC expanded its extensionservice program to increase its coverage of primary producers of jute, caneand bamboo handicrafts who were expected to supply the products for BHMC'strading activities. The extension service organized artisans into groups in

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order to achieve scale economies in training, extension se.-vices, qualitycontrol, product collection and warehousing. Under the project, BHMC alsoparticipated in trade fairs in London, New York and Los Angeles to promotethe new products developed with the help of expatriate design and trainingconsultants. Two consultants in cane, bamboo and jute handicrafts wereemployed for six months each.

4.20 Achievements under this component were modest. About 1,500 hand-icraft producers were reached by the extension program, compared with theappraisal estimate of 6,000. Some export sales were obtained (aboutUS$20O,OOO) but the share of BHMC in handicraft exports declined as privatetraders expanded their operations in the handicraft export "boom" of theearly 1980s. The direct achievements, therefore, of this component in exportsales, design and market development for BHMC were small. However, it stimu-lated the private sector into exploiting more fully the potential of thisactivity. Currently, several private export traders of handicrafts are muchlarger than BHMJ. Indicating the modest achievement of this component, onlyhalf of the IDA funds provided, or about US$70,000 of the US$130,000, wereutilized for design consultants and marketing events.

V. PROJECT IMPACT

A. Institution Building

1 Nationalized Commercial Banks

5.01 It was understood from the beginning that, although the commercialbanks had adequate experience in banking, lending for commercial purposes,and assessing client creditworthiness, they lacked experience in projectlending and appraising project viability. SSI II included elements to assistthe two participating banks in building project lending capacity by develop-ing their capability to analyze subproject proposals, assess procurementalternatives, supervise disbursements and monitor project implementation.It was also agreed with GOB that, for the first eighteen months of projectimplementation, BSCIC was to be involved in project appraisal while the bankswere building up their capacity for this function.

5.02 The plan was to establish specialized departments within the banks,recruit staff, train them adequately, and make the banks completely respon-sible for small-scale industry lending, after the agreed transition period.As envisaged at appraisal, the two commercial banks, Janata and Sonali,established industrial credit divisions (ICD) at their head office andstaffed them initially with officers who were transferred from other depart-ments in the banks. By the time the Credit became effective in September1978, there were six full-time officers in Janata Bank's and 11 in SonaliBank's ICD. Eight key ICD officers were trained in Indian commercial banksfor about five weeks. Other ICD officers and SSI loan officers in major

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branches were given training in project appraisal and supervision in localtraining institutes and local development banks.

5.03 A year after project effectiveness, Sonali's ICD had expanded to 13officers, headed by a deputy general manager, while Janata's ICD had 10 fulltime officers, with another 8 officers available on request. Although bothICDs were headed by deputy general managers, in practice, only an assistantgeneral manager (a fourth level manager) was in charge of the day-to-dayoperations. In the context ot the overall structure of the banks, this wasconsidered adequate. Janata's ICD had 6 MBAs, 2 HAs and 2 graduates inaccounting, all with prior experience in credit activities. On the otherhand, many of Sonali's officers were new recruits from the universities, with1 engineer, 4 MBAs, 2 MAs in economics, and 6 graduates in accounting. Bothbanks had difficulties in recruiting and retaining engineers since there weremany opportunities for overseas employment at that time. Moreover, engineerswere not easily integrated into the regular career stream of commercialbankers.

5.04 By June 1980, at the time of appraisal of the Third Small ScaleIndustry Project, Sonali had expanded its ICD comprising 24 officers, alltrained in SSI operations and industrial appraisal methods. There were also35 small industry loan officers, assigned to district branches, who hadalready completed local courses in project financing. However, the branchlevel appraisal capabilities remained weak. District branch managers,responsible for appraisal of subprojects of up to Tk 100,000, had not beentrained in SSI operations and were too pre-occupied with their normal commer-cial banking activities and therefore could not effectively support their SSIloan officers. Janata bank's SSI operations had expanded to 25 officers inICD, and 28 SSI officers in the branches, all of whom had received trainingin SSI financing.

