world bank document...integrated part of the project (sar, paras 5.45 and 6.4), the ujndp grant...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No.: 17998

IMPLEMENTATION COMPLETION REPORT

SRI LANKA

POVERTY ALLEVIATION PROJECT

(Credit 2231-CE)

Juae 15, 1998

Education SectorSouth Asia Region

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY AND EQUIVALENTS UNIT

Currency Unit = SLRupees (Rs)

Average Yearly US$1.00 Equivalent

1991 1992 1993 1994 1995 1996 199741.4 44.3 47.8 49.7 52.0 55.4 57.8

GOVERNMENT OF SRI LANKA - FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AGA Assistant Government AgentARTEP Asia Regional Team for Employment PromotionCAS = Country Assistance StrategyCBSL Central Bank of Sri LankaCENWOR Center for Research on WomenCF = Credit FundCFS = Consumer Finance SurveyCMED = Credit & Micro-Enterprise DevelopmentCRBs = Cooperative Rural BanksDCS = Department of Census and StatisticsDSA Divisional Secretariat AreaDSD Divisional Secretariat DivisionEDP Entrepreneurship Development ProgramEPPU = Employment and Poverty Policy UnitFSP = Food Stamp ProgramGDP Gross Domestic ProductGND = Grama Niladari DivisionGOSL = Government of Sri LankaGRO = Grassroots OrganizationHRDF = Human Resource Development FundIDA International Development AssociationIFAD International Fund for Agricultural DevelopmentILO = International Labor OrganizationIRDP = Integrated Rural Development ProgramJSP Janasaviya ProgramJTF = Janasaviya Trust FundKfW Kreditanstalt fur WiederafbauMIS = Management Information SystemMOF = Ministry of FinanceMOH = Ministry of HealthMPCS = Multi-Purpose Cooperative SocietiesMPIPA = Ministry of Plan Implementation and Parliamentary AffairsMPPI = Ministry of Policy Planning and ImplementationMTRID = Ministry of Textile and Rural Industrial DevelopmentMYAS Ministry of Youth Affairs and SportsNDTF = National Development Trust Fund

FOR OFFICIAL USE ONLYNF = Nutrition FundNGO/PO Non-Governmental Organization/Partner OrganizationNNCC = National Nutrition Coordination CommitteeNPD National Planning DepartmentNSB = National Savings BankNYSCO = National Youth Services CooperativesPA Public Affairs DivisionPHRD Policy and Human Resource Development GrantPMU Poverty Monitoring UnitPNN Praja Naya Niymaka ("Loan Agents")PPU = Provincial Planning UnitPS Pradeshiya SabhaQLFS Quarterly Labor Force SurveyRDA Recommended Daily AllowanceRDD = Regional Development DivisionRDS = Rural Development SocietyREDS = Rural Enterprise Development ServiceRRDB = Regional Rural Development BanksRWF = Rural Works FundSAL Structural Adjustment LendingSAR Staff Appraisal ReportSEEDS = Sarvodaya Economic Enterprise Development ServiceSK Sahaya Kandayama (JSP "Support Team")SM = Social MobilizationTCCS = Thrift and Credit Cooperative SocietyTrust = Janasaviya Trust Fund'National Development Trust FundUNDP = United National Development ProgramUNICEF = United Nations Children's FundUSAID = United States Agency for International DevelopmentWCNF Women and Child Nutrition FundWCND = Women and Child Nutrition DivisionWERC = Women's Education and Research Center

Vice President Mieko NishimizuCountry Director Roberto BentjerodtSector Leader Ralph HarbisonTeam Leader Jacob Bregman

The Implementation Completion Report is based on the supervision and ICR mission that took place fromSeptember 1-22, 1997. The mission team was composed of Mmes/Messrs. Jacob Bregman (Team Leader, SASED)and consultants Harsha Aturupane (Economist and Poverty Specialist), David Pyle (Senior Nutrition Specialist),Henk Op Het Velt (Rural Works and Social Mobilization Specialist), Mallika Samaranayake (ParticipatoryDevelopment Specialist, SACSL), Julitta Rasiah (Financial Analyst, SACSL), Nandini Gunewardena (Gender andSocial Mobilization Specialist) and Kamal Siblini (Monitoring and Evaluation Specialist). The report is also basedon data collected during the joint GOSL-KfW-IDA Mid-Terrn Project Review mission (May 1995). This ICR wasprepared by Jacob Bregman (Team Leader, LCSHD) and Harsha Aturupane (Economist and Social PovertySpecialist) with inputs from Nandini Gunewardena (Gender and Social Mobilization Specialist) and David Pyle(Senior Nutrition Specialist). Tables and graphics were compiled and edited by Kamal Siblini. The draft text wasproofread and formatted by Julie-Anne Graitge (SASED). Comments from the GOSL, KfW and UNDP (ColomboOffice) are included. Peer reviewers were Mmes. Soniya Carvalho (PRMPO) and Judith McGuire (LCSHD).

