Improving project monitoring and controllingcase of rural finance project funded by world bank

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS Le Thi Thu Trang IMPROVING PROJECT MONITORING AND CONTROLLING: CASE OF RURAL FINANCE PROJECT FUNDED BY WORLD BANK Major: Business Administration Code: 60 34 05 Master of business administration thesis Supervisor: Dr Ta Ngoc Cau Hanoi – 2011 TABLE OF CONTENT ACKNOWLEDGEMENT i ABSTRACT ii TÓM TẮT v TABLE OF CONTENT viii LIST OF TABLES x LIST OF FIGURES xi LIST OF ABBREVIATIONS xii INTRODUCTION 1 The thesis necessity Objectives of the thesis: 3 Scopes of the thesis: 4 Research methodology and approaches: Data sources: Significance: Expected results: The thesis structure CHAPTER 1: LITERATURE REVIEW AND THEORETICAL FRAMEWORK 1.1 Literature review 1.2 Theoretical framework 13 1.2.1 The concept of project monitoring and controlling 14 1.2.2 Key parts and tasks of M&C system during the project cycle 20 viii 1.2.3 Process M&C system: 21 1.2.4 Necessary conditions and capacities for M&C successs 28 CHAPTER 2: CASE STUDY AND FINDINGS 33 2.1 Case study 33 2.1.1 Overview of "Rural Finance Project" funded by WB and its performance 33 2.1.2 M&C system of RFPII: Real situation and Problems .47 2.1.3 M&C system of RFPII: Causes of M&C problems 67 2.2 Limitations 79 CHAPTER 3: CONCLUSIONS AND RECOMMENDATIONS .80 FOR M&C SYSTEM OF RURAL FINANCE PROJECT 80 3.1 Conclusions 80 3.2 Recommendations for developing necessary conditions and capacities M&C improvement of RFPIII 81 3.2.1 Building human capacity for M&C: 82 3.2.2 Introducing incentives for implementation of M&C 84 3.2.3 Revising a clear organizational structure 85 3.2.4 Adopting an integrated Project Management Information System 86 3.2.5 Allocating adequate budget for M&C 89 REFERENCES 90 APPENDIX 93 ix LIST OF TABLES Tab 1.1 Monitoring and Controlling comparison 16 st Tab 2.2 Credit lines to PFIs (As of 31 Dec., 2008) 40 Tab 2.3 Compliance of PFIs with accreditation criteria at Project Completion 41 Tab 2.4 Key Performance Indicators and Results of RDFI 43 Tab 2.5 Disbursement of RDF through PFIs 45 Tab 2.6: Key Performance Indicators and Baselines of RFPII .52 Tab 2.7: Main causes of M&C system's problems under RFPII 78 x LIST OF FIGURES Fig 1.1 Key M&C tasks 22 Fig 2: Process of M&C system 25 Fig 2.1: Participating partners under Rural Finance Project 37 Fig 2.2 for the implementation structure and stakeholders of RFPII .39 Fig 2.3 Cumulative Planned and actual disbursement progress 47 Fig 2.4: Cumulative disbursement lags in Vietnam, regional and global scale 47 Fig 2.5 M&C organization under RFPII (2003-Sep2009) 55 Fig 2.6: Fishbone diagram of possible causes leading to problems of project performance under RFPII 69 xi ACB AGRIBANK /VBARD BIDV EAB GD IAS IDA IDP IT/IS JSCB LAN M&C MFIS MIS MLF MOF MOU MPI NAB OECD PFIs PMIS PMU PhNB RDF RFP SAR SBV SDR xii SIDA Swedish International Development Cooperation Agency SMEs Small and Medium Enterprises SRV The Socialist Republic of Vietnam TA Technical Assistance TCIII Transaction Center III (BIDV) UNDP United Nations Development Program VAS Vietnam Accounting System VIB Vietnam International Bank WB World Bank WBO Wholesale Banking Operation xiii INTRODUCTION The thesis necessity In 2010, Vietnamese economy has continued to grow at an average rate of 6.7% although the global economy has been recovering more slowly The macroeconomic situation has improved especially public debt which, at about 56.7% of GDP, is at the safety level Facing with the demand of making use of different resources to boost socio-ecomomic development in whole country, Vietnam have broadened international relationship, focusing on attracting, receiving and managing well Official Development Assistance (ODA) projects funded by international financial organizations such as World Bank (WB), Asia Development Bank (ADB), Agence Franỗaise de Dộveloppement (AFD), International Fund for Agricultural Development (IFAD), European Investment Bank (EIB), Kreditanstalt für Wiederaufbau (KFW), etc., Actually, WB is the earliest donor; the World Bank‟s funded projects are by far the largest capital projects with high degree of influence and thus are most extensive in typical field of management of ODA projects in Vietnam Thanks to many open and incentive policies by the Government recent time, this growing economy with steadily increasing GDP is acquiring a great amount of investment capital In response to this demand, besides capital accumulated internally, an increasing flow of official