In April 2014, the government of Ghana borrowed $46 million from Rome-based IFAD, the International Fund for Agricultural Development, a UN body that, as its name suggests, finds money for countries to fix some of their agricultural challenges.
IFAD’s loans often go to support projects targeting agro-processing, food security, improved smallholder farmer productivity, and similar goals.
In Ghana’s case, the money was for a ~$78 million project called, GASIP – Ghana Agricultural Sector Investment Program, that officially commenced in May 2015. The goal was simple: boost smallholder farmers’ productivity, output, and income by injecting money into cooperatives through big and medium-sized players called “value chain cluster drivers (VCDs)”, a mouthful term that simply means, “intermediaries”. These intermediaries are to secure funds from GASIP, obtain inputs (like seeds and fertilizer) in bulk, ensure their delivery to farmers in cooperatives, monitor planting and harvesting, aggregate farm outputs, and work with traders to sell at good prices.
Corporate bulk buyers like Nestle; the Ghana Commodities Exchange; tractor and other mechanized services providers; and a host of other actors in the agricultural “value chain” in Ghana were also courted by GASIP to join the initiative. As of 2020, GASIP claimed to have helped bring nearly 100,000 acres of land under cultivation and improved the lives of 50,000 farmers.
An ecstatic Agric Minister asked IFAD to show more confidence in Ghana and drop an extra $105 million. GASIP sounds like a fantastic use of money, but as the reader would have guessed already, there is another, quite different, story that also needs to be told.
Ghana’s Bankruptcy of 2022
As everyone now knows, Ghana stopped paying back foreign loans in December 2022 in the heat of a fiscal crisis that saw inflation go through the roof and the national currency tumble to the ground. How Ghana used all the roughly $30 billion it owed naturally became of great interest. As the country makes strenuous efforts to find more money for its development at a time when the international capital markets have been closed to it, the role of organisations such as IFAD, the World Bank, and the IMF, the only creditors still willing to lend to the country, has come into sharp focus.
A Wider Context of Global Development Finance
Ghana’s development finance issues are, however, for me, part of a bigger policy analysis and research undertaking. I recently wrote a policy note for Paris-based FDL looking into one critical question: why do loans and other forms of development finance released by international organisations like the World Bank and IFAD struggle to make a difference on the ground?
Many global activists are today investing their time, energy, and resources in Western capitals trying to unlock more money for African countries like Ghana. Domestic activists like me, on the other hand, seem more focused on asking questions about what has happened to all the money the likes of Ghana have borrowed already.
This seems like a serious rift, but in some ways, it is a false tension as I hope to show through this short essay on one of IFAD’s loans to Ghana. The big reveal is actually simple: for the likes of IFAD and the World Bank to be able to pump more money into Africa/Ghana, the latter need to get better at receiving and using the money. Because quantity of funds is somehow tied to the quality of spending in the long run.
At this very moment, Africa’s Heads of State have congregated in Nairobi to scheme about how the next IDA replenishment exercise can boost availability of funds for World Bank lending. We won’t find a more befitting time to discuss these issues of capacity to borrow and spend effectively.
The Disbursement Bogey
In the FDL policy note I mentioned earlier, I discussed the issue of “disbursement rates”, how fast money that has already been allocated to a country by a development finance body, like IFAD or the World Bank, actually gets released for spending.
I suggested that slow and stagnant disbursement often means the large cash commitments global activists often push to secure do not always translate into investment inside beneficiary countries. The experience of GASIP in Ghana illustrates this. For the first four years of the program, disbursement barely crossed 10% on a pro rata basis. Essentially, money couldn’t flow because basic project execution at the standard required was stuck.
I also explained in the same paper that there are different ways of increasing disbursement. One way is to enhance project governance and capacity across all key stakeholders so that the project can be delivered according to the international standards the likes of IFAD and the World Bank expect and which are often encoded into the agreements and project charter documents the country consents to.
Assessment Gaming
The second approach is to “game project assessments” and “manufacture progress”. If this is done in a shrewd way, then the lender’s supervisory staff, who also have an incentive to drive project outcomes for their own career success, can breeze over sticky points of governance and keep the funding valves opened.