5.05 In summary, the organizational arrangements were established in bothbanks under the project, as envisaged at appraisal. In quantitative terms,the objectives were met, with both industrial credit divisions fully staffed,branch SSI officers appointed, and with overseas and local trainingcompleted. However, the capability for SSI financing in the ICDs and thebranches did not reach satisfactory levels as evidenced by weak appraisalsand an even weaker collection performance. The main stumbling block toinstitution building was lack of continuity due to frequent transfers oftrained officers out of SSI operations. Also, turnover through resignationswas high, at a time when the private industrial sector was expanding and,later on, when private banks were allowed to operate. Salaries offered bythe new private banks were several times higher than those in the NCBs.Despite adequate staffing levels in the industrial credit divisions, staffturnover continued to weaken them throughout the project life. In thebranches the same problem was evident as new officers with only two to threeweeks of training were assigned to replace more experienced ones. These

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officers lacked practical skills to appraise subprojects and were too juniorto be effective in collecting repayments from more influential borrowers. 1/

2. Bangladesh Small and Cottage Industries Corporation (BSCIC)

5.06 Like other government agencies in Bangladesh, BSCIC has had difficul-,ties in attracting and retaining good caliber staff. Salary scales have beenimproved from time to time, but the improvements were never large enough tocorrect the basic disadvantage v's-a-vis private employers. At the start ofproject implementation, BSCIC ha about 300 professional staff, and another1000 support staff. Obviously, lack of staff was not a problem. In fact, insome areas, BSCIC was overstaffed. Also, there was an excessive proportionof c..pport to professional staff. BSCIC, which in the past financed someprojects through joint financing with the nationalized commercial banks, hada poor loan portfolio, with most loans in arrears over 8 years. Moreover,auditors were unable to establish whether BSCIC's provisions for doubtfuldebts were adequate. These were some of the reasons why further involvementby BSCIC in lending activities was considered inappropriate under theproject.

5.07 Under the project, BSCIC was supposed to undertake organizationalchanges to redirect its efforts into SSI promotion and extension and tostrengthen its promotion and extension departments. Credit 825-BD providedconsultancy funds to help BSCIC establish these departments and develop aprogram for technical assistance to SSI. The plan for BSCIC specificallyincluded: (a) developing separate organization, staffing and schemes forSSI and cottage industries promotion; (b) assigning local staff and theexpatriate advisors specific responsibilities and timetables for completionof subsector and area studies to be used in promotion and extension work; and(c) implementing integrated schemes for specific cottage industries (jute,cane, and bamboo handicrafts). A total of US$350,90o was allocated fortechnical services to be administered by BSCIC.

5.08 While BSCIC agreed in principl to the arrangements whereby it wasto relinquish its project appraisal role in favor of the banks and to focuson promotion and extension, in practice, BSCIC tried, right from the start,to reverse this decision and to regain its role in SSI financing. As aresult, BSCIC only halfheartedly tried to implement the components of theproject assigned to it. BSCIC did expand its project promotion and extension

1/ More recently, Sonali Bank has taken several measures to address theseweaknesses. It has revised its personnel policy to reduce staff turnoverand improve skills matching; increased efforts to recruit qualifiedprofessionals; and expanded its staff training program. To address itsloan recovery problem it had decided to create a new unit within theIndustrial Credit Department to look exclusively after recovery ofindustrial loans.

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services and employed new extension office2s for its district offices. BSCICalso prepared and completed subsector and area potential studies, as agreed.However, there was little management commitment to move from thesepreparatory work into developing and implementing an integrated program ofpromotion and extension.

5.09 Of the US$350,000 made available to BSCIC, only about US$84,000 or24% was utilized. BSCIC hired two promotion and extension advisors who werehardly utilized. These advisors were hired more to meet project requirementsrather than to benefit from their expertise. In summary, given its basicdisagreement with the institutional roles proposed under the project, BSCICnot only failed to carry out its role in promotion and extension but has notstop attempting to regain its role in loan sanctioning.

B. Subproject Financing 1/

1. Subloan Characteristics

5.10 The subloan component of the project financed 175 SSI units and 760cottage industry units, about 13% and 24% fewer than the appraisal estimatesof 200 and 1000 units, respectively. While the average subloan amounts ofUS$26,000 for SSI units and US$210 for CI units were lower than the appraisalestimates of US$30,000 and US$1,300, respectively, cancellations amountingto about 30% of the subloan component reduced the overall coverage of theCredit. Although cancellations of this magnitude are not abnormal in SSIprojects (e.g. cancellations under the First SSI Project in Pakistan wasabout 20%), the participating banks did not properly plan for it by overcom-mitting the subloan component in anticipation of cancellations. Unlike thePakistan SSI Project, however, the institutional set-up under this projectdid not provide for a coordinating agency which could, among others, providean overview of the whole credit program, including overall creditutilization. Under SSI III, this weakness was corrected with the inclusionof the Bangladesh Bank (Be) as the coordinating or apex institution. Thismodification in institutional arrangements was especially important underSSI III since the number of participating banks had increased to three, withthe addition of Agrani Bank.

