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2000 October Report of the Auditor General of Canada

October 2000 Report—Chapter 14

Case Study 14.1—Mali Mortgage Financing Project

Background

The main output of this project is to establish a loan guarantee system to facilitate access by Malian people to property ownership. It intends to stimulate economic activity related to the construction sector and therefore help the poor. CIDA signed a contribution agreement of $4.7 million with a not-for-profit Canadian executing agency for this project.

A contribution agreement was awarded instead of a competed contract

CIDA identified this as a possible project in meetings with the Malian government in 1994. CIDA had a feasibility study done by the not-for-profit organization and the Canada Mortgage and Housing Corporation in February 1996. In May 1996, CIDA asked for and obtained authorization from the Minister to enter into a contribution agreement with the same not-for-profit organization for the implementation of the project. In our view, because CIDA initiated this project, it did not meet the conditions for a project under the country focus approach. A competitive process should have been used.

CIDA was slow to react when assumptions critical to the project's success were not met

The feasibility study identified several assumptions critical to the start of the project. Two involved amendments to Malian legislation. The Malian government agreed in its Memorandum of Understanding with CIDA that these legislative changes were critical to the project and that they would be implemented before the project team arrived. Three months prior to the scheduled mobilization of the Canadian executing agency staff to Mali, a CIDA mission identified a complete lack of progress toward the legislative changes. Despite this fact, CIDA instructed the Canadian executing agency to begin its operations in Mali and help the Malian government draft the legislative changes.

The Canadian executing agency spent considerable time in the first seven months of the project drafting the legislative amendments. This was not part of the original plan. Almost two years after the start of the project, the Malian legislature has not yet passed the changes. About eight months into the project, the project team, made up of both Canadian and Malian staff, also discovered that approval from the Central Bank of the West African States is required to issue loan guarantees. The Canadian executing agency failed to identify this critical condition in both its feasibility study and inception report. The Canadian executing agency then spent one year preparing to meet the approval conditions in order to apply to the Central Bank. The project team is now waiting for the Central Bank's decision.

No loan guarantees - the main output of the project - have been processed so far. The original plan had called for 1,400 out of 8,300 guarantees to have been issued in the first two years. The current annual work plan shows no change in the total number to be issued, but does not explain how the project team plans to catch up.

Lack of necessary involvement of host country causes project delays

This project also shows the difficulty of fostering development in a bilateral context. The planning documents for this project called for the Malian government to contribute about $1 million (400 million CFA francs) to the project. The MOU, which was signed later, required the amount to be taken out of the Malian counterpart fund, which is also completely financed by CIDA. We could find no rationale on file explaining such a significant change to the Malian government's responsibilities on the project. The current situation is a project that is financed 100 percent by CIDA, in serious difficulty and waiting for the local government to act.