• Référence: P-EG-IE0-003
• Date d’approbation: 13/01/2010
• Date de début: 13/01/2011
• Date d'évaluation: 12/07/2009
• Statut: En coursOnGo
• Agence d'implémentation: SOCIAL FUND FOR DEVELOPMENT (SFD)
• Emplacement: Country-Wide

The project will have two mutually reinforcing components, a technical assistance component and an agribusiness facility. The technical assistance (TA) component for a value of USD3.0 Million, is an integral part of the project. Generally, the project will seek to sustainably improve the incomes of the economically active rural smallholder farmers engaged in the production, processing and marketing of selected agricultural commodities (horticulture, livestock and fisheries) by enhancing their participation in productive business alliances and access to affordable finance. The TA component will specifically help in achieving this by:

(i) promoting smallholder farmer participation in associations (including cooperatives);

(ii) creating business linkages between the farmer associations and the large private sector agribusinesses in a value chain, through improved information on market opportunities, value addition, entrepreneurial skills development and reliable trade relations; and

(iii) developing the capacities of financial intermediaries to develop and introduce new and innovative financing instruments for agribusiness. Therefore, the provision of the TA component complementary to the Agribusiness Facility component will be the Bank's holistic response to the issues limiting agribusiness development in Egypt. The TA component will be implemented in three governorates of Upper Egypt, which have substantial potential in agribusiness development but it remains unrealized due to the high poverty incidence and limited access to finance and to know-how. Funds for this component will be secured from the FAPA (USD1 million) and MIC (UA 0.6 million) Grant resources and a GOE counterpart funding of USD 1 million will be provided. Expected outputs include:

(i) at least 300 farmer association workers trained with at least 50% female representation;

(ii) at least 150 pro-poor business/commodity alliances established;

(iii) at least 200 business plans developed; and

(iv) at least 200 staff members (including senior management) of PFIs trained in agribusiness lending methodologies. Component II: Agribusiness Facility (USD 70 Million) This component will seek to address the financing constraints faced by agribusiness MSEs. The project will provide a USD 70 million long-term ADB loan to GOE, who will on-lend to SFD on the same terms and conditions of the Loan Agreement between ADB and GOE. SFD will provide these resources to commercially viable micro and small enterprises, including farmer associations and cooperatives for working and investment capital needs through selected intermediaries. Expected outputs include:

(i) at least 20,000 enterprises receive microfinance loans, of which at least 35% go to women; and

(ii) at least 200 business plans receive small scale financing. ..

The Project Development Objective is to improve the socio-economic livelihood of the economically active rural smallholder farmers engaged in the production, processing and marketing of selected agricultural commodities (horticulture, livestock and fisheries) by enhancing their participation in pro-poor productive business alliances. This will be achieved by

(i) strengthening smallholder farmer associations (including cooperatives);

(ii) creating business linkages between the farmer associations and the large private sector agribusinesses in a value chain, through improved information on market opportunities, value addition, entrepreneurial skills development and reliable trade relations; and

(iii) providing and facilitating easy and affordable and innovative access to finance (including access to finance for micro-entrepreneurs). In this regard, the project will focus on the following strategic outputs:

(i) support over 24,000 smallholder farmers and 20,000 micro enterprises, creating over 60,000 jobs over the 5-year period of the project, and

(ii) develop SFD and its partner financial intermediaries' capacity to develop and introduce new and innovative financing instruments for agribusiness. ..

The project is aligned with Egypt's National Development Plan (2007-2012) which calls for the creation of approximately 750,000 new jobs every year in order to cope with new entrants to the workforce as well as reduce the current level of unemployment from around 9% to 5.5% by the end of the plan. Developing micro and small enterprises (MSEs) is one major strategy for job creation. MSEs are expected to account for up to 350,000 of the new job requirements of which at least 280,000 are expected from SFD support. The project will seek to contribute towards this strategic goal by creating about 60,000 jobs. The project has also been designed in cognizance of the Agriculture Sector Transformation Strategy and the Agro-Industry Investment Plan and the Food Security Initiative developed by the Ministry of Agriculture and Land Reclamation, in conjunction with Ministry of Trade and Industry, and the Industrial Modernization Centre (IMC). The project is also in line with both pillars of the Bank's Country Strategy Paper for Egypt (2007-2011), which focus on

(i) private sector development; and

(ii) support to social development and protection. The former will be supported through the promotion of entrepreneurship development in agricultural value chains, while the latter will be addressed through the poverty and inequality reduction and employment creation dimensions of the project. The project is aligned with the Private Sector Strategy for Egypt approved in 2005 which recognizes the important role that SFD plays in micro and small enterprise development, and also the need for additional Bank support in the area of microfinance. The project is also in conformity with the Bank policy and strategy on microfinance. This has been ensured through:

(i) the application of market-based interest rates;

(ii) use of demand-driven mechanisms;

(iii) increasing focus to women;

(iv) provision of a TA program which is independent but complementary to the key credit program; and

