Completion Report

Project Number: 35170 Loan Number: 2071-NEP (SF) November 2011

NEP: Community Livestock Development Project

CURRENCY EQUIVALENTS

Currency Unit – Nepalese rupee/s (NRe/NRs)

At Appraisal At Project Completion 17 June 2003 30 June 2010

NRe1.00 = $0.01282 $0.01 $1.00 = NRs77.4 NRs71.2

ABBREVIATIONS

ADB – Asian Development Bank CLA – community livestock assistant CPMO – central project management office DLS – Department of Livestock Services DLSO – district livestock services office EIRR – economic internal rate of return FAO – Food and Agriculture Organization of the United Nations FIRR – financial internal rate of return ha – hectare ILP – intensive livestock production LPP – livelihood pilot program MFI – microfinance institution MOAC – Ministry of Agriculture and Cooperatives NGO – nongovernment organization RMDC – Rural Microfinance Development Center SDR – special drawing right

NOTES

(i) The fiscal year (FY) of the Government of Nepal and its agencies ends on 15 July. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2006 ends on 15 July 2006.

(ii) In this report, "$" refers to US dollars.

Vice-President X. Zhao, Operations 1 Director General S.H. Rahman, South Asia Regional Department (SARD) Director B. Hitchcock, Nepal Resident Mission (NRM), SARD Team leader G. Gewali, Senior Project Officer, NRM Team members M. Shrestha, Associate Disbursement Officer, NRM

B. Sitoula, Associate Project Analyst, NRM In preparing any country program strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA i

I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 7 D. Disbursements 8 E. Project Schedule 8 F. Implementation Arrangements 9 G. Conditions and Covenants 9 H. Consultant Recruitment and Procurement 10 I. Performance of Consultants, Contractors, and Suppliers 10 J. Performance of the Borrower and the Executing Agency 10 K. Performance of the Asian Development Bank 11

III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15

APPENDIXES 1. Project Framework 16 2. Achievement of Immediate Objectives 22 3. Project Costs 23 4. Loan Disbursements 25 5. Project Implementation Schedule 27 6. Status of Compliance with Loan Covenants 29 7. Consulting Services 37 8. Economic and Financial Analysis 38

BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Nepal 2071-NEP (SF) Community Livestock Development Project Government of Nepal Department of Livestock Services, and Rural Microfinance Development Center SDR13,969,000 1277

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

17 June 2003 27 June 2003 6 November 2003 8 November 2003 19 December 2003 8 April 2004 7 July 2004 2 December 2005 4 30 June 2010 30 November 2010 None 1% per annum during the grace period, and 1.5% thereafter 32 years including grace period 8 years 5.5% 20 years 3 years Microfinance institutions

9. Disbursements a. Dates Initial Disbursement

20 December 2005

Final Disbursement

18 November 2010

Time Interval

5 years

Effective Date

2 December 2005

Original Closing Date

31 December 2010

Time Interval

5 years

b. Amount (SDR '000) Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance Civil works 43 136 (93) 139 139 (3)Equipment 917 1,119 (202) 1,093 1,093 26Vehicles 187 200 (13) 200 200 -Training 2,852 2,038 814 2,190 2,190 (152)Livelihood pilot program in higher altitudes

1,104 835 269 453 453 382

Consulting services

2,018 1,489 529 1,421 1,421 68

Special studies 212 111 101 63 63 48Credit, insurance and start-up funds

3,946 3,946 - 3,944 3,944 2

MFI development cost

126

126 - 126 126 -

Supervision and implementation

1,539 3,363 (1,714) 3,253 3,253 (110)

Interest charge 607 216 - 607 607 390Unallocated 418 - 309 109 109 109 Total 13,969 13,969 - 12,209 12,209 760

( ) = negative, MFI = microfinance institution. 10. Local Costs (Financed) - Amount ($ ‘000) 17,378 - Percent of Local Costs 94 - Percent of Total Cost 72

C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 2.80 2.95Local Currency Cost 30.20 30.18 Total 33.00 33.13

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2. Financing Plan ($ 'million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 5.00 5.40 ADB Financed 20.00 20.00 RMDC and Financial Intermediaries 6.50 5.80 Beneficiaries 1.50 1.60 Total 33.00 32.80

IDC Costs Borrower Financed 0.00 0.00 ADB Financed 0.90 0.33 Other External Financing 0.00 0.00 Total 33.00 33.13

ADB = Asian Development Bank, IDC = interest during construction, RMDC = Rural Microfinance Development Center.

3. Cost Breakdown by Project Component ($ 'million)

Component Appraisal Estimate Actual A. Base Cost 1. Community Development and Capacity Building 3.20 3.80 2. Livestock Productivity Improvement 14.70 16.50 3. Livestock Processing and Marketing 5.00 5.96 4. Livelihood Pilot Program in Higher Altitudes 1.90 0.93 5. Project Management Services 4.00 5.61 Subtotal (A) 28.80 29.50 B. Contingencies 1. Physical 1.10 0.00 2. Price 2.10 0.00 Subtotal (B) 3.20 0.00 C. Interest during Construction 0.90 0.33 Total 32.90 33.13

4. Project Schedule

Item Appraisal Estimate Actual Date of Contract with Consultants January 2005 26 November 2006Civil Works Contract Date of award June 2004 29 November 2006 Completion of work July 2005 12 December 2007Equipment and Supplies First procurement April 2004 22 May 2006 Last procurement July 2008 27 October 2009Other Milestones

Partial Loan Cancellation - 30 November 2010

Final Cancellation - 30 November 2010

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5. Project Performance Report Ratings Implementation Period

Ratings

Development Objectives

Implementation Progress

2 December 2005 to 31 December 2006 Satisfactory Satisfactory 1 January 2007 to 31 December 2007 Satisfactory Satisfactory 1 January 2008 to 31 December 2008 Satisfactory Satisfactory 1 January 2009 to 31 December 2009 Satisfactory Satisfactory 1 January 2010 to 30 June 2010 Satisfactory Satisfactory D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Fact-finding 12–22 March 2003 3 24 a, b, c, d Project appraisal 17–27 June 2003 3 27 a, b, c, d Project inception 13–18 August 2003 2 28 a, c, d Project review 1 6–23 March 2005 2 12 e, f Project review 2 20 December 2006–

10 January 2007 2 12 e, f

Project review 3 12–28 September 2007 2 14 e, f Project review 4 30 June–14 July 2008 1 8 e, f, g Midterm review 5 15 December 2008–

8 January 2009 3 21 d, f, g

Project review 6 9–24 July 2009 2 16 g, f, h Project review 7 15–24 December 2009 2 14 g, f, h Project review 8 17–30 June 2010 4 12 g, f, h, i Project completion reviewb 15 April–12 May 2011 4 28 g, h, i, j, k, l a a = economist (mission leader), b = counsel, c = senior financial analyst, d = livestock specialist (consultant), e =

project implementation officer, f = assistant disbursement analyst, g = senior project officer, h = assistant project analyst, i = gender and social development specialist (consultant), j = environment officer, k = associate disbursement officer, l = associate project analyst.

b Govinda Gewali, senior project officer and team leader, Madhusudan Shrestha, associate disbursement officer, and Bhakta Sitoula, associate project analyst, prepared the project completion report.

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I. PROJECT DESCRIPTION

1. Agriculture is the dominant sector of Nepal's economy, accounting for one-third of gross domestic product, and provides the main source of livelihood for about 80% of the rural population.1 Livestock is an important component of the agriculture sector, providing draft power and plant nutrients for growing cereal and cash crops, and nutrition and income for farm households. At the time of project preparation in 2003, livestock contributed 31% to agricultural gross domestic product. The Agriculture Perspective Plan (1996–2015) envisioned the livestock subsector's potential to contribute up to 45% of agricultural gross domestic product if it was modernized in a participatory way by upgrading the quality of animals, improving access to extension services and markets, and promoting forage and feed production. The completed Tenth Five-Year Plan (2002–2007), the Three-Year Interim Plan (2008–2010), and the ongoing Three–Year Plan (2011–2013) all emphasized the livestock subsector's importance in providing nutrition and income, particularly for small and marginal farm families. To alleviate rural poverty by realizing the subsector's potential, with a leading role played by communities, non-government organizations (NGOs) and the private sector, the Government of Nepal requested Asian Development Bank (ADB) project preparatory technical assistance 2 to design a community livestock development project with three key elements: (i) intensive livestock production (ILP); (ii) processing, marketing, and commercialization of livestock services; and (iii) a livelihood pilot program (LPP) in higher altitudes.

2. The Community Livestock Development Project was prepared with government and key stakeholder participation, taking into account lessons learned in earlier ADB-assisted livestock development projects.3 ADB approved a loan of SDR13.969 million ($20 million) for the project on 19 December 2003. 4 The loan was signed on 8 April 2004 and became effective on 2 December 2005 with a loan closing date of 31 December 2010. The project aimed to reduce poverty among rural people through gender-inclusive and socially equitable development. Its objective was to improve food security, nutrition, incomes, and employment from livestock production and small livestock-related enterprises in 48 districts across all five development regions of the country.5 The project was intended to benefit 164,000 families through increased livestock productivity in an environmentally sustainable and socially equitable manner, while strengthening the capacity of women and men to manage the development process. To achieve the objectives, the project had the following five components:

(i) Community development and capacity building. This comprised (a) development of farmer groups in selected livestock pockets through partner NGOs and assisted by

1 National Planning Commission of Nepal. 2010. Three-Year Plan Approach Paper. Kathmandu. 2 ADB. 2002. Technical Assistance to Nepal for Preparing the Community Livestock Development Project. Manila. 3 ADB. 1979. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Nepal

for the Livestock Development Project. Manila; ADB. 1985. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Nepal for the Second Livestock Development Project. Manila; and ADB. 1997. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Nepal for the Third Livestock Development Project. Manila.

4 ADB. 2003. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Nepal for the Community Livestock Development Project. Manila.

5 ILP covered 22 districts from three development regions: Far-western—Achham, Baitadi, Dadeldhura, Doti, Kanchanpur, and Kailali; Midwestern—Bardiya, Banke, Dailekh, Jajarkot, Pyuthan, Rolpa, Rukum, Salyan, and Surkhet; Western—Arghakhanchi, Baglung, Gulmi, Lamjung, Nawalparasi, Palpa, and Tanahun. Processing, marketing, and commercialization of livestock services covered 21 districts from four development regions: Midwestern—Dang; Western—Kapilbastu, Kaski and Rupandehi; Central—Bara, Chitwan, Dhanusha, Kathmandu, Kavrepalanchowk, Lalitpur, Mahottari, Makawanpur, Nuwakot, Parsa, Rautahat, and Sarlahi; Eastern—Jhapa, Morang, Saptari, Siraha, and Sunsari. LPP covered five districts from two development regions: Midwestern—Humla, Jumla and Mugu; Far-western—Bajhang and Darchula.

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community livestock assistants (CLA); and (b) technical and managerial capacity building of community-based organizations, NGOs, microfinance institutions (MFIs), government agencies, and the private sector.

(ii) Livestock productivity improvement. This comprised (a) feed development, and promotion of goat and buffalo production; (b) strengthening of the animal health services of the Department of Livestock Services (DLS), and expansion of private services; and (c) selection and capacity building of MFIs to deliver loans to farmers and entrepreneurs.

(iii) Livestock processing and marketing. This comprised (a) development of small-scale processing and marketing of meat and dairy products; (b) delivery of loans for dairy and meat enterprises; (c) improvement of hygiene, and of the quality of milk and meat products; and (d) promotion of consumer awareness and an education program.

(iv) Livelihood pilot program in higher altitudes. This comprised (a) a survey of the changing nature of transhumant livestock keeping, (b) participatory rural appraisal of people's development needs, (c) preparation of a multisector plan, and (d) implementation of the plan for possible replication in other districts.

(v) Project management services. This comprised support for (a) project management, administration, and benefit monitoring and evaluation; (b) consulting services; (c) procurement of vehicles and equipment; (d) training of key personnel of project stakeholders; and (e) incremental operating costs.

