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Lesson
The formulation and design limitations of the BSDP reveal the need for better understanding of sector issues. Thus, even when ADB is working with a development partner reputed to have sector expertise, it remains important for ADB to have sufficient understanding of the issues to be able to address the developing member country’s capacity problems. This is especially important during implementation when other development partners have departed from the scene

Project Number: 31317-013
Project Name: Basic Skills Development Project
Report Date:
Lesson
A small equity investment can have a large impact in the right circumstances, especially if it is supported by TA and policy reforms. Although ADB’s equity investment in BNB was largely effective in achieving its aims, it illustrates that small investments are not easy for ADB to handle within its cost structure.

Project Number: 29243/29243-01/31912
Project Name: Financial Sector Intermediation Facility and Equity Investment in Bhutan National Bank
Report Date:
Lesson
The key problems and constraints of SME access to credit in Bhutan needed to be better understood. Problems included high interest rates, short loan amortization periods, and excessive collateral requirements. The FSIF loan had no effect on these.

Project Number: 29243/29243-01/31911
Project Name: Financial Sector Intermediation Facility and Equity Investment in Bhutan National Bank
Report Date:
Lesson
The failure of interest rate liberalization was also partly a failure of analysis. Removing overt administrative control of interest rates may make little difference to prevailing rates and practices if there is little competition between lenders because of the sector’s oligopolistic and closely held structure. Several factors made it unlikely that simple deregulation of rate setting would be conclusive.

Project Number: 29243/29243-01/31910
Project Name: Financial Sector Intermediation Facility and Equity Investment in Bhutan National Bank
Report Date:
Lesson
Delays in the establishment of a credit information bureau was also partly a failure of analysis. Costs were underestimated and the problems were not fully understood. Founding a CIB in Bhutan is not only a problem of coordination among the lending institutions. The challenge is more fundamental, with the essential problem being the poor data systems and practices of the lending institutions. Substantive analysis at the design stage of the FSIF would probably have identified this issue and allowed ADB and RGoB to address it earlier.

Project Number: 29243/29243-01/31909
Project Name: Financial Sector Intermediation Facility and Equity Investment in Bhutan National Bank
Report Date:
Lesson
Insufficient analytical underpinnings led to formal rather than substantive compliance with tranche release conditions. Joint undertakings with other donors and RGoB might have strengthened the substantive analysis of policies and the robustness of the dialogue with RGoB. 60 For example, requiring that RGoB formulate an FDI policy, without engaging substantively on the substance of that policy, was not useful. A policy was written and adopted, but a new attempt was being made to formulate a workable policy in 2009.

Project Number: 29243/29243-01/31908
Project Name: Financial Sector Intermediation Facility and Equity Investment in Bhutan National Bank
Report Date:
Lesson
Another lesson is that if ADB brings a private partner into the deal with the aim of facilitating capacity development, it should only go with a strategic investor with relevant banking experience, who will remain as a shareholder for a long time and thus play an active role in the management and corporate governance of an institution. In this particular case, the investor was not actively involved in managing the institution and acted more like a financial than a strategic investor.

Project Number: 29243/29243-01/31913
Project Name: Financial Sector Intermediation Facility and Equity Investment in Bhutan National Bank
Report Date:
Lesson
The project team should pay particular attention to selecting the top leadership of assisted institutions to the extent possible, and build in mechanisms to evaluate the performance of VTIs and award good performance to provide incentives. Given the same bureaucratic or external constraints, differences in performance of the VTIs can be attributed largely to differences in the quality of leadership. Furthermore, mechanisms (including incentives) can be established to evaluate and encourage good performance. [Main text, para. 44]

Project Number: 31317-012
Project Name: Basic Skills Development Project
Report Date:
Lesson
A complete package of assistance should be provided to vocational training institutes (VTIs) to ensure the delivery of quality training. Taking into account existing resources, reducing the number of VTIs assisted could have been a better option vis-a-vis thinly spreading available resources to more VTIs. In some VTIs, for instance, a building was constructed or renovated but only minimal equipment was provided.

Project Number: 31317-012
Project Name: Basic Skills Development Project
Report Date:
Lesson
To ensure proper sequencing and smooth coordination between components, the project implementation unit should have been responsible for the overall management of project components. The project provides for both software and hardware assistance as a comprehensive package. GTZ was financing the software side of the project and ADB provides for the hardware support. Since different departments in the Ministry of Labor and Human Resources managed the GTZ and ADB financed components, the sequencing of activities suffered.

Project Number: 31317-012
Project Name: Basic Skills Development Project
Report Date: