Completion Report

Project Number: 41664-013 Loan Number: 2515 Grant Number: 0148 Technical Assistance Number: 7257 June 2017

Philippines: Credit for Better Health Care Project This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – peso (P)

At Appraisal At Project Completion (15 February 2009) (19 August 2015)

P1.00 = $0.02122186 $0.02165205 $1.00 = P47.1125 P46.1850

ABBREVIATIONS

ADB – Asian Development Bank DBP – Development Bank of the Philippines DOH – Department of Health EIRR – economic internal rate of return EMS – environmental management system EROIC – economic return on invested capital HSIAC – health sector investment advisory committee ICC – investment coordination committee LGU – local government unit MDG – Millennium Development Goal MSMEs – micro, small, and medium-sized enterprises PHIC – Philippine Health Insurance Corporation PPP – public–private partnership TA – technical assistance

NOTE

In this report, "$" refers to United States dollars.

Vice-President S. Groff, Operations 1 Director General J. Nugent, Southeast Asia Department (SERD) Director A. Inagaki, Human and Social Development Division, SERD Team leader K. Guzman, Senior Project Officer, SERD Team members E. Arienda, Operations Assistant, SERD

E. Izawa, Senior Education Specialist, SERD R. Roque-Villaroman, Project Analyst, SERD G. Servais, Senior Health Specialist, SERD

S. Tanaka, Senior Social Sector Specialist, SERD K. Taniguchi, Senior Economist, Economic Research and Regional

Cooperation Department

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i I. BACKGROUND 1

A. History 1 B. Scope of Operations 1 C. Relationship with the Asian Development Bank and Other Lenders 1 D. Relevance of Design and Formulation 2 E. Related Grant and Technical Assistance 3

II. IMPLEMENTATION 4

A. Lending Policies 4 B. Characteristics of Subloans 5 C. Implementation and Internal Operations of Subprojects 5 D. Operational Performance of the Development Bank of the Philippines 7 E. Financial Performance of the Development Bank of the Philippines 8 F. Covenants 8 G. Performance of the Asian Development Bank 9

III. EVALUATION 9

A. Loan Appraisal 9 B. Implementation 10

IV. ASSESSMENT AND RECOMMENDATIONS 10

A. Relevance 10 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 12 E. Impact 12 F. Overall Assessment 13 G. Lessons 13 H. Recommendations 14

APPENDIXES 1. Design and Monitoring Framework 16 2. Technical Assistance Completion Report 20 3. Summary of Gender Equality Results and Achievements 22 4. Implementation Data of Subprojects 46 5. Financial Statements of the Development Bank of the Philippines 47 6. Status of Compliance with Covenants 50 7. Project Organizational Structure 59 8. Economic and Financial Analysis 60

BASIC DATA A. Loan Identification 1. Country 2. Loan Number Grant Number 3. Project Title 4. Borrower 5. Name of Development Finance Institution 6. Amount of Loan 7. Project Completion Report Number

Philippines 2515 0148 Credit for Better Health Care Project Development Bank of the Philippines Development Bank of the Philippines ¥4,520,780,200 ($50,000,000) 1626

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Revised – Number of Extensions 6. Terminal Date for Commitments – In Loan Agreement – Actual – Number of Extensions 7. Closing Date – In Loan Agreement – Revised – Number of Extensions 8. Terms to the Borrower – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Free Limit – Repayment Terms 9. Terms of Relending

16 September 2008 3 October 2008 16 February 2009 17 February 2009 25 March 2009 27 April 2009 19 August 2009 19 August 2009 0 19 August 2015 19 August 2015 0 19 August 2015 19 August 2015 0 Sum of London interbank offered rate and 0.60% less credit of 0.40% (based on Sections 3.02 and 3.03 of ADB Loan Regulations) 25 6 $2,000,000 Semi-annually (Retail) The relending terms shall be at market interest rates and the repayment shall be based on projected cash flows of subproject, with a repayment period of up to 15 years for civil works, up to 10 years for equipment, and up to 5 years for working capital, and a grace period of up to

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10. Interest Rate for Subloans – Original – Actual

3 years. Amortization of principal and interest is based on project cash flow. (Wholesale) The sub-borrowers are small-scale health providers such as midwives, physicians, municipal drugstores, and municipal drug distribution companies. Each subloan shall be for an amount ranging between $1,000 and less than $100,000. The expected period is up to 10 years, with a grace period of 6 months to 2 years. 9.0%–11.0% 6.5%–8.0%

11. Disbursements (L2515) a. Dates

Initial Disbursement

17 December 2009

Final Disbursement

24 July 2015

Time Interval

67 months

Effective Date

19 August 2009

Original Closing Date

19 August 2015

Time Interval

72 months

b. By Subloan ($)

Sub-loan No.

Original

Allocation (3)

Partial

Cancellations (4 = 3 – 5)

Last Revised

Allocation (5)

Amount

Disbursed (6)

Undisbursed

Balancea

(7 = 5 – 6)

A01 Capitalization 354,038 0 354,038 354,038 0 A02 VCMC 2,723,005 (15,883) 2,738,888 2,738,888 0 A03 GMCHI 6,886,623 12,485 6,874,138 6,874,138 0 A04 SOCOMECO 1,175,028 38,850 1,136,178 1,136,178 0 A05 SUNGA 1,229,166 59,830 1,169,336 1,169,336 0 A06 CEM 339,136 8,099 331,037 331,037 0 A07 EGMCL 158,264 92,057 66,207 66,207 0 A08 FAITH 339,136 7,999 331,137 331,137 0 A09 GLOBAL MEDICAL 6,330,545 1,826,649 4,503,986 4,503,986 0 A10 ILOCANDIA 2,025,373 (14,520) 2,039,893 2,039,893 0 A11 SAVIOUR 3,345,111 3,345,111 0 0 0 A12 MAGTABOG 613,623 189,194 424,429 424,429 0 Total 25,519,048 5,549,871 19,969,267 19,969,267 0

CEM = CEM Medical Specialist Hospital, EGMCL = Ernesto Guadalupe Medical Center, FAITH = Faith Hospital, GLOBAL MEDICAL = Global Medical Center of Laguna, Inc., GMCHI = Gentri Medical Center, Inc., ILOCANDIA = Ilocandia Medical Group Inc., MAGTABOG = Magtabog General Hospital, SAVIOUR = Saviour Medical and Dental Cooperative, SOCOMECO = South Cotabato Medical Cooperative, SUNGA = Sunga Hospital, VCMC = Visayas Community Medical Center

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c. Partial Cancellations

Original Loan Amount /Partial Cancellation

Dollars

Yen

Original Loan Amount 50,000,000.00 4,520,780,200 1st Partial Cancellation 12,301,363.12 1,140,361,668 2nd Partial Cancellation 11,277,589.82 1,400,000,000 3rd Partial/Final Cancellation

125,417.26 15,591,874

Net Loan Amount

26,295,629.80 1,964,826,658

12. Disbursements (G0148) a. Dates

Initial Disbursement

5 August 2011

Final Disbursement

9 October 2013

Time Interval

26 months

Effective Date

27 November 2009

Original Closing Date

31 July 2011

Revised closing date 30 June 2013

Time Interval

20 months

b. Amount ($)

Category No/Name

Original

Allocation (1)

Revised

Allocation (2)

Amount

Disbursed (3)

Undisbursed

Balancea

(4 = 2 – 3)

3101 Consultants 157,000 379,892 379,892 0.00 3601 Equipment 9,000 0 3801 Consultation on

review of PHIC accreditation

4,500 0

3802 Training needs assessment

18,000 0

3803 Training of trainers 17,000 0 3804 Training of

midwives 72,000 0

3805 Enterprise development services

67,500 0

3806 Knowledge products and services

10,000 0

3901 Publication of material and outputs

10,000 0

3902 Administrative and support costs

15,000 0

3903 PMU office operations and support costs

15,000 15,000 10,623.20 4,376.80

4901 Contingencies

5,000 5,108 0 5,108.00

Total 400,000 400,000 390,515.20 9,484.80

PHIC = Philippine Health Insurance Corporation, PMU = project management unit.

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C. Implementation Data

1. Number of Subloans 11

2. Sectoral Distribution of Subloans

Sector Projected Actual

Not applicable Total

3. Size of Subloans (actual) ($)

Range Number of Subloans Aggregate Amount

Up to $999,999 4 1,152,809.60 From $1,000,000 to $2,000,000 2 2,035,514.45 From $2,000,001 to $3,000,000 From $3,000,001 to $4,000,000

2 1

4,778,780.95 3,345,111.00

Over $4,000,000 2 11,378,124.48

4. Other Breakdown of Subloans by Output($)

Criteria Projected Actual

Output 1: LGU Output 2: PPP/innovative strategies

72 4

0 7

Output 3: Small-scale providers/private sector

20

4

Total 96 11 LGU = local government unit.

5. Subloans Above Free Limit ($)

Subloan Aggregate Number Amount VCMCI 1 2,738,888 GMCHI 1 6,874,138 GLOBAL MEDICAL 1 4,503,986 ILOCANDIA 1 2,039,893

GLOBAL MEDICAL = Global Medical Center of Laguna, Inc., GMCHI = Gentri Medical Center, Inc., ILOCANDIA = Ilocandia Medical Group Inc., VCMC = Visayas Community Medical Center. 6. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 19 August 2009 to 31 December 2010 Satisfactory Satisfactory From 1 January 2011 to 30 June 2011 On Track From 1 July 2011 to 30 September 2012 Potential Problem From 1 October 2012 to 19 August 2015 On Track

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D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-

Days Specialization of Membersa

Fact-finding 19 Nov–10 Dec 2007 10 a, b, c, d, e Appraisal 16 Sep–3 Oct 2008 8 a, b, c, d, f, h Loan inception 15–18 Sep 2009 4 a, b, f, h Project review 1 15–26 Mar 2010 3 a, b, h Project review 2 3–12 Nov 2010 4 a, b, h, i Special administration review 15–22 Nov 2011 3 a, e, f Project review 3 7–18 May 2012 3 a, e, h Special administration review 23–31 Oct 2012,

16 Aug 2013, 7–10 Oct 2012, 22 Jan 2014

5 a, b, e, h, j

Midterm review 8–15 Sep 2014 2 a, h Final review 24 Feb–18 Mar 2015 2 a, h Project completion reviewb 6–13 Feb 2017 4 a, d, f, h

Notes: a a = mission leader, b = mission member(s) (international staff), c = administrative assistant, d = consultant(s), e = country

specialist/economist, f = national project officer, g = counsel, h = assistant project analyst/project analyst, i = gender specialist, j = lead health specialist

b The project completion report was prepared by K. Guzman, Senior Project Officer with support from other team members.

I. BACKGROUND A. History 1. The Development Bank of the Philippines (DBP) is a development finance institution established in 1947 under Republic Act No. 85.1 It forms the reorganized Rehabilitation Finance Corporation that marked the company’s shift from post-war rehabilitation to broader activities. The DBP originally provided credit facilities to develop and expand the agriculture and industry sectors, and diversify the country’s economy. Despite the country’s economic difficulty and a drop in the DBP’s financial viability in the 1970s, Executive Order No. 81 in 1986 revised the DBP’s charter and rehabilitated its lending operations. By 1995, the DBP was granted an expanded banking license making it the country’s first development bank to attain universal banking status. Another amendment to the DBP’s charter, in 1998, increased its authorized capital stock from P5 billion to P35 billion, created president and chief executive officer positions, and further broadened its development objectives. B. Scope of Operations 2. The DBP continues to provide lending facilities to strategic sectors, which has resulted in employment generation, increased incomes, and lower inflation, and has helped ensure availability of food, shelter, and basic infrastructure and social services. It also serves as a conduit of international funds from multilateral and bilateral sources for official development assistance programs. As a universal bank, the DBP offers various loans and credit facilities for industrial development, public utilities, social services, infrastructure, eco-tourism, agro-industry, microfinancing, new and renewable energy, transport, and local government unit (LGU) financing. The bank also offers import and export trade services, and investment, trust, and treasury products and services. C. Relationship with Asian Development Bank and Other Lenders 3. The Asian Development Bank (ADB) first supported the DBP with the $25 million DBP project in December 1975 to finance foreign exchange costs of medium- and large-scale enterprises in the industry and mining sectors. This was followed by (i) the $35 million second DBP project in November 1977 to promote industrial development and make institutional and financial improvements in the DBP, and (ii) the $42 million third DBP project in July 1991 for relending to participating financial institutions that would then onlend to small and medium-sized industries. 2 Because of a lack of viable projects and availability of less expensive funds and/or less restrictive loans from other official sources, these loans were partially cancelled. Between 1978 and 2003, ADB also provided a total of $173.5 million in loans to support the fisheries, small and medium-sized industry, technical education, and housing sectors. Approval of the $50 million Credit for Better Health Care Project followed in March 2009 as ADB’s first assistance to the DBP for the health sector.3

4. The DBP continues to strengthen its partnerships with other development partners such as the Japan International Cooperation Agency, Japan Bank for International Cooperation, KfW, and

1 The government of the Philippines fully subscribed the bank’s initial capitalization of P5.0 billion. 2 ADB. 1975. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Philippines

for the Development Bank of the Philippines Project. Manila; ADB. 1977. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Philippines for the Second Development Bank of the Philippines Project. Manila; and ADB. 1991. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Philippines for the Third Development Bank of the Philippines Project. Manila.

3 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of the Philippines for the Credit for Better Health Care Project. Manila.

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the World Bank–International Bank for Reconstruction and Development in pursuing development in infrastructure and logistics; social services; environment; and micro, small, and medium-sized enterprises (MSMEs). As of 31 December 2015, foreign-funded development loans covering these sectors had an outstanding balance of P24.05 billion (approximately $4.4 billion).4 D. Relevance of Design and Formulation 5. Although health care spending in the Philippines remains at par with its neighbors (e.g., 4.7% of its gross domestic product in 2014 compared to 2.8% in Indonesia, 4.1% in Thailand, and 7.1% in Viet Nam),5 access to services for the poor and quality of care remain a challenge. With 54% out-of-pocket spending, the Philippines has one of the highest percentages in the region (Indonesia 47%, Thailand 12%, and Viet Nam 37%). The Philippine Health Insurance Corporation (PHIC), the country’s national health insurer, was established in 1995 but as of October 2010 only 52% of the population is covered by the National Health Insurance Program. In addition, public hospitals and health facilities have deteriorated because of inadequate budget, and close to 900 rural health units and almost 100 government hospitals have yet to be accredited by the PHIC.6

6. The project is relevant to these challenges, having been designed to address low and inefficient public expenditures in health care. It sought to mobilize additional off-budget credit for pro-poor investment, leverage private participation, and improve allocation towards investment priorities. The project’s outcome is increased use of basic health care and referral services by the poor in general, and by women and children in the subproject sites in particular. The project outputs are (i) upgraded LGU health services, (ii) more efficient health care delivery systems through public–private partnership (PPP) and innovative strategies, (iii) improved access to small-scale private providers, and (iv) enhanced institutional capacity for health sector lending. 7. The design of the project aligned with ADB’s 2005–2007 country strategy and program update for the Philippines, 7 which called for a refined focus to achieve progress towards the Millennium Development Goals (MDGs).8 The project also supported the DBP in offering LGUs and the private sector better access to credit to achieve the MDGs, improve public sector management, stimulate PPPs, and improve rural access to health care. These are further in line with ADB’s long-term strategic framework for 2008–2020.9 8. The project design and formulation was consistent with the government’s decentralization policy, which emphasized local government responsibility for health care. The project targeted a nationwide coverage (except the National Capital Region) and primarily supported the DBP’s Sustainable Health Care Investment Program, 10 which in turn has overall alignment with the government’s health sector reform agenda and implementation framework.11 The project was aimed

4 2015. Development Bank of the Philippines Annual Report. Manila. 5 World Health Organization Global Health Expenditure Database. 2017. 6 ADB. 2013. Philippines: Public–Private Partnership in Health. Consultants’ report. Manila (TA 7257-PHI). 7 ADB. 2005. Country Strategy and Program: Philippines, 2005–2007. Manila. 8 The Philippines’ 2007 MDG report highlighted the slow progress in reducing maternal mortality and the need for better

health services. National Economic Development Authority. 2007. The Philippine Millennium Development Goals: Where are we now? Manila.

9 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020. Manila. 10 This 2007 program is a credit facility available to LGUs and the private sector through (i) direct retail lending for LGUs

and larger private sector sub-borrowers, and (ii) wholesale lending to accredited financial intermediaries (microfinance intermediaries, rural and thrift banks) for small private sub-borrowers.

11 The Aquino Health Agenda: Achieving Universal Health Coverage for All Filipinos was built on the Health Sector Reform Agenda and the FOURmula 1 for Health, aiming to ensure that all Filipinos, especially the poor, receive the benefits of health reform. The government has been and still is increasing health insurance coverage for the poorest people under the PHIC.

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not only at improving health services but also at triggering higher reimbursement of the PHIC. This then reduces the cost of health care for the poor and contributes to achieving the MDGs. Improving capacity at the DBP as the primary borrower and executing agency, and contractual relations between the PHIC and private sector providers, was appropriate.

9. Despite its noted relevance, the project design showed deficiencies that could not be addressed during implementation when unforeseen changes in the lending environment occurred. The project was therefore considered less than relevant at completion (para. 43). The revised design and monitoring framework including achievements of updated performance targets is in Appendix 1. E. Related Grant and Technical Assistance 10. Aside from a $50 million loan, the project also included (i) a $1.0 million attached technical assistance (TA) project to enhance PPP modalities and innovative strategies for health service delivery; and (ii) a $400,000 grant from the Gender and Development Cooperation Fund12 to support midwives interested in establishing their own birthing clinics.13 The DBP was also the executing agency for the TA project and grant. The Bureau of International Health Cooperation under the Department of Health (DOH) and the PHIC were the TA implementing agencies.

11. Technical assistance. The TA outcome was tested PPP modalities that could potentially increase the use of maternal and child health care and referral services in the project sites. The TA outputs were to (i) develop and promote PPP modalities in the health sector, (ii) develop incentives and operational strategies to encourage small-scale health providers to attain PHIC and/or other accreditation for health services in rural and underserved areas that address health-related MDGs, and (iii) develop and initiate the contracting modality for health services to improve the quality and efficiency of health services. During TA implementation, output 2 was revised to develop the PHIC’s global budget system to support PPPs in health initiatives, and output 3 was revised to develop a monitoring and evaluation system and the capacity of national and local government agencies for promoting and implementing PPPs in health. The TA met its outputs but not quite its outcome, which was linked to actual PPP implementation. The TA was nonetheless considered successful, having made significant progress towards raising interest on health PPPs among LGUs and potential private sector partners. The terms of reference, business models, bid documents, and contract templates for health PPP projects developed under the TA provided an impetus for PPP implementation (footnote 6). The TA completion report is in Appendix 2.