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

TABLE OF CONTENTS

PREFACE

EVALUATION SUMMARYIntroduction ................................................... iProject Objectives ................................................... iiImplementation Arrangements .................................................. iiImplementation Experience and Results ................................................... iiProject Sustainability .................................................. viiFuture Operations .................................................. viiKey Lessons Learned .................................................. viii

PART I - PROJECT IMPLEMENTATION ASSESSMENTA. Introduction .B. Project Rationale and Objectives .3C. Achievement of Objectives and Major Factors Affecting Performance .6D. Project Sustainability .15E. Bank Performance .16F. Borrower Performance .18G. - Assessment of Outcome .19H. Future Operations .201. Key Lessons Learned .20

PART Ila - GOVERNMENT CONTRIBUTIONA. Introduction .23B. Project Objectives and Components .23C. Problems Faced by the Project and Contributory Factors .26D. Strengths and Achievements .27E. Major Issues Encountered .28F. Lessons to be Learned .29G. Conclusion .29

PART Ilb - CO-FINANCIERS CONTRIBUTIONA. Credit Component ......................................................... 32

PART III - STATISTICAL AND PROJECT DATA TABLESTable I Summary of Assessments ......................................................... 34Table 2 Related IDA Loans/Credit ......................................................... 35Table 3 Project Timetable ......................................................... 35Table 4 Credit Disbursements: Cumulative Estimated and Actual .............................................. 36Table 5 Key Performance Indicators by Component ......................................................... 41Table 6 Studies Included in Project ......................................................... 43Table 7.1 Project Costs ......................................................... 46Table 7.2 Project Financing ......................................................... 47Table 8 Status of Legal Covenants ......................................................... 48Table 9 Bank Resources: Staff Inputs ......................................................... 50Table O Bank Resources: Missions ......................................................... 51

ANNEXESAnnex I Aide Memoire ..................................................... 52Annex 2 Project Objectives ...................................................... 78Annex 3 Monitoring and Evaluation ..................................................... 79Annex 4 Targeting, Participation and Social Mobilization ..................................................... 82Annex 5 Gender Outcomes ..................................................... 87Annex 6 Institutional Development and the NGO Partners ..................................................... 91Annex 7 Nutrition Interventions ..................................................... 93

Figure I NTDF Organizational Structure ..................................................... 99Figure 2 Project Funds and SOE Flow: IDA, GOSL and NDTF ............................................. 100

Map No. 27509

SRI LANKA

POVERTY ALLEVIATION PROJECT(Credit 2231-CE)


PREFACE

This Implementation Completion Report (ICR) for the Sri Lanka Poverty Alleviation project, forwhich Credit No. 2231-CE in the amount of US$57.5 million equivalent was approved on April3, 1991, became effective on September 26, 1991 and was closed on December 31, 1997, after aone year extension in December 1996. The SAR IDA contribution was US$57.5 million.However, in December 1996, IDA canceled approximately US$10 million (SDR6.5 million).Cofinancing for the project's credit and micro-enterprise development component was providedby KfW from Germany (US$10 million). The SAR estimate of the Government of Sri Lankacontribution was US$17.5 million. Under the technical assistance component of the project, theUNDP provided US$2.5 million for technical assistance to the Trust. Although this was not anintegrated part of the project (SAR, paras 5.45 and 6.4), the UJNDP grant disbursed about US$1million during the project life. The project also benefited from a Japan PHRD Grant for studiesand technical assistance on Gender and Women Migration Issues. The final disbursement datewas April 21, 1998. There are still some outstanding disbursement problems related to theadvances made to the Special Account. Extemal audit reports for 1991-1996 were allunqualified. The 1997 Audit Reports are still outstanding.