3. The DLS, under the Ministry of Agriculture and Cooperatives (MOAC), was the primary executing agency for the project. The DLS’s regional directors in the five development regions were responsible for managing and monitoring effective delivery of services. District livestock services offices (DLSOs) and NGOs implemented district-specific programs. The Rural Microfinance Development Center (RMDC) was the executing agency responsible for project microfinance services and loans to beneficiaries through MFIs and commercial banks.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

4. The project’s design and formulation were consistent with the government’s strategy in the Agriculture Perspective Plan (1996–2015), the Tenth Five-Year Plan (2002–2007), the Three-Year Interim Plan (2008–2010), and the ongoing Three-Year Plan (2011–2013). All plans sought to bring about a sustainable reduction in poverty, with emphasis on the livestock subsector as a strategic means to reach the rural poor. They share a strategy of establishing and strengthening competitive agricultural value chains to derive benefits from crop and livestock products. A related strategy is to foster partnerships between the government, cooperatives, and the private sector for commercialization of agriculture by developing larger production pockets based on geographic, technical, and economic feasibility. The project’s objective was also consistent with ADB’s agriculture development strategy for Nepal—the Country Strategy and Program, 2003–2005 emphasized small livestock development and microcredit for women, and the Country Partnership Strategy, 2010–2012 focused on increasing agricultural income and jobs for poor and socially excluded groups.

5. The project envisaged social mobilization and community development as key approaches to reaching the poor, which was one of the design strengths. The engagement of local NGOs in social mobilization and capacity development of farmer groups also made it easier to reach women and disadvantaged groups, ensure their participation in livestock programs, and build their institutional capacity. This helped the groups become federated into

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associations, graduate as farmer cooperatives, and continue their operations. Poverty mapping of the project districts and ensuing support to target groups were also design strengths. The project prioritized a goat program requested by women and disadvantaged groups, particularly in remote areas where microfinance services were not available. The goat program became popular and many other agencies replicated it for poverty reduction. Hence, the project shifted its priority to a goat-breed improvement program.

6. The project design envisaged a key role of the private sector in dairy business. The government-owned Pokhara Milk Supply Scheme was thus privatized and renamed Sujal Dairy. The project subsequently established Chitwan Milk, another private dairy. These two dairies daily processed and marketed 250,000 liters of milk in the project area, compared with 15,000 liters previously. The project promoted forage development on community and private lands to raise stall-fed animals and protect the environment in project districts. It also emphasized public–private partnerships to ensure the private sector’s participation in livestock processing and marketing. The project management structure was simple and sustainable because DLS district and regional offices were responsible for implementing and monitoring field activities. This was consistent with the government’s policy of not increasing staff and creating temporary structures for project management.

7. However, the project design was found inadequate in some critical areas. The project districts were too numerous, beyond the executing agencies’ management capacity. In remote districts, the microfinance activities could not be implemented in tandem with the livestock program, initially due to a lack of MFIs and later because of their limited financial viability. The project design should not have incorporated livestock insurance without properly assessing legal and institutional frameworks, and privatization of the Pokhara Milk Supply Scheme should not have been kept as a loan effectiveness condition without certainty of government ownership of the reform, or an alternative means of achieving this should have been proposed. Financial and economic rates of return were estimated only for the individual livestock enterprises but not for the overall project, which made it difficult to compare returns at its completion. B. Project Outputs

8. The project met 97% of its output targets, but the actual implementation period between loan effectiveness and completion was 55 months, compared with the planned 72 months, due to delays in meeting a loan effectiveness condition 6 and safety concerns in many project districts because of the country’s internal conflict. Project achievements by component are summarized in the following sections and detailed in Appendixes 1 and 2.

1. Community Development and Capacity Building

9. The project's orientation and capacity-building training was to strengthen awareness and skills of key stakeholders in the livestock value chain. It is estimated that this component achieved 98% of the physical targets.

a. Community Development

10. District-specific poverty and social mapping and analyses, disaggregated by sex, ethnicity, and caste, were undertaken as planned in all 22 ILP districts and 5 high-altitude LPP

6 There was a 17-month delay in meeting loan effectiveness conditions due to slow progress in privatizing the

Pokhara Milk Supply Scheme.

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districts. Mapping and analyses helped target the poor and disadvantaged groups. Baseline surveys and district situation analyses were conducted in all ILP districts, but could be completed only in 2006 due to the delay in loan effectiveness. The project organized 184,680 households into 32,394 groups (10,429 for livestock production and 21,965 for credit), and the groups formed 6,927 committees (2,534 for livestock production and 4,393 for credit) to access extension and marketing services for farm products, compared with the project target of organizing 164,000 beneficiaries into 3,450 farmer groups and 690 committees. While the project trained only 312 CLAs on social mobilization and basic technical services to farmers, against the target of 390, it upgraded their technical skills to a degree that enabled them to provide superior services, rather than meeting the numbers but imparting only basic skills.

b. Development of Nongovernment and Microfinance Capacity

11. The project signed 193 partnership contracts with 134 NGOs, with a 55% share of female staff, for social mobilization, awareness raising, and institutional capacity development of farmer groups, far more than the project target of 88 NGOs. Another 5 NGOs were engaged to assist implementation of the high-altitude LPP. The project trained 206 staff of partner NGOs and 50 staff of MFIs on social mobilization, gender sensitization, microfinance, and livestock enterprise development. The partner NGOs trained 416 farmer group members on enterprise development, bookkeeping, and leadership development.

12. The RMDC provided microfinance training to 1,846 staff and 24,593 clients of 61 MFIs. This is below the project target of mobilizing 76 MFIs. The target could not be met because of a lack of MFIs in some remote districts of the Midwestern and Far-western development regions. However, 42 community livestock committees and 13 cooperatives were trained and strengthened to enable them to deliver microfinance to farmer groups. Of the 61 accredited and trained MFIs, 27 supplied microfinance to the project beneficiaries. Ten development banks were engaged in financing livestock enterprises in the districts selected for processing, marketing, and commercialization of livestock services. The RMDC and MFIs disbursed $23.6 million to 8,740 group accounts, of which $5.8 million and 2,044 group accounts were covered by project funds. Of the $23.6 million loan, 86% was disbursed to 90,222 women for livestock production and to 6,420 men for livestock marketing and processing enterprises, with 100% loan repayment performance. The project also signed a memorandum of agreement with the Agriculture Development Bank to provide additional livestock enterprise loans to commercial farmers and entrepreneurs, since the RMDC loan ceiling of NRs30,000 ($415) was not enough to establish commercial farms and enterprises.

c. Development of Department of Livestock Services Capacity

13. The project trained 3,051 DLS staff on social mobilization, gender sensitization, NGO contracting, enterprise development, extension methods, microfinance, and feed management and marketing. It also prepared a gender strategy for the DLS. Twenty-five DLS officers received scholarships for master's degree studies in systems approach to learning, agricultural extension, animal breeding, animal nutrition, agricultural marketing, and dairy technology. Twenty-six junior staff received scholarships for bachelor’s degree studies, and another 45 staff received training as junior technicians. About 300 DLS and MOAC staff were trained on leadership development, animal feed management, disease diagnosis, monitoring and evaluation, quality certification, good laboratory practices, business planning, and farm business. Eighteen DLS officers went on observation tours to Thailand. Twenty-two progressive farmers and 5 government officers participated in an observation tour to India. About 80% of the trained staff are utilizing their skills effectively in the DLS. The project also developed training manuals

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on livestock production, processing, and gender mainstreaming that DLS has been using in its regular program.

d. Development of Private Sector Capacity

14. The project trained 755 dairy entrepreneurs on milk hygiene and 133 milk-chilling center operators on operation and management of chilling machines. About 1,000 meat entrepreneurs, and slaughterhouse and slaughter slab operators were trained on meat hygiene. Training was also provided to 838 livestock market operators, animal collectors, and farm entrepreneurs. However, the training would have been more effective if the government had enforced the milk and meat hygiene and food safety regulations. The project trained 246 private para-veterinary technicians, known as paravets, on veterinary enterprise management, disease prevention and treatment, and artificial insemination, against the target of 250 paravets. The project provided partial financial support of NRs178,500 per person to 152 trained paravets to establish veterinary services according to their business plans. About 80% of the paravets became able to deliver veterinary services, including artificial insemination, in their areas.

2. Livestock Productivity Improvement

15. This component achieved about 96% of the target. It supported poor women and disadvantaged groups in small-scale activities for livestock income generation, helping reduce poverty. The component supported goat, pig, poultry, and forage production programs for 63,523 families (62% women), comprising disadvantaged castes, resource-poor ethnic groups, and former bonded laborers. It also supported dairy cattle and buffalo production programs in areas with good access to market.

a. Feed Management

16. Forage development was a priority project activity. The project supported cultivation of improved perennial forage on 12,542 hectares (ha) of community land, and 300 ha of private land, directly involving 58,149 farmers, of which 60% were women. It promoted winter forage cultivation on 2,869 ha and summer forage on 738 ha. The total of 16,449 ha under improved forage production was 65% higher than the project target of 10,000 ha. About 1,650 farmers produced 8.5 metric tons of perennial forage seeds annually under the project. The project established 281 forage resource sites, where nutritious forage species were cultivated. The improvement in feed management was a major accomplishment in the project's effort to boost the income of smallholders, significantly reducing labor requirements for fodder collection and allowing farmers to substitute nutritious forage species for expensive concentrated feeds. However, a new weed called “Alupate” has emerged in the hills, which is adversely affecting forage cultivation. The DLS needs to take adequate measures before the weed damages the livestock production system.

b. Breed Improvement

17. Artificial insemination services were extended to 47 districts, from 31 districts in the base year. The number of these services7 increased from 68,511 in 2006 to 138,432 in 2010 with project support, and is expected to further increase in 2011 and beyond with government support. To reach areas that lack artificial insemination services, the project provided the

7 The share of private paravets for artificial insemination services increased from below 10% in the base year to 16%

in 2010.

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communities with 51 higher-quality cattle bulls and 411 buffalo bulls for breed improvement. It also supplied better male goats, sheep, and pigs to upgrade the local livestock breed, distributing about 33,500 goats, 50 sheep, 5,498 piglets, and 1,800 local hens and cockerels with higher-quality breeding males to poor and disadvantaged groups. It further introduced a participatory goat-breed improvement program for 546 farmers in four project districts.

c. Veterinary Services, Ancillary Support, and Livestock Insurance

18. The project provided veterinary services such as vaccination and drenching against internal parasites, laboratory services, disease diagnosis, treatment, and organization of veterinary and infertility camps. It supported construction of animal restraining pens to assist treatment and artificial insemination, and of dipping tanks to prevent external parasites, and supplied Burdizzo castrators to castrate inferior males. At community level, the project supported the establishment of veterinary drug funds to 1,667 groups for sustained treatment of their animals. It provided start-up funds to farmer groups to establish 1,161 animal security schemes, 8 as the livestock insurance plan envisioned by the project design could not be implemented due to legal complications. The animal security scheme was successful for large animals (cow and buffalo) in commercial pockets implemented within cooperatives. The DLS has replicated this scheme in its regular program.

3. Livestock Processing and Marketing 19. This component achieved about 94% of the project’s immediate objectives, supporting the promotion of better livestock product processing and marketing. Public–private partnership arrangements helped support better dairy and meat processing and retail outlets, live animal markets, and collection centers.

a. Dairy Processing

20. The project supported the establishment and improvement of 190 small dairies through its public–private partnership program. These dairies were collecting about 58,000 liters of milk per day from 15,858 farmers and offering full-time employment to 590 persons. The project also supported the establishment of 177 milk-chilling enterprises that would give market access to an additional 29,465 farmers to sell 111,050 liters of milk per day, and create full-time employment for 613 persons. However, subject to availability of milk, the capacity of these enterprises varies between 68% and 90%.

b. Meat Shops and Meat Processing

21. The project provided financial assistance to private sector meat entrepreneurs to improve 416 meat shops (against a target of 325), construct 72 slaughter slabs (against a target of 50), and improve or construct 8 slaughterhouses (against a target of 5). On average, entrepreneurs or municipalities invested 75% of the total cost for infrastructure, with the remainder provided by the project. The project also gave technical assistance to private processing industries such as Rejoin Limited in Hetauda and Shangrila International in Duhabi; and to Butwal, Banepa, and Biratnagar municipalities for slaughterhouse design, and technical services during their construction. Over 95% of the meat shops and 85% of the slaughter slabs are in full operation. Of the slaughterhouses supported by the project, Valley Cold Store in Kathmandu and Sanushri Pig Slaughterhouse in Bardiya were in operation and the others were in the development phase by project completion. Despite project support, the overall meat processing and marketing hygiene is still unsatisfactory. There is a need for the government to 8 Funds established to compensate up to 80% of the total cost if there are deaths in group members’ animals.