12. Gender and Development Cooperation Fund grant. The expected outcome was increased use of facility-based maternal neonatal care and health services by the poor in general, and by women and children in particular. The grant had three outputs: (i) improved capacities of midwives to provide maternal neonatal health care services; (ii) enhanced entrepreneurial and financial literacy of midwives to access credit and operate accredited birthing clinics; and (iii) increased awareness among the poor, especially women, on their reproductive health and family planning rights, entitlements, and available services.14

12 Contributors: the Governments of Canada, Denmark, Ireland, and Norway. 13 Public–Private Partnership in Health Project (TA 7257-PHI) and Enhancing Midwives’ Entrepreneurial and Financial

Literacy Skills. (Grant 0148-PHI), both attached to the Credit for Better Health Care Project (footnote 3). 14 The grant was implemented in the provinces of Kalinga in Luzon, Southern Leyte in the Visayas, and Davao Oriental in

Mindanao. Areas were later expanded to include Metro Manila, Central Luzon, and Southern Tagalog, which have high population density and maternal mortality rates and which potentially had more midwives with capacity to borrow and cooperate with the PHIC.

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13. Gender-related activities were carried out under the grant component, largely in support of midwives and birthing clinics that could potentially access the small-scale loans offered by the project. A total of 208 midwives and 102 birthing clinics were assisted in completing PHIC accreditation requirements, of which 53% of midwives (111) and 67% of birthing homes (68) applied for PHIC accreditation. A series of training activities was also conducted on various midwifery skills needed for accreditation, entrepreneurial and financial literacy, and gender equality and women’s health rights. No loans were granted by the DBP because midwives found it difficult to comply with the bank’s requirements (including on collateral). The grant’s 2-year time frame may have also been inadequate for midwives to gain confidence to start accessing loans. Pre-project assessments and more focused consultants’ terms of reference, possibly with performance-related elements, would have helped identify these issues. Nevertheless, a microfinance project (accreditation fee and renovation and/or equipment purchase loans) was designed under the Gender and Development Cooperation Fund grant and was accessed by a total of 39 midwives. A summary of results and the updated gender action plan are in Appendix 3.

II. IMPLEMENTATION A. Lending Policies 14. The DBP was to relend the project loan proceeds to its potential sub-borrowers at market interest rates through retail and wholesale windows. Relending interest rates were based on (i) the London interbank offered rate (LIBOR) in yen; (ii) ADB’s spread (0.20%) and commitment fee to the DBP (0.15%); (iii) the government guarantee fee (quoted as 1.00%); (iv) government foreign exchange risk cover (quoted as 3.00%); and (v) DBP’s spread between 1.00% and 2.50%, depending on credit rating or social pricing.

15. Wholesale lending. The project originally allocated about $9.15 million for wholesale relending to the DBP’s accredited financial intermediaries. These included microfinance institutions, rural and thrift banks, cooperatives, and nongovernment organizations. The onlending rates of the financial intermediaries were to be determined based on cost of funds, loan administration cost, and credit risk.15 This was also supposed to guide the onlending rates from financial intermediaries to sub-borrowers, who in turn were to be the small-scale health services providers such as midwives, physicians, and municipal drugstores and drug distributors. However, as financial intermediaries obtained lower rates from the local market, they were not interested and did not access project funds.

16. Retail lending. Retail lending for collateralized subprojects from $100,000 to $5 million equivalent was meant for LGUs and larger private ventures (health providers, foundations, health maintenance organizations, and some small-scale sub-borrowers who may also qualify). The DBP’s lending terms were at market interest rates and the repayment was based on a subproject’s projected cash flows, with a repayment period of up to 15 years for civil works, up to 10 years for equipment, and up to 5 years for working capital, and a grace period of up to 3 years. Amortization of principal and interest was on a quarterly basis. Pass-on rates initially ranged from 9.00% to 11.00%, which the DBP later lowered to a maximum of 8.0% for 15-year loans. Project sub-borrowers comprised seven private hospitals, whose loans ranged from $1.0 million to $6.1 million, and four small-scale private hospitals, whose loans were between $0.06 million and $0.40 million. Pass-on rates ranged from 6.5% to 8.0%.

15The terms of onlending by financial intermediaries would also depend on the amount and whether or not end-borrowers

were collateralized. The expected repayment period was up to 10 years, with a grace period of 6 months to 2 years.

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B. Characteristics of Subloans 17. Of the project’s four outputs (para. 6), output 4, which was meant solely for DBP capacity building, was not to have any subloans. The project targeted 96 subprojects nationwide through (i) retail loans to 72 LGUs under output 1 and four private sector providers under output 2, and (ii) wholesale loans to any DBP-accredited financial intermediaries for onlending to 20 small-scale medical service providers under output 3.

18. No LGU used the credit facility under output 1. Seven subloans, all for construction and/or expansion of hospital or multifunction medical arts buildings and provision of equipment, were approved for a total of $25.6 million under output 2.16 Under output 3, none of the DBP’s accredited financial intermediaries borrowed from the project. Instead, the DBP provided retail loans to four small-scale medical providers, all in Mindanao.17 These were for the construction and/or expansion of hospitals and totaled $1.6 million. Subprojects are described in Appendix 4. C. Implementation and Internal Operations of Subprojects 19. Output 1: Upgraded local government unit health services. There was no subproject under output 1. Initially, the DBP’s 2007/2008 pipeline included about 33 LGUs, but not all expressed or sustained interest in taking up loans.18 Pricing on pass-on loans was a challenge during the whole duration of the project. Since 2010, low interest rates in the domestic money market have induced low interest rates for peso loans available for local lenders. The somewhat inflexible pricing structure of pass-on loans from ADB funds made them unattractive to potential sub-borrowers. The DBP lowered its interest rates from 9.0%–11.0% per annum to 8.3% (fixed 15-year rate) in 2011, when prevailing market rates for similar loans were 9.5%–12.3%. This was slightly revised to be within the 7.6%–8.0% range for the 15-year-tenor in 2012 to align with the DBP’s other credit facilities using official development assistance. In 2014, the DBP again lowered its maximum pass-on rates to 7.8% for 15-year loans. However, the rates offered were not attractive for LGUs, who preferred cheaper and/or other sources.19 ADB also recognized that LGU (and financial intermediary) demand for loans was estimated against a high-interest environment, which had completely changed by 2008.

20. Aside from the lending environment, some LGUs did not access project loans because of (i) differences in priority or conflicting views among LGU officials; (ii) weak technical and financial capacity to develop and implement projects according to ADB and/or DBP requirements; (iii) difficulty in securing documents and/or resolutions because of changing political priorities; and (iv) difficulty in securing the Certificate of Good Housekeeping20 and the Central Bank of the Philippines Monetary Board opinion, which are basic requirements of financial institutions in granting loans. Most significant among all valid factors that hindered LGU borrowing was the government’s Health Facilities Enhancement Program that offered similar interventions. 21 In 2014 alone, the Health

16 Four subprojects were in Luzon (one in Ilocos Sur, two in Laguna, and one in Cavite), one in the Central Visayas (Cebu),

and two in Mindanao (Davao del Sur and South Cotabato). 17 Davao City, Davao del Sur, Misamis Occidental, and North Cotabato. 18In June 2010, ADB declared misprocurement for the first subloan presented for funding under the project. To address

procurement issues, (i) the DBP integrated ADB requirements in the standard bidding documents presented to the potential sub-borrowers, and (ii) several DBP and LGU staff were trained in ADB procurement procedures.

19 Other sources included KfW’s Sustainable Health Care Investment Program, the government’s Industrial Guarantee and Loan Fund (through the National Economic and Development Authority), and commercial banks.

20 Issued by the Department of Interior and Local Government. 21 The Health Facilities Enhancement Program was one of the banner programs of the Aquino administration for the

upgrading of health facilities and training health of professionals to improve access to quality health care through grant assistance. This was made available and ran in parallel with the project shortly after it became effective in August 2009. Why this was not reported to ADB and DBP at an earlier stage could not be explained by current DOH staff who were not yet connected with the project at the time.

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Facilities Enhancement Program enabled the government to provide the equivalent of $210 million in grants to LGUs for construction and/or renovation of health facilities. This decreased LGU willingness to access funds from the project22 resulted in (i) partial cancellation of the loan specifically allocated for LGU relending under output 1, and (ii) the project redirecting its support to private hospitals and small-scale medical providers under outputs 2 and 3. ADB approved a minor change in project in December 2013 that decreased output 1 investment from $35.65 million to $5.34 million, and increased output 2 investment from $6.98 million to $30.11 million. The DBP attempted to collaborate with the DOH to develop special products and arrangements, such as combining the LGU credit facility with the Health Facilities Enhancement Program grants. However, it was too late in the process and, given the nature of Health Facilities Enhancement Program grants that were intended for quick disbursement, this was not approved by higher government authorities. After the project closed in 2015, the DBP is set to continue health sector support through the Sustainable Health Care Investment Program.23 Lessons point to the need to optimally align interventions with potential borrowers’ needs. The overall interest rate and the time horizons are important but are not the sole parameters on which decisions to invest in upgrading health services are made.

21. Output 2: More efficient health care delivery systems through public–private partnership and innovative strategies. The project originally intended lending to 3–4 PPP subprojects of between $100,000 and $2 million under output 2. Recognizing a strong demand from private hospitals and the lack of such demand from LGUs, the DBP directed its efforts towards retail lending to private hospitals. This was also agreed by ADB and the government’s investment coordination committee (ICC), even though it took more than 1 year to secure government approval. The ICC reiterated that private health facilities should be pro-poor and be found in areas with any of the following: (i) high concentration of indigenous peoples, (ii) high gender impact, (iii) population–bed ratio of less than 500 persons per bed, (iv) health assistance with total project cost of not more than $5 million, (v) PHIC accreditation, and (vi) be outside Cebu and Davao cities.24 The shift to pro-poor private health facilities came late during project implementation given the delay in securing government approvals. Only seven subloan applications from private hospitals that met the ICC’s criteria were approved. While private hospitals could also access credit from commercial banks, the DBP had lower rates at the time.

22. None of the private hospital sub-borrowers under output 2 achieved any PPP arrangement, despite the project’s TA that developed and promoted PPP modalities in health. This was because private hospitals were focused on completing construction and establishing their operations, given initial project delays and the time it took for them to obtain the subloans. Two out of four output 2 performance indicators were achieved, albeit with lesser coverage and limited only to private hospitals: (i) all hospitals outsourced ancillary services, and (ii) all hospitals engaged in innovative strategies to improve hospital systems (the target for both indicators was only 20% of hospitals).

23. Output 3: Improved access to small-scale private providers. Financial intermediaries were to access wholesale loans for onlending to 20 private, small-scale health service providers. The supposed subprojects were for civil works to meet or improve PHIC accreditation standards. Since there was no demand from the DBP’s accredited financial intermediaries for wholesale subloans (because of the lower rates available in domestic money markets), the DBP diverted efforts to directly attract small-scale private health providers. This included (i) developing specially designed banking products catering to the needs of small-scale health service providers; (ii) providing loans directly to small-scale health providers in the DBP’s regional branches; (iii) removing the $100,000 floor for retail lending, particularly to improve credit access to midwives operating private birthing

22 DBP. 2016. Project Completion Report: Credit for Better Health Care Project. Manila. 23 See also footnotes 4 and 10. As of 31 December 2015, total portfolio stand at P6.6 billion (about $142 million). 24 Memorandum issued by the National Economic Development Authority on 30 April 2013.

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clinics; and (iv) including Metro Manila among the project areas. The project approved construction and/or expansion of four small hospitals, all in Mindanao. 24. All hospital sub-borrowers under outputs 1 and 2 followed commercial procurement practices. A procurement specialist hired under the attached TA identified minimum conditions to ensure adherence to the principles of commercial practices as per ADB procurement guidelines.25 These were incorporated in all subloan agreements between the DBP and private sector borrowers. Of seven subprojects under output 2, one did not materialize because it did not meet the project’s prerelease requirements, while another did not complete before project closing because of construction issues. Two out of the four subprojects under output 3 also failed to fully disburse before project closing because of construction delays. In all such cases, the DBP covered the remaining costs using its own funds. 25. Output 4: Enhanced institutional capacity for health sector lending. No subproject was expected under this output, which was meant to strengthen the DBP’s capacity in dealing with health sector support at national and branch office levels. The DBP established its health policy framework and relending investment policy and monitoring guidelines.26 Subproject monitoring was done by the regional marketing centers and through regular meetings between the DBP and sub-borrowers. D. Operational Performance of the Development Bank of the Philippines 26. Organization, management, and staffing. There has been no significant change in the key organizational structure of the DBP since project inception. A nine-member board of directors appointed by the President of the Philippines continues to govern the DBP. A president, who is also chief operating officer, is the vice-chair of the bank’s board. To further strengthen its governance, the DBP restructured and/or expanded its different committees.27 There is a separate management committee comprising the president and chief operating officer as chair, and designated senior officers. The number of DBP employees grew by 17% between 2010 and 2015. It maintained its network of 15 regional marketing offices and also expanded to over 100 branches all over the country.

27. Personnel administration. The DBP’s 2015 annual report (footnote 4) reported an overall employee retention rate of 96.7% and almost 100.0% retention of its top performers. The bank has a performance-based incentive to match an employee’s performance against agreed targets. In 2015, promotions and rank conferment were given to 569 officers and best-performing employees. The DBP’s Management Associates Program, which was designed to prepare individuals for leadership responsibilities in the bank, also saw a retention rate of 95% of its 165 graduates. The bank reported 237 new employees in 2015, significantly higher than the 90 reported in 2014.

28. Lending operations. The DBP’s development lending portfolio in 2015 concentrated on key priority areas such as infrastructure and logistics, environment, social services, and MSMEs. Development loans from its corporate banking section stood at P102.46 billion at the end of 2015, a 12.0% increase from P91.37 billion for the same time in 2014 and compared with the target growth rate of 7.5%. This accounted for 79% or P101.8 billion of the total loan portfolio, 38% of which (P34.8 billion) went to infrastructure and logistics and 21% went to commercial loans (P26.9 billion). From

25 ADB. 2010. Procurement Guidelines. Manila. 26 Management Committee Resolution No. 0283 dated 26 November 2007. 27 Includes the executive committee whose main task is to review/endorse DBP’s short- and long-term plans to the board,

a trust committee for the bank’s investment activities, a risk oversight committee for DBP’s risk policies and controls, an audit and compliance committee, an information technology governance committee, a human resources committee, a governance committee that ensures the board’s effectiveness in fulfilling its responsibilities, and a development advocacy committee that spearheads DBP’s drive towards achieving its development mandate.

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the DBP’s branch banking area, the focus of development loans to the public sector included LGUs, hospitals, and schools, and reached P37.1 billion in 2015.

29. The DBP revised its credit guidelines on retail lending for MSMEs to cover start-up projects. This increased the bank’s total MSME loan portfolio by 14%, from P6.67 billion in 2014 to P7.60 billion in 2015. The MSME program could be a fitting alternative for small-scale health providers such as midwives, general practitioners, and operators of diagnostic laboratories, mobile clinics, and drugstores, among others, who were all potential sub-borrowers under the project.

30. Other operations. The DBP assumes the lead role in capital-raising transactions for the country. It currently serves as the transaction advisor to the Department of Transportation and Communications on three PPP projects. The bank also remains active in facilitating remittances for overseas Filipino workers and in providing financial literacy training for them and their families. Other activities include trust investments, corporate fund raising activities, and other nonlending programs in the environment and education sectors as part of its corporate social responsibility efforts.

E. Financial Performance of the Development Bank of the Philippines

31. The DBP’s operations grew substantially to P504 billion, largely due to growth in loans. Revenues increased by P1.9 billion from 2014, led by interest on loans, core businesses, and recurring and sustainable sources, allowing the DBP to deal with market volatilities. Deposits are posting a double-digit growth of 10.4% in 2015 especially in current and savings accounts. Net income in 2015 increased despite the difficult market conditions. From 2014, the branches delivered a 17.72% growth in total deposits and 30.00% growth in volume of current and savings accounts, which was chiefly responsible for delivering a net interest margin of 2.11% in 2015. The bank’s capital adequacy ratio in 2015 was 16.6%, significantly exceeding the Central Bank’s minimum required ratio of 10.0%. Key financial ratios are given in the table. Balance sheets, income statements, and cash flow statements are in Appendix 5.

Development Bank of the Philippines Key Financial Ratios (%)

Ratio 2013 2014 2015

Net interest margin Return on average equity Return on average assets Capital to risk assets

2.15 12.71 1.36 24.33

2.34 11.01 1.03 20.91

2.11 11.67 0.97 16.65

Source: Development Bank of the Philippines Annual Report 2015.

F. Covenants 32. Of 25 covenants, 22 were complied with and three were partly complied with. The three covenants that were partly complied with were for submission of the quarterly performance report; the conduct of the baseline study for each subproject; and the recruitment of consultants in health systems, hospital civil works, hospital environment and waste management, monitoring and evaluation, financial management and legal matters. For the latter, DBP mobilized its internal staff/existing consultants. Other details of compliance with covenants are in Appendix 6.

33. All approved subprojects were rated category C for resettlement, category C for indigenous peoples, and category B for environment. The DBPs’ environmental management system (EMS) was assessed to be satisfactory at appraisal. It had appropriate staff capacity and its environmental policy and environmental assessment procedures were of the same standard as ADB’s Environment Policy (2002). DBP ensured that appropriate mitigation measures were prescribed for all subprojects,

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and that each had an approved initial environmental examination and environmental compliance certificate issued by the Department of Environment and Natural Resources.

G. Performance of the Asian Development Bank

34. The performance of ADB is rated satisfactory. Generally, ADB responded to project requests positively and promptly. It closely supervised subproject preparation processes and guided overall project implementation. ADB showed flexibility in retargeting the loan from the LGU to the private sector, and approved partial cancellations to reduce unrealistic components and the government’s burden on commitment fee payments. Joint review missions by ADB, DBP, DOH, and the National Economic and Development Authority were fielded twice a year to monitor project progress. Special project administration and midterm review missions were also fielded and identified solutions to critical implementation issues.

35. Significant changes in the lending environment, the government’s health facilities improvement initiative, and the subsequent drastic change in LGUs’ interest were key challenges to ADB. While not foreseeable, these should have been considered as risks during the design phase and mitigation measures planned.

III. EVALUATION A. Loan Appraisal

36. Distribution of subloans. The huge gap between intended and actual distribution of subloans was significantly affected by LGUs’ lack of borrowing of project proceeds. The government’s program that increased grants to finance health infrastructure, and the massive fall in interest rates worldwide and hence available borrowing opportunities, led to limited interest in the project credit facility, despite extensive marketing from the DBP. This prompted the DBP to adjust targeting of potential sub-borrowers.

37. Covenants. Except for covenants relating to upgraded LGU services, all other covenants remained relevant. There were also no changes in scope or implementation arrangements that warranted revising the covenants.

38. Quality of appraisal. The consultation process with the DBP during design formulation was adequate. However, the lack of consultations with targeted borrowers (LGUs and small-scale stakeholders such as midwives and local drugstores) was apparent in design assumptions. For example, (i) the assumption of an average lending in the range of $500,000 per LGU was probably substantially higher than what a municipal LGU would require to upgrade its facility, (ii) assumptions implied that LGUs would not likely have borrowing options other than the project, and (iii) the government was assumed to be static and would not have similar interventions. Some of these assumptions could have been presented as risks but the project opted to be more optimistic. This further shows that the project’s monitoring concept and overall risk assessment were not fully developed.

39. The original intention of developing an integrated health care delivery system was rather ambitious given the still comparatively weak health management capacities at the municipal and provincial levels. Similarly, the idea of PPPs and innovative strategies was inadequately formulated for it to be helpful guidance in project execution.