Government of Sri Lanka US$17.5KfW cofinancing US$10.0IDA US$57.5Total US$85.0

This ICR was prepared by Messrs. Jacob Bregman (LCSHD) and Harsha Aturupane (EconomistConsultant). Substantial contributions were made by Ms. Nandini Gunewardena (Gender andSocial Mobilization Consultant) and Mr. David Pyle (Senior Nutrition Consultant). Peerreviewers were Mmes. Soniya Carvalho (PRMPO) and Judith McGuire (LCSHD). The GOSLcontribution to the ICR is included as part IIA and the KFW contribution as Part IIB and bycommenting on the draft Part I. Comments from UNDP (Colombo Office) and NGOs areincluded in the main ICR text.

ICR preparation began during the Bank's final supervision/completion mission, conducted fromSeptember 1- 22, 1997 and was completed in April 1998. The ICR is based on data in the projectfiles, records maintained by the project implementation unit in Sri Lanka, information collected inthe field by supervision teams, and beneficiary surveys conducted between December 1995 toSeptember 1997. A comprehensive NGO-Beneficiary Assessment, jointly supervised by GOSLand IDA was completed from September 1997 to January 1998. This survey was executed byexternal consultants from the University of Colombo.

SRI LANKA



EVALUATION SUMMARY

Introduction

1. The Poverty Alleviation Project (Credit 2231-CE) evaluated in this report was preparedby the Government of Sri Lanka (GOSL) and the World Bank between October 1988 and April1990. The project became effective on September 26, 1991 with IDA credit of US$57.5 million,and was closed on December 31, 1997. In December 1996, IDA canceled approximately US$ 10million (SDR6.5 million) of credit. As of June 10, 1998, the total disbursed amount of the IDAcredit was US$38,068,536 (SDR26,390,073) or 83% of the original credit amount. There are stillsome outstanding disbursement problems related to the adivances made to the Special Account.IDA has requested a refund of US$100,461 representing unused funds remaining in the SpecialAccount. The audit reports for 1997 are still outstanding. All audit reports for 1991-1996 wereunqualified. The project was the first of its kind in Sri Lanka, based on a production-oriented,participatory poverty strategy in place of previous top-down, welfare-oriented poverty reductionapproaches. The project was consistent with the objectives of the Sri Lanka Country AssistanceStrategy (CAS) and the Government of Sri Lanka's own policy objectives for poverty reduction.

2. The project was prepared and implemented during a period of economic and politicaldifficulties in Sri Lanka, which affected its performance and outcome. A civil war in the NorthEastem Province increased in intensity in 1987. The President of the country was assassinatedin 1993. In August 1994, the government in office changed after 17 years causing major changesin policies and administration that affected project implementation. The escalating civil war ledto increased violence, including bomb attacks in Colombo, one of which damaged the offices ofthe project implementation agency in 1997. Adverse political factors hampered economicperformance. From 1992-97 inflation was high, averaging 12% per year; the exchange ratedepreciated by 29% and the government budget deficit averaged 9% of GDP per year. Sucheconomic and political trends were likely to have had an adverse impact on the incidence, depthand severity of poverty.' However, child malnutrition fell from 38% in 1987 to 33% in 1995, andunemployment declined from 14% in 1985-90 to 10% in 1997. Project activities are likely tohave contributed to these improvements in malnutrition and unemployment.

Poverty estimates for overall Sri Lanka after 1990/91 are not yet available. However, there is evidence of worsening poverty insome areas of the country in recent years; See Aturupane, Rodrigo and Perera, Poverty Among Female Headed Households, (1996);Ministry of Plan Implementation, Poverty Monitoring Unit.

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Project Objectives

3. The major project objectives were to: i) increase income earning opportunities among thepoor; and ii) improve the malnutrition status of pregnant and nursing mothers, and children under3 years of age (raised at project mid-term to 5 years of age). To achieve these goals, the projectincluded five sub-objectives: a) re-orient and expand existing institutional capacity to serve thepoor, and create additional capacity; b) develop credit and other services for promoting self-employment and micro-enterprise development through group-based lending and entrepreneurialdevelopment; c) expand productive wage employment for the poor through technically,economically and socially viable rural works projects; d) develop programs for nutritioninterventions for malnourished children and pregnant and nursing mothers; and e) create policyresearch and program formulation capacity within GOSL (Ministry of Policy Planning andImplementation - MPPI) to take greater account of poverty and unemployment issues inoverall growth policies and public investment projects. In addition, the project aimed toemphasize gender concerns by promoting female participation in project activities and benefits.