5.11 To ensure access to the credit program by smaller SSI units, the DCArequired that each participating bank maintain a minimum portfolio of 40% ofsubprojects with fixed costs of not more than Tk 1 million (US$65,000). Withdifficulty, both banks achieved this ratio. On several occasions duringimplementation, the banks had to slowdown sanctioning of larger subl¢ans inorder to maintain the required ratio. This contributed to slower projectimplementation. Still, this requirement ensured lending to smaller

1/ Annex 2 provides tables detailing the characteristics of the sub-projects financed under this Credit.

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stbprojects. The average subloan size of US$26,000 is not only lower thanthe appraisal estimate of US$30,000 but also much lower than the maximumallowed of US$110,000, indicating that sufficient attention was given tosmaller units.

5.12 Subloans by Sonali Bank had a maturity mean and mode of 10 years anda grace period mean and made of 12 months; subloans of Janali Bank had12 years and 36 months, respectively. The reason why the means and the modeswere equal in both banks was the blanket practice of giving almost all sub-projects the same loan maturity and grace period regardless of the natureof the subproject and expected cash flow. This weaknesses was pointed outtime and time again by IDA through the subproject review process. Inresponse to these comments, subloan maturities and grace periods were shortened but the practice of giving almost the same maturities and grace periodsto all subloans continued. This shortening of maturities, and especially ofgrace periods, contributed to the subsequent high arrears levels and lowcollections ratios, as loan amortizations fell due even before the projectsstarted operations. To resolve this problem, the banks were later allowed toreschedule loans based on a review of the merits of each case.

5.13 The subloans generated investments totaling Tk 130 million (US$7million). Despite the 30% cancellation, this was only slightly lower thanthe appraisal estimate of Tk 140 million due to the Tk devaluation. Theaverage equity contribution of project sponsors was about 321, a littlehigher than the minimum equity requirement of 30%. Again, this reflects thepractice of the participating banks to require only a minimum equity con-tribution rather than structuring the subprojects on a case to case basisand based on factors such as the capacity of sponsors, availability ofsecurities, the nature of the subproject, etc.

2. Subproject Characteristics

5.14 Subsectoral Distribution. Except in 6 cases, the subloan componentfinanced the establishment of new subprojects, indicating that the banks werewilling to take greater risks than expected in this regard. There is noinformation, however, on whether the sponsors of these new projects were newor existing clients of the banks. The subsector distribution of subprojectsshow that the banks financed somewhat traditional projects such as rice andflour milling (30%), saw milling (18%), metal workshops (11%) and foodprocessing (e.g. ice cream making, bakeries, biscuit manufacturing - 10%),which balanced off the risks of their being new projects. This distributionalso indicates that the project sponsors were mainly traditional businessmenwith close ties to the agriculture sector.

5.15 Geographic Distribution. The project aimed at a greater geographicdistribution of subprojects than was achieved under the first SSI projectwhich financed subprojects of which 88% were located in Dhaka and Chittagong.Under this project, Dhaka (21%) and Chittagong (12%) together still took 33%of the credit, but the balance was more evenly distributed among the remain-

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ing 16 districts. The concentration in Dhaka and Chittagong reflects popula-tion concentration, availability of raw materials and skilled labor,proximity to major markets and local entrepreneurship. Also, urban branchesof the participating banks were more equipped to deal with the procedures andrequirements of the credit program.

5.16 Size of Subprojects. Most of the lending was for smaller subprojectswith total assets below Tk 1.0 million (US$65,000). Only about a quarter ofthe subprojects had total assets over Tk 1.0 million. Despite the sizeceiling of Tk 2.5 milLion in line with the official definition of SSI, 6subprojects exceeded the ceiling. This was, however, due to the devaluationof the Tk in the course of project implementation, rather than a deliberateviolation of this lending criterion. The skewing of the project size towardssmaller projects was due principally to the requirement to maintain the 60:40ratio. In general, there was a tendency to utilize the credit for the targersubprojects such that, from time to time, sanctioning of larger subprojectshad to be suspended to restore the ratio.