40. Implementation arrangements did not clearly define the roles of the PHIC and the health sector investment advisory committee (HSIAC) (para. 41). The broad range of activities from the lenders side in having to deal with financial intermediaries, the PHIC, small-scale providers, and

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government agencies led to overly complex responsibilities and targets at the DBP. This could have been avoided by a clearer implementation structure with more defined roles and targets for the DBP and the other agencies. It was also not at all evident if the design and implementation arrangements considered lessons from ADB’s previous experiences in the health sector and its past projects with the DBP and DOH.

B. Implementation

41. The project was implemented within 6 years as designed, and utilized about 40% of the approved ADB funding. There were no changes in project structure from appraisal (Appendix 7). The HSIAC was to provide guidance and oversight, particularly in responding to implementation challenges, and monitor and report on project performance. However, convening key representatives proved to be difficult and the committee essentially did not serve its purpose. The mechanisms by which the HSIAC and the technical working group would impact on the project were also not clear with regard to the DBP’s internal structure. The PHIC’s role was not defined, and certain activities such as marketing retail loans were not a focused responsibility of one unit. The project management office set up in the DBP nevertheless functioned effectively in planning, coordinating, and monitoring units for project implementation.

42. The DBP satisfactorily carried out project activities, but as a government-regulated finance institution it was hampered by the complex governance structure surrounding the project. 28 Coordination among agencies was also routine and ad hoc and did not enhance collaboration. The government’s Health Facilities Enhancement Program, for instance, was among the DOH’s major programs that, if properly informed and coordinated, would have allowed earlier planning and mitigation of the lack of LGU interest in taking up project loans. Inclusion of large private hospitals at the onset could have improved disbursement level of the facility.

IV. ASSESSMENT AND RECOMMENDATIONS

A. Relevance

43. The project is rated less than relevant. Significant geographical and financial access barriers and stubbornly high out-of-pocket expenditures disproportionally affect the poor population. The initial project design aimed at improving the province-wide supply of quality and affordable health services. The project was supposed to contribute to improving health services and thus compliment the government’s approach to grant free access to health facilities through the PHIC’s subsidized premium for the poor. The PHIC membership indeed substantially increased the demand for health services both at public and private facilities. The intended project outcome remained in line with country development priorities and ADB country and sector strategies. The design of the project was also in accordance with the government’s poverty reduction and health policy strategies of decentralized investment projects and ADB’s health sector strategy at the time of appraisal. However, significant design deficiencies and the unforeseen changes in the lending environment during implementation seriously affected delivery of targeted outputs and the intended outcome coverage.

44. The project suffered severely from the initial overemphasis on LGU-driven subprojects, while other models were taken up only relatively late. Unforeseen changes in government policies and the

28 Decision making on project changes or new approaches lies within central government institutions such as the National

Economic Development Authority, DOF, and the Central Bank of the Philippines, which in turn also have their own internal processes. As early as 2010, the DBP flagged concerns about the lack of LGU uptake and suggested redirecting efforts towards the private sector. It was only in February 2013 that the DOF endorsed partial cancellation of P500 million. Another 6 months was needed for the government to approve the shift from LGU to private sector lending (approved in November 2013), and nearly 1 year after that (September 2014) to get subloans to private hospitals signed.

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short political terms in LGUs (3 years) discourage LGUs from considering long-term investments. The change in external finance parameters made implementation of the project difficult. Borrowers (and financial intermediaries) would request lending rates comparable to those of government or other lending sources, which the DBP under this facility could not provide. 45. Overall, the project was based on several assumptions, took too few risks into account, and did not include appropriate mitigation measures. The design and monitoring framework indicators did not fully capture direct effects. The upgrade of facilities (buildings and equipment) is important but clearly does not suffice. The project focused on health infrastructure improvement and apart from midwives’ capacity building did not explore improving human resources for health and operational processes, even though these recommendations came out in the health sector analysis at the time of appraisal.

B. Effectiveness in Achieving Outcome

46. The project is rated less than effective. The project’s intended outcome was partly achieved by investing in private health care facilities. The revised design and monitoring framework targets on the number of patients served in the supported facilities were met. Given, however, that the outcome target is “increased use of basic health care and referral services by the poor in general, and by women and children in particular, in the subproject sites,” sex- and age-disaggregated data would be needed but is not available. Beneficiaries of the PHIC-sponsored program (which benefits the poor) increasingly use the health facilities built by the project. However, it is difficult to measure whether the intended effects of the investments were achieved.

47. The project was not designed with some form of controlled trial where a control group of those who did not receive loans was established. This makes it difficult to separate causal effects due to the investments from those attributable to general developments (economic growth, changes in patient perceptions, and PHIC policies and reimbursement levels). Data collected from the hospitals generally indicated a rise in the number of in- and out-patients. Clearly, overall supply improved, but whether these investments specifically benefitted the poor is again based on limited evidence. The overall effects seem to be neutral—the poor, compared to the general population, were neither positively nor negatively affected.

C. Efficiency in Achieving Outcome and Outputs

48. The project is rated less than efficient. At appraisal, a cost-effectiveness analysis was conducted based on the assumption that project interventions would have a substantial and quantifiable impact on maternal and child health. At completion, this analysis was found inappropriate, being plagued by the idea of identifying a causal relationship between the project’s activities and a measurable impact at the population level.

49. Given that the economic benefits of the project could not be comprehensively quantified, this completion report looked at the economic return on invested capital (EROIC) instead of recalculating the economic internal rate of return (EIRR). EROIC is used as a proxy to assess the project’s economic contribution by calculating the financial return on invested capital and adjusting for factors such as taxes and subsidies used to derive the EIRR.29 Three subprojects with complete financial data were used and their EROIC ratios ranged from 29.6% to 70.5%. These are above ADB’s standard social discount factor of 12.0%, indicating that the project is viable in the base-case scenario for these hospitals. Still, a rating of less than efficient was deemed more appropriate,

29 ADB. 2008. Project Administration Instructions 6.07B: Extended Annual Review Reports for Nonsovereign Operations.

Manila. Using the economic return on invested capital as a proxy economic indicator was also confirmed by ADB’s Economics and Research Department.

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considering that the project generally failed to deliver its envisaged outcome coverage. The economic and financial analysis is described in Appendix 8.

D. Preliminary Assessment of Sustainability

50. The project is assessed likely sustainable, given the long-term nature of investment in buildings and equipment and raised awareness of continuous future investment needs. The EROIC ratios for three subprojects indicate profitability, and financial internal rates of return computed for selected subprojects also indicate sustainability (Appendix 8). It was suggested that the DBP follow up the development of core services and financial and outcome data so it could further advise the borrowers on continuous improvement. Sustainability of the various subprojects may be achieved through prudent hospital management and increased number of patients, and with it higher financial revenues.

E. Impact

51. The expected impact was improved overall health status in relation to MDG 4 (reduce child mortality) and MDG 5 (improve maternal health). Given the small number of loans provided, the causal link between the project and impact at the national level is weak. Maternal, under 5 years, and infant mortality rates had substantially improved by 2016 but no systemic effect of the project on these improvements can be assumed. There is only anecdotal evidence that the project contributed towards a well-financed health care system that is attracting qualified people and giving people access to quality care without causing them financial hardship. In this respect, the institutional involvement of the DOH and PHIC (although only partly realized) also had a positive effect on overall coordination at the system level and led to a better understanding of the needs of other relevant stakeholders. 52. Safeguards. Overall, there is no evidence that the poor and marginalized were negatively affected by the project. There were no grievances received during construction and operation of all health facilities, which complied with the DBP’s EMS. The subprojects also did not require any resettlement. Indigenous people were not affected by the construction of subprojects itself but may have been affected by changes in access to care. Any positive effect, however, cannot be concluded.

53. Gender. The project most likely had a positive impact on raising awareness about maternal and neonatal health, available services, and efforts on gender equality. The gender-specific outcome of increasing women delivering in health facilities by 25% in 2015 was achieved. Six fully operational hospitals supported by the project are PHIC accredited, offer maternal and child health care packages, and provide treatment for communicable diseases.30 The loan facility under the project specifically targeted midwives to be PHIC accredited, and renovation and/or purchase of equipment for their existing facilities. While midwives did not access loans from the DBP or other financial intermediaries under the project (para. 13), the facility paved the way for them to gain confidence to do so after the project through other credit providers. By project end, 75% of gender action plan activities were completed and 73% of targets achieved (see also Appendix 3).

54. Poverty reduction. The poverty reduction objective of the project was partly achieved. As the LGUs, which cater most for the poor population’s health needs, did not take up the loan, the effect on this group was limited. In some instances, clients of improved private facilities were from PHIC sponsorship programs targeting the poor. However, it is not possible to give solid evidence on pro-poor impact even at the regional level. Given that hospitals have the obligation to include at least

30 Half of these hospitals are newly constructed while the other half expanded their capacity and improved these services

after the project.

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10% indigents in all patients served, it can be assumed on the limited data available that the investments taken by private facilities had a positive spill-over effect on the poor population. For any advanced analysis, a household-based survey would be needed which could be matched with data from the PHIC and facility-based data to show the poor have coverage, access, and eventually obtain quality care.

F. Overall Assessment

55. With project performance rated less than relevant, less than effective, less than efficient, and likely sustainable, the overall assessment of the project is less than successful.

56. In principle, the design was appropriate for the project’s desired outcome but proved to be weak in several areas. The project structure was too complex and lacked clear roles, responsibilities, and lines of reporting. There was no participatory subproject planning, and consultations with beneficiaries and other stakeholders were limited. Mechanisms for ensuring timely and effective coordination among government line agencies were not identified. Performance monitoring and evaluation was deemed sufficient during the construction and loan disbursement period. Most of the subprojects were completed in the last year of the project and did not allow a thorough assessment of the project’s impact on and access by the poor. Although provision of detailed data from supported private providers formed part of agreements with the DBP, actual data collection proved difficult. Risks associated with all of these were not anticipated, and therefore mitigating measures, if any, were taken at a late stage of project implementation.

57. Despite problems in design and execution, the project made positive contributions to the Philippines’ health sector. This is by way of improved private facilities, knowledge on streamlined procedures and management in executing such projects, and the need for a clear and succinct project structure, particularly when many stakeholders are involved.

G. Lessons

58. Health care will remain a critical area, as highlighted by the Philippine Development Plan 2017–2022.31 In this regard, the following lessons are useful and relevant:

(i) LGUs are important as facilitators of health projects but should not be overburdened with health care investments. If such investments are deemed necessary, it will be important to carefully assess their actual needs and interest, and facilitate the uptake and appropriate use of loans.

(ii) Private sector providers need motivation to invest and expand their services in poor and remote areas, and to strive for better quality of care. The hurdles for small-scale providers in accessing a loan should be reduced as much as possible. The DBP has developed specific credit programs to facilitate lending to small-scale providers such as medical doctor and dentist clinics.32

(iii) If consultations with target groups were done up front, a bigger role for midwives could have been envisaged. Midwives can borrow from the DBP if they have sufficient collateral at their disposal. However, few midwives may have such collateral and/or land available for building a (small) facility and may consequently rely on partnerships

31 Available at http://pdp.neda.gov.ph/ 32 DBP’s Credit Guidelines 160-A approved on 25 February 2015 cover retail lending to micro enterprises (projects up to

P3 million) and small enterprises (projects between P3 million and P15 million). Eligible projects include short-term or permanent working capital, capital expenditures (building construction, equipment acquisition, etc.), and acceptable refinancing, among others.

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with other stakeholders such as LGUs or the private sector. Innovative solutions could include using PHIC receivables as collateral for a loan.

(iv) For midwives, an important partner appears to be nongovernment organizations and women’s groups, particularly those focusing on sexual and reproductive health. Many of them are providing training to midwives already, have an established relationship of trust, and have played an important role in launching a number of successful projects, such as a network of clinics owned and operated by midwives.

(v) The complementary approach of initiating or strengthening more PPPs should be viewed with caution. PPPs are not a panacea and, to be successful, mechanisms need to be identified through which PPPs can assist in the improved provision of services without financial hardship for the users. The project did not define what kind of PPPs should be implemented. Indicators should be defined up front to allow an assessment of PPP performance.

(vi) The PPP experience under the TA showed the importance of political support in any such endeavors, and the consequences of the lack of institutional continuity.

H. Recommendations

59. The project had a good design concept that can increase access to quality care, provide value for money for PHIC clients, and mobilize additional resources for the health sector. It is recommended, however, that future interventions have targets that are less ambitious, particularly as health sector lending is complex with many aspects beyond the reach of a specific project. Although the effects of the project will influence health care and its outcomes in the country, monitoring and impact assessment may be more appropriately kept at the local or regional level.

60. Similarly, future interventions should be based on careful understanding and identification of sector and target beneficiary needs. Up-front consultations with intended target groups to determine their needs, wants, and constraints would be more prudent, e.g., capacity building to develop specific financial products and services responsive to target group needs. Project design of sector-specific interventions involving credit lines can also benefit from close collaboration with the concerned public management, finance sector, and trade division.

61. The Philippine Development Plan 2017–2022 (footnote 30) continues to recognize gaps that need to be addressed to improve access to quality health services. Opportunities for ADB involvement may continue to be on upgrading health facilities and services in the areas of maternal health and child care, reproductive health and family planning, the aging population, and promoting the development of healthy lifestyles. Implementation delays were specified as main hurdles to upgrading health facilities, and should be given adequate attention for any future investments.33

1. Project Related

62. Future monitoring. A major shortcoming of the project was the lack of timely and relevant data. Better monitoring efforts are strongly suggested. Indicators should indeed be specific, measurable, achievable, realistic and time bound, followed up, reported, and adjusted based on intermediate results. More data are needed on costs and effects, particularly as the effects are not fully clear at present.

33 Includes disagreements on building design, multiple construction assignments of some contractors, poor coordination,

and maintenance of services during construction (footnote 30).

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63. Covenants. A clear, unequivocal, and functioning project structure should be in place. Covenants should include more specific measures to ensure that the project structure is maintained and functional throughout implementation. The project also noted that reports required under the project may be streamlined to include, for instance, environment status monitoring reports as part of the second and fourth quarterly reports, to encourage compliance. Predesigned report formats would also facilitate information exchange and ease the review process.

64. Further action or follow-up. As the DBP continues to monitor subprojects and maintain its relationship with sub-borrowers, opportunities for further improvements or expansion in health infrastructure, human resources, health systems, and health services delivery may be explored. A better mechanism for collecting, monitoring, and reporting accurate data from the private hospitals and small-scale providers should also be considered. Capacity building to collect and use data (including sex-disaggregated data where relevant) for decision making is an area that should be considered for future support.

65. Additional assistance. Scope for additional assistance is apparent as private health providers continue to explore innovations to improve hospital systems and management, and broaden delivery of health services. This could be more specifically in the areas of research, data collection, and supporting health systems and marketing analyses.

66. Timing of the project performance evaluation report. Operations of most subprojects are either in the initial stages or only starting to take off. The report may best be timed around 2019, when all subprojects have been in full operation for at least 3 years.

2. General

67. Flexibility. ADB’s flexibility during project implementation helped to avoid unnecessary effort, misdirected funds, and accrued interest. Given the huge number of development projects and funding opportunities in the country, more policy coordination may be neither feasible nor helpful, and therefore flexible approaches could be further enhanced to allow for quick reaction to a changing environment.

68. Gender. Constraints on target groups (e.g., midwives) that have high potential for, and interest in, accessing lending facilities should be properly assessed in advance. Remedial measures to address those constraints can include development of specific products and services, and other innovative solutions.

69. Future technical assistance. The role of TA should be reconsidered. The cost of the TA in this case was substantial ($1 million) and care should be taken so that outputs are not misdirected. Instead of reviews and training, concrete and practical solutions to fully achieve the outcome should be sought. TA terms of reference should incorporate clearly defined targets and possible incentives for achieving tangible outputs. Terms such as “informing,” “sensitizing,” and “capacity building” all too often obfuscate the real shortcomings in delivering the TA.

70. Public–private partnerships in health. ADB should reconsider the role and use of PPPs in health, and better understand the many challenges that substantially influence performance and eventual success of a PPP (see also technical completion report recommendations in Appendix 2). The PPP Center in the DOH should have a clearer role and constant communication and coordination with sectors implementing PPP in health projects, and give support to or at least help monitor PPP contracts.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Original Performance Targets/Indicators Revised Performance Targets / Indicators Achievements

Impact

Improved overall health status, especially in relation to MDG 4 (reduce child mortality), and MDG 5 (improve maternal health) by 2015

Maternal mortality ratio reduced by 50% (from 162 per 100,000 live births in 2006 to 81 by 2020)

Maternal mortality ratio reduced by 50% (from 162 per 100,000 live births in 2006 to 81 by 2020)

MMR (down from 142 per 100,000 in 1990 to 114 per 100,000 in 2015a), U5MR (down from 58 per 1,000 in 1990 to 28 per 1,000 in 2015b) and IMR (down from 41 per 1,000 in 1990 to 22 per 1,000 in 2015c) have all substantially improved by 2016, but no systemic effect of the project on these improvements can be assumed. There is only anecdotal (local) evidence that the project contributed towards a well-financed health care system, attracting qualified people, and giving people access to quality care without causing financial hardship.

Under-5 years child mortality rate reduced by 20% (from 32 per 1,000 live births in 2006 to 26 by 2020)

Under-5 years child mortality rate reduced by 20% (from 32 per 1,000 live births in 2006 to 26 by 2020)

Infant mortality rate reduced by 20% (from 24 per 1,000 live births in 2006 to 19 by 2020), by primarily focusing on reducing neonatal mortality

Infant mortality rate reduced by 20% (from 24 per 1,000 live births in 2006 to 19 by 2020), by primarily focusing on reducing neonatal mortality

Outcome

Increased use of basic health care and referral services in the subproject sites

Increased households use of health facilities at the subproject sites:

Increased households use of health facilities at the subproject sites:

(i) Population using health facilities increased from 57% in 2003 to 71% by 2015

(i) In- and out-patients using health facilities increased by 3% by 2015

Achieved. Number of in- and out-

patients using health facilities in all of seven completed hospitals increased by 10% or more

(ii) Indigents using health facilities increased by 20% by 2015 (baseline to be established)

(ii) In-patient indigents using private health facilities increased by 10% by 2015

Achieved. Number of in-patient

indigents in all of six completed hospitals increased by 10% or more

(iii) Women delivering at health facilities increased from 38% in 2003 to 57% by 2015

(iii) Women delivering at health facilities increased by 25% by 2015

Achieved. Number of women delivering

in hospital facilities in four out of six hospitals completed or financed increased by 25% or more

(iv) Children for whom treatment was sought at health facilities increased from 46% in 2003 to 60% by 2015

(iv) In government primary health care facilities, fully immunized children (12–23 months) increased from 70% in 2003 to 85% by 2015 in the catchment area

Not achieved. No government facilities

were financed by the project.

