Apuseni Development Project

Under the former communist regime, the mountainous Apuseni region was neglected for decades. Never collectivized, mountain communities were left to decay. When communism collapsed, rural people in the region were deprived of remittances from family members who worked in factories and mines that were closed.  Lack of funds for inputs and equipment kept production low, and marketing structures were undeveloped.

For this project, on the basis of its experience in other transitional economies, IFAD invested in providing rural financial services. At the same time it provided limited support to the government for coordinating rural services. The project pioneered a new concept by establishing the Apuseni Revolving Credit Fund. The credit fund refinanced investments and working capital loans for those who qualified. The activities eligible for financing included livestock production, small processing plants and activities that would generate income and employment, such as agro-tourism facilities and other small businesses.

The project got off to a slow start, but once it became clear that the initiative had major implementation problems, IFAD moved pro-actively to overcome them. As a result of the need for collateral and security, IFAD had to abandon pursuit of a lending strategy favouring poor borrowers. Those who were able to benefit from the loans were non-poor individual and corporate borrowers. The portfolio of loans remained relatively small. For those who were eligible, the loans had a strong impact on productivity.

Although the project did not meet its objective of empowering poor rural people, it showed that agricultural lending is feasible and that the risks involved can be managed.

Source: IFAD