Implementation Arrangements

4. Administration of the Funds (CF, HRDF, RWF, NF) was the responsibility of theJanasaviya Trust Fund (JTF), renamed in 1995 the National Development Trust Fund (NDTF).The JTF (NDTF) was established as an apex agency as a result of collaboration with GOSL andIDA and with the technical assistance from UNDP. The Trust received and disbursed designatedproject funds to Partner Organizations and NGOs (NGOs/POs) according to criteria agreed withIDA. Thie establishment of the Employment and Poverty Policy Unit was the responsibility of theMPPI. The Trust was chartered in January 1991. Its charter specified its non-profit characterand its authority to enter into relationships with foreign sources of funding that have receivedGOSL approval. Its objectives were employment generation and poverty alleviation. The Trustcomprised three elements: (i) a Board of Trustees; (ii) an NGO advisory Board and (iii) anexecutive arm. It linked with the GOSL through the Ministry of Policy Planning andImplementation (in 1995 this Ministry was incorporated into the Ministry of Finances). Atechnical assistance team assisted the Board and a Managing Director of the Trust. TheManaging Director and the Board were all appointed by the Government, although the NGOsector was represented as stipulated in the original agreements with IDA. However, in practicethe Trust operated very much as a government body and did not attain the necessaryflexibility and autonomy to become a true partner of the NGO partner organizations. Thelack of autonomy and flexibility of the Trust proved to be one of the major weaknessesthroughout the project life in developing strategies for poverty alleviation with the supportand through NGOs.

Implementation Experience and Results

5. The achievement of project objectives was partial and unsatisfactory. The overallobjectives, expansion of employment opportunities and incomes among the poor, and thereduction of malnutrition among mothers and young children, were achieved to a limitedextent. There were several reasons for the unsatisfactory project performance:

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a) Political Factors: Political factors worked to the detriment of the project. The project'sname in the early years, Janasaviya Trust Fund, caused it to be associated with the government'sJanasaviya Program. This introduced a degree of political identification of JTF that hamperedproject implementation. Opponents of the government actively sought to hinder projectoperations, while some supporters of the government sought to use project funds to extendpolitical patronage. The new government, which assumed office in August 1994, took time toreview the project, and was ambiguous in its commitment to project activities as these wereperceived as an arm of the previous government's agenda.

b) Troubled GOSL-NGO Relationship: The relationship between GOSL and NGOs wasweak throughout the project's life time. This weakened implementation given the large roleenvisaged for NGOs as partner organizations (POs) of NDTF in the delivery of project services.

* In 1991, at project inception, the government in power had appointed a commission toinvestigate NGO activities. This alienated the NGO sector and made them unwilling toestablish a partnership with NDTF which was perceived as a government institution. Duringproject preparation the largest and most experienced NGO, Sarvodaya, had been expected toplay a prominent role in project implementation. However, when the NGO commission was inprogress, Sarvodaya was banned from participating in NDTF activities. These factors causedproject disbursements to be initially delayed by more than one year.

* After 17 years of opposition the new government had come into power in mid-1994 pledging toalleviate poverty through its flagship Samurdhi Program [see Box 2 in the main text]. Samurdhiwas to be implemented by a cadre of workers recruited directly by the government. It onlyaccorded a more limited role for NGOs/POs than was intended during project preparation. Thusthere was no significant move towards adopting a more participatory approach as envisaged inthe project.

* After the new government assumed office, there were again allegations of political bias andcorruption against NGOs/POs, especially those involved in the HRDF. It appeared that someNGOs might have used project funds to promote political election campaigns for the pre-1994government. These allegations culminated in GOSL appointing another committee of inquiry in1995. NDTF agreed with IDA that external auditors should be contracted (Coopers & Lybrand)and that all NGOs (about 140) having received funds through the Credit Fund would be audited.After a lengthy preparation process the external auditors produced at the end of 1995 a detailedaudit report reviewing the 12 largest Credit NGOs (who together represented 87% ofoutstanding funds from the Credit Fund). This external auditor report, which was jointlyaccepted by IDA and the GOSL, concluded that (i) most NGOs needed to strengthen andimprove their financial accounting procedures, (ii) for most NGOs accounting procedures werein accordance with Sri Lanka's required guidelines, but not necessarily with internationallyagreed guidelines, (iii) many smaller NGOs needed substantial training and technical assistanceto bring their accounting procedures in line with accepted standards, and (iv) procedures andeligibility criteria for the Credit Fund needed to be revised.