(v) Fully immunized children (12–23 months) increased from 70% in 2003 to 84% by 2015

Appendix 1 17

Design Summary Original Performance Targets/Indicators Revised Performance Targets / Indicators Achievements

(vi) Consumer satisfaction with health service performance from 37% for public hospitals in 2006/07 to 50% in 2015

Output

1. Upgraded LGU health services.

Participating LGUs will have:

Financed LGU health facilities: Not achieved. No subloan was taken out

by the LGUs

(i) At least 80% of clinics (new or renewed) accredited by 2013

(i) 100% of health facilities accredited with PHIC

(ii) At least 80% of clinics (new or renewed) accredited offering PHIC out-patient benefits package by 2013

(ii) 100% of health facilities providing PHIC maternal and child health care package

(iii) At least 80% of hospitals newly or renewed accredited by 2013

(iv) At least 80% of hospitals newly or renewed upgraded and accredited from primary to secondary level by 2013

(v) At least 80% of hospitals newly or renewed expanded and accredited offering PHIC maternal and child health care packages by 2013

(vi) At least 80% of hospitals newly established and accredited with consignments of drugstores selling generic drugs (e.g., botika ng lalawigan) by 2013

2. More efficient health care delivery systems through PPP and innovative strategies

Participating hospitals:

Hospitals financed under the project:

(i) At least 20% of public hospitals achieved economic enterprise or autonomous hospital status by 2013

(i) At least 20% of public hospitals achieved economic enterprise by 2015

Not achieved. LGUs did not access

subloans under the project.

(ii) At least 20% of clinics or hospitals achieved PPPs in health service provision by 2013, or

(ii) At least 20% of hospitals achieved PPPs in health service provision by 2015

Not achieved. No subproject has

achieved PPP arrangement.

(iii) At least 20% of hospitals achieved outsourcing clinical and ancillary services by 2013, or (iv) At least 20% of hospitals engaged in innovative strategies to improve hospital systems such as management information systems, telemedicine, or others by 2013

(iii) At least 20% of hospitals achieved outsourcing clinical and ancillary services by 2015

Achieved. All private hospitals outsourced

ancillary services (laundry, food).

18 Appendix 1

Design Summary Original Performance Targets/Indicators Revised Performance Targets / Indicators Achievements

(v) At least 20% of hospitals engaged in innovative strategies to improve hospital systems such as management information systems, telemedicine, or others by 2015

Achieved. All financed hospitals that are

operational are engaged in innovative strategies such as MIS, while others will be acquiring MISs upon operation.

3. Improved access to small-scale private providers.

Participating private providers: Project-financed hospitals:

(i) At least 80% of private clinics and hospitals newly or re-accredited offering PHIC maternal and child health care and communicable disease control program by 2013

(i) At least 80% of private clinics and hospitals newly or re-accredited offering PHIC maternal and child health care and communicable disease control program by 2015

Achieved. All private hospitals financed

under the project are PHIC certified. Private hospitals offer maternal and child care, provide treatment of communicable diseases, and have isolation rooms.

(ii) At least 80% of drug retail stores selling generic drugs established or expanded with PITC accreditation by 2013

(ii) At least 80% of hospitals established or expanded with drug retail stores selling generic drugs

Achieved. All private hospitals financed

under the project have drug retail stores selling generic drugs.

(iii) At least 80% of midwives established or expanded with PHIC accreditation by 2013

(iii) At least 80% of midwives established or expanded with PHIC accreditation by 2015

Partly achieved. Out of 208 midwives

who participated in project consultations, 111 (53%) have submitted applications for accreditation as professional service providers, out of which 35 (32% of applicants, 17% of midwives engaged) were granted accreditation, 33 of whom are women (94%).

(iv) Enhancing midwives’ entrepreneurial and financing literacy in three selected provinces

(iv) Enhancing midwives' entrepreneurial and financing literacy in three selected provinces (Kalinga, Southern Leyte, and Davao Oriental)

Achieved. Workshops on enterprise and

financial literacy, business planning, business plan preparation, business start up requirements, loan facility packaging, and financial models for birthing homes were held during March 2012 to April 2013 in the three provinces and expanded areas. 552 attended these workshops, of which 502 are women (91%).

(v) At least 30% of midwives by 2009 and 50% of midwives by 2010 consulted credit lending agencies for credit application

(v) At least 30% of midwives by 2009 and 50% of midwives by 2010 consulted credit lending agencies for credit application

Not achieved. 72 loan applications

(including from 33 midwives closely mentored by the project) were filed with DBP but, because of difficult documentary requirements, none of these materialized into a loan until project completion. Post-project, three loans from midwives

Appendix 1 19

Design Summary Original Performance Targets/Indicators Revised Performance Targets / Indicators Achievements

interested in setting up a birthing home were granted by the DBP.

4. Enhanced institutional capacity for health sector lending

(i) Circular established for DBP's health relending investment policy and monitoring guidelines before mid-2010

(i) Circular established for DBP's health relending investment policy and monitoring guidelines before mid-2010

Achieved. DBP’s Management

Committee Resolution No. 0283 dated November 26, 2007

(ii) Project monitoring briefings provided to sub-borrowers on an annual basis, and information published on DBP website

(ii) Project monitoring briefings provided to sub-borrowers on an annual basis, and information published on DBP website

Continuing. Project information is also

published on DBP’s website.

DBP = Development Bank of the Philippines, IMR = infant mortality rate, LGU = local government unit, MDG = Millennium Development Goal, MIS = management information system, MMR = maternal mortality rate, PHIC = Philippine Health Insurance Corporation, PITC = Philippine International Trading Corporation, PPP = public-private partnership, U5MR = under five mortality rate. ahttp://www.who.int/gho/maternal_health/countries/phl.pdf bhttp://data.worldbank.org/indicator/SH.DYN.MORT?end=2015&start=1990 chttp://data.worldbank.org/indicator/SP.DYN.IMRT.IN?end=2015&start=1990

20 Appendix 2

TECHNICAL ASSISTANCE COMPLETION REPORT TA Number, Country, and Name: Amount Approved: $1,000,000

TA 7257-PHI: Public–Private Partnership in Health Revised Amount: Not applicable

Executing Agency: Development Bank of the Philippines

Source of Funding: Japan Special Fund

Amount Undisbursed: $15,637.34

Amount Utilized: $984,362.66

TA Approval Date: TA Signing Date: Fielding of First Consultant: TA Completion Date Original: 31 Dec 2010

Actual: 30 Sep 2013

25 March 2009 14 May 2009 28 May 2010 Account Closing Date Original: 31 Dec 2010

Actual: 31 Dec 2013

Description

The TA was attached to the Credit for Better Health Projecta to support enhancing PPP modalities and innovative strategies for health service delivery, particularly in government health facilities. The DBP was the executing agency while the DOH and PHIC were implementing agencies. Expected Impact, Outcome, and Outputs

The TA impact was to help improve maternal and child health status by 2015 in the subproject sites with PPPs. The outcome was to have tested PPP modalities that demonstrate the potential to increase the use of maternal and child health care and referral services in the project sites. The outputs were to (i) develop and promote PPP modalities in the health sector, (ii) develop incentives and operational strategies to encourage small-scale health providers in attaining PHIC and/or other accreditation for health services in rural and underserved areas that address health-related MDGs, and (iii) develop and initiate the contracting modality for health services to improve quality and efficiency of health services. Delivery of Inputs and Conduct of Activities

The TA engaged an international consulting firm and four individual consultants, and provided a total of 17.5 person-months of international and 94.4 person-months of national inputs. Fielding of consultants was delayed because of decisions at inception to split TA implementation between policy development and implementation support. Consultants’ inputs were satisfactory and delivered on time. ADB review missions supported TA implementation and resolved issues whenever appropriate. Performance of ADB and of DBP as executing agency was also satisfactory. Three minor changes were approved to (i) provide specific capacity building activities for the DOH, DBP, and other relevant agencies; (ii) revise the scope of outputs 2 and 3 as a result of leadership transition and changes in policy directions in the PHIC; and (iii) engage two individual consultants to support a regional learning and dialogue event for PPPs in health. Output 2 was revised to develop the PHIC’s global budget system to support PPPs in health initiatives, and output 3 was revised to develop an M&E system, and the capacity of national and local government agencies for promoting and implementing health PPPs. The TA was extended five times. The first extension supported revisions in consultants’ TOR and was scheduled to allow the two-phase approach to TA implementation. The subsequent extensions were to extend consultants’ contracts and complete knowledge products, publications, and dissemination activities. The TA design was formulated based on the overall structure of the project, which itself had inadequacies. Weaknesses in TA formulation include that (i) there was an expectation that LGUs can easily adopt PPP initiatives despite the lack of a broader, overall PPP policy at the national level; (ii) there was an unclear project and reporting structure between the TA team and DBP, DOH, and PHIC; (iii) too much emphasis was placed on the development of technical manuals and conceptual work; and (iv) insufficient attention was given to TA performance indicators associated with the number of successful loans taken up under the project, or at least some scope for feedback from the intended target groups. Evaluation of Outputs and Achievement of Outcome

The TA achieved its output targets. Under output 1, diagnostics were established on the PPP environment, potential subprojects were identified, and documents were prepared to support the identified subprojects. Knowledge and social marketing products were also developed and these provided partners and stakeholders with guidelines to facilitate implementation of health PPPs, including basic information on the project. The TA assisted six provinces that expressed interest in health PPPs by preparing feasibility studies, bid processes, and guidelines. Unfortunately, none of these led to concrete subprojects for the project. This was largely due to one or more of the following reasons: (i) the LGUs losing interest because they did not meet DBP requirements for taking up loans; (ii) the LGUs withdrawing their loan applications given other fund sources such as government grants or lower-cost loans; (iii) the LGUs having other priorities over health-sector-related activities; and/or (iv) changes in LGU governance following the 2013 local elections did not sustain general interest in PPPs or health PPPs. The TA had no clear risk and mitigation measure associated with any of these.

Appendix 2 21

The TA successfully met the revised outputs 2 and 3. It facilitated the PHIC’s adoption of the Global Budget Payment Program that aimed to stimulate a more effective and efficient delivery of health services by government facilities, and supported a workshop that helped draft the program policy guidelines.b Under output 3, the TA strongly emphasized capacity development to ensure sustainable implementation of health PPPs. It produced and widely disseminated various knowledge products,c developed an online portal (http://partnersforhealth.ph) to serve as a hub for PPP knowledge and engagements, provided expert inputs to several health forums, and held various training and workshops, including an international conference that showcased international best practices in health PPPs. Despite achieving its outputs, it was not possible to achieve the TA outcome, which was linked to adoption of PPPs. Overall Assessment and Rating The TA is rated successful. The TA made significant progress towards raising interest in health PPPs among LGUs and potential private sector partners. The TOR, business models, bid documents, and contract templates for health PPP projects developed under the TA provide an impetus for implementation. The TA also resulted in incorporating health PPPs in the national setting, having assisted the DOH to craft the policy framework for PPPs in Health (Administrative Order 2012-0004) and its implementing rules and regulations. This was ratified by the health secretary in March 2012. The TA further developed a long-term capacity development framework for health PPP implementers in collaboration with the Development Academy of the Philippines, resulting in curricula for health business planning, social marketing, and knowledge management. Major Lessons

The TA’s complementary approach to strengthen and initiate PPPs should be viewed with caution. PPP is not a panacea and, in order to be successful, mechanisms need to be identified through which PPPs can assist in the improved provision of services without financial hardship for users. It remains unclear how PPP was defined in the overall project. Indicators should be defined up front to allow an assessment of PPP performance. The experience with LGUs under the TA has also demonstrated the importance of political support, and the consequences of the lack of institutional continuity. Recommendations and Follow-Up Actions

There is scope to continue exploring PPP opportunities in the health sector. However, the role and use of PPPs in the Philippine health setting should be considered against challenges that may have a substantial influence on performance and eventual success. These include (i) unclear definition of PPP and its difference to simple outsourcing of specific services; (ii) bureaucracy within a complex process (including political dynamics at the local government level) that has to consider available resources (of public and private stakeholders) and market feasibility of projects; (iii) personnel displacement (in introducing health PPP in a government setting, the immediate reaction of public health workers is the fear of losing their jobs); (iv) adherence to DOH policy guidelines should provide the basic principles (e.g., fair competition and transparent process), coupled with the applicable procedures and requirements in the build–operate–transfer law and the implementing rules and regulations; and (v) multistakeholder participation with numerous government bodies (e.g., DOH, Commission on Audit, DILG) and the LGU make any health PPP proposal inherently complex. The PPP Center in the DOH should be sustained. It may need to have more policing powers, or at the least should have constant communication and coordination with LGUs that might opt or have opted to implement PPPs in health interventions. The center should have the authority and capacity to support and/or monitor PPP contracts.

ADB = Asian Development Bank, DBP = Development Bank of the Philippines, DILG = Department of Interior and Local Government, DOH = Department of Health, LGU = local government unit, M&E = monitoring and evaluation, PHIC = Philippine Health Insurance Corporation, PPP = public–private partnership, TA = technical assistance, TOR = terms of reference. a ADB. 2009. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and

Administration of Grant to the Republic of the Philippines for the Credit for Better Health Care Project. Manila. b The guidelines were approved under PHIC Board Resolution No. 1630. c Includes frequently asked questions on health PPPs; guidebooks for developing PPPs in pharmacy services and

hospital management; resource books on PPP in birthing homes, and capacity development (social marketing and knowledge management); legal and policy issues in health PPPs; financing options in health PPPs; procurement processes in health PPPs; and the audio-visual presentation called Partnerships for Health.

Prepared by: Ma. Karen R. Guzman Designation and Division: Senior Project Officer, SEHS In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

22 Appendix 3

SUMMARY OF GENDER EQUALITY RESULTS AND ACHIEVEMENTS

I. PROJECT DESCRIPTION 1. The Credit for Better Health Project was designed to help achieve health-related Millennium Development Goals (MDGs) of the Philippines by addressing low and inefficient public expenditures in health care. 1 It provided a loan, grant, and technical assistance (TA) to a government financial intermediary, the Development Bank of the Philippines (DBP), to mobilize additional off-budget credit for pro-poor investment by leveraging private participation and improving allocation towards investment priorities. The perceived impact was improved overall health status, especially in relation to MDG 4 (reduce child mortality) and MDG 5 (improve maternal health) by 2015. 2. The intended project outputs were (i) upgraded local government unit (LGU) health services, (ii) more efficient health delivery systems through public–private partnerships (PPPs) and innovative strategies, (iii) improved access to small-scale private providers, and (iv) enhanced institutional capacity for health sector lending. The project was planned nationwide except the National Capital Region and, for output 3, the initial focus lay on Kalinga, Southern Leyte, and Davao Oriental.

3. The project had attached technical assistance (TA) (Technical Assistance on Public–Private Partnership in Health) for PPPs that supported implementation of output 2 and a $400,000 grant from the Gender and Development Cooperation Fund (GDCF) that supported output 3 with special emphasis on midwives wanting to establish their own clinic (Enhancing Midwives’ Entrepreneurial and Financial Literacy Skills).2 The DBP was the executing agency of the project, TA, and grant. The Department of Health (DOH) Bureau of International Health Cooperation and Philippines Health Insurance Corporation (PHIC) were implementing agencies for the TA. The project ran for 6 years, from effectiveness on 19 August 2009 until financial closing on 19 August 2015; the grant for 4 years, from 27 November 2009 until financial closing on 13 November 2013; and the TA for about 4 years between 14 May 2009 and 30 September 2013.

4. The gender category in project design is gender equity as a theme.

II. GENDER ANALYSIS AND PROJECT DESIGN FEATURES A. Gender Issues and Gender Action Plan features 5. Low access to affordable quality basic care is reflected in the health status of the family, increases the burden on women as caretakers, and raises the risks associated with pregnancy and delivery. The gender-specific issue the program sought to address is maternal health and more particularly the low rates of institutional delivery, especially among the poor (11% versus 38% overall in 2003). It is for this reason that one of the project outcome indicators relates to increased use of basic health care and referral services in the subproject sites and that women delivering at health facilities increased by 25% by 2015.

1 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loan and

Administration of Grant to the Republic of the Philippines for the Credit for Better Health Care Project. Manila. 2 Public–Private Partnership in Health (TA 7257-PHI) and Enhancing Midwives’ Entrepreneurial and Financial Literacy

Skills (Grant 0148-PHI), both attached to ADB. ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of the Philippines for the Credit for Better Health Care Project. Manila.

Appendix 3 23

6. To achieve this, the project encouraged investments addressing women’s reproductive health needs, including for safe maternal and neonatal care through the development of birthing facilities owned by midwives and obstetricians. Professional midwives, who are mostly female, are micro entrepreneurs outside the scope of traditional microfinance development schemes who face difficulties upgrading and expanding their businesses because of inexperience in banking and health facility financial management. They have difficulty in achieving PHIC accreditation, although that would help offset their clients’ low ability to pay. The main obstacles to obtaining PHIC accreditation as professional service providers and operators of birthing facilities include (i) lack of requisite professional and financial skills, (ii) complex application process for accreditation, (iii) high accreditation costs, and (iv) lack of resources to set up birthing facilities that comply with PHIC standards.

7. The gender action plan (GAP) was thus designed to mainly address these obstacles. It has four main design features, corresponding to the four project outputs:

(i) Under output 1, the DBP social marketing focuses on LGU facilities targeted to be basic emergency obstetric centers and comprehensive emergency obstetric centers.

(ii) Under output 2, the GAP ensures at least 30% women’s representation in seminars on PPPs in health care delivery systems.

(iii) Under output 3, the GAP features are (a) supporting the PHIC’s review for midwives’ accreditation standards,

processes, and benefit package; (b) developing a training curriculum and module for midwives; (c) developing loan packages for midwives by credit lending agencies; and (d) legal empowerment on women’s health rights, entitlements, and services.

(iv) Under output 4, the GAP features are (a) assessment of progress in outreach will be carried out at midterm and at project

closing; (b) midterm review will include meetings with participating microfinance institutions

(MFIs), midwives’ organizations, and midwife borrowers; and (c) based on key project findings, corrective models will be developed including (i)

gender audit of DBP staff and programs, (ii) gender assessment of training tools and modules, and (iii) adoption of corrective measures.

8. At the outset, output 2, including the single GAP action under it, was covered by the PPP TA (footnote 2), which aimed to provide support to, among others, small-scale service providers to obtain access to credit to support health-related MDGs. The GAP interventions under output 3 were financed by the GDCF grant (footnote 2), and implementation was supported by the Kaunlaran ng Manggagawang Pilipino Inc. (KMPI), a national health nongovernment organization (NGO) engaged by the project for 2 years (from June 2011 until June 2013). Under the terms of reference (TOR) of KMPI, some GAP activities and targets were revised to align with project implementation developments and were based on KMPI’s own findings during grant implementation. 9. The coverage of GAP activities (specifically under output 3) expanded from the original three target provinces (Kalinga, Southern Leyte and Davao Oriental) to include Metro Manila, Central Luzon, and Southern Tagalog because, as found during the inception period, there were very few midwives from the three provinces who were interested in going through what was required to set up birthing clinics under the project. The expansion of the coverage areas was deemed necessary to maximize the use of the project grant funds. It was noted that the additional

24 Appendix 3

areas have high population density and maternal mortality rates (MMRs), and would therefore benefit greatly from the project.