3. Economic Impact of Subprojects Financed

5.17 The 175 SSI subprojects and 760 CI units financed under the subloancomponent have generated about 3,150 full-time and 2,000 part-time jobs,respectively, or about a third of the appraisal estimates of 8,000 and 6,000jobs respectively. This was due partly because, with cancellation, fewerprojects were financed and partly because the cost per job in SSI units werehigher than expected, i.e. US$2,000 vs. US$1,500. Still, the average costper job in SSI units was lower than the maximum ratio allowed of US$3,000 perjob created and much lower than the ratio under SSI I (US$5,000). In CIunits it was much lower than the appraisal estimate of US$500. The laborintensity criterion was therefore met. The subprojects financed under theproject were heavily dependent on local raw materials; about 87% of the valueof raw materials is estimated to be of local origin, which is significantlyhigher than the minimum of 60% required under the credit. The subprojectsare strongly linked to agriculture as they represent the first stages ofagro-processing, i.e., flour/rice milling, raw-milling, food processing andcold storage, and engineering and repair services for agriculturalimplements. Exports constitute an insignificant portion of the output ofsubprojects since most of them are oriented not even to the dumestic nationalmarket but to local market6. The information relating to ex-post financialrates of return of the subprojects are considered unreliable and have notbeen used in this report. However, the most recent portfolio review of thebanks indicate that most projects are operating profitability and only about15% have experienced operating problems. Nevertheless, the collection ratioin all subloans have been poor, indicating that many subborrowers (63%) arewillful defaulters. This has fed from, and is feeding into, the generalproblem of credit indiscipline in the country. The effect on income dis-tribution due to this problem is probably negative.

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5.18 Compared with the subprojects financed under SSI I, the activitiesfinanced under this project appear to make more economic sense. They aremore labor-intensive, more dependent on local raw materials, have more linkswith agriculture and are more geographically dispersed. Except for the?n1bprojects in handicraft production and exports, the subprojects were prin-cipally oriented to the local market. This project objective, as reflectedin the lending criteria, was therefore not achieved to any significantdegree. Still, it appears that the practice of using simple eligibilitycriteria was useful in directing the lending program to investment areas thatmake some economic sense. 1/

VI. ROLE OF IDA

6.01 Credit 825-BD was among the first SSI projects developed followingthe elaboration of the Bank Group's policy on lending to the SSI sector.Bank policy towards assistance, to small scale enterprises was spelled outin the 1978 policy paper entitled, "Employment and Development of SmallEnterprises". This project benefitted from the discussions within and out-side the Bank which culminated in the publication of this sector policypaper. The establishment of clear eligibility criteria for SSI lending as ameans to directing investments to economically sensible activities withoutinvolved project by project economic analysis, helped redirect SSI lendingfrom import-dependent, capital intensive, urban and larger projects underSSI I to more labor-intensive, local raw material-dependent, more regionallydispersed projects under SSI II. Allowing the financing of local costs andworking capital requirements, as proposed in the policy paper, made thisproject more responsive to the needs of SSI. Using commercial banks, asrecommended in the policy paper, has resulted in a more wide reaching creditsystem for SSI.

6.02 To ensure that this project would be designed in accordance withBank policy recommendations, IDA devoted considerable amount of direct andindirect staff and consultant effort_ to project development. IDA coor-dinated closely with GOB in preparing the project and devoted greater effortthan usual in appraising and supervising the project. IDA employed consult-ants in project supervision to assist the agencies in implementing theirproject components, especially in the more difficult areas of SCI promotionand extention.

6.03 IDA provided assistance in institution building, both for theparticipating banks and for BSCIC. While more time and effort was given toassisting BSCIC, the results were relatively much better with the banks than

1/ Detailed information on the financial and economic performance of eachsubproject in available in the project file.

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with BSCIC. The basic reason for failure with BSCIC was its being areluctant, sometimes an antagonistic, client. IDA's expectation of beingable to influence BSCIC appears to have been not well founded.

VII. CONCLUSIONS AND LESSONS LEARNED

7.01 Following on the First SSI Project which was considered to have madea limited impact on the SSI sector in general and on SSI support institutionsin particular, SSI II aimed at reforming and strengthening institutions andensuring that investment financing supported the right SSI subsectors. Thegreatest weakness in the institutional set-up was considered to be the over-lap of responsibilities for SSI financing between the banks and BSCIC whichnot only confused responsibilities and diluted accountability, but alsodiverted BSCIC from focussing on crucial non-credit assistance for SSI.Second, due to lack of clear lending eligibility criteria, the first creditfinanced mostly more capital-intensive, import-dependent, urban and largerSSI units, with limited impact on expanding employment, regional developmentand linkage with the agricultural sector.

7.02 Guided by the lessons learned from SSI I and the recommendations ofthe 1978 Bank policy paper on SSI assistance, SSI II had more ambitious,though clearer, objectives than SSI I. The institutional objectives of theproject, while theoretically straightforward, proved to be difficult toachieve. BSCIC's tenacity at retaining its role in SSI financing wasstronger than expected. With this basic disagreement between BSCIC and IDA,the assistance provided by the project to build BSCIC's capability in SSIpromotion and extension work was only perfunctorily accepted. The twoadvisors employed were not fully utilized and had little impact on theorganization. BSCIC did complete some of the subsector and area potentialstudies which were to be used for a more systematic promotion and extensionprogram. BSCIC also expanded its staff for promotion and extension.However, the studies were poorly prepared and were not utilized for thepurpose they were prepared. The quality of staff recruited or transferred toperform the promotion and extension function was weak, with many of them veryjunior staff members who could not inspire confidence among potential SSIclients.