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ensure efficient implementation and monitoring of the enterprises along legal standards and norms.

c. Live Animal Marketing

22. The project improved 50 live animal markets against the targeted 26, and established 29 livestock collection centers. It also developed master plans and codes of practice for the operation of model markets. The average financial contribution of management committees, village development committees, and municipalities was 73% of the total infrastructure cost, with the project funding the balance. Four live animal markets and five collection centers were not in operation by project completion, which suggests for greater care in analyzing the needs before deciding on any financing for the establishment of markets and collection centers.

4. Livelihood Pilot Program in Higher Altitudes

23. This component achieved about 95% of the immediate objectives. The project specified development models and enterprises for the five high-altitude districts in June 2007. It prepared a participatory multisector plan for the districts in January 2008 and formed a livelihood improvement action team in each district to support planning and implementation of need-based community programs. The established needs were grouped into (i) small infrastructure and social development, (ii) livestock development, (iii) agriculture development, (iv) non-timber forest products, and (v) marketing infrastructure development. The 2-year pilot program implemented forage development, local cattle upgrading, rural poultry production and establishment of animal slaughter slabs, trail improvement, vegetable production, and other livelihood improvement activities such as small-scale water supply and irrigation systems.

5. Project Management Services

24. This component fully achieved the immediate objectives. The DLS established a small and effective central project management office (CPMO) with a qualified project manager, professionals, and support staff to coordinate project activities. It also provided buildings, vehicles, and equipment for the central, regional, and district offices responsible for project implementation. Each district had a livestock action team to assist project implementation, supervision, and monitoring. The CPMO helped all ILP districts prepare and implement 3-year gender action plans. Gender focal points were determined at the central, regional, and district offices and are functional. The project prepared 16 implementation guidelines for livestock production, processing, and marketing. A project monitoring and evaluation system was designed and implemented in ILP districts to track sex-disaggregated project outputs and outcomes. However, district offices generally only reported financial and physical progress rather than outputs and outcomes. This situation could have been improved if senior staff from MOAC, the DLS, and CPMO had applied greater field monitoring and encouraged DLSOs to use the evaluation system. On the other hand, the DLS decided to adopt the market information management system developed by the project. The Food and Agriculture Organization of the United Nations (FAO), single-sourced for consultancy services, began field implementation work on 1 January 2007 with a full team of international and national consultants, and concluded it on 30 June 2010.

C. Project Costs

25. The total project cost was estimated at $33 million at appraisal, comprising $2.8 million foreign exchange, and $30.2 million local currency as loan proceeds. ADB was to provide $20 million in loan funds (61%), the government $5 million equivalent (15%), the RMDC and MFIs $6.5 million equivalent (20%), and beneficiaries $1.5 million equivalent (4%). The actual

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cost at project completion was $33.13 million ($2.95 million foreign exchange and $30.18 million local currency), out of which $20.33 million9 in loan funds (61%) was from ADB, $5.4 million equivalent (16%) from the government, $5.8 million equivalent (18%) from the RMDC and MFIs, and $1.6 million equivalent (5%) from the beneficiaries (Appendix 3). A reduced actual project implementation period and lack of qualified MFIs in remote project districts were the main reasons for the lower contributions by the RMDC and MFIs. Including physical and price contingencies, the appraisal cost estimates by component were (i) $3.6 million (11%) for community development and capacity building, (ii) $16.3 million (51%) for livestock productivity improvement, (iii) $5.6 million (17%) for livestock processing and marketing, (iv) $2.1 million (7%) for the high-altitude livelihood pilot program, and (v) $4.5 million (14%) for project management services. However, actual expenditure by component at project completion were $3.8 (12%) for community development and capacity building, (ii) $16.5 million (50%) for livestock productivity improvement, (iii) $5.96 million (18%) for livestock processing and marketing, (iv) $0.9 million (3%) for the livelihood pilot program, and (v) $5.61 million (17%) for project management services. Overestimation of costs for the livelihood pilot program and high project management costs due to the many scattered project districts were the main reasons for cost deviations among components. D. Disbursements

26. The loan amount was SDR13,969,000 ($20 million equivalent) at appraisal, of which SDR13,669,000 ($20.33 million equivalent) was disbursed and SDR300,000 ($0.42 million equivalent) was cancelled at the time of loan closure (Appendix 4). Two imprest accounts of $0.55 million were established, one for the DLS for regular project expenditures and another for the RMDC for microfinance services and credit funds. The imprest accounts were fully liquidated by 18 March 2010. The statement of expenditure procedure was used to facilitate reimbursement and liquidation of small contracts under $50,000. Many project expenditures were small in value so that the imprest accounts and statement of expenditure procedure allowed timely project implementation and accounting. Loan reallocation was required to increase funds for supervision and implementation, and to finance programs for poverty alleviation and livestock processing and marketing, since there was no separate cost category for these activities. Surplus loan funds from the consulting services and training cost categories were reallocated to the civil works category for renovation and reconstruction of district livestock offices. The loan account was closed on 30 November 2010 after disbursing all eligible claims. E. Project Schedule

27. The project was originally planned to be effective in July 2004 and be implemented over about 6 years until June 2010. However, the loan became effective only on 2 December 2005, 17 months late because of delays in meeting loan effectiveness conditions and country-internal conflict. Still, the project has met almost all the targets despite a reduced implementation period of 4.5 years. The project was effective because the DLS was an experienced executing agency and had capable central, regional, and district staff to support project implementation; the CPMO had already been established before loan approval; and project implementation was started quickly by making some adjustments to the implementation manual of an earlier project. 10 Livestock action teams supported effective implementation and monitoring of the project activities. A demand-based approach and interventions, supplemented by 9 The loan amount in dollar terms increased due to the depreciation of the US dollar against the SDR. The

$20.33 million disbursed under the project includes $2.8 million foreign exchange cost and $0.33 million interest charge during implementation.

10 Loan 1461-NEP: Third Livestock Development Project, implemented during 1997–2004.

9

implementation guidelines, contributed to quick and efficient project outputs and outcomes (Appendix 5).

F. Implementation Arrangements

28. The implementation arrangements followed the successful model of the earlier livestock projects, with the exception that the RMDC was the executing agency for the microfinance program. There were no major changes to the design during implementation. The DLS as the agency responsible for overall project management and implementation of all non-credit activities established a CPMO with experienced staff. The CPMO was responsible for project planning and reporting, supervision of implementing agencies, and monitoring and evaluation of project activities. The DLS also ensured that cross-cutting issues such as gender awareness and equity were mainstreamed in the project. An FAO consulting team assisted the CPMO in project management. Project management authority was delegated to the DLS regional directorates to coordinate, supervise, implement, and monitor field programs. DLSOs and NGOs undertook social mobilization, gender awareness, group development, livestock productivity improvement, farmer training, and monitoring in project districts. The RMDC, as the executing agency for credit delivery, provided project microfinance services and disbursed loan funds to participating MFIs and development banks on agreed terms and conditions, although delivery of loans in remote districts was constrained by the lack of MFIs.

29. A project steering committee chaired by the secretary of MOAC oversaw the overall implementation of the project. Other members of the committee were the joint secretaries from MOAC; the director general of the DLS; representatives from the ministries of finance; forests and soil conservation; local development; and women, children, and social welfare; the National Planning Commission; and the RMDC. The director general of the DLS acted as the member-secretary. The committee met as required during the project. To guide the CPMO on a more regular basis, an implementation coordination committee chaired by the director general of the DLS was formed. That committee comprised heads of DLS program directorates and representatives of the Department of Woman Development at the Ministry of Women, Children, and Social Welfare; milk, meat, and poultry organizations; the RMDC; and regional project managers. The central project manager acted as member-secretary. Representatives of stakeholder organizations were co-opted as necessary. While the implementation coordination committee did not meet regularly in the early years, it met regularly once project implementation picked up.

G. Conditions and Covenants

30. The loan was declared effective after fulfillment of loan conditions, the major one being the privatization of the Pokhara Milk Supply Scheme. Both the EAs submitted audited project accounts and the auditor’s report to ADB on time, and in accordance with accepted auditing practices. In all, the project had 35 useful and adequate covenants that were all complied with, although the implementation coordination committee meetings were held when necessary, rather than once every 2 months as stipulated. Another covenant where compliance was delayed called for the full implementation (within 1 year of loan effectiveness) of a time-bound action plan to solve livestock subsector issues, particularly regarding private sector participation. Details on compliance with loan covenants are in Appendix 6.

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H. Consultant Recruitment and Procurement

31. ADB single-sourced FAO for the consultancy services. Technical expertise, international experience, and low overhead cost were the reasons for selecting FAO for 43.1 person-months of international and 527.1 person-months of national consultant services (Appendix 7). The services covered team leadership, monitoring and evaluation, marketing, agribusiness development, training and institutional development, forage and seed production, rural finance, dairy and meat enterprise, private veterinary practices, gender, environment, and resettlement. FAO fielded consultants only on 1 January 2007 due to delays in loan effectiveness and FAO’s lengthy process in finalizing the contract. Periodic adjustments were made in the allocation of consultant inputs to better meet project requirements.

32. The project procured 9 vehicles, 63 motorcycles, office equipment, furniture, veterinary kits, and animal health and breeding equipment and supplies using direct purchase, international shopping, and the government’s local competitive bidding procedure acceptable to ADB. The CPMO contracted national firms for 14 studies, including baseline and poverty surveys, and several impact studies to learn lessons from project interventions and refine approaches to improving project performance. There were only a few minor civil works contracts provisioned under the project. The equipment, supplies, and civil works were generally used for the intended purpose, were in good condition, and contributed to timely and effective project implementation.

I. Performance of Consultants, Contractors, and Suppliers

33. The performance of FAO’s consulting services was satisfactory, although fielding of the international team leader was delayed due to unavailability of a suitable candidate. Later, the contract of the team leader was terminated on performance grounds after utilizing 10 person-months of inputs. Replacement of the team leader was possible only for the last 4 months of the project, to contribute to the preparation of a final progress report and the borrower’s project completion report. However, the national deputy team leader led the consultant team efficiently thanks to his long and international experience in the livestock subsector. Consulting firms and NGOs, commissioned to undertake studies, training programs, and social mobilization, performed satisfactorily. The contractors’ performance in civil works was also satisfactory as their contracts were completed on time with an acceptable quality standard. The procurement performance of the suppliers of vehicles, equipment, and other supplies was also satisfactory. Procured items were delivered on time and met the specified quality standards.

J. Performance of the Borrower and the Executing Agency

34. The performance of the borrower and the two executing agencies was rated satisfactory. The project had two project managers, both experienced senior DLS staff. The government privatized the Pokhara Milk Supply Scheme, although the process took longer than anticipated and delayed loan effectiveness and the start of project implementation. There was reasonable continuity of staff in regions and districts, and the DLS filled all key staff positions to ensure smooth project implementation. Project decisions were generally taken on time, and adequate counterpart funds were provided. The RMDC competently implemented the microfinance portion of the project, although it had difficulties finding a sufficient number of MFIs in the Midwestern and Far-western development regions. Cooperatives were selected and trained to graduate as multipurpose cooperatives and provide farmer groups with microfinance in those areas that lacked MFIs. The project signed a memorandum of understanding with the Agriculture Development Bank to provide credit to commercially oriented farmers and entrepreneurs. The

11

government and ADB commended the project management team with the best-performing project management team award for 2009, which recognized the high commitment of the project staff and their exemplary project implementation performance. K. Performance of the Asian Development Bank

35. ADB’s performance was also rated satisfactory. The project was delegated to the Nepal Resident Mission before its effectiveness to enable close consultations with the government and the executing agencies, and effective field monitoring during implementation. The deadline for meeting the loan effectiveness conditions was extended four times to let the government privatize the dairy sector and broaden farmers’ access to markets. ADB held monthly meetings with the project management team to ensure prompt feedback and resolution of implementation issues. ADB fielded 11 missions, including loan processing, review, midterm review, and project completion. The review missions undertook extensive field visits, provided valuable insights on implementation issues, and highlighted these to the government offering practical solutions, particularly to address the microfinance issues in remote districts, to focus consultant inputs on remote and impoverished districts, and to improve district-specific project monitoring and evaluation. The missions also gave feedback on the need to improve the quality of livestock production and processing for the safety of consumer health. The review missions prepared time-bound action plans that were readily monitored by the executing agencies.