development assistance capital (from US$ 1,810 million and US$ 410 million of committed and disbursed amount respectively in 1993 to more than US$ 8,0 million and US$ 3,5 million in 2010) [19] (see the ODA capital in Vietnam in Appendix No.5) has been pumped into various aspects of Vietnamese economy by international donors and non-governmental organizations through Development Agreements with the Government of Vietnam The Rural Finance Projects under Development Credit Agreements in 2003 and 2009 for Credit No 3648-VN (US$ mil 200 equivalent) and 3884-VN (US$ mil 200 equivalent) respectively entered into the Government of Socialist Republic of Vietnam (SRV) and International Development Association (IDA) with objective of assisting Vietnam in its efforts to improve living conditions in the rural areas are three of the most biggest projects of the same kind in Vietnam The two projects have been implemented in the form of wholesale banking operation (WBO) They have introduced the concept of WBO for the first time in Vietnam Because of this new nature, the project monitoring and controlling (M&C) have become a very essential factor to a successful project performance together with others factors ranging from objective to subjective ones It is project management unit (PMU) nominated by Bank for Investment and Development of Vietnam (BIDV) called Transaction Center III (TCIII) responsible for managing both Rural Finance Project II (RFPII) and Rural Finance Project III (RFPIII) In general, M&C is a task, which is so crucial but “is not performed well in most organizations” and “is one of the most neglected areas of project management” [10, p359] M&C is necessary because it possesses method to analyze how well a completed task has been performed This can also be used to evaluate progress on unfinished work if one examines data for a specific period and makes estimates of work completed to date More over, M&C provides managers and other stakeholders with continuous feedback on implementation and identifies actual or potential successes and problems as early as possible to facilitate timely adjustment to project operation Despite the essential role of M&C, there still are some mistakes commonly made such as: having some prejudice before monitoring and controlling, lack of updated and necessary information for M&C, evaluating unreasonably, unclear objectives, unreasonable criteria, unreasonable monitoring and controlling organizing In addition, because RFPIII has been already become effective, one of the major tasks that implementing agency has had to undertake in performing its WBO as an apex bank is to implement this project successfully within agreed schedule th According to annual Consultative Group Meeting 18 for Vietnam (Dec., 2010), the project M&E as well as project controlling in Vietnam in general have been concerned as one of the problem which needs to be improved in the coming time, especially for projects/program in agricultural and rural fields In addition, there are many essays or rearches about ODA project management or project monitoring and evaluating in Vietnam recently, however there are no specific research mentions to monitoring and controlling WB‟s loan projects particular those have been carried out through commercial banks aiming at supporting for agriculture and rural development For the above existing reasons, a research on M&C is very important to a successful performance of not only Rural Finance projects funded by World Bank but also for the alike, which have been getting increased in numbers recently Objectives of the thesis: This study aims at reviewing, analyzing M&C system of RFPII to find out its problems that have affected adversely to project performance and drawing lessons for improvement of the system contributing to better performance of RFPIII These objectives will be achieved by performing the following tasks:  Making clear the concept and fundamentals of M&C  Analyzing M&C system of RFPII to find out its obstacles and problems in project implementation  Proposing suggestions for improving M&C system in RFPIII To achieve objectives of the study, those tasks need to be done to answer the following questions:  What are the main tasks of project M&C?  How can M&C contribute to project performance?  How can a project be monitored and controlled?  