10. By project end, 75% of GAP activities were completed and 73% of GAP targets were achieved. Details of the original GAP, changes made during project implementation, and accomplishments under the revised actions and targets are detailed in the GAP Monitoring Table Update (Annex). B. Overall Assessment of Gender-Related Results and Achievements 11. The overall thrust of the GAP is to raise awareness, build capacities, and provide financial and technical support, mainly for midwives in the target communities to improve their skills and facilities so they can be more effective contributors in MDG achievement, especially MDG 5 (improve maternal health). However, because of the changes in the GAP actions that affected the fundamental gender design and strategy, and the failure of the project to collect and monitor sex-disaggregated data, at the very least the achievement of the intended gender equality results is difficult to measure. Thus, despite the achievements in many of the modified GAP actions, the project is considered less than successful from a gender perspective. 12. Nevertheless, gender-specific interventions yielded considerable outputs. A total of 3,492 people, including 2,994 (or 86%) women, participated in capacity building and awareness raising activities held under the project. These activities included (i) a regional multistakeholder seminar on PPPs in health with the theme Developing Models, Ensuring Sustainability: Perspectives from Asia and Europe; (ii) a series of workshops on enterprise and financial literacy and other business-related topics for start-up midwives; (iii) an orientation session on PHIC requirements for accreditation as professional providers and institutional operators; and (iv) post-graduate midwifery skills training. A total of 208 individual midwives and 102 active or prospective birthing home operators were identified and supported on their accreditation needs. Out of the 208 midwives, 111 applied for PHIC accreditation and 35 had been accredited by project completion. Of the 102 birthing homes engaged, 68 (or 67%) applied for accreditation and 26 were granted by project completion. 13. KMPI developed a loan facility to serve as a bridge fund for midwives who are unable to obtain larger loans from local financial institutions for various reasons, including lack of necessary documentary requirements and lack of confidence to assume the responsibility of a debtor. There were two kinds of loan under this facility, depending on its purpose: (i) an accreditation fee loan for a maximum of P10,000 to enable the midwives to pay for the fees and other costs related to obtaining their PHIC accreditation, and (ii) a renovation and equipment purchase loan for a maximum of P100,000 to enable the midwives to finance minor renovations in their existing facilities and/or purchase necessary equipment to fulfill the minimum requirements for PHIC accreditation for institutional providers. By project completion, 39 midwives (of which 36 or 92% were women) took out an accreditation fee loan, and three female midwives took out a renovation and equipment loan. After the project it was found that these three midwives went on to obtain further loans from local banks and are now fully operating their own birthing facilities in their villages, where previously there was none. 14. Overall, the project started out with ambitious gender designs—setting out to review and possibly revise the existing government accreditation standards for midwives—and high numerical targets for midwives’ participation in the different project activities and number of midwives’ accredited. Modifications made during project implementation, particularly at the time

Appendix 3 25

when the TOR of the implementing NGO were developed, lowered GAP activities and targets and ultimately proved to be only partially effective in achieving the project’s intended gender-specific outcome target of increasing women delivering at health facilities by 25% by 2015 and increasing use of health facilities by women and girls. By project completion, four out of the six fully operational hospitals that the project supported reported an increase of 25% or more in the number of women delivering in their facilities. All these hospitals are PHIC certified, offer maternal and child health care packages, and provide treatment for communicable diseases. C. Gender Equality Results

1. Participation, Access to Project Resources, and Practical Benefits 15. Under output 2. The GAP indicator under this output targeted 30% women’s participation in PPP seminars. Under the PPP TA (footnote 2), which supported this output, a regional forum for PPP in health was held on 23–25 October 2012. Co-convened by the Asian Development Bank (ADB), the United Nations Economic Commission for Europe, the Philippines Department of Health (DOH), DBP, and PHIC, it brought together 364 delegates comprising policy makers, decision makers, local and international PPP health advocates, private and public sector health professionals, local chief executives, health sector business leaders and suppliers, academicians, researchers, and media representatives. This forum was attended by many women and civil society organizations at the forefront of Philippine reproductive health services and advocacy. In total, women comprised 41% of the entire forum delegation (150 out of 364), exceeding the target of 30% women’s participation. 16. Under output 3: facilitating Philippine Health Insurance Corporation accreditation of midwives as health care professional providers and operators of birthing facilities. To facilitate the accreditation process for midwives, the project started with the holding of information campaigns and orientation sessions in the different target areas on basic topics like PHIC accreditation requirements, PHIC maternal care packages, and DBP retail lending guidelines for midwives. All these were held from July 2011 to October 2012 and were attended by a total of 1,398 participants (exceeding the target of 30 persons per province), 92% of whom (1,290) were women. These were followed up by consultations with provincial stakeholders to identify potential midwives and institutional partners interested in engaging with the project and establishing or accrediting birthing facilities. These consultations led to the identification of 208 midwives and 102 existing or planned birthing homes as potential project partners. Out of these, 111 midwives and 68 birthing facilities submitted applications for PHIC accreditation. By project completion, PHIC accreditation was granted to 35 midwives as professional providers and to 26 birthing homes as institutional providers. 17. Under output 3: assisting midwives obtain skills training certification for Philippine Health Insurance Corporation accreditation. To be effective at delivering the requisite skills needed for PHIC accreditation both as professional providers and operators of birthing facilities, the project conducted a training needs assessment in two ways: (i) through a focus group discussion during the midwives’ enhancement orientation sessions, which was attended by a total of 343 midwives; and (ii) by way of the open forum during the orientation sessions on PHIC accreditation requirements, and PHIC maternal and child care package. The following were the training needs identified: post-graduate midwifery courses on the Revised Midwifery Law, post-

26 Appendix 3

graduate skills on newborn screening, BeMONC and/or CeMONC,3 screening for pregnancy-related complications, family planning counseling, and maternal and child health services. Further, skills needed to run birthing homes were identified, particularly business models for birthing homes and business plan preparation. Additional knowledge and skills on responding to violence against women and on reproductive health were also found to be needed by the midwives. 18. Following the training needs assessment, the project partnered with various accredited training institutions, which in turn carried out the different trainings for the midwives across the project areas in the country. A total of 19 post-graduate training courses on the Revised Midwifery Law and Midwifery Skills were held across the country from July 2012 to June 2013. These trainings were attended by 319 midwives, of whom 292 or 92% were women. 19. Apart from post-graduate midwifery knowledge and skills training, a series of workshops geared towards increasing the capacity of midwives to run birthing centers was held from March 2012 to April 2013 across the project areas. The workshops were on enterprise and financial literacy, business planning and business plan preparation, business start-up requirements, loan facility packaging, and financial models for birthing homes. These workshops had 552 participants, 502 (91%) of whom were women. 20. Under output 3: developing loan packages for midwives by credit lending agencies. Following an assessment by the project of the financial needs of midwives, it was found that the most common constraint for midwives on setting up their birthing clinics is the inadequacy of funds to build facilities and purchase equipment so as to comply with PHIC standards. Other major constraints are (i) lack of information on how to go about establishing clinics; and (ii) lack of confidence to embark on their own business, including because of lack of business skills. It was also shown that the preferred sources of funds included loans from commercial banks, government institutions, and personal savings. The major considerations in taking up loans are affordable interest rates and terms, which for the midwives were 1%–2% monthly, a term of 1–5 years, no collateral requirement, and fast loan release. The loan requirement was P100,000–P600,000 to be able to build or renovate their clinics. 21. A study of 15 financial institutions around the target areas showed that these institutions provide microfinance credit facilities with a start-up amount of P3,000–P5,000, with increasing rates for repeat loans, to a maximum of P15,000–P150,000 payable over 3–6 months. Granting of loans depended on the borrower’s track record and/or group endorsement. Loan interest rates are 2.0%–2.5% per month, using the straight method. These financial institutions also provide collateralized loans for small businesses, including clinics, with loan amounts depending on working capital and asset requirements. Loan term depends on the business plan, is at going market rates, and requires real estate collateral as security. 22. The DBP was also consulted, particularly on its retail lending for micro, small, and medium-sized enterprises (MSMEs). It offered the lowest interest rate and the loan term was considered appropriate for the needs of the midwives. However, the requirement for a real estate mortgage or chattel mortgage collateral requirements and the seeming complexity of the loan application documentary requirements (including required submission of income tax returns, business permits, and audited financial statements) proved to be daunting requirements for midwives embarking on a business venture for the first time.

3 Availability of basic and/or comprehensive emergency obstetric and newborn care help avoid majority of maternal

and early newborn deaths

Appendix 3 27

23. Given the apparent disconnect between the need and the capacity of the midwives with regard to the products of the financial institutions, particularly on the loan amounts and terms, the project designed a microfinance product meant to act as a bridge fund to enable midwives to settle their PHIC accreditation requirements and finance minor renovations and equipment purchases. The accreditation fee loan was for a maximum of P10,000, payable through equal monthly amortizations for a maximum period of 3 months, at 1.5% add-on interest per month. The renovation and equipment loan was for a maximum of P100,000, payable through equal monthly amortizations for a maximum period of 18 months, at 1.85% add-on interest per month and with the borrower providing post-dated checks for the loan installment payments. 24. A total of 39 midwives (of which three, or 8%, were men) took up the KMPI accreditation fee loan, and three midwives (all women) took up the renovation and equipment purchase loan, which was offered at the beginning of May 2013. 25. KMPI also provided small group coaching sessions on preparing business plans in preparation for applying for bigger business loans with the DBP. Among 39 midwives, 33 (all women) exhibited keen interest in establishing their own birthing clinics and submitted their business plans and loan applications with the DBP. Upon review of their documents, the DBP instructed the project team to assist the midwives in revising and improving the business plans submitted. The DBP particularly required the following: (i) adjustment of financial statements to reflect depreciation; (ii) proof of income tax payments; (iii) 8.5% interest on loans, payable for a maximum of 5 years, with 1-year grace period; and (iv) statement on amount of equity and ensuring that collateral is unencumbered. Some applicants were required to submit additional documents, such as MSME application forms, business permits, and Department of Trade and Industry registration. For start-up businesses, the applicants were required to submit a duly signed statement of assets, liabilities, and net worth, and personal income tax returns for the past 3 years. For those with existing businesses, the DBP required submission of balance sheets and income statements for the past 3 years certified correct by the borrower and/or auditor. In the end, because of all these requirements, none of the applicants could comply, resulting in no actual borrowing from the DBP during the project period. 26. By June 2013, a total of 72 loan applications (including the 33 earlier that were closely mentored by KMPI) had been filed, 19 of which were from midwives in the three provinces and the rest (53) were from the expansion areas. It was learned during the project completion mission that from the 33 loan applications filed with the DBP, three midwives from Kalinga were able to get loans and build their own lying-in clinics after the project period. These three midwives were the same midwives who obtained the bridge loan for renovation and/or purchase of equipment from KMPI. While only these midwives were contacted after the project period, more midwives may have been able to obtain loans and build their own birthing centers. Unfortunately, there was no opportunity under the project to visit the other project sites to validate this. 27. Under output 3: capacity building on gender equality and equity on health rights, entitlements, and services. A total of 11 batches of gender sensitivity and reproductive health workshops were conducted from November 2011 to June 2013, with 261 participants, including midwives, LGU officials, and health sector partners, (217 women [83%] participants). Included in the discussions in the gender sensitivity seminars were the salient features of the Magna Carta of Women, the Anti-Sexual Harassment Law, the Anti-Violence Against Women and Their Children Law, family planning, and reproductive health rights. The midwife participants were able to relate some provisions of the law with specific situations affecting their clients, and share their own experiences in dealing with these situations. The midwives gained knowledge on how to

28 Appendix 3

recognize if their clients are probable victims of gender-based violence and how to properly manage such cases. They were also taught client counseling techniques through small group exercises, so that they can replicate these with their own clients in their own facilities. 28. In addition, members of NGOs and civil society organizations working in the health sector joined the LGU in the gender sensitivity and gender and development (GAD) budget review sessions. The project noted that in the project sites there has been a substantial increase in local budget allocation for GAD programs, including health care and indigence programs and welfare programs for women, children, and youth.

2. Strategic Changes in Gender Relations

29. Midwifery has always been a female-dominated profession. Unfortunately, midwives find it difficult to access services and finances to further their professional development and improve and increase their businesses. In addition, the burden of care and domestic work further make it difficult for them to pursue and flourish in their profession. The stories of Evelyn, Virginia, and Rosemarie (see boxes) illustrate the strategic changes that resulted from their participation, access to resources, and the practical benefits brought about by the gender design of the project, not only for them as direct beneficiaries of the project but also for the patients in the communities they serve. 30. The most obvious strategic change resulting from the project interventions is the increase in income of accredited midwives from direct services rendered to patients through reimbursement from the PHIC. For instance, a single delivery entitles the midwife to a reimbursement of around P9,000 ($185). Also, at a personal level, there is an increased sense of self-satisfaction arising for various reasons, including, as cited by one midwife, fulfilling a lifelong dream of being a clinic owner. Another midwife talked about her experience with maternal death and feeling fulfilled that she now contributes to reducing maternal death in her community. 31. At the family level, apart from the increased family income, the midwives gained a stronger voice in family decision making, and increased willingness of their husbands and children to share in the burden of unpaid housework. One midwife narrated that her husband did the household chores while she attended to her patients at the clinic. At a societal level, young women in the communities have found in these midwives role models, inspiring them with the meaningful and noble work that they do for other women and for children. The midwives reported that young women in their villages have expressed their desire to pursue midwifery as a profession. Likewise, through their work, they have earned the respect of other members of the community, one even encouraged to run as barangay (village) chairperson.

32. Lastly, because of the work of the midwives, women and newborns in the villages had more access to reproductive health care and newborn child care services. One village mother said that they are thankful for the presence of the midwife in their village, otherwise they would have to travel 2–3 hours to get to the nearest birthing center in the provincial capital. This accessibility of quality service, in turn, is a big factor in reducing maternal deaths in their communities. A provincial health officer of Kalinga testified that the midwives and their newly set-up birthing clinics were instrumental in reducing maternal mortality in the province.4

4 A video showing the stories of these three women and illustrating the gains from the GAP implementation may be

viewed at http://bit.ly/2q3Ubns.

Appendix 3 29

EVELYN REDOLOZA Barangay Dagupan Weste, Tabuk, Kalinga

Evelyn, 58, has been a midwife for 21 years and is presently working as a public health midwife at the Kalinga Provincial Hospital. Through the project she was able to attend the various entrepreneurial and post-graduate midwifery trainings which helped her obtain her PHIC service provider accreditation and the needed confidence and determination to take up some loans (from Kaunlaran ng Manggagawang Pilipino Inc. and Development Bank of the Philippines) to open her own birthing home (BH). Now being accredited by the Philippine Health Insurance Corporation as a health facility, her JR-BH operation provides for some additional income which greatly helps her, especially as she’s a single mother. Now in just its second year of operation, her BH attended to nine normal deliveries, including two complicated births where the newborns had big tumor mass on their limbs, and screened nine newborns and counseled 84 women on family planning. She also attended to a pregnant woman who tried to commit suicide by ingesting poison by providing her crucial first aid intervention before she could reach the provincial hospital for further treatment, thereby saving her from certain death. Apart from these services, Evelyn has also become the de facto counselor of some women who have experienced domestic violence. Through the project’s seminars on violence against women, she has also gained knowledge and confidence to provide counseling and referral services to these women. She commends the project as it not only paved the way for her to have her own BH but it also made the people in her community very happy as they don’t need to go far to get the health services they need.

VIRGINIA BANTIAG Barangay Maswa-Basao, Tinglayan, Kalinga

Virgie, 60, has been a midwife for 32 years and is presently employed as a government midwife at the Tinglayan rural health unit in Kalinga province. In 2012, she had the unfortunate experience of handling a case of maternal death. Since then, she vowed to continue improving her skills to help end maternal deaths in her community. The high cost of attending post-graduate trainings prevented her from doing so. Under the project, she attended the entrepreneurial and post-graduate midwife trainings which helped her get Philippine Health Insurance Corporation (PHIC) service provider accreditation. Intent on being able to give more to her community, she then pursued establishing her own birthing home for her private practice after office hours and weekends. After obtaining loans from Kaunlaran ng Manggagawang Pilipino Inc., Development Bank of the Philippines, and Landbank, her VMJ birthing home (BH) was established in 2013. With further support from the project, her BH was accredited as a health facility provider. Since then, home deliveries decreased and no case of maternal death has been reported in their community. Pregnant women were very relieved as they don’t have to travel far to give birth. To date, in a village of 1,069 with 210 households (as of 2016), her BH has attended to 42 normal deliveries and provided family planning counseling which resulted in seven depot-medroxyprogesterone injections (ovulation prevention) and 10 contraceptive pill acceptors. The establishment of her own BH is like a dream come true for Virgie. Like the other midwives, she has a lot to thank the project for as she gained some business confidence, aside from the newer technical knowledge and information from the project-supported trainings she attended. She now gets additional income from the revenues from the BH services, particularly from PHIC normal delivery claims. Besides that, her new status afforded her a new kind of social responsibility. She sponsored the PHIC membership of a couple of her clients so that they can have their deliveries in her BH at no cost. Further, with the new business providing them additional family income, she observed that her relationship with her husband improved. Her husband takes on the household chores when she attends to clients at the BH. Her neighbors now have a higher regard for her. Some young girls in her community look up to her as their inspiration, even taking up midwifery studies to be like her. In fact, because of her new stature in their community, many even encouraged her to run as their barangay (village) chairperson.

30 Appendix 3

3. Contribution of Gender Equality Results to Overall Loan Outcomes and

Effectiveness 33. ADB approved the project with a clear understanding of its design to result in major social, gender, and poverty benefits with multiple impacts. The project has a gender mainstreaming category at entry of gender equity theme (GEN). As such, the overall project outcome directly addresses gender equality and women’s empowerment by narrowing gender disparities with a particular focus on women’s access to reproductive health services. This is clearly reflected in the project’s impact statement to reduce the maternal mortality ratio, and outcome target of increasing the number of women delivering at health facilities. The targeted groups included female health professionals and female patients from poor and disadvantaged backgrounds. 34. The GAP’s main interventions and strategies of increasing the capacity of local service providers to provide quality services to pregnant women, providing them with financial and technical support to establish and run a quality birthing clinic, and targeting midwives as beneficiaries in the remotest areas of the country where there are no similar services are, without doubt, the main drivers that led to the achievement of the project’s intended outcome of increasing access of pregnant women to health facilities for delivery. Because of the changes made in project design during project implementation that considerably limited the coverage and scope of the overall project, and the difficulties experienced in overall project implementation, the achievements in GAP implementation had only a limited effect on the increased use of basic health care and referral services in the subproject area. Furthermore, the envisaged 25% increase in women delivering and accessing maternal services in health facilities was only met in some of the supported hospitals, which in turn resulted in only a limited reduction in child mortality and improving maternal health in the target communities.