* After the change of government in August 1994, doubts about NDTF's continued existence,which originated in the GOSL creation and strong support for the Samurdhi Program, createdsome uncertainty in the minds of NDTF staff and among NGOs/POs. This led to increased staff

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turnover, reduced personal incentives for investment in human capital development andcaused work flow interruptions and cutbacks in the field.

c) Lack of a strategy for institutional development and capacity building: The SARrecommendations for developing NGO/PO capacity and institutional strengthening wereinadequately implemented. Although 25% of HRDF funds (about US$2.9 million) was to beallocated for strengthening the conceptual and management skills of NGOs/POs, only anegligible portion of this was actually spent for such activities.

d) Limited results from international technical assistance: The IBRD was requested bythe GOSL and UNDP to administrate the UNDP grant for tectnical assistance to the JTF(NDTF). Four long term international consultants were contracted under IBRD conditions byJTF (NDTF). However, because their contracts were with the Bank, the NGOs were given theimpression that the consultants were working for IBRD. In fact they were selected by and workingunder responsibility of the JTF (NDTF). In monitoring and evaluation, the technical assistance waspartly successful. However, NDTF was not satisfied with results in the area of HRD, management,micro-credit and internal staff training. In addition, one of the long term consultants, who wasbrought in the first year of project implementation (1991) to assist NDTF with Human ResourceDevelopment and Management improvements, joined some NGOs in opposing NDTF and failed todeliver good practices on partnerships. International consultants were recruited between 1993-95to: (i) help improve strategies for credit and micro-enterprise development; (ii) design and developNGO training programs; and (iii) design and implement NDTF's monitoring and evaluationactivities. In early 1995 the GOSL decided not to renew the technical assistance contracts andrequested the Bank to act accordingly. In the meantime, the Bank, UNDP and GOSL had reviewedthe technical assistance financed under the UNDP grant in a joint supervision mission executed inlate 1994. It was jointly decided that the administration of the Technical Assistance program by the

-Bank and its results left much to be desired. This further weakened the already weak managementwithin NDTF. The administration of the UNDP grant would be returned to the UNDP office inColombo with the aim to transfer management of the remaining funds to the GOSL (NDTF) at alater stage. The UNDP grant had disbursed at that point about US$1 million. The transfer ofmanagement to the GOSL did not take place and UNDP canceled the remaining amount.

e) Absence of synergy between trustfunds: The project was expected to develop synergybetween the four trust funds in field implementation activities. It was an important assumption inthe project design that communities and NGOs would progress to use all four Funds to escapepoverty. However, it was not always possible for NGOs to develop all four TF activities, becauseNGOs were in many cases specialized. This was insufficiently recognized during the earlyimplementation years. NGOs wanted to be selective and build capacity more slowly in newareas. The RWF was intended to be the first initiating activity and it was thought that this wouldhelp to activate communities to start savings schemes, mobilize the poorest in the communities,obtain training and use the Credit Fund for micro credit and employment generation activities.This proved to be a difficult task to achieve for several reasons:

* Project interventions in one fund failed to lead smoothly to interventions in other funds.According to the SAR, social mobilization activities under the HRDF were expected toprepare beneficiaries for participation in the CMED, RWF and nutrition activities.Alternately, nutrition interventions which proved to be a good entrance into a community,were to lead to credit and rural works activities. However, such progression of activitiesfrom one fund to another was limited due to weak understanding within NDTF of the

importance of promoting synergy between activities of the four trust funds and poorcoordination of efforts between NDTF trust funds and NGOs/POs; and

* Uncoordinated sector specialization by NGOs/POs also weakened synergy effects betweenproject components. For example, at peak project implementation in 1996, 55% ofNGOs/POs were only working with one of NDTF's funds, while only 27% worked with allfour funds. In addition, the lack of training to develop NGO/PO expertise prevented themfrom expanding and diversifying their activities.

Weak monitoring and evaluation mechanisms during the first three projectyears:Monitoring and evaluation was weak throughout the life of the project. According to the SAR, amanagement information system (MIS) was to be developed in NDTF to facilitate decision-making and management. In practice this proved to be very difficult. Only in mid-1995, as aresult of technical assistance (from IDA missions and international consultants) did an adequatemonitoring system at three levels slowly emerge: (1) within NDTF organization, (2) betweenNGOs and NDTF, and (3) by NGOs at beneficiary levels. This was a complex task and requiredcostly and dedicated work by NGOs. The results from these efforts did not show up but in thelast year of project implementation and thus have not contributed significantly to the project. Anexception was the monitoring mechanisms established early by the Nutrition Fund. This wasvery effective, and broke new ground. However, with the change of the Nutrition Director at theend of 1995 the results deteriorated again. Nevertheless, toward the end of projectimplementation an effective monitoring mechanism had emerged and it was possible (withtechnical assistance) to analyze the project's impact over the last three implementation years.Due to the initial delays in implementation at the start of the project life, disbursement during thelast three project years represented the major part of disbursed project funds.