Sometime around 2019, as elections approached, the government of Ghana committed to supporting one million farmers through its Planting for Food & Jobs initiative. A sudden shot of enthusiasm thus went through GASIP. From a disbursement rate of just 10% as of June 2019, the rate was catapulted to 74% in a matter of mere months. Money started to flow like water. Over the next two years, disbursement would hit 86%. By the time the project was about wrapping up, disbursement had hit 92%, a spectacular result.
But at what cost?
The Ratings Issue
The third relevant insight from my paper is that official ratings by development finance institutions of the likes of the World Bank and IFAD have to be treated with considerable caution for reasons that will soon be made clear.
On a scale of 1 to 5, IFAD raters say that GASIP scored a nice 4, with particularly high sub-scores for effectiveness, outreach, targeting, partnership-building, and audit quality.
Reading the final supervision report, dated November 2022, warms the heart.
Yes, there were a few challenges with about 25% of the tractors meant to make life easy for selected cohorts of farmers in certain implementation sites. But tractors weren’t even there before, yes?
True, farmer-based organisations, though eager to learn and improve, were found to lack capacity in various areas, such as financial skills. Only about 4% of the farming cooperatives reached a level of sophistication that could be called “mature” at the end of the program. And, admittedly, there had been inadequate monitoring of loan repayments in some credit schemes established as part of GASIP. Still, a 4-star rating in this area felt just right. As the report puts it, “overall, the provision of financial services under GASIP is performing generally well.”
From cashew nurseries and solar powered mechanical boreholes to innovative hybrid seed kits and rural financial services, the final supervision report preempts the yet to be published completion report with its glowing description of various achievements and celebration of the more than 78,000 farmer-beneficiaries in 1200 cooperatives that GASIP has supported so far.
Even though only 6% of the length of roads anticipated under the public infrastructure component of the project was attained, and just 0.2% of last mile electrical power connections were completed, the “underperformance” was attributed to funds expected from third-party financing partners that “did not materialize”.
High-yield cashew seedlings distributed to farmers mostly went unplanted, but the highlights of the report emphasise the more than 400,000 seedlings grown in the cashew nurseries established under the project. You have to read deeper into the latter sections to learn about the failure to plant.
Netting off these minor disappointments against the overwhelming thrust of success stories lead inexorably to the 5-star rating for the “effectiveness” and “developmental focus” aspects of the project assessment. As the report succinctly explains, “overall, GASIP implementation continues to make good progress towards achieving its development objective. In many of the cases, the cumulative output targets have been exceeded by large margins.”
One gets a sense of how exactly facts on the ground feed into ratings when one considers that the only exciting tangible output promised by GASIP for the “knowledge management” component, making a simple video to document GASIP’s experiences, couldn’t be achieved, and yet performance on this component is rated 4 star.
Fascinatingly, whilst the GASIP project was galloping along, an older, larger, $265 million IFAD funded project, Rural Enterprises Program (REP) was languishing in “potential problem” state. Commenced in 2011 and originally scheduled to be completed by 2020, the closing timeline has been extended three times, with 2025 being the latest one. REP is still rated at more than 4 stars for its likelihood of meeting its development objectives, and has a near 92% disbursement rate (on its core AF1 measure).
In short, when disbursement rates are boosted through assessment gaming, delivery risks escalate.
The Reality Not Told
The last aspect of the IFAD-GASIP case study that resonates with the analysis in my paper is the issue of divergence between ratings, and even official field reports, with the reality as experienced by those directly impacted by such projects.
An important objective of every IFAD loan is how it catalyses partnerships around the intended project to unlock more money and other resources. The IFAD partnership strategy is a detailed framework emphasizing the criticality of this approach to the organisation’s mission. GASIP was thus designed to get local banks and other financial institutions involved. Its success required the government at both the local and central levels to chip in money. The strategic agents mentioned earlier (the so-called “value chain cluster drivers”) are meant to organize and support farmer-based organisations (FBOs) or cooperatives (acknowledged by IFAD as the weakest link in the chain), where the ultimate beneficiaries, the farmers, sit. Various other actors are expected to join in as well. Obviously, trust is absolutely essential in such a system.
