VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS Le Thi Thu Trang IMPROVING PROJECT MONITORING AND CONTROLLING: CASE OF RURAL FINANCE PROJECT FUNDED BY WORLD BANK Major: Business Administration Code: 60 34 05 Master of business administration thesis Supervisor: Dr. Ta Ngoc Cau Hanoi – 2011 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENT ACKNOWLEDGEMENT .v TABLE OF CONTENT. viii LIST OF TABLES .x LIST OF FIGURES .xi LIST OF ABBREVIATIONS. The thesis necessity.
Objectives of the thesis:. Scopes of the thesis:. Research methodology and approaches:. The thesis structure .6 CHAPTER 1: LITERATURE REVIEW AND THEORETICAL FRAMEWORK .1 The concept of project monitoring and controlling .2 Key parts and tasks of M&C system during the project cycle .20 viii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.4 Necessary conditions and capacities for M&C successs .28 CHAPTER 2: CASE STUDY AND FINDINGS .1 Overview of "Rural Finance Project" funded by WB and its performance .2 M&C system of RFPII: Real situation and Problems .3 M&C system of RFPII: Causes of M&C problems .79 CHAPTER 3: CONCLUSIONS AND RECOMMENDATIONS .80 FOR M&C SYSTEM OF RURAL FINANCE PROJECT .2 Recommendations for developing necessary conditions and capacities M&C improvement of RFPIII .1 Building human capacity for M&C: .2 Introducing incentives for implementation of M&C .3 Revising a clear organizational structure .4 Adopting an integrated Project Management Information System .5 Allocating adequate budget for M&C .93 ix LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Tab.1 Monitoring and Controlling comparison .2 Credit lines to PFIs (As of 31st Dec.3 Compliance of PFIs with accreditation criteria at Project Completion .4 Key Performance Indicators and Results of RDFI .5 Disbursement of RDF through PFIs .6: Key Performance Indicators and Baselines of RFPII .7: Main causes of M&C system's problems under RFPII.78 x LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Fig.
2: Process of M&C system .1: Participating partners under Rural Finance Project .2 for the implementation structure and stakeholders of RFPII .3 Cumulative Planned and actual disbursement progress .4: Cumulative disbursement lags in Vietnam, regional and global scale47 Fig.5 M&C organization under RFPII (2003-Sep2009) .6: Fishbone diagram of possible causes leading to problems of project performance under RFPII .69 xi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF ABBREVIATIONS ACB Asia Joint Stock Commercial Bank AGRIBANK Vietnam Bank for Agriculture and Rural Development /VBARD BIDV Bank for Investment and Development of Vietnam EAB East Asia Joint Stock Commercial Bank GD General Director IAS International Accounting System IDA International Development Association IDP Institutional Development Plan IT/IS Information Technology/Information System JSCB Joint Stock Commercial Bank LAN Local Area Network M&C Monitoring and Controlling MFIS Micro-finance Institutions MIS Management Information System MLF Micro Lending Fund MOF Ministry of Finance MOU Memorandum of Understanding MPI Ministry of Planning and Investment NAB North Asia Joint Stock Commercial Bank OECD Organization for Economic Cooperation and Development PFIs Participating Financial Institutions PMIS Project Management Information System PMU Project Management Unit PhNB Southern Joint Stock Commercial Bank RDF Rural Development Fund RFP Rural Finance Project SAR Staff Appraisal Report SBV State Bank of Vienam SDR Special Drawing Right xii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SIDA Swedish International Development Cooperation Agency SMEs Small and Medium Enterprises SRV The Socialist Republic of Vietnam TA Technical Assistance TCIII Transaction Center III (BIDV) UNDP United Nations Development Program VAS Vietnam Accounting System VIB Vietnam International Bank WB World Bank WBO Wholesale Banking Operation xiii LUAN VAN CHAT LUONG download : add luanvanchat@agmail. The thesis necessity In 2010, Vietnamese economy has continued to grow at an average rate of 6.7% although the global economy has been recovering more slowly. The macroeconomic situation has improved especially public debt which, at about 56.7% of GDP, is at the safety level. Facing with the demand of making use of different resources to boost socio-ecomomic development in whole country, Vietnam have broadened international relationship, focusing on attracting, receiving and managing well Official Development Assistance (ODA) projects funded by international financial organizations such as World Bank (WB), Asia Development Bank (ADB), Agence Française de Développement (AFD), International Fund for Agricultural Development (IFAD), European Investment Bank (EIB), Kreditanstalt für Wiederaufbau (KFW), etc.
Actually, WB is the earliest donor; the World Bank‟s funded projects are by far the largest capital projects with high degree of influence and thus are most extensive in typical field of management of ODA projects in Vietnam. Thanks to many open and incentive policies by the Government recent time, this growing economy with steadily increasing GDP is acquiring a great amount of investment capital. In response to this demand, besides capital accumulated internally, an increasing flow of official development assistance capital (from US$ 1,810 million and US$ 410 million of committed and disbursed amount respectively in 1993 to more than US$ 8,0 million and US$ 3,5 million in 2010) [19] (see the ODA capital in Vietnam in Appendix No.5) has been pumped into various aspects of Vietnamese economy by international donors and non-governmental organizations through Development Agreements with the Government of Vietnam. The Rural Finance Projects under Development Credit Agreements in 2003 and 2009 for Credit No.