III. EVALUATION OF PERFORMANCE

A. Relevance

36. The project’s objective was to reduce the incidence of poverty in rural communities. The two-pronged approach—reaching the poor and the disadvantaged with social mobilization and small animal programs, and commercialization of production and processing of livestock products by increasing their access to markets—was consistent with the government’s and ADB’s strategies to achieve pro-poor economic growth. The government’s Three-Year Plan (2011–2013) and ADB’s Country Strategy and Program, 2005–2005 and Country Partnership Strategy, 2010–2012 continue to support poverty reduction through small livestock development and microcredit for women, and increasing agricultural income and jobs for poor and socially excluded groups. Institutional and management arrangements were well designed, although some adjustments and strengthening of arrangements were required, such as provision of microfinance in remote districts, and output monitoring and evaluation during implementation. The project outputs were highly relevant to outcome and impact both at project appraisal and completion. B. Effectiveness in Achieving Outcome

37. The project was effective in surpassing its outcome targets despite the 20% shorter implementation period. It was estimated that nutritional intake of girls and boys under 6 years of age increased by 19.1%, compared with the target of 20%. This was based on an estimated 11% increase in milk consumption, 50% increase in meat consumption, and a substantial increase in vegetable consumption through kitchen gardening. The project’s ILP districts increased cow milk production by 140% and that of buffalo by 57%, compared with the target of 50%.11 Goat off-take increased by 28% in the ILP districts, against the target of 30%. These 11 About 80% of cattle group members (2,090 farmers from active, matured groups) replaced buffalo (1,440 liters per

lactation) with higher-quality cattle (2,100 liters/lactation). Similarly, 60% buffalo group members (17,739 farmers from active, matured groups) replaced local buffalo (700 liters/lactation) with better breeds.

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achievements were the results of a flexible and demand-led approach. The project formed 10,429 farmer groups (62% women members) that improved livestock production, compared with a target of 3,450. The project’s focus on women and disadvantaged groups through support for goat raising, forage cultivation, and microfinance services was the main reason for achieving much higher female participation, 62% against the target of 35%. The project also developed or strengthened 2,856 livestock production, processing, and marketing enterprises, against the target of 1,050. Average milk production per cow and buffalo increased by 85% (from 3 liters per day to 5.6 liters/day), compared with the target of 50%, and average live goat off-take increased by 28% (from 19.3 kg to 24.7 kg), compared with the target of 30%.

C. Efficiency in Achieving Outcome and Outputs

38. The project was found efficient in achieving its outcome and outputs on the basis of financial and economic analyses by following a similar methodology to that used at appraisal. However, a straight comparison with the appraisal estimates was not possible because the appraisal had estimated the financial and economic rates of return (FIRR and EIRR) only for individual livestock enterprises, not for the overall project. Hence, the appraisal estimates for four key enterprises related to dairy and meat production—which by project completion covered 80% of the enterprises promoted, total income generated, and beneficiaries intended—were aggregated to derive the appraisal-based FIRR and EIRR for the overall project. The derived appraisal FIRR was 26%, the derived appraisal EIRR was 47%. The estimated FIRR at project completion was 48.5% and the estimated EIRR 47.3%, both higher than the derived appraisal rates (Appendix 8). Hence, the project is justified from its financial and economic rates of return. If the benefits accrued from community development, empowerment of women and the disadvantaged, and environment preservation from forage cultivation are taken into account, the project will substantially exceed the targeted outcome and outputs. This achievement was possible because the executing agencies and ADB efficiently managed project implementation. D. Preliminary Assessment of Sustainability

39. The project benefits are likely sustainable because the delivered training, financial support, and equipment markedly improved the capacity of the DLS, NGOs, MFIs, cooperatives, and private entrepreneurs. A key contribution of the project was the development of private dairy enterprises and dairy cooperatives. Privatization of the Pokhara Milk Supply Scheme created a positive environment for growth of dairy industries and cooperatives, which contributed to a substantial increase in milk production and incomes for farmers and dairy entrepreneurs. With the emergence of the private dairies, the government-owned Dairy Development Corporation moved to the Midwestern and Far-western development regions, providing a market for additional 30,000 liters of milk per day. Private milk-processing enterprises supplying pasteurized milk in cities have invested in developing capacity of primary dairy cooperatives as a source to collect and store fresh milk. The dairy cooperatives have gradually been upgraded to milk-chilling centers in rural areas, thus improving the marketing system and links with processing units. Some private dairies have worked with commercial banks to provide farmers with credit at subsidized rates for the purchase of cows and buffaloes. These developments indicate the sustainability of project benefits.

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E. Impact

1. Income and Employment

40. The project impact is rated positive because it directly benefited 207,864 households through increased livestock productivity and processing and marketing activities, compared with the target of 164,000 households. The project increased real per capita income by 88% (NRs2,574) in 2010, compared with the target of 50% (NRs1,464), at 1996 constant prices. A total of 6,245 person-years of incremental employment was generated in the livestock production, processing, and marketing enterprises that were supported or strengthened by the project, which is much higher than the project target of 5,100 person-years. An additional 13,597 person-years of full-time job were created in the project-supported livestock farms, for which there was no target at project design. These are only initial impact values, as impacts will continue to be realized during the project’s economic life. Thus, an impact assessment after 5 years will provide the best measures.

2. Social Impact

41. The project promoted gender equality and social inclusion, particularly in reaching poor women and men, the landless, and households headed by women. Women represented 62% of the beneficiaries of the goat program, and representation of disadvantaged castes amounted to 33% and that of ethnic groups to 28%. The increased income mainly went to women who used it for children's education, family healthcare, and purchase of food. The forage program reduced the fodder collection time of women by 2–5 hours per day. The time saved was used to care for children and for other, income-generating activities. However, the dairy cow and buffalo groups were less inclusive of disadvantaged groups because inclusion required higher investments in purchasing these animals and becoming members. Nevertheless, the high participation of women and disadvantaged groups in most project activities (particularly in goat raising and microfinance), the increased nutritional intake of children under 6 years of age, and the full-time employment generated in livestock production, processing, and marketing programs (exceeding the project target) indicate significant social impact of the project.

3. Environmental Impact

42. The project complied with all environmental safeguard requirements. Its interventions had a positive environmental impact. Reinforcement of terrace risers and bunds with higher-quality forage, and expanded ground cover with better forage on degraded lands, were effective in minimizing surface runoff and soil erosion from rainfalls. Intensive on-farm forage development programs and stall feeding of livestock allowed farmers to collect manure and minimize the use of chemical fertilizers. About 60% of the dairy farmers had installed biogas units that provided household lighting, cooking gas, and organic fertilizer from the slurry. The use of biogas reduced the use of fuel wood and kerosene for household cooking and lighting, improved health by minimizing cooking smoke, and reduced forest degradation. The project’s human health awareness campaigns sensitized meat and dairy entrepreneurs to hygienic production, processing, and marketing of dairy and meat products, although more support will be needed to replicate it nationally. The project focused on development or rehabilitation of processing facilities, drainage and water supply systems, and disposal of waste materials. To minimize land pollution from solid waste, the project trained 246 paravets to comply with the code of practice and ethics for veterinary practices. Such measures have had a significant positive impact on the environment.

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IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

43. The project was rated successful after review of its relevance, efficiency, effectiveness, and sustainability. Its design was consistent with the priorities of the government and ADB. Implementation was completed in 20% less time than originally scheduled with a loan saving of $0.4 million. Nonetheless, the project was effective in achieving its targeted outputs in the areas of community development and capacity building of farmers, private entrepreneurs, NGOs, MFIs, and government staff; increasing livestock productivity; improving livestock processing and marketing; and improving livelihoods in higher altitudes. The project also met its outcome targets of increasing per capita income of beneficiary households and nutritional intake of children under 6 years of age; promoting livestock enterprises that directly benefited farmers; creating full-time employment opportunities; ensuring high participation of women and the disadvantaged in project activities and group organizations; and boosting livestock subsector productivity and production. Further increases in incomes are anticipated as the benefits from institutional capacity development, support for livestock enterprises, and resulting expansion of market links are further consolidated. The increased capacity and profitability, and new links with service institutions such as private sector enterprises, service providers, and farmer groups, will cement the sustainability of project benefits.

B. Lessons

44. Poverty mapping was a useful tool to determine the beneficiaries and suitable ways to involve them in project activities. However, to include women and the disadvantaged in commercial processing and marketing enterprises that require more resources and better skills, alternative approaches are needed, such as organizing skills training in their areas of interest, easing access to institutional loans on a group guarantee basis, and establishing links with marketing institutions.

45. Privatization of public sector enterprises is not sufficient to achieve growth in the dairy industry. Strong links with milk-producing farmers and cooperatives are needed to ensure uninterrupted milk supplies to milk processors, achieve full capacity, and maximize investment benefits.

46. Public–private partnership is an effective approach to promote private sector participation in the livestock subsector. This has been demonstrated by the successful operation of project-assisted meat and dairy shops, abattoirs, paravets, and veterinarians.

47. Effective implementation of laws and regulations on operation of slaughterhouses coupled with a consumer awareness program are essential to improve hygienic meat processing and marketing, and optimize benefits from project support.

48. RMDC-supported MFIs were successful in delivering loans and ensuring timely repayment in areas with enough opportunities to earn daily wages. However, for areas without such opportunities, farmer cooperatives should be developed to deliver loans. These cooperatives have low overheads and function even in adverse geographic and political conditions because of their community ownership.

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C. Recommendations

1. Project Related

49. Future monitoring. The DLS should continue to assess project impact on beneficiary incomes, employment, nutrition, and livestock productivity on an annual basis and share these reports with ADB even after project completion. The DLS should also continue to develop the skills of district staff in monitoring and evaluation of field activities. 50. Covenants. The DLS began implementation of the Feed Act, 1976 only 3 years after loan effectiveness. Effective nationwide adoption of the act by feed industries will require awareness programs and close monitoring of compliance by the DLS. 51. Additional assistance. The number of livestock enterprises has significantly increased in the project districts. However, they are not well organized and their links with dairy and meat industries are weak. There is a need for further external and domestic investments to make the enterprises commercial and ensure that they have clear links with milk and meat producers, processors, and marketers. 52. Timing of the project performance evaluation report. It is recommended that the project performance evaluation report be prepared in 2014 to allow for consolidation of project outcomes and confirmation of the project completion report rating.

2. General

53. Dairy programs should follow a road corridor and contiguous pocket-based approach. This will help improve farmers’ access to markets, and allow slaughterhouses to operate at full capacity through better supply of slaughter animals.

54. Livestock development should follow a business-oriented and value chain approach, and producers should also be integrated into value chains. Private firms, cooperatives, and service providers should be trained for technical and business advisory services. Organized livestock committees and associations should also be trained and allowed to graduate as multipurpose cooperatives for microfinance services in the absence of MFIs.

55. The DLS’s role should be gradually changed to that of a facilitator rather than a service provider, and the private sector should be enabled to supply quality semen, which is in high demand. The genetic improvement of local hill goats and introduction of productive breeds should be further expanded.

56. The existing legislation on animal feed, medicine, and livestock product quality should be effectively enforced. This will require clear delineation of the roles of the DLS, the Department of Food Technology and Quality Control, livestock producers, processors, and consumers.

57. MOAC and the DLS should also place high priority on enforcing the slaughterhouse operation and quality control regulations. This could be implemented in a phased manner by first targeting major cities and then gradually extending it to other towns.

58. ADB and the government should clear all major loan conditions before approval. To ensure a timely start of project implementation, there should only be standard conditions for loan effectiveness.

16 Appendix 1

PROJECT FRAMEWORK

Design Summary

Performance Indicators and Targets

Assessment

Impact Less poverty among rural women and men through gender-inclusive and socially inclusive development

A total of 164,000 households benefiting directly from increased livestock productivity, processing, and marketing activities

Per capita income of NRs2,925 (1996 prices) of poor households increasing by 50% by 30 June 2010 Proportion of women and people from disadvantaged ethnic groups and castes in farmer groups increasing to at least 50% (NRs1,464) by 30 June 2010

207,864 households benefited: 118,789 from livestock productivity improvement; 23,184 from livestock processing and marketing; 1,739 from the higher-altitude livelihood program; and 64,152 from microfinance.

Per capita income of poor households increased by NRs2,574 from 1996 prices, or 88% (38% higher than the target).

Women's participation in farmer groups is 62%, while the share of disadvantaged ethnic and caste people is 27%.