(v) promoting the development of an all inclusive financial system in Egypt by using both banks and NGOs as intermediaries using internationally recognized best practices. As of 2005, Egypt embarked on an aggressive reform program, which has since positioned the country as one of the fastest growing economies in the region - growing at a 1.5 percentage point higher than the MENA region countries and at a 1.8 percentage point for each 1 percentage point growth in world GDP . Investment has been the main driver of growth, with domestic investment increasing by almost 60%, while FDI has increased from USD 400 million in 2000/01 to USD 11.1 billion, or 9% of GDP, in 2007/08. However, despite this exemplary performance, poverty and vulnerability continue to be a major challenge in Egypt. Based on a recent Poverty and Social Impact Assessment (PSIA), Egypt - "Towards a More Effective Social Policy: Subsidies and Social Safety Nets", carried out by the World Bank, about one out of five Egyptians lives in poverty. Poverty declined during the second half of the nineties from 19 to 17 percent, but preliminary evidence suggests that poverty began to inch upwards in the early 2000s as growth stagnated. Moreover, a significant proportion of households live in near-poverty situations as 14 percent of the population have consumption expenditures falling within 20 percentage points above the poverty line, making them vulnerable of falling into poverty in the case of an adverse event such as job loss or health shock. Poverty is concentrated in rural areas and in Upper Egypt. Wide disparities exist between Upper Egypt (south) and Lower Egypt (north) and between rural and urban populations. Poverty reduction in the 1990s was concentrated in Lower and Metropolitan Egypt, but poverty actually grew in Upper Egypt within the same period, exacerbating regional inequalities. About three-quarters of the poor live in rural areas, with 55 percent living in rural Upper Egypt. In addition to lower consumption, rural dwellers and residents of Upper Egypt have less access to basic infrastructure and services, and are mostly non-wage workers in household enterprises, which limit their capacity to rise out of poverty. There is gradual increase in the number of income generating activities in rural areas but are mostly confined to petty trading and micro agri-businesses. In most cases, involvement in such activities is an opportunistic response to immediate needs for cash for food and other consumables. There is a general lack of sufficiently integrated agribusiness value chains that effectively and equitably integrate smallholder farmers, especially the poor farmers. Agribusinesses and smallholder farmers especially are further constrained by:

(i) inadequate economic infrastructure (e.g. agro-processing facilities);

(ii) low agricultural productivity- from lack of skills, technology, etc.;

(iii) weak marketing systems and market linkages;

(iv) low incomes, resulting from limited value addition in farm-based agric produce;

(v) limited off-farm employment opportunities;

(vi) weak enterprise culture; and (vii) weak business development services. Most traders operate informally on a small scale, trading on small lots due to lack of working capital and with inadequate storage and transport facilities. The consequence is a very slow and expensive process of trading. Accordingly, recognizing that one of the key limiting factors of the sector is the lack of entrepreneurship (technical and commercial) skills to transition rural economies from semi-subsistence agriculture to medium sized enterprises, the Ministry of Agriculture and Land Reclamation, in conjunction with Ministry of Trade and Industry, and the Industrial Modernization Centre have developed a comprehensive Agriculture Sector Transformation Strategy and an Agro-Industry Investment Plan to promote:

(i) increased productivity for both agricultural and non-agricultural activities through the adoption of new technologies and access to greater market intelligence; and

(ii) formation of associations (either as cooperatives or farmer associations) to enhance participation in value chains that will help them improve their productivity by giving them better and more equitable access to markets, technologies and organizations. The entities of a value chain are typically primary producers, service providers, processors, distributors and retail outlets. Through their participation in value chains, organized rural producers will be able to form productive alliances and benefit from:

(i) collective bargaining power in negotiating with other actors in the chain;

(ii) greater technology uptake; and

(iii) reduced individual risks through risk spreading. At present, small-scale producers assume the typical risks of farming, as well as the risk of not selling their product, or selling it without recovering costs. Raising rural competitiveness will require:

(i) technological uptake to raise productivity;

(ii) targeted market intelligence to enhance market access;

(iii) financial capital to boost access to productive assets; and

(iv) capacity building and technical assistance to be able to meet the market demands. To this effect, the strategy puts emphasis on the need to promote private sector development and encourage public-private partnerships. ..

Generally, the project will focus on the following strategic outputs:

(i) support over 24,000 smallholder farmers and 20,000 micro enterprises, creating over 60,000 jobs over the 5-year period of the project, and

(ii) develop SFD and its partner financial intermediaries' capacity to develop and introduce new and innovative financing instruments for agribusiness. Specific outcomes will include: (a) increased sales volume of smallholder farmers; (b) increased number of households with increased incomes; (c) increased number of jobs created; and (d) increased number of small-scale agribusinesses enterprises/associations receiving financing. The project will assist the primary beneficiaries to

(i) obtain the inputs and technologies necessary to obtain higher yields of better quality produce;

(ii) add value to produce by processes including aggregation, sorting, grading, drying, and storage;

(iii) make better commercial decisions on the basis of improved market information;

(iv) obtain higher and more stable prices through participation in contract farming and/or outgrower arrangements; and

(v) gain access to the financial and technical support services needed to make the transition from subsistence to small-scale commercial farming. The economic rate of return of the project is estimated to be in the range of 16 - 24%. Detailed economic and sensitivity analysis will be carried out during project appraisal to determine the robustness of the conclusions drawn. The encouragement of wider stakeholder participation and partnerships in the project's activities will enhance positive social equity outcomes through

(i) reducing isolation and improving access to economic opportunities for the poor and

(ii) decreasing social exclusion of certain groups such as women. The project will apply a multi-faceted approach to increase the market outcome for women by

(i) promoting women entrepreneurs (comprising of at least 50% of the envisaged beneficiaries) to venture into the segment of the value chain often dominated by men, for example, as distributors and marketers;

(ii) building women's leadership skills to participate in the governance of the smallholder farmer associations and cooperatives; and

(iii) sensitizing men to support women's enhanced role in the value chain development.

EL SOKKARY Gehane - OSHD1

Source	Montant
BAD	UAC 45.070.000
MICF	UAC 600.000
FAPA	UAC 640.000
Delta	UAC 690.000
Total	UAC 47.000.000