7.03 The objective of financing economically sensible SCI subprojects wasgenerally achieved. Not only were 175 SSI units and 760 CI units financed,but these units were more labor-intensive, more geographically dispersed, hadcloser linkage with the agricultural sector and smaller than the unitsfinanced under the first SSI project. This favorable result was principallydue to the establishment of clear eligibility criteria for lending whichdirected investments into economically desirable activities.

7.04 The institution building objectives for the participating banks wereonly partially achieved. Small industry departments were created at the

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headquarters of these banks, SS loan officers were recruited and trained inproject-based lending methodology, operating systems and procedures wereestablished and subloans for 175 SSI units and 760 CI units were processed bythese banks. Still, the appraisal skills remained weak, project supervisionsystem and procedures were only partially established, and the collectionperformance is still poor and hardly improving. This is due principally tohigh staff turnover, inadequate systems and procedures, and unclear sharingof accountabilities between the headquarters and the branches.

7.05 Specific lessons learned under the project include the following:

(a) Among the financial institutions in Bangladesh, the large commercialbanks appear to be the right channels for a broad-based lendingprogram for SSI, considering their wide branch network, their tradi-tional banking relationships with industry and commerce and theirresource mobilization capability. However, for them to become effec-tive in this activity, they need to strengthen their stafi throughan on-going training program, reduce staff turnover to retain theexpertise developed, and improve their project supervision andcollection procedures.

(b) Beyond institution building aspects for the commercial banks, theGovernment needs to address the problem of credit and financialindiscipline among borrowers through clear and consistent policy,determined support for the financial system in enforcing contractsand an efficient legal system. Unless these basic problems of thecredit environment are resolved, the viability of lending programsas well as financial institutions themselves will be undermined.

(c) The lesson to be learned from IDA's relationship with BSCIC is quiteobvious. Unless there is clear agreement with the implementingagency and consequent strong commitment by it to its role, no legalcovenant will ensure acceptance of roles and effective projectimplementation according to the objectives spelled out at appraisal.

(d) Supporting marketing activities by government corporations inBangladesh, such as BHMC, should be avoided since government policiesand procedures make it difficult for governmenL operations to respondefficiently to rapid market developments; it might be more difficult,but more fruitful, to develop mechanisms to assist the private sectorin this area. This approach would also conform with current govern-ment policy of expanding the role of the private sector in industrialactivity.

December 1986Revised: April 198T

- 22 -ANNEX 1



(CREDIT 825-8D)

Projected and Actual Cumulative Disbursements(US$ in millions)

IDA Fiscal Year Appraisal Actualand Quarter Amount X Amount X

FY79 Third quarter 0.25 4 - -

Fourth quarter 0.75 11 - -

FY80 First quarter 1.25 19 - -

Second quarter 1.85 27 0.03 1Third quarter 2.55 37 0.26 4Fourth quarter 3.35 49 0.26 4

FY81 First quarter 4.15 60 0.78 11Second quarter 4.85 70 1.04 15Third quarter 5.45 79 1.74 25Fourth quarter 6.05 87 2.50 36

PY82 First quarter 6.55 94 2.80 40Second quarter 6.75 97 2.97 42Third quarter 6.85 99 3.28 47Fourth quarter 7.00 100 3.64 52

PY83 First quarter - - 3.85 55Second quarter - - 3.90 56Third quarter - - 3.91 56Fourth quarter - - 4.00 57

FY84 First quarter - - 4.00 57Second quarter - - 4.15 59Third quarter - - 4.49 64Fourth quarter - - 4.49 64

FY85 First quarter - - 4.71 67Second quarter - - 4.84 69Third quarter - - 4.85 69Fourth quarter - -

Source: IBRD, Disbursements Division

- 3 - ANNEX 2Page 1 of 2



(CREDIT 825-BD)

Characteristics of Subprojects Financed(Tk in million)

1. Distribution by Bank No. Amount X

Janata Bank 94 47.78 54Sonali Bank 81 a/ 41.22 46Total 175 88.90 100

2. Type of Subproject No. Amount Z

New 169 84.32 95Existing 6 4.58 5Total 175 88.90 100

3. Subsectoral Distribution No. %

Rice/Flour Milling 52 30Saw Milling 31 18Light Engineering 20 11Food Processing 17 10Ice Plant and Cold Storage 12 7Chemical Products 11 6Tobacco Crushing 8 5Textile and Garments 7 4Poultry/Dairy/Fishing 5 3Printing and Packaging 5 3Jute 4 2Coconut Oil 3 1Total 175 100

4. Geographic Distribution

District No. X

Dhaka 37 21Chittagong 21 12Bogra 16 9Rangpur 15 9Noakhali 14 8Comilla 12 7Barisal 10 6

a/ A later report by Sonali Bank indicated that it had 82 subprojects withsubloans amounting to Tk 42.03 millions. Review of files revealed that asmall industry subproject was misclassified as a cottage industrysubproject.