Outcome Men and women’s food security, nutrition, incomes and employment from livestock production and small-scale livestock-related enterprises improved in 48 districts of Nepal

20% increase in nutritional intake of girls and boys under 6 years of age in the project area by 30 June 2010 1,050 livestock enterprises developed, creating 5,100 new jobs, by 30 June 2010 3,450 farmer groups comprising 35% women members managing their own production and marketing activities by 30 June 2010 Animal productivity in 22 districts improving by 50% for milk (from 3 liters/day to 4.5 liters/day) and 30% for live goat off-take (from 19.3 kg) by 30 June 2010

Nutrition intake of boys and girls under 6 years of age rose by 19.1% thanks to more consumption of milk and meat. 2,856 livestock production, processing, and marketing enterprises (including 237 veterinary drug supply and 1,600 forage and seed production enterprises) developed or strengthened and 6,245 person-years of employment generated. An additional 13,579 full-time jobs created in the project-supported livestock farms. 10,429 farmer groups comprising 62% women members are managing their own production and marketing. Average milk production per milking cow and buffalo has increased by 85% (5.6 liters/day). Meat off-take from goat has increased by 28% (to 24.7 kg per goat).

Outputs Component 1: Community Development and Capacity BuildingCommunities mobilized and participating in the project

District-specific poverty and social mapping and analysis undertaken in 22 districts by contracted local NGOs, DDCs, and VDCs to provide baseline data differentiated by

A baseline survey of 27 districts—collecting data disaggregated by sex, ethnicity, and caste—conducted by involving NGOs, DDCs, and VDCs.

Appendix 1 17

Design Summary

Performance Indicators and Targets

Assessment

Other stakeholders’ capacity improved, including staff of district development committees, nongovernment organizations, microfinance intermediaries, industry associations, Department of Food Technology and Quality Control, and Department of Livestock Services.

gender, ethnicity, and caste, by 31 December 2004 Gender capacity-building training provided to all DLS project staff, farmer groups, and other project stakeholders Livestock action teams formed in DDCs and select livestock pockets according to agreed-upon criteria by 30 June 2005 Partnership agreements signed with 88 suitable NGOs by 31 December 2004 88 partner NGOs conducting awareness programs on services and available project assistance by 31 December 2004 88 NGO partners providing enterprise training to all members, leadership training to chairpersons and secretaries, and bookkeeping training to treasurers by 31 December 2009 3,450 farmer groups comprising 35% women formed or strengthened based on enterprise packages selected by the community by 30 June 2010 390 CLAs selected, of which 50% will be women, by 31 December 2008 NGOs and microfinance intermediaries with partnership agreements receiving training in

2,534 communities were mobilized through partner NGOs. Gender capacity was strengthened through training of 4,781 farmers; staff of 134 NGOs, 300 cooperatives, and 119 livestock enterprises; 50 CLAs; and 317 DLS officers and 2,202 junior technicians. 44 farmers, 173 cooperatives and community-based organizations, and 31 DLS officers were trained in cooperative development. 57 entrepreneurs were trained in food safety and hygienic practices. 39 DLS and DFQTC staff were trained in good laboratory practices. LATs formed in all 22 intensive livestock program districts. Partnership agreements were signed with 134 qualified NGOs. All 134 partner NGOs conducted awareness programs on available project support to farmer groups and entrepreneurs. All 134 partner NGOs provided enterprise development training to general members, and leadership and bookkeeping training to executive members. 3,662 farmer groups comprising 30% women were formed and strengthened to engage in livestock-related enterprises. 312 CLAs were trained, of which 58% are women. 168 of them are operational. 1,846 staff of 61 MFIs and 24,593 MFI clients were trained on financial management.

18 Appendix 1

Design Summary

Performance Indicators and Targets

Assessment

social mobilization, including gender sensitization, microfinance, and livestock agribusiness by 30 June 2010 DDC staff (2 per district) and LAT members trained in livestock planning, monitoring and evaluation by 30 June 2009 DLS officers, including women, receiving management and leadership training by 30 June 2005 DLS staff receiving training in social mobilization, including gender sensitization, NGO contract system, enterprise development, extension methods, microfinance, and marketing by 31 December 2007 DLS staff receiving training in disease diagnosis, M&E, and marketing by 30 June 2010 An M&E system disaggregated by gender, ethnicity, and caste and vertically linked from field to department and ministry prepared by 31 December 2006 Meat industry training for 200 butchers, 50 processors, and 200 meat shop entrepreneurs conducted with private sector partners by 30 June 2010 10 DFQTC staff trained in meat quality certification, assurance, and accreditation 60 DLS staff, 45 feed millers, and 300 key farmers (35% women) trained in feed-related matters

54 DDC staff and 168 LAT members were trained on livestock planning and M&E. 47 DLS officers (13 women) received management and leadership training, and also participated in a national workshop on gender strategy. 132 DLS staff received training on social mobilization, gender sensitization, livestock enterprise development, microfinance, and marketing. 142 DLS staff received livestock extension, M&E, and marketing training. 25 DLS officers received scholarships for master's degree studies in systems approach to learning, livestock extension, and marketing. 70 junior technicians received scholarships for bachelor’s degree studies in livestock processing technologies. A comprehensive M&E system was established and remained operational throughout the project period Meat industry training was provided to 156 butchers, 38 processors, and 288 meat shop entrepreneurs. 17 persons from DFQTC, DLS, and Valley Cold Store were trained on quality assurance and certification. 77 DLS staff, 55 feed millers, and 280 key farmers (28% women) were trained on feed production and management.

Component 2: Livestock Productivity Improvement Gender-balanced farmer organizations

390 CLAs, of whom 35%t are women, being trained for self-

312 CLAs trained (58% women) and mobilized, of which 168 are working.

Appendix 1 19

Design Summary

Performance Indicators and Targets

Assessment

formed, strengthened, and ready for growth Forage and feed resources developed as a basis for livestock production Animal health services strengthened in DLS and expanded in private sector Microfinance insurance services provided to men and women farmers

employed community services in livestock by 30 June 2010 Forage production to support livestock enterprises increased by 60% on 10,000 hectares of communal land, and 100,000 women and men farmers directly and actively involved by 30 June 2010 1,500 contract seed growers (50% women) producing 50 tons perennial seed per year with quality assurance through a forage seed testing facility within Central Seed Quality Control Center of the Ministry of Agriculture and Cooperatives by 30 June 2010 Gender-balanced farmer organizations formed, strengthened, and prepared for growth Animal health services strengthened in DLS and expanded in private sector Rural Microfinance Development Center and at least 76 MFIs trained and providing livestock credit according to agreed-upon guidelines by 30 June 2010 At least 1,000 farmer group-based self-funded insurance schemes (35% women) started by 30 June 2010

12,542 ha of communal land under forage production, 88,149 farmers involved 2,869 ha under winter forage and 738 ha under summer forage 2 forage seed production federations working in Palpa and Nawalparasi districts involving 1,600 seed growers (52% women) 281 forage resource centers established 10,429 farmer groups and 2,534 committees (58% women) formed Livestock extension services were strengthened in project districts by building the capacity of district livestock services offices and supporting the establishment of 133 private practitioners. 137,110 farmers received field training on livestock management and productivity improvement 8 development banks, 2 microfinance banks, 7 financial NGOs, and 20 cooperatives provided credit ($65 million) and related services. 61 MFIs were trained and 501 entrepreneurs received credit for commercial operations. 1,161 farmer group-based livestock security schemes (with 40% women) promoted and operational.

Component 3: Livestock Processing and Marketing Milk and meat processing and marketing improved

Market appraisal and demand studies completed by 31 December 2009 285 improved retail milk centers and 37 milk-chilling centers established 1,200 rural milk collectors (50% women) trained in milk hygiene and

Market appraisal and demand studies were undertaken for key livestock products. 177 chilling centers, including 7 model chilling centers, and 190 dairy outlets and 5 model dairies were established. 885 milk collectors and 838 market operators and owners of chilling centers were trained

20 Appendix 1

Design Summary

Performance Indicators and Targets

Assessment

Live animal marketing improved Veterinary and para-veterinary services established Consumer awareness programs initiated Agrofinance (for livestock processing, marketing, and commercialized services) provided

570 chilling center operators trained in plant operation and maintenance 20 slaughter slabs, 30 small-scale slaughter sheds, and 5 slaughterhouses established 125 butcher shops and 200 meat shops upgraded 30 entrepreneurs assisted into meat processing ventures 26 live animal markets established or strengthened 1,200 market contractors trained by 30 June 2010 250 para-veterinarians trained, equipped, and established in practice 30 urban communities receiving hygiene and quality awareness by 30 June 2010 Consumer awareness programs initiated Microfinance (for livestock processing, marketing, and commercialized services) provided

on milk hygiene, processing, and machine operation and maintenance. 39 slaughter slabs, including 8 model slaughter slabs and selling centers, and 4 slaughterhouses were established. 377 meat shops (including 4 meat processing, 50 livestock markets, and 17 livestock collection centers) upgraded and operational 88 entrepreneurs trained in meat processing 14 live animal markets established and 13 strengthened 838 market operators and contractors trained 246 private veterinarians trained, of which 152 are in business.

114 public awareness campaigns, 26 consumer awareness workshops and 25 animal disease control workshops conducted Awareness program in hygienic meat and milk consumption broadcast by radio. Video documentaries on meat shop improvement and livestock insurance aired on television. 8 development banks financed livestock processing, marketing, and commercialization services. Agriculture Development Bank provided loans for bigger enterprises.

Component 4: Livelihood Pilot Program in Higher AltitudesStudies on high-altitude farming systems undertaken, and livelihood program initiated

Studies on high-altitude farming systems undertaken by 30 June 2005 Pilot program for livestock development prepared for approval by 31 December 2006 Pilot program implemented from 2007 to 2010

High-altitude livelihood study completed by June 2007 16 sites and communities chosen for the program through stakeholder workshops in all 5 districts. Activities selected through on-site bottom-up planning exercises. The program was approved in 2008. Multisector pilot activities initiated in all 16 sites from 2008 to 2010, directly benefiting

Appendix 1 21

Design Summary

Performance Indicators and Targets

Assessment

139 households. Component 5: Project Management Services Central project management office in Kathmandu established Project implementation office in Nepalgunj established Participation and monitoring links established

DLS appointment of an acceptable project manager and agreed-upon number of staff seconded Livestock subsector policy on gender developed and approved by DLS by 31 December 2006 Project implementation office in Nepalgunj established A suitable building with acceptable communications assigned for project management Technical assistance consultants engaged according to schedule Vehicles and equipment procured according to time and cost schedules Gender focal points identified at the central, regional, district, and farmer group levels

The DLS appointed a project manager and an agreed-upon number of staff was seconded since inception. The DLS approved the gender policy, which is in the process of publication. A project office was not established in Nepalgunj because the Regional Livestock Directorate was actively involved in project implementation and monitoring there. The directorate was given backstop support from the CPMO in Kathmandu. The project was assigned a separate office building with all necessary communication facilities. FAO provided 43 person-months of international and 527 person-months of national consulting services. 9 vehicles and 63 motorcycles were procured and used for project purpose. Gender focal persons were determined and are functional at all levels.

CLA = community livestock assistant, CPMO = central project management office, DDC = district development committee, DFTQC = Department of Food Technology and Quality Control, DLS = Department of Livestock Services, FAO = Food and Agriculture Organization of the United Nations, LAT = livestock action team, MFI = microfinance institution, M&E = monitoring and evaluation, NGO = nongovernment organization, RMDC = Rural Microfinance Development Center. Sources: ADB. 2003. Report and Recommendations of the President to the Board of Directors on a Proposed Loan

to the Kingdom of Nepal for the Community Livestock Development Project. Manila. DLS. 2010. Borrower’s Project Completion Report for the Community Livestock Development Project. Kathmandu. ADB. April–May 2011. Project Completion Review Mission, Kathmandu.

22 Appendix 2

ACHIEVEMENT OF IMMEDIATE OBJECTIVES

Component Weight per component and activity

Achievement (%)

1 Capacity Development Community development 3.6 100 Development of NGO and MFI capacity 0.6 95 Development of DLS capacity 4.2 100 DDC strengthening 0.1 100 Development of private sector capacity 3.5 95 Status 12.0 98 2 Livestock Productivity Improvement Forage development 17.9 98 Animal breeding and veterinary services 23.0 95 Microfinance services and loan

disbursement 12.8 95

Status 51.0 96 3 Livestock Processing and Marketing Milk processing and marketing 6.4 98 Meat processing and marketing 7.2 90 Live animal markets 3.4 95 Status 17.0 94 4 Livelihood Pilot Program in Higher

Altitudes

Status 6.0 95 5 Project Management Status 14.0 100 Overall Status 97.0 100.0 DDC = district development committee, DLS = Department of Livestock Services, MFI = microfinance institution, NGO = nongovernment organization. Sources: DLS. 2010. Borrower’s Project Completion Report for the Community Livestock Development Project,

Kathmandu; ADB. April–May 2011. Project Completion Review Mission, Kathmandu.