While the IFAD supervision reports do contain the information to show that this framework was not sufficiently adhered to and that the non-adherence breaches the agreement the government of Ghana signed with IFAD, it does so in an appendix-like manner. The tables below from the final supervision report shows clearly that the mobilised private financial institutions, including banks, refused to pay the money they committed despite various agreements.
In short, the local banks and other financial institutions that pledged to contribute nearly $17.5 million simply refused to release the monies all through the 9-year life of the project.
Yet, a few months prior, the preceding supervision report had created the impression that these financing partnerships were doing well, even if momentum is tepid.
The partnership linkages with financial institutions have remained low but the crowding in effect of the matching grants have resulted in GASIP monitoring short-, medium- and long-term loans to target groups recording approximately 87% of its US$7 million target. The equipment financing arrangements under the matching grant where GASIP facilitated the remaining 30% contribution from the beneficiary FBOs through a financier and the FBO-based VSLA arrangements with credit unions and rural banks, where these have occurred, have created additional partnerships which, whilst largely ad hoc in nature, have been in the right direction.
The district assemblies (Ghana’s local government units) also refused to invest even a single dollar or cedi despite their pledges.
Clearly, the final report is more candid about the situation because with the project wrapping up and the clear legal breach unresolved, now was the time to elevate the issue. Yet, no where are the legal implications for the institutions that made commitments and caused other participants in the program, especially farmers, to invest their life savings in various anticipatory measures discussed. Instead, the IFAD report, as already mentioned, observes as follows:
Overall, the provision of financial services under GASIP is performing generally well.
But that is far from being the worst thing about this affair. Leaked confidential observations from Ghana’s Office of the Auditor General that I have seen raise troubling issues about sleaze, graft, diversion of funds, impersonation, and run of the mill embezzlement involving certain senior GASIP personnel, who appear to have forced farmers to attest to receiving resources that simply didn’t reach them. These farmers now feel very duped.
None of these problems, quite well known to domestic actors close to the matter, are mentioned in any IFAD reports. Yet, the sense of injustice and grievance on the ground is so deep, that petitions have gone to Ghana’s Attorney General and there is ample bad blood between some farmer groups and GASIP. The erosion of trust and sense of betrayal is palpable.
GASIP evidently lacked in its design an adequate beneficiary feedback mechanism, a sound grievance resolution process, and tight integrity failure controls. Even though the project would normally be expected to have a steering committee, one with civil society representation, it is reported by disgruntled farmers as either “non-existent” or “toothless”. Its ratings process, in view of all the challenges, could benefit from a massive reset that brings in more community verification actors and a revamped methodology. Despite administrative changes to project rollout over the 9-year period, such adaptiveness and agility could not be found by IFAD and the Ghanaian government.
- Enter Fidelity Bank
Frequent readers of this website would recall my recent fracas with a Ghanaian bank that bills itself as the country’s largest private bank. I was not too surprised to see them make a cameo in this saga as the only tier-1 commercial bank mentioned in the reports to have had a direct role in the troubled partnerships-based financing model given their close relationship with the government of Ghana.
Fidelity is reported to have set up the necessary ring-fenced accounts to facilitate the value chain partnerships the farmers need to access tractors, farm inputs, and credit among other benefits.
Our ongoing investigation on the ground, however, found several disgruntled farmers and farming cooperative managers claiming otherwise. Given the nature of the situation, this issue deserves dedicated attention and treatment, which it shall receive in due course.
And now, ladies and gentlemen, PROSPER!
Given what has been recounted so far, one can be forgiven for thinking that the end of GASIP would be marked by serious soul-searching, broad-based consultations, and an effort to transparently reckon with some serious deficits. Following such a cooling off period, IFAD and the Ghanaian government could then make amends before proceeding with any more of such ambitious, trust-heavy, agric value chain programs. The short answer is, “wrong”.
Even before GASIP could properly close, in late 2021, the government entered into another agreement for a successor loan program, an even bigger one. Called PROSPER, it aims to disburse twice the resources allocated to GASIP to 100,000 farmers, and wrap up in 2032.
If all goes well.
[This is a developing story. To be continued.]