6. Credit and Micro-Enterprise Development (CMED) Fund. The objectives of the CMEDFund were only partially satisfied. The SAR expected that about 175,000 poor households would beable to increase their earnings from credit and entrepreneurial activities. However, only 117,000micro-enterprises were established during the project life. Among these, only about 37% survivedbeyond three years of operation. Net employment creation was 40,000 jobs (approximately 23% ofSAR targets). Beneficiary targeting was generally sound, with project selection criteria beingsatisfied in over 90% of cases. The majority of micro-enterprises did not develop capacity toexpand production, improve product quality or diversify into new lines of production. This waspartly the result of a lack of training in enterprise development. However, it was also partly theresult of difficulties inherent in promoting micro-enterprises in a troubled economic and politicalclimate. The SAR may have also over-estimated the demand for credit. The repayment rate of loansfrom NGOs/POs to NDTF was about 97%, while the repayment rate of loans from beneficiaries toNGOs was only about 83%, suggesting that NGOs/POs were utilizing its own funds, including theearnings and assistance from other sources, to repay NDTF credits.

7. Human Resource Development Fund (HRDF). The objectives of the HRDF were onlypartially met. Over 1.1 million low-income households were reached and mobilized, withbeneficiaries organized into about 177,000 small groups. Beneficiary targeting was sound, with themajority of beneficiaries coming from households below the poverty line. The social mobilizationefforts contributed to enhanced social capital in low income communities, one of the implicitobjectives of all social fund projects. The participatory approaches used by NGOs/POs (ascompared to previous top-down and paternalistic approaches toward community development)

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resulted in improved bargaining power and self-reliance among the poor. But the HRDF was onlypartially able to fulfill its main aim of providing skills and competencies to enable individuals toestablish successful micro-enterprises. Insufficient preparatory training in the selection anddevelopment of micro-enterprises appropriate to rural markets, consumer demand and villagetechnologies led to limited success in micro-enterprise development.

8. Rural Works Fund (RWF). The objectives of the RWF were partially satisfied.Approximately 700,000 households benefited directly from about 7,765 RW projects. The roads,bridges and culverts constructed or rehabilitated lowered travel time and costs to schools, healthfacilities, post offices, banks and shops, improved access to raw materials and inputs for production,and enhanced access to markets to sell outputs. Irrigation facilities constructed under the projectimproved the productivity of agricultural activities and increased the availability of irritable land.Hence, the rural works projects constructed are likely to have had a positive effect on social welfareand poverty. However, project targets for employment generation and wage incomes were not met.Only about 3.5 million work days of employment, worth about SLR210 million (US$5 million) inreal wages were generated through the rural works program, as compared to the SAR target of 10million work days, worth SLR600 million (US$15 million) in real wages. The project's financialallocation to RW projects was completely utilized. Hence, the shortfall in the quantity and value ofwage employment created may be partly attributed to cost-ineffective methods of projectconstruction. It is also likely that the SAR targets for work days and wage income were over-optimistic. Also, by project closure, sound maintenance arrangements had not been established forrural works facilities.

9. Nutrition Fund (NF). The activities of the nutrition fund were the most successful. Theproject covered over one-fifth of the population within the conflict-free zones of Sri Lanka, and wasoperational in 18 of the 25 districts. At peak project operation (1995-96) about 68 NGOs/POs wereinvolved in nutrition interventions in over 1,600 Grama Niladari Divisions (GNDs), with abeneficiary participation rate of 89% of the target population. Beneficiary targeting was sound, withbenefits concentrated among the poorest members of village comnmunities. The outreach of the twoapproaches, the In-Depth Program and the Basic Program, was approximately 700,000 mothers and2.7 million children, well in excess of the SAR target of 300,000 mothers and I million children.Program success can largely be attributed to innovative interventions focusing on behavioral factorsrather than food insecurity. The reliance on participatory approaches succeeded in enhancingnutrition awareness and improving feeding practices, as compared to previous prescriptiveapproaches which had yielded insignificant results. However, government production anddistribution of the nutrition supplementary food, Triposha, was unsatisfactory and had to bediscontinued in 1996. Also, the long-term sustainability of improved nutrition behavior is not yetknown.