- 24- ANNEX 2Page 2 of 2

4. Geographic Distribution (cont'd)

District No. X

Faridpur 7 4Khulna 7 4Pabna 7 4Mymemsingh 6 3Jessore 5 3Kushtia 5 3Rajshahi 5 3Sylhet 4 2Jamalpur 2 1Tangail -Patuakhali -Total 175 100

5. Size of Subprojects

a) Total Project Costs No. X

Tk 100,000 and less 12 7Tk 100,001 - 500,000 89 51Tk 500,001 - 1,000,000 30 17Tk 1,000,001 - 2,500,000 38 22Tk 2,500,001 and more 6 3

Total 175 100

b) Subloan Size No. X

Tk 100,000 and less 73 42Tk 100,001 - 500,000 38 22Tk 500,001 - 1,000,000 40 23Tk lOOOOOl - 1,750,000 13 7Tk 1,750,001 and more 11 6

Total 175 100

6. Maturity of Subloans No.

Less than 5 years 1 15 to 7 years 53 308 to 12 years 121 69Total 175 100

-25 - ANNEX 3


BANGLADESH - SECOND SHALL SCALE INDUSTRY PROJECT

(CREDIT 825-BD)

Cumulative Collection Performance of Participating Banks(Tk in millions)

Janata Bank Sonali Bank TotalDue Collected Z b/ Due Collected % Due Collected Z

Jun 1984 25.18 4.60 18 15.88 5.30 33 41.06 9.90 24

Dec 1984 33.18 5.94 18 26.21 10.71 41 59.39 16.65 28

Jun 1985 26.70 a/ 7.35 28 30.67 13.16 43 57.37 20.57 36

Dec 1985 37.19 10.04 27 35.58 16.01 45 72.77 26.05 36

Jun 1986 41.80 11.34 27 42.32 18.48 44 84.12 29.82 35

a/ After rescheduling.b/ Collection ratio = Cummulative cash collections as of given date

Cummulative due as of given date

Source: Monthly collection performance reports by Bangladesh Bank.

- 26 - ANNEX 4



(CREDIT 825-BD)

Portfolio Classification according to Operating and Repaying Statusas of December 1985(Tk in million)

CumulativeCumulative Amount Amount

Status No. X Amount Due Collectetd in Arrears

Not in arrears 23 13 7.56 7.78 103 (0.22)

Subloans not yet due 1 1 0.00 0.00 0 0.00

Subloana with above 501collection 13 7 3.93 3.30 84 0.63

Delayed subprojects 3 2 1.79 0.04 2 1.75

Operating profitably but inarrears (wilful default) 110 63 42.71 13.90 33 28.81

Operating with problems andin arrears 8 5 5.96 0.63 11 5.33

Closed subprojects 12 7 9.64 0.31 3 9.33

Others 5 2 1.18 0.09 8 1.09

Total 175 100 72.77 26.05 36 46.72

Source: PCI veports on portfolio analysis.

- 27 - AMTACHNENT IPage 1 of 4

BANGLADESH BANK NUSRUZL> CDITHEAD OFFICE SDA&W3

Rqf .IC /1 5- Dated 0 .1! ;9870

)COMENTS RECEIVED FROM THE BANGLADESH BANK

The Ohief of MissionWorld Beak Resident Missionin Bangladesh 1 APR 1987222 New Eskaton Roa

Dhk.

- Si, Project Completion Report on Bangladeshneat St, Second Small soale In4ustry 1rojeat

(Cr-edit 825-BD).

Please refer to the letter dated February 27, 1987of Mr. Alexander Nowiokit Division Chief, Operations EvaluationDepartment of your Headquarters addressed to us on the abovesubjects

Bangladesh Bank's oomments on the draft PCR regarding2nd SSI Projeot are sent herewith, as requested* Kindly forwardthe same to your headquarters for necessary actions at theirend.

With regards.

YOr 2sosrely,

Enolo t 3(s ()

( 11d.MJustsFDeputy Director.