What does the M&C system of the RFPII undertake as planned and what are its main obstacles and problems? All PFIs increase in real volume of lending to non State Sector a a From a December 2012 benchmark level Appendix no PROJECT SUPERVISION PLAN – RFPII Source: World Bank (2010) Staff Appraisal Report (SAR) Socialist Republic of Vietnam Rural Finance Projet Report No 0000357-VN (p69-70) Socialist REPUBLIC OF VIET NAM RURAL FINANCE PROJECT PROject sUPERVISION PLAn IDA's Supervision Inputs into Key Activities The staff inputs indicated in the table below are in addition to the regular supervision needs at headquarters for review of progress reports, procurement actions, and other requirements During the project implementation period, it is estimated that total IDA supervision staff and consultant resources would be 77 staff weeks, of which 57 staff weeks would be in the field and the balance at headquarters An indicative supervision plan is given in Table TABLE 1: INDICATIVE SUPERVISION PLAN Approximate Date July 2002 October 2002 March 2003 August 2003 Approximate Date December 2004 April 2005 September 2005 January 2006 May 2007 October 2008 March 2009 Appendix no REPORT FORMS UNDER RFPII A- REPORT FORM SUBMITTED TO PMU BY PFI’s Form 1: Lending and collecting RDF Sub-loans Form 2: Sub-loans Statement of Expenditures Form 3: Overdue Analysis (Form 2C) Source: World Bank (2002) RDF and MLF Policy Manuals B- REPORT FORM SUBmitteD TO WB BY PMU Quarterly progress form Quarterly progress Report No.TCIII-3648, Quarter IV Dec 2009 Source: TCIII (2009) Quarterly progress report No.TCIII-3648 by TCIII Form 1: Name of PFI LENDING AND COLLECTING RDF SUB-LOANS (Quarter Year .) I Lending - collection result, up to: (specifies the date of report submission) Lending Unit: VND Mill Content Accrued from the project beginning to the Quarter beginning Development during the quarter Accrued to the quarter’s end Loan Collection Accrued from the project beginning to the Quarter beginning Development during the quarter Accrued to the quarter’s end II RDFIII’s lending mix 2.1 RDF’s lending mix during the quarter by loan duration RDF II total loans: Of which: 2.2 By sub-loan size Sub-loan size Up to 20 VND From 20 to 50 Mill VND From 50 500 Mill VND Over VND 2.3 By nature of sub-projects (form 2a); 2.4 By sectors (form 2b); 2.5 By nature of investment; I Content New investment Expansion Total 2.6 Overdue (form 2c) 2.7 Obstacles during the RDFII lending 2.8 Summarize the lending – collection result during the quarter 2.9 Proposals recommendations: (toward PMU) ………, date……….month…….year………… Originator General Director Director (sign, full name) (sign, full name and seal) Form 2: PFI: Address: General information Province: A… I Cultivation N Van A N Van B Total II Animal husbandry N Van A N Van B Total III Aquaculture N Van A N Van B Total IV Processing N Van A N Van B Total Name of subborrower Address of subborrower General information Province: A… V VI Name of subborrower Address of subborrower Service N Van A N Van B Total Other N Van A N Van B Total other Total province A Province ….B … … Total province B Grand total Note: Original documents maintained at: Originator Form 3: Name of PFI: Form 2c Overdue analysis Quarter… year… Name of project (1) (2) Data……month…… year II Originator III Supervisor General Director (Director) PFI (sign, full name) (sign, full name) (sign, full name and seal) b- report form submitted to wb by TCIII SOCIALIST REPUBLIC OF VIETNAM BANK FOR INVESTMANT AND DEVELOPMENT OF VIETNAM TRANSACTION CENTRE III Rural FINANCE PROJECT IDA Credit No 3648-VN Quarterly Progress Report No.TCIII-3648 Hanoi, Dec 2009 1.1 1.1.1 1.1.2 1.1.3 1.2 1.3 1.4 3.1 3.2 Tables Table l Table Table Table Table Table Table 6a Table 6b Table 6c MAP OF RFPII PARTICIPATING PROVINCES Appendix no LIST OF INTERVIWEES No Name I Central level Mr Quach Hung Hiep Ms Xiaolan Wang II Senior level Ms Pham Thi Mai Ms Nguyen Hoa Mai Ms Pham Minh Hue Mr Nguyen Manh Hung Ms Dao Thu Thuy III Middle level Mrs Le Thi Thanh Hang Mr Do Ngoc Quynh IV Operating level Mr Nguyen Truong Son Mr Phan Van Thuong Mr Duong Hong Diep Mrs Le Thi Hoa Mrs Nguyen Thi Lai ... the unsatisfactory project performance 2.1 Case study 2.1.1 Overview of "Rural Finance Project" funded by WB and its performance 2.1.1.1 Brief of ideas and objective of RFPII and RFPIII Aiming... parts of this chapter Chapter will examine M&C and its problems in case of Rural Finance Project II (RFPII) funded by WB The overview of RFPII will provide information on ideas and objectives of. .. 2.1.1 Overview of "Rural Finance Project" funded by WB and its performance 33 2.1.2 M&C system of RFPII: Real situation and Problems .47 2.1.3 M&C system of RFPII: Causes of M&C problems