RURAL INVESTMENT AND SERVICES PROJECT (Phase II, March 2006 – June 2013)
The project is the second Phase of a two-phase Rural Investment and Services Program (1st phase 2002-2006). The project strives to continue to foster the post-privatization growth in the agricultural and rural sectors of Moldova by improving access of farmers and rural entrepreneurs to legal ownership status, know-how, knowledge and financial services, while building the capacity of the private and public institutions to ensure the sustainability of the activities.
The Phase II builds on success achieved under the Phase I, by: (i) strengthening and expanding the rural advisory services; (ii) improving business skills of the to-be entrepreneurs and assisting with the legal registration of the new businesses; (iii) upgrading the financial sector environment through a range of risk management measures, such as supervision capacity building, and introduction of new lending instruments such as leasing; (iv) increase the commercial banking sector outreach into rural areas; and (v) developing a practical approach to reducing transaction costs in land markets. It also builds the capacity of the government to manage the specific activities of the project which should be taken over by the Government by project’s end and will gradually transfer responsibilities.
The project has four main components plus support for project management:
(a) Rural Advisory Services;
(b) Rural Business Development Services;
(c) Rural Finance;
(d) Land Re-parceling Pilots
(e) Project Management.
Component 1: Rural Advisory Services
The Rural Advisory Services (RAS) component aims to provide information and training to private farmers and rural population. The objective is to further strengthen the network of private rural advisory services providers established under Phase I, to enhance its focus, efficiency, sustainability and to strengthen the capacity of the Government to manage this type of Government program after the closing date of the project.
Component 2: Rural business development
The RBDC continues to finance technical assistance to rural entrepreneurs, and operational support for local development agencies with the aim to create legally registered, self and co-owned sustainable rural businesses, which become clients of financial institutions. The component finances, based on expressed demand, support for the formation of potentially viable agribusinesses, including business cooperatives, processing and marketing entities, as well as non-farm rural businesses with proper legal and operational status, which contribute to employment creation and income augmentation in rural areas.
Component 3: Rural Finance
The Rural Finance component aims to: (a) continues to expand the outreach of formal financial sector to rural areas, to ensure broader access to investment financing for farmers and rural entrepreneurs and (b) rebuilds the Savings and Credit Associations (SCA) industry for the purpose of its strengthening and delivery of financial services to a large segment of population which currently does not have access to traditional banking services, as well as ensure prudential growth of the industry through proper management and supervision and structure the industry so that it can become sustainable in the long term.
Component 4: Land re-parceling pilots (completed)
The goal of this component is to respond to the concerns of Government and other stockholders about the fragmentation of agricultural land. The component facilitated the efficient functioning of land markets in pilot locations through the implementation of village land re-parceling projects based on international best practice. The specific objectives of these pilots were to: (i) test the demand for and feasibility of land re-parceling with small landowners as the primary target group; (ii) use the pilot experience as the basis for designing a potential national-level approach, including techniques, resource requirements and legislative framework; and (iii) assess the impact of re-parceling at the local level, including on land markets, agricultural production, and equity. The target group of the pilots was the small households.
ADDITIONAL FINANCING FOR THE RURAL INVESTMENT AND SERVICES PROJECT (JUNE 2008)
RISP II has been provided with additional financing in 2008 by adding a Drought Adaptation Component focused on providing targeted investments for small-scale on-farm irrigation rehabilitation and the provision of technical assistance to farmers.
Financial support for investments in small-scale irrigation rehabilitation is being provided to eligible beneficiaries through the existing RISP II credit line mechanism. The difference under the proposed Component represents the small grant of 20% from the investment aimed to alleviate borrowing costs to beneficiaries who are struggling financially in the aftermath of the 2007 catastrophic drought.
Technical assistance for promoting drought adaptation agronomic techniques and practices will be provided to farmers under the framework of the RISP II Rural Advisory Component (RAC) via the National Rural Development Agency (ACSA).
Being operational from June 2008, the credit line financed the drip irrigation system. At the end of June 2011, 15 sub-loans were disbursed from the credit line from the draught adaptation component. There are several reasons that caused poor disbursements. Two years of drought, considerable precipitations moved irrigation solutions to the bottom line of farmers’ priorities. Taking into account the limited interest for this credit line, the restructuring of component was approved early 2011.
The restructuring of the Additional Drought Adaptation Component has been approved during the Government Strategic Planning Committee. The undisbursed sources will be shifted to the general credit line preserving the 20% grant component for irrigation sub-projects as well as conservative agriculture.