FROM WORLD BANK DHAKR 04/15/87 09:11 P.21

- 28 - ATTACH)T I

Page 2 of 4INDUSTRIAL CREDIT D3PARTMT

BANGIADBSH BANKHEAD OPPICE

UA OIDPIT 825-3D

SEO0ID SMALLCA.LS _DU P

Proleot 0ompletion. ARegrt

IDA, Washington have prepared a draft project CompletionReport (POE) dated December 5, 1986 on the 500Cd 8SI ProJeotunder IDA Credit 825-BD; and sent a copy thereof to us, amongothers, inviting comments on the report,

2, This TS$ 7.00 million Credit was ln opeation for fiSncingoT Small Scals and Cottage Industry Projects through Sonali Bank

and Janata bank with a subloan component of US$ 6.52 million. TheCredit was made eTfective !n Septembebr 1978 aM disbursawet wasclosed -.n April.* 1985,

3, Bangladesh Bank had no uignifidant role to play In the loanoperation/administration under the 2nd 551 Programme except thatat a very later stage, the Industrial Credit Department(BangladeshBank) started to monitor the colloetion performance of the parti-cipating credit institution 'PCI) under this Credit. Benco, we have

very limited soope to comment on the various lisues di8ouseed In the

report. However, Bangladesh Bank does not have a specific comments

on the views expressed by IDA in the report on overall achievemenltof the desired objectives of the ProJectp *peo,ally thome concerninginstitutional reform for lending to SCIc; and appraisal, supervision,

monitoring and collection standad of the OXIs.

46 The commercial banks are continuing their efforts toward.

developing their operational standard and oapabilities for haling

industrial finance, specially for SS loMing; and signifioantimprovemerts could be demonstrated in the subsequently hundlod*:oadi\progs,am95s although it in true that the systems for proj.ot

Contd.. ,P/2

M WORLD BANK DHAKA 04/15/87 09:12 P.22

ATAGW4ENT I

- 29- Page 3 of 4

supervision/ond-uoe monitoring and subloan oolleotf.ong need

to be developed further to make them effeotive in real terms,

5. The 3rd S8I Project oame into effectiveness as a cootinuation

of the 2nd Project and kept the conoerne* POls on their wheels for

another Project-period; but the SS3 lending programme and sotivitXes

of these institutions suffered a set-back, so to say, when'IDA

suddenly dropped the 4th SI Project from thsir lending programme,

after oompletion of all the preparatory works of this Projeot.

Achievement of the colleotion targets fixed by IDA for SSI-XI and

III oould not have been possible for many reasons which include the

weaker supervision/end-use monitoring and oollection drives. But

these aotivities have subsequently been geared up and the situation

Is expeoted to substantially improve within a reasoxable period of

time. We, therefore, feel that reconsideration for processing the

4th SSI Programme by IDA would be of signifioant and valuable assis-tance in overall development of our SSI lendig institutiono andstrategies.

6. Some corrections are required to be made in the MOR on the*

following aspeots:

a. Currently our SSI is defined as "an industrial undertaking

engaged either In manufacturing process or service activity,

within a total investment up to Tk. 15 million and investment

in machinery and equipment not exoeeding Uk.10 million exclu-

ding taxes and duties"; and not as stated in para 2,07 of

chapter II of the report.

be In para 4,02 of the POR it has been mentioned that conultancy

funda of SSI-II were not utiliaed due to lsok of follov-up by

Bangladesh Bank in locating and employing suitable cons.tant;s.

We, however, point out that Bangladesh Bank made all its AfTorts

to locate, select ana appoint consultants under the Credit but

it oould not be done for many other reasone. Pirt of all, the

candidate from DCP9 Manila recommended by IDA was seLected

I given specific offer which he refused to aeoopt; and by

f l 44 - ContdobotP/3

F IWORLK DHAKA 04/15/83 09:13 0.Z3

ATTACHENIT IPage 4 of 4

- 30 -

that time a long period already elapsed. Thereafter,suitable oandidate was not being available; and finallyin the process of seleoting and appointing anotheroandidate, the tenure of 8SI-III was over.

7. As regards Government control of the marketing support

sotivities of Bangladesh Handicraft Marketing Corporation andIDA's suggestions to induce private soector in this area, ourcomment is that BHMC is only one suoh organisation in the publicsector, There are many similar mrketing organisations omed bythe private seotor alrea4y doing the same job as that of BOOSOand the Government policy rather OncourQages more private sectorpartioipation in such areas.

FROM WORLD DANK DHAKA .04/15/87 09:14 P.24

HEAD OFFICI______________________31 MOTUHIJH C. A.