ROSEMARIE ANGNGALAO Barangay Ambato Leg-leg, Tinglayan, Kalinga

Rose, 47, has been practicing midwifery for 16 years and is presently working as a public health midwife at the rural health unit of Tinglayan municipality in the province of Kalinga. She wanted to have her own birthing home (BH) but it was not her priority as she admits having no confidence or the business skills to do so. However, this desire resurfaced when she joined the Kaunlaran ng Manggagawang Pilipino Inc. (KMPI) entrepreneurial and other post-graduate midwife trainings supported by the project in her province. Coupled with the approval for midwives like her working in the government to have a private practice after office hours, she then pursued establishment of her own BH. After taking out a start-up loan from KMPI, she established the RMS BH which is adjacent to her home. She further took other small loans from the Development Bank of the Philippines and Landbank to refurbish the BH to be eligible for accreditation from the Philippine Health Insurance Corporation (PHIC). Now operational and PHIC-accredited for 4 years, her BH provides services like normal deliveries, prenatal and postnatal check-ups, family planning methods and counseling, and infant immunizations. She has a lot to thank the project for, not just because it helped her be PHIC accredited and realize her dreams of having her own BH but also because it paved the way for bringing health services closer to her community. On an account of one of Rose’s clients, the establishment of the RMS BH is a very welcome thing for them as it brought the health services very close to them, so they no longer need to make the expensive and long trip to the RHU to obtain the needed services. Besides this, they appreciate the services provided by their kind, considerate, and very understanding midwife. So far, in a village of 555 people and 75 households (as of 2016), the BH had 24 normal deliveries, facilitated immunization for 39 infants, and provided family planning counseling to 14 mothers, which resulted in six depot-medroxyprogesterone injections (ovulation prevention), five bilateral tubal ligations, and one contraceptive pill acceptor.

Appendix 3 31

III. LESSONS LEARNT AND RECOMMENDATIONS

35. The GAP was designed to directly support the outcome of increasing women’s access to health facilities, particularly during childbirth, to ultimately contribute to reduction of the MMR. The main strategy to achieve these results was to increase the capacity of local midwives, who are mostly women, to provide quality services, and to do so in a manner that would be sustainable for them as professionals, and the constituency that they serve, through the PHIC reimbursement mechanism. 36. The original GAP called for the review of PHIC standards in recognition that local midwives from remote areas found it difficult to comply with. However, because of the PHIC assessment that there was no need for review at the time of the project implementation, the GAP strategy then shifted to facilitating and providing technical support to midwives to obtain their accreditation through information sharing, skills building, and direct financial support. There was also a substantial reduction of numerical targets from the original GAP to the revised GAP actions and targets via the TOR under the GDCF grant (footnote 2) to conform to the realities seen on the ground.

37. While the project is deemed partially successful in terms of completing the GAP activities and achieving the numerical targets, it also fell short of measuring actual empowerment outcomes using broader data sources from all project sites. The 2-year period of the GDCF grant apparently was too short for these outcomes to manifest and be monitored. Nevertheless, the stories of Virginia, Rosemarie, and Evelyn (all from Kalinga), gathered 2 years after the project ended, provide a glimpse of the possible picture of the project’s empowerment outcomes in the other target areas. This remains conjecture, however, given the absence of data to confirm these outcomes. 38. Given the accomplishments and limitations of the GAP implementation, as described above, the following are the major lessons and corresponding recommendations:

(i) Reducing the MMR is an unfinished agenda in countries like the Philippines and in other member countries in the region. Increasing the capacity of midwives—in terms of skills building and provision of financial material resources to be able to sustainably provide quality services—continues to be a crucial strategy in reducing the MMR. ADB should continue to finance similar projects in the areas of sexual and reproductive health and rights in the future, especially in the Philippines, taking into account the still limited access to sexual and reproductive services and information for women (and men) in general, and particularly for young girls and boys, and the commitment made in this area under Sustainable Development Goals 3 and 5.

(ii) The targeted support for midwives in terms of financial and business literacy was highly relevant. This matter is not taught in schools or in the usual post-graduate midwifery courses. As shown by this project, this encourages small-scale providers to consider investing in their facilities and provides prestige and professional and economic fulfillment, and fosters sustainability of project investment. ADB should thus continue employing the strategy of instilling financial and business literacy in small-scale health service providers for more sustainable results.

(iii) Partnership with local NGOs in GAP implementation was very effective given that the NGO (i) is an expert in the field and therefore competent to deliver the services, and (ii) can be focused in the delivery of intended gender results. Nevertheless, it would be useful to have adequate mechanisms integrated in the project whereby

32 Appendix 3

knowledge can be shared during project implementation between the different stakeholders including the NGO, and some kind of platform where the NGO can advocate with the executing agency, local authorities, and other stakeholders on the needs and constraints of the target groups.

(iv) While the shift from review of PHIC standards to assisting midwives to get accreditation resulted in obtaining the certificates of accreditation for many of the direct beneficiaries, sticking to the original GAP action of review and advocating for change in these standards would have been more strategic and would have benefited more women beyond the direct project target areas and beneficiaries. As shown by the project, the accreditation process is cumbersome and midwives find it difficult to fulfill these accreditation requirements. The continuing viability of birthing homes largely depends on the ability of the midwives to successfully reimburse claims from the PHIC for covered patients. The PHIC-accredited birthing homes will eventually be required to also comply with the licensing guidelines to be issued by the DOH. The midwives will require assistance to enable them to comply with these guidelines. But more importantly and strategically, making standards responsive to the needs and capacities of the concerned stakeholders should remain the focus. ADB should continue to support work at this policy and standard-setting level.

(v) There has been a clear disconnect between the financial needs and capacities of the midwives and the financial packages offered by the financial institutions, including the DBP. This shows the need to also work with the executing agency and financial intermediaries to conduct assessment, and then support the financial intermediaries to develop specific products and services that are responsive to the needs of their prospective clients, and find innovative solutions.

(vi) Project monitoring of medium- and long-term results has been severely wanting. First, sex-disaggregated data was not gathered throughout the project—only in relation to GAP implementation. Second, the 2-year grant period was just enough to do capacity building activities (trainings, coaching) for the midwives. Apparently, there was no time to monitor the results of these process activities. As a result, the project has very little data by which to measure outcomes. The TOR of project implementers should always provide for measuring not merely process outputs but also empowerment outcomes. ADB projects are undertaken precisely to effect development and the empowerment of those in the margins, thus subprojects should reflect this thrust and work plans, budgets, and timelines should accordingly provide for this. Fundamental in all these is the need to consistently build capacities for all project implementers to collect and use data (including sex-disaggregated data) and to devise and use proper information and monitoring systems.

(vii) The lack of a gender specialist within the project management unit (PMU) has proven to be a major constraint on the effective and full implementation of the GAP as originally designed. The PMU seemed to have the mistaken impression that implementing the GAP and achieving gender-specific results were confined solely within the coverage of the GDCF grant, relying solely on the NGO consultant to deliver the results. Thus, there was a lack of focus on outcome-level gender equality results and lack of appreciation of the strategic GAP interventions at output level. A gender specialist should always be engaged by the PMU for a GEN project such as this one.

Appendix 3 33

39. The following are other recommendations for the design of future GAPs:

(i) Systematically identifying entrepreneurial midwives. A province-wide assessment of midwives’ business acumen, their ability to initiate a new business and potential ability to repay it, as well as a reflection of alternative arrangements may be undertaken. The LGUs may pursue PPP arrangements by building the birthing homes, especially in hard to reach areas, to be operated by midwives who may be given the option to buy out said facility. This would be beneficial for the provinces if pursued. The LGUs needed services to be delivered and the midwives need structures or facilities to work in. In response to the gender needs identified under the project, it is strongly suggested that approaches are developed that allow women to more easily make use of ADB lending facilities. Things that might be useful are peer-to-peer education by bringing in successful midwives, providing individual supervision and coaching, and a stronger assessment procedure to identify those midwives who have the necessary capabilities to go through with such a lengthy and arduous process.

(ii) Improving gender equity in remote areas. Moreneeds to be done to improve

overall equity in access to quality care, especially for women, the poor, and the disadvantaged. Remote locations limit access to such care. Barriers also remain for poor households to obtaining quality services during pregnancy, childbirth, and aftercare for both mother and child. There is no data available that could indicate to what extent, for example, hard to reach areas (geographically isolated and disadvantages areas) within the project sites were covered by the project. Although there is a clear dominance of women in the areas of nursing and midwifery, the number of women actually setting up (larger) private facilities, possibly hiring staff, and increasing their patient base remains very small. Very few front-line health providers managed to set up their own business as they lack resources and support. In particular, midwives wanting to develop facilities for the specific needs of mothers and infants find it difficult to obtain funding and the necessary permits. It is important to encourage the design of risk-based credit products that are appropriate for the credit needs of the midwives and which may be extended by retail financial institutions such as rural banks, thrift banks, MFIs, and NGOs. Financing for rural-based birthing homes may include subsidies to compensate for higher risk given the limited business opportunity, limited number or absence of existing private birthing homes, and a weak enabling economic environment to support the viability of private birthing homes. In urban areas, there are several existing private birthing homes and a higher demand for credit.

34 Appendix 3, Annex

GENDER ACTION PLAN UPDATE

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

Output 1: Upgraded LGU health services

Action 1.1

DBP social marketing focuses on LGU facilities targeted to be basic emergency obstetric centers and comprehensive emergency obstetric centers Responsible: DBP (Marketing Unit)

No change.

This action was dropped because of the partial cancellation of the loan specifically allocated for LGU relending under output 1.

Although there was a promising pipeline of interested LGUs at the start of the project, none of the LGUs took out a loan. This was because the interest rate offered by the project was substantially above market rates in the wake of the 2008 financial crisis. The government’s Health Facilities Enhancement Program that provided grants to LGUs for upgrading health facilities also ran in parallel to the project, adding to LGUs’ disinterest in taking project loans. This led to partial cancelation of the project and redirecting focus of lending to the private sector.

Output 2: More efficient health care delivery systems through PPP and innovative strategies

Target 2.1

Invitation to PPP seminars extended to representatives of NCRFW, IMAP, PLPGMI, and other midwives’ associations, women’s NGOs, and civil society, including faith-based organizations (target: 30% women’s representation) Responsible: DBP (Marketing Unit)

No change.

Target 2.1: Achieved

A regional forum entitled PPP in Health in Manila with the theme Developing Models, Ensuring Sustainability: Perspectives from Asia and Europe was held on 23–25 October 2012. It was convened by ADB, the UNECE, the Philippines DOH, DBP, and PHIC. As part of the regional forum, the International PPP Specialist Centre on Health, a focal point for best practices in PPPs in health, was launched on 23 October 2012.The regional forum brought together 364 delegates (including organizing team and

-

Appendix 3, Annex 35

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

resource persons) from 22 countries; 177 delegates were from the public sector (77 women, 44%); 133 from the private sector (49 women, 37%); and 54 from international organizations, NGOs, and the media (24 women, 44%). The delegates, of which 80% were from the Philippines, comprised policy makers and decision makers, local and international PPP health advocates, private and public sector health professionals, local chief executives, health sector business leaders and suppliers, academicians, researchers, and media representatives. Although none of the attending delegates were from the Philippine Commission on Women (PCW, previously NCRFW), IMAP, and PLPGMI, other relevant women’s and civil society organizations at the forefront of Philippine reproductive health services and advocacy were in attendance. This allowed rich exchanges of experiences from different points of view among the delegates. In total, women comprised 41% (150 out of 364) of the entire forum delegation. This regional forum was financed under the PPP TA attached to the projecta

Output 3: Improved access to small-scale private providers

3a. Supporting PHIC’s review for midwives’ accreditation standards, process, and benefit package

3a. Facilitating PHIC accreditation of midwives as health care professional providers and as operators of birthing facilities

In the course of project implementation, the PHIC did not agree to carry out any review of the midwives’ accreditation standards, which led to refocusing this action from reviewing standards to assisting midwives in the accreditation process.

Target 3a.1

Consultations (50 participants each) carried out by the NGO, with 75% target participation of stakeholders

Target 3a.1 (revised)

Consultation and coordination meeting with provincial stakeholders to identify prospective “on-call professionals

Achieved

Consultations and meetings were held with provincial stakeholders to identify midwives and institutional partners

36 Appendix 3, Annex

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

(DBP, DOH and PHIC representatives) and beneficiaries

and/or institutional partners” for midwives interested in establishing lying-in clinics (target: three referral facilities and/or on-call professionals) per province

interested in establishing birthing facilities or lying-in clinics. A total of 208 midwives and 102 birthing home operators were identified. From these, there were 111 applications for midwife accreditation and 68 applications for birthing homes accreditations. In the end, 35 midwives and 26 birthing homes were accredited.

Action 3a.1

PHIC accreditation standards, benefit packages, and claims processing requirements for midwives reviewed (and possibly revised)

Target 3a.2 (Revised Action 3a.1)

Information campaign on the PHIC, DOH, and DBP programs for practicing midwives attended by at least 30 persons per province (total, 90)

Achieved

Capacity and awareness building programs for midwives including sessions on PHIC accreditation requirements, PHIC maternal care package, and DBP retail lending guidelines were held during July 2011–October 2012 in all the project sites. These were attended by a total of 1,398 participants, including 1,290 women (92%).

Target 3a.2

900 midwives accredited by PHIC in the three target provinces Responsible: KMPI

Target 3a.3 (revised Target 3a.2)

Coordination with and assistance for the midwives in seeking PHIC accreditation (15 applicants per province)

Not Achieved

From the 208 midwives who were identified in the project, 111 were assisted in their application for accreditation, 35 of whom were accredited by project completion (5 from original target areas and 30 from expanded areas)

3b. Development of a training curriculum and modules for midwives

3b. Assisting midwives obtain skills training certification for PHIC accreditation

This sub-output was revised following inception findings. It pertains to linking midwives with accredited training providers for the required skills training and certification rather than developing training curriculum and modules for accreditation.

Target 3b.1

Training needs assessment carried out in three target provinces

Target 3b.1 (revised)

Conduct of training needs assessment of midwives with regard to the expanded function of midwifery (50 participants per province)

Achieved

A training needs assessment of the midwives in the project sites in regard to the required skills certification for PHIC accreditation was included in the profiling assessment tool administered in September 2011 during the Midwives Enhancement Orientation sessions. A total of 343 midwives were in attendance

Appendix 3, Annex 37

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

and participated in the assessment through a focus group discussion. It was found that, among others, midwives need post-graduate trainings on newborn screening, BeMONC/CeMONC, screening for pregnancy-related complications, family planning counseling, and maternal and child health services. Training needs assessment were also done during the course of the information drives conducted under target 3a.1 and the consultations with stakeholders in the different provinces under target 3a.2. During these sessions, midwives had the opportunity to examine what they then have in terms of knowledge, skills, and facilities with regard to PHIC requirements for accreditation. The training needs were based on the identified gaps (e.g., post-midwifery courses on the Midwifery Law, newborn screening, and family planning; orientation on business models for birthing homes; business plan preparation; gender sensitivity; violence against women; reproductive health; and facilities and instruments for lying-in clinics, etc). These sessions were attended by the midwives, as well as representatives from the DOH, DBP, and PHIC. The local PHIC officers served as the resource persons. As indicated under the above-mentioned indicators, these sessions were participated in by a total of 1,398 participants, including 1,290 women (92%).

38 Appendix 3, Annex

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

Target 3b.2

Training-of-trainers sessions organized in three target provinces

Target 3b.2 (revised)

Conduct of training of trainers for Health Literacy for Midwives (Post-graduate Skills Training Course in the Revised Midwifery Law) (five participants per province) Target 3b.3 (additional)

Linkage and collaboration with accredited training providers and other partners (one per province)

Not Achieved

A training-of-trainers session was organized in Davao Oriental in partnership with the provincial government and the DOPH with the DJFMH-SOM as training team. It was an intensive training held during 2–10 July 2012 and attended by three participants: the DOPH chief of clinics, resident obstetrician, and a nurse-midwife. Achieved

The project entered into a partnership with the PHIC-accredited IMAP, which has several chapters in nearby provinces, so that it could provide the needed trainings for the midwives. Thus, trainings were organized by the IMAP Cebu Midwives Clinic for the midwives from Southern Leyte; IMAP Isabela Chapter organized trainings for the midwives from Kalinga; and IMAP Naga College Foundation organized training for the midwives from the expansion areas. A partnership was also entered into between the project and the DJFMH School of Midwifery, a PHIC-accredited training institution, to provide trainings in other areas. Three batches of trainings were held in the DJFMH facility in Santa Cruz, Manila. The project also arranged for trainings conducted by other accredited training providers: Health Integrated Development Services, Inc. in Malolos, Bulacan, which organized five training batches; and with St. Joseph College – Amaya in Tanza, Cavite, which held one training course. These entities

During project implementation, it was found that there were no PHIC-accredited training institutions in the target provinces. To address this, the project entered into partnership with accredited institutions in nearby areas to provide the needed training, resulting in the achievement of this target.

Appendix 3, Annex 39

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

then conducted the different trainings mentioned in Revised Target 3b.4.

Target 3b.3

Sixty 5-day forums organized quarterly and facilitated by 30 trainers (representing 50% of the initial pool) in three selected municipalities and cities in each of the three target provinces

Target 3b.4 (revised Target 3b.3)

Conduct / roll-out of training on Health Literacy for Midwives (post-graduate skills training course in the Revised Midwifery Law) (10 participants per province, 30 from new areas)

Achieved

A total of 19 post-graduate training courses on the Revised Midwifery Law and Midwifery Skills, including on newborn screening and family planning, were held during July 2012–June 2013 across all the project areas, with a total of 319 participants, 292 (92%) of whom were women.

Target 3b.4

75% target participation of DBP, DOH, and PHIC representatives

Target deleted.

Target 3b.5

At least 1,800 PHIC nonaccredited midwives trained and received certification in health course toward PHIC accreditation by 2011

Covered by the modification in Target 3b.4 (revised Target 3b.3) above.

Achieved

(See update on Target 3b.4)

Target 3b.6

At least 1,800 midwives trained in health enterprise financing and banking literacy, of which at least 50% will have prepared business proposals by 2011 Responsible: Health NGO engaged by DBP, in collaboration with DOH and PHIC

No change

Not achieved

A series of workshops on enterprise and financial literacy, business planning, business plan preparation, business start-up requirements, loan facility packaging, and financial models for birthing homes was held during March 2012–April 2013 in the three provinces and expanded areas; 552 people attended these workshops, of whom 502 were women (91%). Thirty-three people (all women) exhibited keen interest in establishing their own birthing clinics and submitted their business plans, together with their loan applications, to DBP.

40 Appendix 3, Annex

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

3c. Development of loan packages for midwives by credit lending agencies

No change This component was essentially maintained in KMPI’s revised TOR, except for some specific actions and targets described in the following.

Action 3c.1

Market research on target midwives, loan package, and social marketing strategies and materials developed in consultative manner and on time

Original Action 3c.1 was modified as follows: Revised Target 3c.1

Market research and profiling of financing needs and capacities of midwives (50 participants per province, total 150 participants) Action 3c.1Consultation with DBP and

its partner financial conduits and MFIs to design loan packages for midwives

Achieved

Market profiling was done in the three target areas in July and September 2011. A total of 349 midwives accomplished the assessment tool. Major reasons for midwives’ delay or inability to set up their own lying-in clinics or birthing homes were (i) inadequate funds, (ii) lack of information on how to set up a clinic, (iii) lack of confidence to embark on their own business. It was also found that midwives’ preferred sources of funds include loans from commercial banks, government institutions, and personal savings. Major considerations in taking up loans were (i) affordable terms (i.e., 1%–2% monthly interest rate with a term of 1–5 years), (ii) no collateral requirement, and (iii) fast loan release. The loan requirement was P100,000–P600,000 Achieved

Fifteen financial institutions in the target areas and nearby were also surveyed. Findings include (i) microfinance start-up amount ranged from P3,000 to P5,000, with increasing rate per repeat loan to a maximum of P15,000–P150,000 payable over 3–6 months, (ii) borrower’s track record and/or group endorsement is crucial to be considered qualified to take a loan, (iii) interest rate is 2.0%–2.5% per month using the straight method. Collateralized loans are also available for small businesses, including clinics, with loan amounts depending on working

Appendix 3, Annex 41

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

capital and asset requirements. Loan term depends on the business plan, at going market rates and with the required real estate collateral as security for the loan. DBP’s MSME facility was also looked into. It had the lowest interest rate; the loan term was considered appropriate for the needs of the midwives. However, the requirements to take up a loan seemed too much for the start-up midwife: (i) real estate mortgage or chattel mortgage collateral requirements; and (ii) loan application documentary requirements, which include income tax returns, business permits, and audited financial statements, were found to be too complex by the applicants.