Appendix 3 23

PROJECT COSTS

Table A3.1 Actual Project Costs ($ ’000)

Item Foreign Exchange

Local Currency

Total Cost

A. Base Cost 1 Community Development and Capacity Building 0.66 3.14 3.802 Livestock Productivity Improvement 0.66 15.84 16.53 Livestock Processing and Marketing 0.65 5.31 5.964 Livestock Pilot Program in Higher Altitudes 0 0.93 0.935 Project Management Services 0.65 4.96 5.61

Subtotal 2.62 30.18 32.80 B. Interest Charge During Implementation

0.33 0 0.33

Total 2.95 30.18 33.13

24 Appendix 4

Table A3.2: Financing Plan ($ ‘million)

Description

Asian Development Bank Government Beneficiaries RMDC and MFIs Total

Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual A. Investment Costs 1. Civil works 0.10 0.22 0.00 0.06 0.00 0.00 0.00 0.00 0.10 0.28 2. Vehicles 0.30 0.32 0.00 0.04 0.00 0.00 0.00 0.00 0.30 0.36 3. Equipment and supplies 1.40 1.69 0.30 0.22 0.00 0.00 0.00 0.00 1.70 1.91 4. Special studies 3.20 0.10 0.40 0.01 0.00 0.00 0.00 0.00 3.60 0.11 5. Training 4.30 3.38 1.00 0.85 0.00 0.00 0.00 0.00 5.30 4.23

6. Credit, Insurance and Start-Up Funds

6a. MFI development costs 0.20 0.19 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.19 6b. Supervision and implementation 0.40 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.50 0.00 6c. Credit line 5.20 6.10 2.10 0.00 1.50 1.60 6.50 5.58 15.30 13.28

Subtotal Credit Insurance and Start-Up Funds 5.80 6.29 2.20 0.00 1.50 1.60 6.50 5.58 16.00 13.47 7. Livelihood Pilot Program in

Higher Altitudes 1.70 0.70 0.40 0.12 0.00 0.00 0.00 0.00 2.10 0.83 8. Supervision and Implementation 2.30 0.00 0.60 0.00 0.00 0.00 0.00 0.00 2.90 0.00 Total Investment Costs 19.10 12.70 4.90 1.30 1.50 1.60 6.50 5.58 32.00 21.18 B. Recurring Costs 1. Consulting services 0.00 5.13 0.10 4.03 0.00 0.00 0.00 0.00 0.10 9.16 2. Supervision and implementation 0.00 2.17 0.00 0.28 0.00 0.00 0.00 0.00 0.00 2.45 Total Recurrent Costs 0.00 7.30 0.10 4.31 0.00 0.00 0.00 0.00 0.10 11.61 Total Project Costs 19.10 20.00 5.00 5.61 1.50 1.60 6.50 5.58 32.10 32.79

MFI = microfinance institution, RMDC = Rural Microfinance Development Center. Source: Loan Financial Information System, Asian Development Bank.

Appendix 4 25

LOAN DISBURSEMENT

Table A4.1: Yearly Loan Disbursement ($)

Category Description 2005 2006 2007 2008 2009 2010

01 Civil works 0 7,916

59,016 137,495 137,495 218,868

02 Equipment 117,088

212,417

439,263 616,409 1,206,855 1,687,291

03 Vehicles 0 383 383 18,949 319,246 319,246

04 Training 0 317,371

1,385,392 1,982,637 2,541,900 3,384,645

05 Pilot livelihood program 4,071

29,343

69,500 71,690 325,245 701,030

06 Consulting services 0

950,000

1,450,000 1,750,000 2,050,000 2,171,237

07 Special studies 16,670

53,173

62,661 67,653 90,234 95,765

08 Credit, insurance and start-up funds 518,161

526,137

1,529,044 3,254,886 5,726,711 6,102,514

09 Microfinance institutions' development costs

31,839

31,839

63,052 97,941 138,450 190,905

10 Supervision and implementation 362,171

1,192,180

1,592,206 2,646,936 3,560,445 5,127,441

11 Interest charge 0 12,139

53,771 132,016 253,222 332,349

Total 1,050,000 3,332,898 6,704,288 10,776,612 16,349,803 20,331,291Source: Loan Financial Information System, Asian Development Bank.

26 Appendix 4

Table A4.2 Quarterly Loan Disbursement ($ ’000)

Year Quarter Disbursement

Projected Actual

2005

I 0.000 0.000 II 0.550 0.000 III 0.500 0.000 IV 0.160 1.050

Subtotal 1.210 1.050

2006

I 0.000 0.000 II 0.250 0.347 III 0.890 0.701 IV 0.400 1.234

Subtotal 1.540 2.282

2007

I 0.399 0.100 II 0.600 0.633 III 1.000 1.461 IV 0.500 1.178

Subtotal 2.499 3.372

2008

I 0.540 0.484 II 1.080 1.057 III 1.150 1.625 IV 1.230 0.906

Subtotal 4.000 4.072

2009

I 0.860 0.484 II 1.260 1.206 III 1.160 1.532 IV 1.720 2.351

Subtotal 5.000 5.573

2010

I 0.310 0.290 II 1.278 0.959 III 0.840 1.155 IV 0.000 1.577

Subtotal 2.428 3.981 Total 16.677 20.330

Source: Loan Financial Information System, Asian Development Bank.

Appendix 5 27

PROJECT IMPLEMENTATION SCHEDULE

Activity 2005 2006 2007 2008 2009 2010

1. Community Development and Capacity Building

Poverty mapping completed and baseline data established

Communities and development pockets established

Livestock action teams formed

Partnerships with nongovernment organizations established

Farmer groups adopt livestock enterprises

Community livestock assistants trained

Village-based training for farmers conducted

District development committee staff trained

Management training provided to DLS officers

DLS district staff training modules completed

DLS monitoring and evaluation section strengthened

DLS marketing directorate strengthened

DLS training directorate strengthened

Meat Industry Association strengthened

Dairy Industry Association strengthened

Private sector para-veterinaries (paravets) trained

Feed industry strengthened through training

2. Livestock Productivity Improvement Farmer organizations formed and strengthened

Forage and seed resources developed

28 Appendix 5

Activity 2005 2006 2007 2008 2009 2010

Animal health services strengthened

Microfinance services made available

Animal feed services strengthened

3. Livestock Processing and Marketing Market area survey and appraisal benchmarking completed

Slaughter and meat handling improved

Milk entrepreneurship developed

Live animal markets established or strengthened

Paravets assisted into private practice

Consumer awareness programs implemented

Agrofinance made available to entrepreneurs

4. Livelihood Pilot Program in Higher Altitudes

Studies

Pilot project implementation

5. Project Management

Project management unit staff assigned

Project implementation unit established

Steering and implementation coordination committees functioning

Specialist services recruited and functioning

Vehicles and equipment purchases completed

DLS = Department of Livestock Services.

Sources: ADB. 2003. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Nepal for the Community Livestock Development Project. Manila; and ADB. April–May 2011. Project Completion Review Mission. Kathmandu.

Original schedule

Actual

implementation

Appendix 6 29

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant Reference in Loan Agreement

Status of Compliance

1 The Borrower shall (i) maintain separate accounts for the Project, (ii) have such accounts and financial statements audited annually by qualified independent auditors, (iii) furnish to the Bank not later than nine months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and report of the auditors, including auditor's opinion on the use of the loan proceeds and compliance with the covenants, use of imprest account, and statement of expenditures in English, and (iv) furnish to the Bank all information related the accounts and financial statements on request.

Article IV, Section 4.06 (b)

Complied with.

2 The Borrower shall furnish to the Bank four monthly reports on the carrying out of the Project and on the operation and management of the Project facilities. Such reports should be in Bank requested form and indicate progress made and problems encountered during the four months under review, steps taken to resolve the problems, and proposed program of activities and expected progress during the following four months.

Article IV, Section 4.07 (b)

Complied with.

3 Within three months of the Project completion, the Borrower shall furnish to the Bank a report in the format requested by the Bank on the execution and initial operation of the Project, cost, performance of the Borrower as per obligations under the loan agreement and the accomplishment of the purpose of the loan.

Article IV, Section 4.07(c)

Complied with.

4 Imprest accounts for the Department of Livestock Services (DLS) and the Rural Microfinance Development Center (RMDC) shall be established at Nepal Rastra Bank. The imprest accounts shall be established, managed, replenished, and liquidated in accordance with the Bank's "loan disbursement handbook" and detailed arrangements between the Borrower and the Bank. The initial amount to be deposited into the imprest accounts shall not exceed the equivalent of six months projected expenditures, or 10% of the loan amount, whichever is less.

Schedule 3, Section 8 (a)

Complied with.

5 The DLS shall be the principal project executing agency, responsible for overall management and

Schedule 6, para. 1

Complied with.

30 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

implementation of all non-credit activities under the Project. RMDC shall be the executing agency for the credit related activities under components 2 and 3 of the Project and shall coordinate, manage and regulate the distribution of Project funds to MFIs, nongovernment ofganizations (NGOs) and community based organizations (CBOs), and participating banks.

6 The Project Steering Committee (PSC), chaired by the Secretary of the Ministry of Agriculture and Cooperatives (MOAC) shall include relevant joint secretaries from MOAC; representatives from the Ministry of Finance, Ministry of Forest and Soil Conservation, Ministry of Women, Children and Social Welfare, Ministry of Local Development; heads of the planning and budget divisions of DLS, National Planning Commission, and RMDC. The Director General (DG) of DLS shall act as its member-secretary. The PSC shall meet as necessary, but not less than twice a year to (i) oversee overall project implementation and review progress, (ii) provide overall policy guidance, and (iii) undertake inter-ministerial coordination necessary for implementation of the Project.

Schedule 6, para. 2

Complied with.

7 The Implementation Coordination Committee (ICC), established to guide the CPMO on a regular basis and chaired by the DG of DLS, shall comprise heads of DLS directorates for animal health, marketing, training and extension, forage development, animal production and quality assurance, DG of the Department of Women Development of the Ministry of Women, Children and Social Welfare, representatives of milk, meat and poultry based representative organizations, one each representative of RMDC and Nepal Rastra Bank, as well as the Regional Project Managers. The Project Manager (PM) shall act as its member-secretary.

Schedule 6, para. 3

Complied with.

8 The ICC shall meet once every two months for (i) addressing implementation issues, (ii) advising on technical matters, and (iii) advising the PSC on policy matters. The ICC will review and advise the PSC annually on (i) rates of interest to participating financing institutions, and (ii) adjustments to reflect prevailing market

Schedule 6, para. 4

Complied with.

Appendix 6 31

Covenant Reference in Loan Agreement

Status of Compliance

conditions.

9 The CPMO shall be responsible for the overall management and day to day coordination of the Project as well as implementation of component 3 of the Project and all centrally organized training. The CPMO shall be headed by a PM, who shall be a gazetted first class officer. The PM shall report directly to the DG of DLS. The CPMO shall be located in Kathmandu, and in addition to the PM, shall consist of a team of seconded staff, including (i) one gazetted second class officer (Deputy PM), and (ii) two gazetted third class planning officer (field programs, and monitoring and evaluation), (iii) two junior technical staff, (iv) one accounts officer, and (v) adequate support staff.

Schedule 6, para. 5

Complied with.

10 Regional PMs, who shall be the DLS Regional Directors in each of the five development regions, shall support the CPMO in the management, coordination, and monitoring and evaluation of district level project activities. The Regional PMs shall report directly to the PM. The Regional PMs shall provide office facilities and support to technical assistance consultants working within the region.

Schedule 6 para. 6

Complied with.

11 Within one year of the Effective Date, DLS in partnership with local NGOs, shall have undertaken a poverty and social mapping to identify poorer communities for project assistance in the intensive livestock production districts. The mapping shall explicitly include the following groups: landless households, women-headed households, former bonded laborers, and low caste families.

Schedule 6, para. 7

Complied with.

12 DLS shall ensure that the selection of pocket areas for intensive livestock production under component 2 of the Project shall be on the basis of poverty-affected communities. Criteria for selection of pocket areas shall include (a) incidence of poverty as evidenced by the poverty and social mapping mentioned in paragraph 7 above, (b) ethnic or low caste populations, (c) ownership of livestock by women, (d) natural resource base, and (e) the existence of an emerging market axis.

Schedule 6, para. 8

Complied with.

32 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

13 The Borrower shall bear the foreign exchange risk for the Bank loan. The funds to be reloaned under the RMDC subsidiary loan agreement shall have an interest rate of 2% per year for a total period of 20 years, including a grace period of 5 years.