DNA" .S,W"VISNE8

ZND;U L ORNDIT DM WION Page 1 of 2PROJUT OPRA.TION DEim,

NOHQ:XICDaPOD*2XDa.DA PIDZTsOL/ 451DAMut 19m4m1987,

CONETS RECEIVED FROM THE SONALI BANK

I6wjSurtuder KJaftlk,0Senor 26onomiat,Th4 World B.aniResident Nis.ion in Ba4ladooh~22 Now Zakaton Road,GPoSOZO97

Subs ProJeot oompletion Report on Duqlad.eh-Soooad Small SeeloWul0 zrAsot (Cedi

Dear Sir,

We have received a letter dated Februax7 27,1,67 rom Me W.r24Dsnk,Vnshngtons.nUSOA. alo.gwith a draft PwoJbt Oompol tReport (PrC) on the above aentioned oredit wherein they bavei1nvte4 our commnuts for refleotion in the tinal "port thxroh&tt1aolent.

we as oucb frui'h, our cements as per attaohd shoet ferouward submiooson to The World SB*a VOh1hatou.*8*A, toeVade

incorporation in the tfinl repor,t,

5tooking you.

Dv W IPKDH QUl64 .

FROM WORLD BANK DHAKA 04/22/87 16:43 P. a

- 32 - ATTA T IIPage 2 of 2

Subs Cements on PrOJejt O aea ept(l

gX~~Smn Uma bale ThAirt ,n e0R eot No

Zti Ia faet shut fte -bank iaiti.ell taeod vvobleft et bdLareuad adequato ePwinial hUand.ObVtowl.7 at the eadQtles of am*VOW amthod of PPojeot teeaLbllty WA *ag ta0 oan eaely0Aab.TIM .M dittrene. ftre the trelioa eb.rt.tea loadiatOf the bea0kvhQrO ndght be reason. to'? lov dveYlopseO at the.XPutIDoo and tiowmwr of *relad etftoew. ia the abs en.. ofPlazaaed vadorstwmatag Uowv.viutho USAL SaZ.e.t.bek am dadosetedIn the report ha.as we bollo,by nw boon yerooem.h, wdu.tw.alOroet DIvUlvo Is a.- gearing Uap MntwLg o n=xia ooeloa pmtowwMAo00,foS'rt are thers to we l$t motv t

&t.tls1AolanG and tof extensiwo veeTaiag .t tho 91moaoA,al slys"and wAsager.4 adition to thb oziats" *o Uqttet D i. )$anotio & Usbuowont (Ci) ferolow- Xu 0t - dmUs*Departmeat4f hw boen doidd to got up a 0aweto sen to beheaded by OM AsA tt.ee*wa" Ma e to leek after fealustwoll.otions( wacowery of the zndwbtodel l.aM.Preoweeo

be ared boo MOW"d to Podo thO re rd WoA of Oet lr &Stafft ther VOOOVea' ol1 ok ths ftopust tru anot erro saOfflore * And A a ba to zeeajv th proble ot tra1nd Offfiewo XZdumaIte loe,1Lt has "so e bo apWaved by the lank' a ben of

Dfreoto" Su th go@woe of their awroP ig the be*a' state0 ofZaduatrial fInancin in the LIgt at ZWUctsil pohLy.19S6 ft&lole., oo-.rdinttn en por disaoes so*ul preoal Lu beftege

ZOD eM Pereonuml VD*Oi in worpeot of ftetw of the OQBtfegemidered suitable for eOrb La Xudtrie orodit,affeta awe alsounder wSL to traft up lage nube of fPAnca *Ualyute/gV.qOfiowe

ia Zdu.tial disoipime from all S vdeiabIe sepe tnO thi, 1 good.qumt attaehment na brenehe. and buiom&l Ofi. to dipowe vithth provisiOn ot Smel zuatry tiaanot"(Gvoom.b m* o tralpolicr 1986) window as laid down & sphahined by the eawgledoe PeakIn that diroetin.A resend oete point eobseved La *he d&af gopwtand hihlghto to"". *we hav to be LA ewe.aes vAt thewQOet* eOZOOv that the number of sUb-Vojeotgtfamed by Soma *UnwoulM be 82 tor disburseent of 2h,4.03 millie. ug Santi as feD&4`1.22 aIlion S mentioned Im the rport,

FROM WORLD BANK DHAKA 04/22/87 16:44 P. 3

Documents

World Bank Document...BHMC - Bangladesh Handicraft Marketing Corporation BSCIC - Bangladesh Small and Cottage Industries Corporation CI - Cottage Industries ... SUBJECT: Project Completion