Target 3c.1

At least 30% of midwives (2010) and 50% of midwives (2011) from baseline will have consulted lending agencies for credit application

Revised Action 3c.2

Consultation meetings with business development service providers and selected midwife entrepreneurs on the loan facility to support project preparation (five participants per province; 30 participants from expansion areas)

Achieved

KMPI held consultation meetings with midwives who were interested in pursuing their subprojects and supported and guided them before the DBP. KMPI provided this technical support to 33 midwives on the preparation of business plans, and submitting applications for bigger business loans with DBP. However, because of voluminous documentary requirements from DBP, none of those who submitted were able to obtain a loan within the lifetime of the grant (until June 2013). By then, 72 loan applications (including the 33 earlier closely mentored by KMPI) had been filed, 19 of which were from midwives in the three provinces and the rest (53) were from the expansion areas.

The midwives who submitted applications for DBP loans were easily daunted by the requirements imposed by the bank. According to KMPI, the biggest obstacle was the lack of suitable collateral. In addition, KMPI observed that it takes more time to change the midwives’ attitudes towards investment and lending and it recommended having at least a 3-year period to work on this issue in projects such as the Credit for Better Health Care Project.

42 Appendix 3, Annex

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

Action 3c.2

Loan products for midwives pilot- tested Responsible: DBP (Marketing Unit)

No change

Achieved

The project designed a microfinance bridge fund, which was devised to provide support for midwives in two ways: (i) accreditation fee loan for a maximum of P10,000, payable through equal monthly amortizations for a maximum period of 3 months, at 1.5% add-on interest per month, to support accreditation fees and other documentary costs; and (ii) renovation and/or equipment loan was for a maximum amount of P100,000, payable through equal monthly amortizations for a maximum period of 18 months, at 1.85% add-on interest per month and with the borrower providing post-dated checks for the loan installment payments. Thirty-nine midwives (36 or 92% of whom were women) took up the accreditation fee loan, and three (all women) took up the renovation and/or equipment purchase loan.

3d. Legal empowerment on women’s health rights, entitlements, and services

3d. Gender equality and equity on health rights, entitlements, and services

The sub-output was modified in KMPI’s revised terms of reference dated June 2011.

Action 3d.1

Number of women enabled through legal empowerment training initiatives

Revised Action 3d.1

Capacity of women increased through advocacy, education, and training

Achieved

A total of 11 batches of gender-sensitivity and reproductive health workshops were conducted during November 2011–June 2013, with 261 participants, including midwives, LGU officials, and health sector partners (217 women [83%] participants). Topics discussed were Magna Carta of Women, the Anti-Sexual Harassment Law, the Anti-Violence Against Women and Their Children Law, family planning, and reproductive health rights.

Appendix 3, Annex 43

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

Target 3d.1

Number of indigent women registered under the PHIC indigent sponsored program (30% increase from baseline in year 1, and 50% increase from baseline in year 2) (Target 3d.1)

Deleted

Not applicable

Not applicable

Action 3d.2

Number of LGU maternal and reproductive health policies, laws, and regulations adopted at LGU level

Revised Action 3d.2

Local NGO supported to advocate gender equality and equity at LGU level

Revised Action 3d.2: Achieved

Members of NGO and civil society organizations working in the health sector joined the LGU in the gender-sensitivity and GAD budget review sessions. The project noted that in the project sites there has been a substantial increase in local budget allocation for GAD programs, including health care and indigence, and welfare programs for women, children, and youth.

Output 4: Enhanced institutional capacity for health sector lending

Action 4.1

Assessment of progress in outreach will be carried out at midterm and project closing

No change

Action 4.1: Achieved

The midterm review of the overall project was held in September 2014. By then, the GAP implementation, which was largely through the GDCF granta and done by KMPI, was already finished, having started in June 2011 and ended in June 2013. Thus, for the purposes of the GAP, the midterm review was in June 2012, and the grant closing in June 2013. Assessment of the first year outreach activities was done for the midterm, and for the second year for closing. Findings for the first-year assessment were then contained in the interim report, dated August 2012, and for the second-year assessment in the final report, dated June 2013.

The interim report included a discussion of the difficulties or barriers encountered by midwives in the PHIC accreditation process (e.g., lack of funds for accreditation fee), and the evaluation of the available loan products provided by MFIs and other financial institutions to local midwives. It was during this interim period assessment that the need to come up with a bridge loan (see Action 3c.2) was conceptualized and, thereafter, implemented.

44 Appendix 3, Annex

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

Action 4.2

Midterm review will include meetings with participating MFIs, midwives organizations, and midwife borrowers

No change

Action 4.2: Not achieved

As stated above (Action 4.1), the project midterm review was held in September 2014. By then, engagement with midwives and their organizations had already been finished, with the ending of the GDCF granta in June 2013. By the time the main project MTR was held, there was no more opportunity to examine and review GAP implementation for purposes of further action, because the PMU had for all intents and purposes already considered GAP implementation finished by that time. However, the GDCF granta had its own midterm and final review and findings of the midterm review are embodied in the interim report of August 2012 and findings of the final review in the final report of June 2013. Thus, while no meetings for purposes of midterm review, per se, were held with the midwives, midwife borrowers, and the microfinance institutions, the assessment findings contained in the interim report were culled from the consultations, meetings, and various engagements with these groups during the first year of implementation of the GDCF grant.a

The lack of a gender specialist within the PMU appears to have been a major constraint on the effective and full implementation of the GAP as originally designed. The PMU seemed to have the mistaken impression that implementing the GAP and achieving gender-specific results were confined solely within the coverage of the GDCF grant,a and there was reliance solely on the NGO consultant to deliver the results. This resulted in the lack of focus on outcome results, and lack of appreciation of the strategic GAP interventions at output level. The nonachievement of both actions 4.2 and 4.3 shows this lack of appreciation of the gender dimension of the project. A gender specialist should always be engaged by the PMU for a gender equity project such as this one.

Appendix 3, Annex 45

GAP Activities, Indicators and Targets, Time Frame, and Responsibility Status at Completion (against revised GAP

activities/targets) Issues/Challenges

and Recommendations Original GAP (at Appraisal)

Revised / Final GAP (at Completion)

Action 4.3

Based on the key findings, corrective modalities may be developed and include (i) gender audit of DBP staff and programs, (ii) gender assessment of training tools and modules, (iii) adoption of corrective measures.

No change Action 4.3: Not achieved

There were no specific activities reported by DBP with respect to gender assessment, auditing, or adoption of corrective measures.

ADB = Asian Development Bank, BeMONC = basic emergency obstetric and newborn care, CeMONC = comprehensive emergency obstetric and newborn care, DBP = Development Bank of the Philippines, DJFMH-SOM = Dr. Jose Fabella Memorial Hospital-School of Midwifery, DOH = Department of Health, DOPH = Davao Oriental Provincial Hospital, GAD = gender and development, GAP = gender action plan, GDCF = Gender and Development Cooperation Fund, IMAP = Integrated Midwives’ Association of the Philippines, KMPI = Kaunlaran ng Manggagawang Pilipino Inc., LGU = local government unit, MFI = microfinance institution, MSME = micro, small, and medium-sized enterprises, NCRFW = National Commission on the Role of Filipino Women, NGO = nongovernment organization, PCW = Philippine Commission on Women, PHIC = Philippine Health Insurance Corporation, PLPGMI = Philippine League of Government and Private Midwives Inc., PPP = public–private partnership, TA = technical assistance, TOR = terms of reference, UNECE = United Nations Economic Commission for Europe. a Technical Assistance for Public-Private Partnership (TA 7257-PHI) and Gender and Development Cooperation Fund Grant for Enhancing Midwives’

Entrepreneurial and Financial Literacy Skills (Gran 0178-PHI), attached to ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of the Philippines for the Credit for Better Health Care Project.

Sources: Asian Development Bank, Development Bank of the Philippines, and Kaunlaran ng Manggagawang Pilipino Inc.

46 Appendix 4

IMPLEMENTATION DATA OF SUBPROJECTS (as of 19 August 2015)

Subproject

Location Purpose

Credit Approval

Date

Subproject Agreement

Date

Amount Approveda

($ million)

Amount Disburseda

($ million)

Pass-on Rate

(%)

Physical Completion

at Loan Closing

(%) No. Name

A02 Visayas Community Medical Center

Cebu City, Cebu New construction (200-bed capacity) and medical equipment

8 Feb 12 9 May 12 2.70 2.70 7.50 100

A03 Gentri Medical Center and Hospital, Inc.

General Trias, Cavite

New construction (100-bed capacity) and medical equipment

20 Jun 12 7 Sep 12 6.90 6.90 6.52 100

A04 Socomedics Medical Center

Marbel, South Cotabato

Additional building (25–65-bed capacity) and medical equipment

22 May12 8 Sep 12 1.10 1.10 7.67 100

A05 Sunga Hospital Digos City, Davao del Sur

Expansion of facilities (35–50-bed capacity)

12 Jul12 21 Nov 12 1.20 1.20 7.65 100

A06 CEM Medical Specialists Hospital

M’lang, North Cotabato

New construction (25-bed capacity) and medical equipment

12 Nov 12 18 Dec 12 0.30 0.30 7.90 100

A07 Ernesto Guadalupe Community Hospital

San Nicolas, Davao City

Expansion of existing facilities (24-bed capacity)

23 Oct 12

26 Mar 13 0.20 0.08 8.00 60

A08 Faith Hospital Aguada, Ozamis City

Expansion of existing facilities (37 additional beds)

5 Sep 13 17 Sep 13 0.30 0.30 7.71 100

A09 Global Medical Center of Laguna, Inc.

Cabuyao, Laguna New construction (100-bed capacity) and medical equipment

22 May 13 21 Jun 13 6.30 4.50 6.66 77

A10 Northside Doctors Hospital

Bantay, Ilocos Sur New construction (100-bed capacity) and medical equipment

8 Feb 12 13 Feb 14 2.00 2.00 6.50 100

A11 Savior Medical and Dental Cooperatives

Calamba, Laguna (Excluded from financing due to noncompliance with prerelease requirements)

A12 Magtabog General Hospital

Sta. Maria, Davao del Sur

Expansion (18–32-bed capacity) and medical equipment

23 Oct 12 26 Mar 13 0.60 0.43 6.90 65b

a Amounts financed under the Credit for Better Health Care Project; excludes equity. b Completed using Development Bank of the Philippines’ funds. The Asian Development Bank’s cut-off to finance sub-projects was one year before closing date

(August 2014). Sources: Asian Development Bank and Development Bank of the Philippines.

Appendix 5 47

FINANCIAL STATEMENTS OF THE DEVELOPMENT BANK OF THE PHILIPPINES1

Table A5.1: Development Bank of the Philippines Balance Sheets 31 December 2015 and 2014

(P ‘000)

1 All financial statements that the Development Bank of the Philippines agreed to disclose in this project completion

report are from the bank’s 2015 annual report available at https://www.devbnkphl.com/

48 Appendix 5

Table A5.2: Development Bank of the Philippines Income Statement for Years Ended 31 December 2015 and 2014

(P ‘000, except per share amounts)

Appendix 5 49

Table A5.3: Development Bank of the Philippines Cash Flow Statement

For the Years Ended 31 December 2015 and 2014 (P ‘000)

50 Appendix 6

STATUS OF COMPLIANCE WITH COVENANTS

Schedule Para No.

Type Description Remarks/Issues

2 1 Others DBP’s HSIAC, which consists of representatives from DBP, DOH, PHIC, MDFO, DILG and the private sector, shall (i) ensure compliance with Guarantor and ADB policies and regulations, (ii) provide Project oversight and guidance, (iii) oversee completion of the Borrower’s health investment policy framework for health lending, (iv) review and decide on deviations to qualified subproject eligibility, (v) coordinate inter-sectorally and interdepartmentally, (vi) respond to project implementation challenges, and (vii) monitor and report project performance. The Committee will be chaired by the Senior Vice President of DBP.

Complied with. In 2008, even before the project became effective, DBP established the HSIAC through an agreement with DOH, PHIC, MDFO, DILG, and the private sector. HSIAC’s role was clear and was carried out as per this covenant. Several meetings were held in 2008 and 2009. Although only one meeting was held in 2011, DBP consulted and closely coordinated with HSIAC members (undersecretary level) on an ad hoc basis given the challenge to convene members due to conflicting schedules. Prior to project end, another meeting was held in August 2015 to address remaining project policy issues.

2 2 Others Established, Staffed, and Operating PMU or PIU

Complied with. DBP established a PMU before the project started and DBP staff were appointed to serve as project director, project manager, assistant project manager, and project associates (two).

2 2 Others The PMU shall recruit experts in health systems, hospital civil works, hospital environmental and waste management, monitoring and evaluation, financial management, and legal matters.

Partly complied with. As agreed with the ADB, DBP staff/in-house consultants were deemed sufficient to provide needed expertise in health systems, hospital civil works, hospital environment and waste management, monitoring and evaluation, financial management and legal matters.

2 3 Others DBP will ensure that the Loan proceeds will be relent only to Qualified Enterprises and Qualified LGUs for the purpose of Qualified Subprojects.

Complied with.

Appendix 6 51

Schedule Para No.

Type Description Remarks/Issues

2 5 Financial The Borrower shall ensure that all necessary counterpart funds for project implementation shall be provided on time. The Borrower shall prepare annual plans for subproject investment and for loan disbursement. Every year, the Borrower shall submit the annual plan to ADB for endorsement not later than the first quarter of the year.

Complied with.

2 6 Financial The Borrower shall ensure that it maintains (a) capital adequacy ratio of 10% or above, (b) a minimum return on average total assets of 0.5% and (c) a minimum liquid assets ratio of 25%.

Complied with.

2 7 Social DBP will ensure that the activities included to be funded under the Gender Development Cooperation Fund, which is the Enhancing Midwives' Entrepreneurial and Financial Literacy component will be carried out during the first two years of project implementation. DBP will closely monitor, and the progress will be reported in the quarter reports to ADB.

Complied with. NGO consultant mobilized on 24 June 2011 and contract completed on 30 June 2013

2 8 Financials DBP will conduct financial due diligence on the subborrowers prior to subloan approval, monitoring during subproject implementation and evaluation after the subproject is completed.

Complied with.

2 9 Others DBP will ensure that the first three subloans financed under the loan and any subloans costing more than $2.0 million equivalent shall be submitted to ADB for review and approval before DBP approves the subloan.

Complied with.

2 10 Financials Retail relending shall be for collateralized subprojects between $100,000 and $5,000,000, and shall be for LGUs and larger private ventures, including health providers, foundations and health maintenance organizations. Small-scale subborrowers may also qualify under this relending modality. The relending terms shall be at market interest rates and the repayment shall be based on projected cash flows of subproject, with a repayment

Complied with. All subprojects were through the retail lending window. A minor change was approved in October 2011 increasing the ceiling for retail relending from $5 million to $10 million.

52 Appendix 6

Schedule Para No.

Type Description Remarks/Issues

period of up to 15 years for civil works, up to 10 years for equipment, up to 5 years for working capital, and a grace period of up to 3 years. Amortization of principal and interest is on a quarterly-basis.

2 11 Financials Wholesale relending is for accredited financial intermediaries (including MFIs, rural and thrift banks, cooperatives and NGOs). The amount shall range between $100,000 and $500,000. Onlending rates for financial intermediaries (rural banks, coop banks, MFI banks, and NGOs) shall be determined based on cost of funds, loan administration cost, and the credit risk, and that too determines the onlending rate from the financial intermediaries to the Subborrower. The Subborrowers are small-scale health providers such as midwives, physicians, municipal drugstores and municipal drug distribution companies. Each borrowing shall be for an amount ranging between $1,000 and less than $100,000. The term of onlending by financial intermediaries depends on the amount and whether the end borrowers are collateralized or uncollateralized. The expected repayment period is up to 10 years, with a grace period of 6 months to 2 years.

Complied with. The wholesale relending window was offered to potential sub-borrowers (midwives, physicians, municipal drug stores and drug distribution companies) through the financial intermediaries. There were extensive marketing efforts with the assistance of the GDCF grant. Financial literacy programs were conducted among the target sub-borrowers. The GDCF grant, assisted 19 midwives in crafting their respective business plans and financial statements. None borrowed through an accredited financial intermediary using project funds.

2 12 Others Within 12 months of loan effectiveness, DBP will establish a website to disclose project-related information. To the extent permitted under the Government's banking regulation relevant to confidentiality, DBP will disclose all relevant information with regard to the project activities, including the subprojects and the stakeholders.

Complied with. Project information was published on DBP’s website, under the broader Sustainable Health Care Investment Program which was launched on 22 January 2010, 5 months after the project became effective in August 2009. Web-disclosed information were updated though most project activities were also included in DBP’s publications (e.g., magazines).

2 13 Social Within 6 months of the Effective Date, the Borrower shall design and approve a grievance redress mechanism, acceptable to ADB, and establish a task force at the PMU.

Complied with. The grievance taskforce, including its functions, was incorporated in DBP’s Policies and Rules for Grievance

Appendix 6 53

Schedule Para No.

Type Description Remarks/Issues

The task force shall receive and resolve complaints/grievances or act upon reports from stakeholders on misuse of funds and other irregularities, including grievances caused by resettlement and environmental issues. The task force shall (a) make public the existence of this grievance redress mechanism through a public awareness campaign in every area where is a subproject; (b) review and address grievances of stakeholders in relation to the Project, any of the service providers, or any person responsible for carrying out any aspect of the Project; and (c) proactively and constructively respond to them.

Redress specific to the project, and took effect in December 2009 (4 months after effectiveness).

2 14 Safeguards The Borrower shall ensure that Subloan proposals requiring a FPIC is monitored to ensure compliance with the project IPDF, Republic Act No. 8371 on Indigenous Peoples Rights 1997, and the National Commission for Indigenous Peoples Administrative Order 1/2006 on the FPIC Guidelines of 2006.The Borrower shall not approve any Subloan or subproject until the National Commission for Indigenous Peoples issues a Certificate of Precondition attesting that all FPIC guideline requirements have been met. Information on geographic location of existing and proposed Indigenous Peoples Ancestral Domains/Lands used for FPIC compliance requirements will be updated regularly and periodic monitoring of subloan implementation to ensure FPIC agreements are met.

Complied with. Approved subloans did not require FPIC.

54 Appendix 6

Schedule Para No.

Type Description Remarks/Issues

2 15 Safeguards The Borrower shall ensure that it shall not approve any subproject that involves involuntary resettlement according to ADB's Policy on Involuntary Resettlement (1995).The Borrower shall further ensure and certify compliance with the Involuntary Resettlement Framework that no Subloan credit application shall be approved. Due diligence shall be carried out on each proposed subloan site and approval shall be granted to only those subloan proposals with clear property title without encumbrances, and without eviction of informal settlers.