Schedule 6, para. 9

Complied with.

14 The Borrower shall ensure that RMDC shall onlend to microfinance institutions (MFIs) for livestock productivity activities at an interest rate of not more than 5.5% per annum. The Borrower shall ensure that RMDC's lending spread shall be used to cover the cost of bad debts, evaluating and selecting MFIs as well as monitoring their performance, credit risks, and profit. The funds onlent to MFIs for providing loans shall be for 18 months with quarterly repayment of interest and semi-annual repayments of principal amount. Subject to acceptable MFI repayment performance, the terms of subsequent loans may be extended to three years, and eventually five years. The Borrower shall ensure that prior to the onlending of any funds to any MFI, RMDC shall have entered into a subloan agreement, acceptable to the Bank, with such MFI, recording the flow, use, accountability, and repayment of such funds.

Schedule 6, para. 10

Complied with.

15 To achieve the required coverage for the livestock productivity activities mentioned under para. 10 above, RMDC shall establish partnerships with micro-finance and other credit organizations as required. In Project districts without qualified MFIs, RMDC shall identify at least five NGOs as potential MFIs within six months of the effective date, and provide them training to become MFIs.

Schedule 6, para. 11

Complied with.

16 Funds for livestock processing and marketing credit shall be channeled through RMDC to MFIs, the Agriculture Development Bank of Nepal and other participating banks. Prior to the channeling of such funds, RMDC shall have entered into a financing agreement with each participating bank in form and substance acceptable to the Bank. RMDC shall provide pre-financing to the participating banks, who will make disbursements from these accounts in response to applications received in support of Project activities. Participating banks shall

Schedule 6, para. 12

Complied with.

Appendix 6 33

Covenant Reference in Loan Agreement

Status of Compliance

submit claims every four months for reimbursement to RMDC, which shall aggregate these claims and submit them to the banks with supporting evidence of disbursements.

17 The Borrower through RMDC, shall ensure that participating banks and MFIs shall onlend the proceeds of the loan to poultry, buffalo fattening, and goat-rearing smallholders and to entrepreneurs investing in processing enterprises at prevailing market rates, using the interest rate margin to cover credit delivery and management costs, other operating costs, and an allowance for bad debts and profit. The Borrower shall ensure that livestock loans will be supported by farmer organizational insurance schemes.

Schedule 6, para. 13

Complied with.

18 All loan application forms for small enterprises shall provide sufficient information to determine if there will be environmental or involuntary resettlement effects. For this purpose, and within three months of the Effective Date, the CPMO shall prepare and submit to the Bank for its approval, a loan applicant format. If a proposal triggers the environmental and involuntary resettlement effects, CPMO will engage a resettlement specialist to ensure compliance with the Bank's policy and guidelines on involuntary resettlement.

Schedule 6 para. 14

Complied with.

19 Funds provided under the completed Third Livestock Development Project (Loan 1461-NEP) for onlending to MFIs continue to be used for livestock loans to farmers, including potential beneficiaries of the present Project.

Schedule 6, para. 15

Complied with.

20 The approved budget for the Project shall be sufficient to cover all counterpart funding required for the Project, in accordance with the financial plan.

Schedule 6, para. 16

Complied with.

21 The Borrower shall take all necessary and appropriate measures to ensure full implementation of the Project Gender Action Plan, set forth in annex 1 of Schedule 6 of the Loan Agreement, of which it forms an integral part.

Schedule 6, para. 17

Complied with.

22 Within nine months of the Effective Date, the CPMO shall have identified at least one NGO

Schedule 6, para. 18

Partly complied with. RMDC

34 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

and RMDC shall have identified at least two MFIs per district as potential partners for Project implementation, together with their capacity building requirements.

could identify potential MFIs in two remote districts only in 2009.

23 Within one year of the Effective Date, the CPMO shall have entered partnership agreement with each of the selected NGO. DLS shall ensure that the participating NGOs provide social development training, including awareness raising on available services and project assistance, group management, legal literacy, governance, health, and hygiene.

Schedule 6, para. 19

Complied with.

24 Within 18 months of the Effective Date, DLS shall have adopted measures for quality assurance and control for compounded animal feeds. This shall include measures for the implementation of the Borrower's Feed Act, dated 1976.

Schedule 6, para. 20

Delayed compliance. Adoption of the Feed Act started after 3 years of the effectiveness.

25 Within one year of the Effective Date, the Borrower shall have fully implemented the Time-Bound Action Plan to address livestock sector-based issues, decided by the PSC on 1 October 2003 and as agreed with the Bank.

Schedule 6, para. 21

Complied with.

26 Within two years of the Effective Date, the Borrower shall have approved the Pilot Livelihood Program for Higher Altitudes under Component 4 of the Project.

Schedule 6, para. 22

Complied with.

27 The Borrower shall ensure that civil works contractors comply with all applicable labor legislation. Bidding documents shall include a clause on the prohibition of child labor and equal pay for women and men for equal work as defined in national legislations.

Schedule 6, para. 23

Complied with.

28 The Borrower shall ensure that all public markets, slaughter slabs and houses, and milk chilling and processing facilities to be constructed, extended or upgraded shall be located on land owned by the Borrower and no displacement of resettlement of people shall be involved. In the event that involuntary resettlement is unavoidable, the Borrower shall immediately inform the Bank hereof and prepare resettlement plans in accordance with the Banks

Schedule 6, para. 24

Complied with.

Appendix 6 35

Covenant Reference in Loan Agreement

Status of Compliance

policy and guidelines on involuntary resettlement and shall ensure that no construction shall start prior to having obtained the Bank's approval of such resettlement plan.

29 Local bodies involved in development of integrated market facilities, known as livestock commercial centers, shall not acquire private land, either compulsory or through land donations, for this purpose. Any land required shall either be Government owned land free of encumbrances, or shall be purchased in the open market.

Schedule 6, para. 25

Complied with.

30 The design, extension, upgrading, renovation and operation of facilities under the Project will follow the Borrower's environmental requirements, the Bank's environmental guidelines for selected infrastructure development projects, and other relevant Bank guidelines on environment. The Borrower shall ensure that the design of markets, slaughter slabs, and milk treatment facilities shall include effective and environmentally sound waste and water disposal systems.

Schedule 6, para. 26

Complied with.

31 Within nine months of the Effective Date, the CPMO shall have established a Project Performance Monitoring System to monitor whether project inputs and activities deliver the expected outputs and benefits to the intended beneficiaries.

Schedule 6, para. 27

Complied with.

32 The CPMO shall ensure that within six months of the Effective Date, gender segregated initial baseline physical and socioeconomic surveys shall have been conducted, and shall have submitted a detailed Project implementation-monitoring plan for Bank's review and concurrence. The data will include income and expenditure data, demographic trends, gender issues, information on ethic and minority groups, nutritional status, child labor, and environmental status. After the initial survey, the CPMO shall conduct and submit to the Bank annual benefit monitoring reports.

Schedule 6, para. 28

Complied with.

33 The Bank, DLS, through the CPMO, and RMDC, shall jointly review the Project at least twice a year throughout the implementation period. The biannual reviews shall include a review of (i) the

Schedule 6, Para. 29

Complied with.

36 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

performance of DLS, the CPMO, RMDC, MFIs, participating banks, and NGOs participating in project implementation; (ii) implementation of the assurances set out in Schedule 6 of the loan agreement; (iii) implementation of the gender action plan mentioned in para. 17; (iv) physical progress of the Project; and (v) the progress and impact of capacity building activities.

34 One month prior to the project mid-term review, the CPMO shall have conducted a detailed review of all the information gathered to assess progress of the Project. The CPMO shall complete an impact evaluation study prior to the preparation of the project completion report.

Schedule 6, para. 30

Complied with.

35 In addition to the biannual reviews, DLS through the CPMO, RMDC, and the Bank shall carry out a mid-term review of the Project at the end of year three of its implementation. The mid-term review shall monitor closely the progress of the Project with a view to making adjustments to Project design and implementation arrangements where necessary.

Schedule 6, para. 31

Complied with.

DG = director general; DLS = Department of Livestock Services; ICC = implementation coordination committee; MFI = microfinance institutions; MOAC = Ministry of Agriculture and Cooperatives; NGO = nongovernment organization; PM = project manager; CPMO = central project management office; PSC = project steering committee; RMDC = Rural Microfinance Development Center

Source: ADB.2003. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to

Nepal for the Community Livestock Development Project. Manila. DLS 2010. Borrower’s Project Completion Report for the Community Livestock Development Project.

Kathmandu. ADB. April – May 2011. Project Completion Review Mission, Kathmandu.

Appendix 7 37

CONSULTING SERVICES

Project Implementation Consultant Team Original Inputs (person-months)

Revised Inputs (person-months)

Utilized (person-months)

International Consultants Team Leader/Monitoring and Evaluation/Systems Approach to Learning/Marketing Specialist

24.0 11.6 11.6

Seed Development Specialist 8.0 11.9 11.5Monitoring and Evaluation Design Specialist 5.0 5.0 5.0Market Development Specialist 5.0 5.0 5.0Abattoir Design Specialist 2.0 2.0 2.0Quality Improvement and Certification Specialist 3.0 5.0 5.0

Agro-Enterprise Specialist 4.0 0.0 0.0Dairy Development Specialist 2.0 2.0Meat Enterprise Specialist 1.0 1Subtotal 51.0 43.5 43.1National Consultants Deputy Team Leader/Senior Facilitator/Production and Institution Specialist

43.0 40.0 40.0

Training Design and Participation Specialist 24.0 21.0 21.0Forage Development and Seed Production Specialist 36.0 36.0 36.0

Rural Microfinance Specialist 36.0 30.0 30.0Meat Enterprise Development Specialist 36.0 39.0 39.0Dairy Enterprise Development Specialist 36.0 37.0 37.0Gender and Development Specialist 24.0 26.0 26.0Monitoring and Evaluation System/Training Specialist 18.0 37.0 36.0

Training Methods Specialist 8.0 24.0 24.0Veterinary Private Practitioner Facilitator 18.0 35.0 35.0Market Development Specialist 12.0 22.0 22.0Quality Improvement and Certification Specialist 9.0 8.0 8.0

Agro-Enterprise Specialist 6.0 27.0 27.0Resettlement/Environmental Impact Monitoring Specialist 2.0 2.0 1.0

Cooperative Development Specialist 22.5 23.0Subtotal 308.0 406.5 405.0Total 359.0 451.0 448.0Source: Department of Livestock Services. 2010. Borrower’s Completion Report of the Community Livestock Development Project. Kathmandu.

38 Appendix 8

ECONOMIC AND FINANCIAL ANALYSES A. Introduction 1. The financial and economic analyses follow the methods applied at project appraisal,1 which are in line with the Guidelines for the Economic Analysis of Projects of the Asian Development Bank (ADB). The incremental benefits have been estimated by comparing “with project” and “without project” situations. The main quantifiable benefits included in the analyses are increased milk production (buffalo and dairy cow enterprises) and goat meat production (including hill herd and stall-fed enterprises). At appraisal, financial and economic analyses were done for 15 individual enterprises that formed choices for beneficiaries. As the exact demand for specific enterprises by potential beneficiaries could not be ascertained, it was not considered practical to conduct an overall assessment of the project on the basis of financial and economic evaluations of individual enterprises undertaken at appraisal. 2. The present analyses used data from primary sources such as interviews with farmers and entrepreneurs from Banke, Bardiya, Chitwan, Kailali, Lamjung, Nawalparasi, Palpa, and Pyuthan districts, and market functionaries. Secondary sources used included the executing agencies’ progress reports, and publications on international skim milk powder prices. B. Assumptions 3. The financial and economic analyses of the project are based on the following assumptions:

(i) The economic life of the project is assumed to be 17 years, including the 4.5-year implementation period from December 2005 to June 2010.

(ii) The import parity pricing for milk based on internationally traded price of skim milk powder has been used to derive economic benefits of incremental milk production. Milk prices beyond 2010 are projected based on linear trend forecast values. The Manufactures Unit Value Index is used to convert prices in terms of constant 2010 dollars.

(iii) Border prices for goat meat (imported from India) have been used in the economic analysis.

(iv) Prices are expressed in terms of constant 2010 prices wherever a price series has been used.

(v) The official exchange rate of NRs71.22 for 1 US dollar (prevailing at the time of project completion on 30 June 2010) has been used.

(vi) Financial prices of non-traded goods are converted into economic prices by applying the standard conversion factor of 0.9.