10. Gender Objectives. The gender objectives of the project were partially met. The socialmobilization efforts contributed to improving women's self-reliance and bargaining power.However, the entrepreneurship training provided to women was inadequate to enable them toincrease incomes through micro-enterprise development. The 1997 NGO-BeneficiaryAssessment revealed that only about one third of women participants who received credit wereable to operate successful micro-enterprises. Successful credit beneficiaries tended to havefamily business connections.

11. The Employment and Poverty Policy Unit (EPPU) and the Poverty Monitoring Unit(PMU). The EPPU and PMU were partially successful in meeting their objective of strengthening

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government capacity to develop national policies for poverty alleviation and employmentgeneration. Several studies on poverty monitoring and policy research provided valuableinformation on critical factors related to labor market functioning and the interrelationships betweenpoverty and unemployment. These were used in policy formulation by a number of governmentministries and agencies. However, GOSL was not able to develop a mechanism through whichpolicy research findings could feed consistently into policy formulation and resource allocation forpoverty reduction.

12. Institutional Strengthening and Capacity Building. The main objective of expandinginstitutional capacity to serve the poor and creating additional capacity, was met only to a limitedextent. Capacity building in NDTF was weak, partly due to its failure to transfer knowledge gainedfrom international technical assistance recruited for this purpose. Project implementation washampered by the inability of NDTF to provide adequate training to NGOs/POs. Better trainingwould have strengthened the ability of NGOs/POs to implement activities especially in the HRDcomponent. Consequently, NDTF was also unable to significantly assist NGOs/POs develop theirprogram implementation capacities and skills. However, over the course of project implementation,communication and cooperation among NGOs/POs and between NGOs/POs and the governmenthad improved considerably at the end of the project. Also, many NGOs/POs improved theirmanagement capabilities, expertise and field effectiveness, although largely through their ownefforts.

Project Sustainability

13. The prospects for project sustainability are limited. The experience gained through thisproject has apparently failed to convince the Government that the principle of publicly financedpoverty alleviation activities managed by a flexible, semi-autonomous apex body which contractsNGOs to implement poverty programs is superior to that of direct interventions by specializedgovernment agencies. GOSL has shifted its focus to more direct government implementation ofpoverty alleviation activities through its Samurdhi poverty alleviation program.

14. While NGOs continue to play a role under several GOSL programs, such as the integratedrural development program, the prospects for continued NGO involvement in poverty alleviationactivities are however sound. The NGO-Beneficiary Assessment showed that NGOs have generallyexpanded their access to sources of funding from external sources (bilateral and private donors), andutilize these resources to sustain their involvement in micro-credit, social mobilization and nutritionprograms for the poor.

Future Operations

15. GOSL has expressed interest in a follow-up poverty project which would be supportive ofand build on its Samurdhi program. While the Bank is committed to funding programs for povertyalleviation in Sri Lanka, the nature and scope of such programs are yet to be determined. GOSL hasorganized a consultative process, consisting of key government officials, donors and localconsultants, to undertake analytical work on poverty related issues. The Bank is supporting thisprocess through its economic sector work on poverty and support for an integrated survey andanalysis. This work is expected to provide the foundation for a follow-up poverty project in the nextfiscal year.

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Key Lessons Learned

16. There are several important lessons to be drawn from this project.

a) Implementing poverty alleviation activities through NGOs operating under an apex semi-government organization is an extremely complex and demanding task The managerial,administrative, research and technical skills and competencies required are formidable.Substantial lead time and resource investment would be required to develop institutionalcapacity to ensure that project implementing agencies and NGOs/POs function efficiently.

b) The apex organization through which assistance is channeled to NGOs/POs needs to have asound governance structure, and a high degree of autonomy from government. Projectactivities suffered because the NDTF was perceived as politically linked to the Janasaviyapoverty alleviation program of the earlier government. Also, the NDTF was located under theMinistry of Finance and Planning and the Board of Management consisted mainly of publicservants, so that administrative and financial procedures tended to be strict. It shouldrecognized, however, that in spending public funds, certain rules have to be followed in order toachieve accountability and prevent misappropriation and waste. This was perceived asbureaucratic by some NGOs/POs. It is important that an apex organization be highlyautonomous, so that it can play an effective facilitating role among NGOs/POs. It is alsoimportant that NGOs/POs be given considerable decision-making power in programimplementation. However, this has to be achieved within the context of adequate financialaccountability and transparency.