Complied with. Approved subloans did not involve resettlement.

2 16 Safeguards DBP will comply with its EMS, the Government's environmental laws and regulations and ADB's Environment Policy (2002). If there is any discrepancy between DBP's EMS, the Government's laws and regulations and ADB's Environment Policy, ADB's Environment Policy requirements will apply. Construction and operation of all health facilities to be financed under the subloans will comply with DBP's EMS, the Government's environmental laws and regulations and ADB's Environment Policy.

Complied with. Approved subloans met environmental standards and/or requirements. DBP ensured that each subproject had an approved initial environment examination and an environmental clearance certificate as required by the Department of Environment and Natural Resources. DBP provided the Project Evaluation and Environmental Report of each sub-loan financed by the project which served as an environmental status report. Required status reports were also provided as part of mission MOUs and quarterly progress reports.

DBP will ensure that only category B and C subprojects will be eligible for financing. DBP will not finance category A subprojects. DBP will further ensure that impacts from category B subprojects will be mitigated by implementing the measures provided under the EMS. DBP will submit to ADB a report on the environmental status of the project every 6 months, in the form and substance acceptable by ADB.

Appendix 6 55

Schedule Para No.

Type Description Remarks/Issues

2 17 Social The Borrower shall ensure that the Project is carried out in accordance with ADB's Policy on Gender and Development (1998) and the gender strategy contained in the Summary Poverty Reduction and Social Strategy that has been prepared for and agreed between the Borrower and ADB. The Borrower shall ensure that gender specific actions and targets shall be included in the annual implementation plan and in the project monitoring system.

Complied with.

2 18 Financials DBP will establish immediately after the Effective Date an Imprest Account. The Imprest Account will be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook. The initial and ceiling amount to be deposited into the Imprest Account will be an estimate of 6 months expenditure or 10% of the loan amount, whichever is lower. The SOE procedure may be used to liquidate advances. Any individual payment that may be liquidated under the SOE procedure will not be more than the equivalent of $100,000.

Complied with. DBP’s letter of 7 December 2009 advised that the imprest account at the Royal Bank of Scotland Tokyo has been opened. The initial imprest advance was based on the project’s estimated 6 months’ expenditures. SOE procedure was applied based on provisions of this covenant.

2 19 Others The Borrower shall oversee project performance and submit quarterly reports to the Committee and ADB. To assess impact and outcome, the Borrower shall collect information on the use of health facilities including for indigent, women and children. All Qualified Subprojects shall require baseline and end-of-project health services surveys to assess services improvement in terms of use, quality, affordability, and patient satisfaction. Surveys shall be conducted jointly with subproject feasibility studies prior to investment. In addition, the Borrower, as guided by the Committee and ADB, shall conduct selective qualitative studies to obtain the views of stakeholders on the services and related matters.

Partly complied with. Submission of quarterly reports complied with, but with delays. Surveys and selective qualitative studies were also not conducted.

56 Appendix 6

Schedule Para No.

Type Description Remarks/Issues

2 20 Others DBP will ensure a baseline study as part of the feasibility study of each subproject. The indicators will include those from the design and monitoring framework and address issues of equity. The study will be conducted during and no later than the first 3 months of subproject approval.

Partly complied with. Baseline study conducted for each subproject (through project evaluation and endorsement report). Exit study and beneficiaries’ impact assessment study were not conducted given the revised focus of the project at completion.

DBP will also conduct an exit study for each subproject and report the same to ADB within 6 months of the subproject's completion. DBP's Program Evaluation Department will conduct a beneficiaries' impact assessment study. In furtherance to these, DBP will ensure that (a) the appropriate budget will be allocated by DBP and/or its subborrowers to support the studies; (b) the studies will be conducted in accordance with the terms of reference developed for such purpose; and (c) the results and findings of the studies will be shared with ADB.

2 21 Others DBP will prepare and submit to ADB (i) a quarterly report on the operational and financial performance of the Project's implementation within 2 months after end of each quarter; (ii) projected annual disbursement schedule, broken down quarterly by 15 December each year; (iii) an updated 3 year financial projections by 31 March of each year; and (iv) a project completion report within 3 months of project completion.

Complied with delay. The delay was only caused by consolidation of data for the reports and the approval process of the same within DBP. Items (ii), (iii), and (iv) were all submitted on time.

Article V Others Section 5.02 –DBP shall at all times make adequate provision to protect itself against any loss resulting from changes in the rate of exchange between pesos and the currency or currencies in which the Borrower's outstanding money obligations will have to be met.

Complied with.

Appendix 6 57

Schedule Para No.

Type Description Remarks/Issues

Article V

Others Section 5.03 - DBP will at all times make adequate provision to protect itself against any loss resulting from changes in the rate of exchange between pesos and the currency or currencies in which the Borrower's outstanding money obligations will have to be met.

Complied with.

Article V

Others Section 5.04 -DBP will maintain records and accounts adequate to record the progress of each qualified subproject (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, the operations and financial condition of DBP.

Complied with.

Article V

Others Section 5.01 - DBP will carry out the Project with due diligence and efficiency and in conformity with sound banking, administrative, financial, engineering, environmental and business practices.

Complied with.

Article V

Financials Section 5.06 - DBP will have its accounts and financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and will, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they related, furnish to ADB (i) the report of the auditors relating thereto (including the auditors'' opinion on the use of the loan proceeds, imprest account, SOE procedures and compliance with the financial covenants of this Loan Agreement), all in the English language. DBP will furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB will from time to time reasonably request.

Complied with delay. Only the submission of DBP’s AFS was delayed primarily because of delayed release of government’s Commission on Audit reports. However, the project AFS was always submitted on time.

58 Appendix 6

Schedule Para No.

Type Description Remarks/Issues

Article V

Others Section 5.05 - DBP will furnish to ADB all such reports and information as ADB shall reasonably request concerning the qualified enterprises, qualified subprojects and the subloans as part of the reports and information. DBP will include information on the execution of the qualified subprojects and their costs.

Complied with.

ADB = Asian Development Bank, AFS = audited financial statement, DBP = Development Bank of the Philippines, DILG = Department of Interior and Local Government, DOH = Department of Health, EMS = environmental management system, FPIC = free, prior, and informed consent, HSIAC = health sector investment advisory committee, IPDF = indigenous peoples development framework, LGU = local government unit, MDFO = municipal development fund office, MFI = microfinance institutions, NGO = nongovernment organization, PCR = project completion report, PHIC = Philippine Health Insurance Corporation, PIU = project implementation unit, PMU = project management unit, SOE = statement of expenditures.

Appendix 7 59

PROJECT ORGANIZATIONAL STRUCTURE

BBS = branch banking sector, CAM = credit and appraisal management, CI = credit investigation, DBP = Development Bank of the Philippines, DILG = Department of Interior and Local Government, DOF = Department of Finance, DOH = Department of Health, ED = evaluation department, LGU = local government unit, MDFO = municipal development fund office, MFI = microfinance institution, NGO = nongovernment organization, OB-Gyn = obstetrician-gynecologist, PHIC = Philippine Health Insurance Corporation, PMO = project management office, RMC = regional marketing center, SME = small- and medium-sized enterprises, SRMO = super region management office.

60 Appendix 8

ECONOMIC AND FINANCIAL ANALYSIS

A. Background 1. The Asian Development Bank (ADB) designed the Credit for Better Health Care Project to help achieve the health-related Millennium Development Goals (MDGs) of the Philippines. It was approved for $50 million on 25 March 2009, became effective on 19 August 2009, and closed on 19 August 2015. Nearly half (about $24 million) of the loan was canceled by the end of the project. The project sought to address the low and inefficient public expenditures in health care by (i) mobilizing additional off-budget credit for pro-poor investment through the Development Bank of the Philippines (DBP), a government financial intermediary; (ii) leveraging private participation; and (iii) improving allocation towards investment priorities. The project, which supported DBP’s Sustainable Health Care Investment Program, 1 envisaged an outcome of increased use of basic health care and referral services in the subproject sites. Its outputs were (i) upgraded local government unit (LGU) health services, (ii) more efficient health care delivery systems through public–private and innovative strategies, (iii) improved access to small-scale private providers (such as midwives and local drugstores), and (iv) enhanced institutional capacity for health sector lending. B. Economic Sustainability Analysis

1. Key Assumptions and Methodology 2. The cost-effectiveness analysis conducted at appraisal looked at the interventions of the project and their assumed impact on maternal and child health. The project expected to reduce neonatal and maternal deaths through an intervention to increase childbirth at health facilities or under the care of health professionals. At completion, this analysis was found inappropriate, particularly as none of the envisaged LGUs and midwives accessed the project’s credit facility. A total of 10 hospitals took out loans2 and the impact this made at the regional or national level was negligible and difficult to measure. 3. A total of 1,681 deliveries in 2016 were reported by all 10 facilities combined. If the infant mortality rate of about 20 per 1,000 live births and maternal mortality rate of about 120 per 100,000 live births are considered, a total of 32 infant deaths and 2 maternal deaths in these hospitals could be expected. Even in a zero-death scenario, an improvement of maternal mortality, infant mortality, and children aged under 5 years mortality rates by only those 10 facilities would not have had much impact on the total population served in the regions. Moreover, there could be many children delivered in other facilities or at home and figures cannot accurately reflect improving maternal and child health at delivery. This nullifies the public health basis for the initial analysis. 4. Given that the economic benefits of the project could not be comprehensively quantified, this completion report looked at the economic return on invested capital (EROIC) instead of recalculating the economic internal rate of return. EROIC is used as a proxy to assess the project’s

1 A credit facility established in 2007 to support the government’s health sector reform agenda and implementation

framework. 2 Complete list is in Appendix 4 of this project completion report.

Appendix 8 61

economic contribution by calculating the financial return on invested capital and adjusting for factors such as taxes and subsidies used to derive the economic internal rate of return.3 5. Three subprojects (totaling around $2.7 million) with complete financial data were used and EROIC was evaluated over 5–7 years depending on data availability. Among the private hospitals supported under output 2, Sunga Hospital (Davao del Sur) was evaluated over 5 years and Faith Hospital (Ozamis City) over 6 years. Among the four small service providers supported under output 3, Socomedics Medical Center (South Cotabato) was evaluated over 7 years.4 Because of limited data availability, it was not possible to evaluate the other seven subprojects. 6. The analysis used the local currency as numeraire. All nominal prices were adjusted to 2010 prices using actual and projected inflation rates. While the return on invested capital is normally calculated as a ratio, i.e., net operating profit less adjusted taxes (NOPLAT) divided by invested capital (i.e., long-term debt and equity), it may also be calculated as an internal rate of return based on cash flows. 5 NOPLAT was calculated from the income statements as net operating income netting out the corporate tax. However, it is the norm that the corporate tax rate is excluded as taxes represent a transfer payment within the economy. The tax rate is assumed to be 30%, and invested capital was estimated from the balance sheets as the sum of fixed assets and current assets, less current liabilities and cash. Taxes and financial contingencies are excluded from all valuations of costs and benefits. The value of invested capital in the final year was taken as the terminal value for the purposes of EROIC estimation.

2. Calculated Economic Return on Invested Capital for Three Selected Hospitals

7. The base-case EROIC for Sunga Hospital was 59.0%, for Faith Hospital 70.5%, and for Socomedics Medical Center 29.6% (Tables A8.1–A8.3). These are above the ADB standard social discount factor of 12%, indicating that the project is viable in the base-case scenario for these hospitals. While other hospitals with inadequate or no financial data could not be assessed, there is an unknown likelihood that at least some of them are economically unsustainable. During ADB’s visits to newly constructed hospitals in Cavite and Laguna, for instance, patients’ responses were encouraging and proprietors were positive that their investment would pay off within the next 3–5 years.

3 ADB. 2008. Project Administration Instructions 6.07B: Extended Annual Review Reports for Nonsovereign

Operations. Manila. Using the economic return on invested capital as a proxy economic indicator was also confirmed by ADB’s Economics and Research Department.

4 Other hospitals could not be evaluated because of unavailability of financial data: Northside Doctors Hospital (Ilocos Sur), GenTri Medical Center and Hospital (Cavite), CEM Medical Specialists (North Cotabato), and Global Medical Center (Laguna) were newly built; Ernesto Guadalupe Medical Clinic and Laboratory (Davao City) did not provide data; Magtabog General Hospital (Davao del Sur) had incomplete data; and construction of the Visayas Community Medical Center (Cebu City) was not completed.

5 ADB’s Independent Evaluation Department advised that the EROIC be calculated based on a stream of net benefits calculated as Year (Yr)0: –invested capital; Yr1 to Yrt = NOPLAT less change in invested capital; Yrt = final invested capital.

62 Appendix 8

Table A8.1: Real Economic Return on Invested Capital for Sunga Hospital (P billion, 2010 real values)

Year Economic NOPLAT

Economic Invested Capital

Difference in Economic

Invested Capital Net Flow

2012 39.0 (39.0) 2013 14.0 9.7 (29.3) 43.3 2014 16.6 11.2 1.5 15.1 2015 18.1 13.5 2.3 15.7 2016 12.1 12.1

EROIC 59.0%

( ) = negative, EROIC = economic return on invested capital, NOPLAT = net operating profit less adjusted tax. Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank estimates.

Table A8.2: Real Economic Return on Invested Capital for Faith Hospital (P billion, 2010 real values)

Year Economic NOPLAT

Economic Invested Capital

Difference in Economic Invested

Capital Net Flow

2010 1.41 (1.41) 2011 0.50 1.98 0.56 (0.07) 2012 2.24 4.86 2.88 (0.64) 2013 3.08 2.83 (2.03) 5.11 2014 4.20 9.52 6.70 (2.50) 2015 13.50 13.50

EROIC 70.5%

( ) = negative, EROIC = economic return on invested capital, NOPLAT = net operating profit less adjusted tax. Notes: The hospital did not provide 2016 data; Numbers may not sum precisely because of rounding; Source: Asian Development Bank estimates.

Table A8.3: Real Economic Return on Invested Capital for Socomedics Medical Center

(P billion, 2010 real values)

Year Economic NOPLAT

Economic Invested Capital

Difference in Economic

Invested Capital Net Flow

2010 1.79 (1.79) 2011 4.10 31.21 29.42 (25.32) 2012 2.90 30.92 (0.29) 3.19 2013 2.42 61.77 30.85 (28.43) 2014 11.19 48.89 (12.88) 24.07 2015 22.88 50.76 1.87 21.01 2016 86.16 86.16

EROIC 29.6%

( ) = negative, EROIC = economic return on invested capital, NOPLAT = net operating profit less adjusted tax. Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank estimates.

3. Sensitivity Analysis for Three Selected Hospitals

8. The sensitivity analyses for the three hospitals were omitted for two reasons. First, since the EROIC is beyond the real social discount rate of 12%, it is quite unlikely that the EORIC will

Appendix 8 63

be below 12% for any variable changes. Second, this analysis re-evaluates actual figures, and there is very little forecast in the model.6 There is therefore no variable to test the sensitivity. C. Financial Sustainability Analysis

1. Key Assumptions and Methodology 9. The financial analysis done at appraisal used an actual case of an LGU provincial hospital expansion (generally not income generating) in one of the target provinces, and actual costs and estimated incomes for small-scale health providers such as midwives, obstetricians, and drugstores. As no such loan was taken out under the project, financial analysis at completion focused on the actual subprojects, all from private hospitals that either constructed new medical buildings or expanded existing facilities. 10. Financial sustainability was determined by using the weighted average cost of capital (WACC) and financial internal rate of return (FIRR) for each subproject. However, there is no basis to compare results for actual subprojects at completion with those envisaged at appraisal. There was limited financial data available from the private hospitals, and therefore ADB verified and merely adopted the financial sustainability analysis the DBP ran on selected subprojects.7 11. The DBP’s analysis used unique assumptions and projections for each subproject, given the differences in their circumstances. These mainly considered planned expansions or other innovations that would affect increases in gross receipts and hospital revenues. While the FIRR was estimated for each subproject, only those entirely for new construction were set against the WACC. This is because income streams or cash flows from expansions supported solely by the project cannot be separately calculated. Out of 10 subprojects, the FIRR was not calculated for the Gentri Medical Center and Hospital (Cavite), which has defaulted on its payments to the DBP and is therefore in the process of restructuring its loan, and the Ernesto Guadalupe Medical Clinic and Laboratory (Davao City), which had no financial data. The FIRRs for the rest of the hospital subprojects were computed based on an assumed project life of 20 years, except for the Visayas Community Medical Center, construction of which has not been completed, and a project life of 22 years was assumed.

2. Weighted Average Cost of Capital and Financial Internal Rate of Return 12. The WACC calculation is shown in Table A8.4 and is used as the hurdle rate to determine financial sustainability of the subprojects.

6 The only forecasted figure is the inflation rate in 2016, which is assumed to be 2.0% based on the International

Monetary Fund at http://www.imf.org/external/country/PHL/, accessed on 12 February 2017. 7 DBP. 2016. Project Completion Report: Credit for Better Health Care Project. Manila.

64 Appendix 8

Table A8.4: Weighted Average Cost of Capital

Source of Fund

% of Project Costa

Interest Rate in Current

Prices

Corporate Tax Ratee

Tax Adjusted Nominal

Rate

Inflation Ratef

Cost of Funds in Constant

Prices

Weighted Average

ADB 51% 7.21%b 30% 5.05% 1.40% 4.96% 2.53%

DBP 22% 6.87%c 30% 4.81% 1.40% 4.73% 1.04%

Subborrower 28% 10.00%d 10.00% 1.40% 9.85% 2.76%

WACC 6.33% aAverage financing percentage among subprojects. bAverage pass-on rates to clients. c2015 domestic banks’ interest rates (high). These are notably lower than ADB rates which DBP/Subborrowers access on a long-term basis compared to shorter-term loans accessed from domestic banks. dBest rates of equity estimates based on based on available financial data of hospitals. eBureau of Internal Revenue published rate for 2015. fInflation rate for 2015. Source: ADB and DBP estimates.

13. For construction of new medical facilities, the FIRR of the Global Medical Center (Laguna) was 7%, for Northside Doctors Hospital (Ilocos Sur) 15%, and for the CEM Medical Specialists (North Cotabato) 45% (Table A8.5). Figures are above the WACC of 6.33% and therefore indicate financial viability. Nevertheless, ADB suggested that the DBP follow up the development of core services, and financial and outcome data, to further advise the borrowers on continuous improvement. Sustainability of the various subprojects may be achieved through prudent hospital management, increased number of patients, and with it higher financial revenues.

Table A8.5: Financial Sustainability of Subprojects

Subproject FIRR (%)

Global Medical Center, Laguna 7 Northside Doctors Hospital, Ilocos Sur 15 CEM Medical Specialists, North Cotabatoa 45 Visayas Community Medical Center, Cebu 5b Sunga Hospital, Davao del Sur 9 Faith Hospital, Ozamis City 16 Magtabog General Hospital, Davao del Sur 35 Socomedics Medical Center, South Cotabato 6

aClinic that converted into a hospital through the project. bComputed over 22 years. FIRR = financial internal rate of return. Source: Development Bank of the Philippines estimates.