3648-VN (US$ mil. 200 equivalent) and 3884-VN (US$ mil. 200 equivalent) respectively entered into the Government of Socialist Republic of Vietnam (SRV) and International Development Association (IDA) with objective of 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com assisting Vietnam in its efforts to improve living conditions in the rural areas are three of the most biggest projects of the same kind in Vietnam. The two projects have been implemented in the form of wholesale banking operation (WBO).
They have introduced the concept of WBO for the first time in Vietnam. Because of this new nature, the project monitoring and controlling (M&C) have become a very essential factor to a successful project performance together with others factors ranging from objective to subjective ones. It is project management unit (PMU) nominated by Bank for Investment and Development of Vietnam (BIDV) called Transaction Center III (TCIII) responsible for managing both Rural Finance Project II (RFPII) and Rural Finance Project III (RFPIII). In general, M&C is a task, which is so crucial but “is not performed well in most organizations” and “is one of the most neglected areas of project management” [10, p359].
M&C is necessary because it possesses method to analyze how well a completed task has been performed. This can also be used to evaluate progress on unfinished work if one examines data for a specific period and makes estimates of work completed to date. More over, M&C provides managers and other stakeholders with continuous feedback on implementation and identifies actual or potential successes and problems as early as possible to facilitate timely adjustment to project operation. Despite the essential role of M&C, there still are some mistakes commonly made such as: having some prejudice before monitoring and controlling, lack of updated and necessary information for M&C, evaluating unreasonably, unclear objectives, unreasonable criteria, unreasonable monitoring and controlling organizing.
In addition, because RFPIII has been already become effective, one of the major tasks that implementing agency has had to undertake in performing its WBO as an apex bank is to implement this project successfully within agreed schedule. According to annual Consultative Group Meeting 18th for Vietnam (Dec., 2010), the project M&E as well as project controlling in Vietnam in general have been 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com concerned as one of the problem which needs to be improved in the coming time, especially for projects/program in agricultural and rural fields. In addition, there are many essays or rearches about ODA project management or project monitoring and evaluating in Vietnam recently, however there are no specific research mentions to monitoring and controlling WB‟s loan projects particular those have been carried out through commercial banks aiming at supporting for agriculture and rural development. For the above existing reasons, a research on M&C is very important to a successful performance of not only Rural Finance projects funded by World Bank but also for the alike, which have been getting increased in numbers recently.
Objectives of the thesis: This study aims at reviewing, analyzing M&C system of RFPII to find out its problems that have affected adversely to project performance and drawing lessons for improvement of the system contributing to better performance of RFPIII. These objectives will be achieved by performing the following tasks: Making clear the concept and fundamentals of M&C. Analyzing M&C system of RFPII to find out its obstacles and problems in project implementation. Proposing suggestions for improving M&C system in RFPIII.
To achieve objectives of the study, those tasks need to be done to answer the following questions: What are the main tasks of project M&C? How can M&C contribute to project performance? How can a project be monitored and controlled? What does the M&C system of the RFPII undertake as planned and what are its main obstacles and problems? 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com What should be done to improve M&C system to enhance project performance? 3. Scopes of the thesis: This study focuses on examining M&C system of RFPII funded by WB mainly at project management unit (PMU) in terms of its component, process and function in project implementation stage to identify its problems. Research methodology and approaches: Theoretical framework of M&C is discussed and then applied to analyze current status of M&C system and problems occurred during implementation of the Rural Financial Projects and after that, recommendations will be made upon findings. Secondary data and primary data are used to conduct this study.
Secondary data is gathered from external sources like libraries, textbooks, government documents and internal sources like progress reports, project documents helping researcher obtain an overview of theoretical framework of M&C as well as status of M&C system of RFPII. Primary data is collected by conduct qualitative research. The qualitative research objective is to obtain information on the obstacles of M&C system of RFPII and requirements for M&C of RFPIII from interviewing PMU‟s staff and managers as well as project officers of other PFIs. The research method used is in-depth personnel interview by unstructured questionnaires.
Managers of PMU have been interviewed on how they used information from M&C system of RFPII for making decision in project implementation, how these information could respond to their needs; what obstacles that make the M&C system ineffective and inefficient were; what they can do to improve M&C system for better project performance of RFPIII. Staff of PMU and PFIs have been asked how they got data, analyzed and reported; what problem they had with M&C system; how they are motivated to undertake M&C system and same questions on obstacles and improvement of the system. 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com In addition, general observation has been also conducted to examine aptitude of staff and officers involving in M&C system for their tasks and accompanying significance. Sample has been selected from central, senior, middle and operating level of M&C system of RFPII or in other words from WB and PMU, PFIs‟s project management and PIFs‟ braches respectively.
At senior level, a manager from WB and an operation officer in charged of RFPII from WB were selected. At senior level, 05 staffs were selected from respective departments of PMU. At middle level, 02 relevant managers from Agribank and VIB that had biggest credit line proportion of 68.6% and 22% respectively [23] were selected out of 25 PFIs and At operating level, 03 staff from 03 branches out of 39 participating branches of Agribank and 02 staff from 02 branches out of 24 participating branches of other PFIs were selected. Totally, 16 people were selected (Appendix No.9) Qualitative data of interviewers‟ ideas and opinions are processed by using qualitative analysis method.