(vii) A shadow wage rate factor of 0.53 is used for unskilled labor, which is consistent with the project appraisal and the 2010 situation of rural underemployment, especially of women who undertake most of the livestock-related work.

(viii) Transfer payments such as taxes and subsidies are excluded from the calculation of economic values.

(ix) The government investment has been included as recurrent cost. The government investment beyond the project completion date is assumed to be equal to the budget allocated for 2011 and to continue until the end of the project’s economic life.

1 ADB. 2003. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Kingdom of Nepal for the Community Livestock Development Project, Manila.

Appendix 8 39

(x) Beneficiary contribution is estimated at 5% of the investment by ADB, government, and microfinance institutions (MFIs), which has been distributed each year.

(xi) A discount rate of 12% has been used as the opportunity cost of using capital to calculate present values of the net incremental benefits and costs, and to derive the benefit–cost ratios.

C. Demand Analysis 4. The main final outputs of the project are milk and meat. Despite the project's efforts, Nepal still faces a demand–supply mismatch for main dairy and meat products. Nepal produced a total of 1,495,897 tons of milk in 2010, of which only 10% is currently being marketed through the organized sector, which includes the government’s Dairy Development Corporation, private dairies, and cooperatives. It is estimated that annual milk demand in urban areas has been growing at the rate of 11%. However, overall annual milk production has increased by just 3.3% from 2000 to 2010. The current annual shortfall amounts to about 300,000 liters of processed milk per day (representing an estimated supply gap of 60%). Import of fresh and powdered milk from India has been filling the gap. Nepal imported 4,342 tons of dairy products, including powdered milk from India and overseas in 2010. However, in India (and the People's Republic of China), domestic demand for milk and milk products substantially exceeds production. India has banned the export of milk powder from February 2011 and allowed tax-free importation of milk powder and butter to boost supply. This might create complications in Nepal’s milk supply chain, as it needs to import powdered milk to meet domestic demand for processed milk. 5. The project has made a significant contribution to strengthening the entire milk value chain by increasing the number of better-quality buffaloes and dairy cows, along with increased collection, storage, and marketing of milk. The government’s Pokhara Milk Supply Scheme was privatized under the project, operating as Sujal Dairy. Since privatization, the dairy has increased its daily milk processing capacity to 100,000 liters in 2010, from 12,000 liters in 2005. The private sector milk processing capacity has significantly increased in recent years, reducing dependence on the government dairy, although the government dairy collected 56,418 tons of milk from farmers and cooperatives in 2010. Milk producers’ cooperatives have proliferated in the project districts along with greatly improved capacity to procure, store, and market fresh milk. A total of 1,603 dairy cooperatives were actively involved in the dairy business in 2010. There has also been significant private investment in the sector. Chitwan Milk, another private dairy established in 2008 with a daily milk processing capacity of 150,000 liters, is the largest producer of skim milk powder in Nepal (15 tons per day) and has a fully automated plant. Given the expanded milk processing capacity, including conversion into skim milk powder by the private sector, the chronic milk marketing problems faced by dairy farmers during flush production seasons was no longer present from 2010. 6. The total meat production in the country was 248,573 tons in 2010, which was roughly about half the estimated national demand of 453,000 tons. The shortfall is mainly filled by the import of live animals from India and China, and meat from overseas. In 2010, Nepal imported 25,960 buffaloes, 391,184 goats, 25,798 sheep, and 1,595 pigs from India. The project has responded to the largely unmet demand by putting emphasis on meat production, especially by promoting goat-raising programs in relatively poor communities. D. Project Benefits 7. The analysis includes quantifiable benefits in terms of the net incremental value of milk and meat production throughout the project’s economic life. The analysis included four buffalo

40 Appendix 8

and dairy cow enterprises for milk production and goat (hill herd and stall-fed) enterprises for meat production. Pig enterprises were left out because of the insignificant contribution to the generation of direct benefits to smallholders, since such enterprises (especially pig-fattening ones) are not feasible. Commercial poultry enterprises (broiler production) are also not included in the evaluation given the lack of reliable data on the number of operating production units. Forage production is regarded as an intermediate good and used as on-farm input to livestock enterprises. Similarly, benefits from activities higher up in the value chain that are mainly supporting the marketing of major livestock products (milk and meat) are not included in the analysis. Of the total 118,789 beneficiaries in the intensive livestock program districts, over 80% are included in the enterprises selected for evaluation. The project has also generated non-quantifiable benefits, which are outside the scope of the present evaluation. These include positive contribution to the greater role of women in community activities as a result of social mobilization, the benefits in health and nutrition due to higher household incomes, and the reduction in cost of milk and meat production, and environmental preservation, arising from the widespread forage cultivation. E. Financial Evaluation and Sensitivity Analysis 8. The results of the financial analysis are in Table A8.1 below. The project’s financial internal rate of return (FIRR) for its economic life has been estimated at 48.53%. The project has a reasonable financial benefit–cost ratio of 1.68. The estimated overall FIRR is higher than the 26% appraisal FIRR, derived by aggregating the FIRRs of three key enterprises related to dairy and meat production—milking buffalo (40% FIRR), hill goat (25% FIRR), and stall-fed goat (18% FIRR)—which covered 80% of the enterprises promoted, total income generated, and beneficiaries served at project completion.

Appendix 8 41

Table A8.1: Financial Evaluation ($ ’000)

Year Investment

(ADB, RMDC, MFIs, and

Beneficiaries)

Govern-ment

Recurrent Expenditure

Total Cost

Total Benefit (Milk + Meat)

Net Benefit

Dis-counted

Cost

Dis-counted Benefit

Dis-counted

Net Benefit

2005 1,050 - 1,050 - (1,050) 938 - (938) 2006 2,526 1,584 4,110 2,851 (1,259) 3,276 2,273 (1,003) 2007 4,082 625 4,706 4,502 (204) 3,350 3,205 (145) 2008 5,412 566 5,978 6,908 930 3,799 4,390 591 2009 8,585 1,015 9,600 8,603 (997) 5,447 4,882 (566) 2010 7,212 1,231 8,443 8,603 160 4,278 4,359 81 2011 - 1,890 1,890 8,603 6,713 855 3,892 3,037 2012 - 1,890 1,890 8,603 6,713 763 3,475 2,711 2013 - 1,890 1,890 8,603 6,713 682 3,102 2,421 2014 - 1,890 1,890 8,603 6,713 609 2,770 2,162 2015 - 1,890 1,890 8,603 6,713 543 2,473 1,930 2016 - 1,890 1,890 8,603 6,713 485 2,208 1,723 2017 - 1,890 1,890 8,603 6,713 433 1,972 1,539 2018 - 1,890 1,890 8,603 6,713 387 1,760 1,374 2019 - 1,890 1,890 8,603 6,713 345 1,572 1,227 2020 - 1,890 1,890 8,603 6,713 308 1,403 1,095 2021 - 1,890 1,890 8,603 6,713 275 1,253 978

Total 28,867 25,810 54,677 126,105 71,428 26,773 44,989 18,216 FNPV 18,216 FBCR 1.68 FIRR 48.53%

( ) = negative, ADB = Asian Development Bank, FBCR = financial benefit–cost ratio, FIRR = financial internal rate of return, FNPV = financial net present value, MFI = microfinance institution, RDMC = Rural Microfinance Development Center. Sources: DLS.2010.Borrower’s Project Completion Report for the Community Livestock Development Project,

Kathmandu. ADB. April – May 2011. Project Completion Review Mission, Kathmandu. 9. The results of the sensitivity analysis, including sensitivity indicators and switching values are in Table A8.2. Four scenarios were worked out, including the base case, cost increase by 10%, benefits decrease by 10%, and the combined case with cost increase by 10% and benefits decrease by 10%. The financial benefit–cost ratio across the four scenarios ranges from 1.37 to 1.68. Similarly, the FIRR ranges from the lowest 29.65% in the combined case to 48.53% in the base case. The FIRR is not highly sensitive to the assumed increases in costs and benefits, except in the combined case.

Table A8.2: Financial Sensitivity Analysis

Case FNPV FBCR FIRR (%) SI SV (%) Base case (1) 18,216 1.68 48.53 Cost Increase by 10% (2) 15,539 1.53 38.38 (1.47) -68.04 Decrease in Benefits by 10% 13,717 1.51 37.45 2.47 40.49 Combined case (2+3) 11,040 1.37 29.65 3.94 25.38

( ) = negative, FBCR = financial benefit–cost ratio, FIRR = financial internal rate of return, FNPV = financial net present value, SI = sensitivity indicator, SV = switching value.

42 Appendix 8

F. Economic Evaluation and Sensitivity Analysis 10. The economic evaluation is in Table A8.3 The overall EIRR has been estimated at 47.26%. The discounted net benefits and costs yield an economic benefit–cost ratio of 1.88, which is fairly high to indicate the project's efficiency in economic terms. The estimated overall EIRR is higher than the 47% appraisal EIRR, derived by aggregating the EIRRs of four key enterprises related to dairy and meat production—milking buffalo and cow (61% FIRR), hill goat (41% FIRR), stall-fed goat (47% FIRR), heifer calf (22% FIRR)—which covered 80% of the enterprises promoted, total income generated, and beneficiaries served at project completion.

Table A8.3: Economic Evaluation ($ ’000)

Year Investment

(ADB, RMDC, MFIs, and

Beneficiaries)

Govern-ment

Recurrent Expenditure

Total Cost

Total Benefit (Milk + Meat)

Net Benefit

Dis-counted

Cost

Dis-counted Benefit

Dis-counted

Net Benefit

2005 960 - 960 - (960) 857 - (857) 2006 2,305 1,426 3,731 2,082 (1,649) 2,974 1,659 (1,315) 2007 3,721 562 4,283 3,992 (291) 3,048 2,842 (207) 2008 4,928 509 5,437 8,161 2,723 3,455 5,186 1,731 2009 7,804 914 8,718 4,699 (4,019) 4,947 2,666 (2,281) 2010 6,547 1,108 7,655 7,612 (43) 3,878 3,856 (22) 2011 - 1,701 1,701 8,206 6,505 769 3,712 2,942 2012 - 1,701 1,701 8,832 7,131 687 3,567 2,880 2013 - 1,701 1,701 9,214 7,513 613 3,323 2,709 2014 - 1,701 1,701 9,550 7,849 548 3,075 2,527 2015 - 1,701 1,701 9,883 8,182 489 2,841 2,352 2016 - 1,701 1,701 10,212 8,511 437 2,621 2,184 2017 - 1,701 1,701 10,537 8,836 390 2,415 2,025 2018 - 1,701 1,701 10,859 9,158 348 2,222 1,874 2019 - 1,701 1,701 11,178 9,477 311 2,042 1,731 2020 - 1,701 1,701 11,493 9,792 277 1,875 1,597 2021 - 1,701 1,701 11,863 10,162 248 1,728 1,480

Total 26,264 23,229 49,494 138,370 88,876 24,277 45,629 21,353 ENPV 21,353 EBCR 1.88 EIRR 47.26%

( ) = negative, ADB = Asian Development Bank, EBCR = economic benefit–cost ratio, EIRR = economic internal rate of return, ENVP = economic net present value, MFI = microfinance institution, RMDC = Rural Microfinance Development Center. Sources: DLS.2010.Borrower’s Project Completion Report for the Community Livestock Development Project,

Kathmandu. ADB. April – May 2011. Project Completion Review Mission, Kathmandu. 11. Table A8.4 presents the results of sensitivity analysis with base case and three alternative scenarios—cost increase by 10%, decrease in benefits by 10%, and the combined case of both increase in cost by 10% and decrease in benefits by 10%. The economic benefit–cost ratio yields the lowest value of 1.54 in the combined case, whereas the base case has the value of 1.88, which indicates high efficiency in the project's economic use of resources. The EIRR ranges from a minimum of 31.54% in the combined case to 47.26% in the base case. The sensitivity analysis shows that the project is not highly sensitive to possible increases in costs and decreases in benefits at reasonable levels.

Appendix 8 43

Table A8.4: Economic Sensitivity Analysis

Case ENPV EBCR EIRR (%) SI SV (%) Base case (1) 21,353 1.88 47.26 Cost Increase by 10% (2) 18,925 1.71 38.90 (1.14) (87.96) Decrease in Benefits by 10% (3) 16,790 1.69 38.13 2.14 46.80 Combined case (2+3) 14,362 1.54 31.54 3.27 30.55

( ) = negative, EBCR = economic benefit–cost ratio, EIRR = economic internal rate of return, ENPV = economic net present value, SI = sensitivity indicator, SV = switching value.