c) The staff of an apex organization like NDTF needs to possess experience with and respect forNGOs. This was lacking in the project. NGOs encountered considerable problems with NDTFstaff members because the latter lacked experience of, and respect for, NGO activity. Forinstance, during one period of project implementation NDTF refused to allow NGOs to utilizefunds obtained from NDTF to pay NGO staff salaries, although these NGO staff members wereengaged in implementing poverty alleviation activities under the NDTF trust funds. In contrast,there were periods when project components were facilitated by the presence of individualNDTF staff members who respected and sympathized with NGOs/POs activities. For example,the success of activities under the nutrition fund were partly due to the existence of acommitted, well-informed Nutrition Fund management. Subsequently, after the management ofthe nutrition fund changed in late 1995, the quality of activities deteriorated.

d) The economic rationale and technicalfeasibility ofproject components need to be analyzedand developed with care. The HRDF failed to provide the poor with adequate technical skillsto undertake micro-enterprise activities successfully, as envisaged in the SAR. However, it ishighly questionable whether successful entrepreneurship skills, including taking calculatedrisks, can be developed through training. Also, the demand for employment among the poorwas mainly for wage employment, not micro-enterprise opportunities. Action to removeconstraints to the growth of wage employment opportunities, especially in off-farm activities,may be a more effective strategy to assist the poor than the supply of credit to promote micro-enterprises.

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e) Pilot projects, as a basisfor testing strategies and approaches, can play a central role infacilitating overallproject success. The project could have benefited greatly from a pilot phaseat project inception which would have helped identify best strategies as well as field constraints.The project SAR recommended that implementation models be developed and that networkingamong NGOs/POs be supported. However, in practice there was little support for suchactivities. Piloting would have provided valuable experience and models, as well as theopportunity to identify possible shortcomings in design and field constraints early.

J) A high quality and effective MIS, including regular beneficiary surveys, is essential to ensureefficient project implementation and achievement of objectives. The quality of projectimplementation would have been substantially strengthened if a high quality managementinformation system (MIS) had been established early in the project life. A MIS should containsound baseline survey data, realistic trends and targets to be achieved, and clearly specifiedinput, process, output and impact indicators.

g) Importance of exploiting synergy effects. Synergy between the four trust fund components,rural works, nutrition, human resource development and micro-credit, needed to be exploited toderive optimal social benefits from the project. This aim was partially achieved by some largeNGOs/POs, with adequate capacity, which implemented all four project components: ruralworks, nutrition, human resource development and micro-credit. However, the aim was notachieved by other smaller NGOs/POs specializing in one or two activities. Such NGOs/POsshould have been related by NDTF to other NGOs/POs operating in complementary areas sothat synergy effects could have been exploited through their combined activities. However,although integration of complex poverty alleviation interventions is desirable, it is not alwayspossible or realistic to expect a multi-dimensional approach from small rural NGOs.Unfortunately, the NDTF component trust funds operated relatively independently of eachother, so that synergy between project components could not be effectively exploited.

h) Importance ofproviding training to NGOs/POs in poverty alleviation activities Projectimplementation was hampered by the inability of NDTF to provide adequate training toNGOs/POs. Better training would have strengthened the ability of NGOs/POs to implementactivities, especially in the HRD component.

i) Most NGOs/POs' administrative andfinancial systems did not comply with Bank-requiredaccountability and audit regulations. The complexity of this problem was insufficientlyrecognized during project preparation and appraisal. NDTF's original four operationaldivisions adopted compartmentalized approaches because of weaknesses in project design,political climate and the complexity of building institutional capacity.

j) The Government's broad strategyfor poverty alleviation in Sri Lanka underwent a majorshift in emphasis mid-way through the projects lifespan. Originally, under this project, thestrategy of delivering assistance to the poor through NGOs/POs was given a prominent role bythe Government. In this context, the NDTF was planned as an apex organization to provideassistance to NGOs/POs to implement poverty alleviation programs. After the new governmentassumed office in August 1994 the emphasis of the overall poverty alleviation strategy changed.The Samurdhi poverty program gave prominence to the strategy of delivering assistance 'to thepoor directly through government channels, (the Samurdhi Niyamakas), rather than throughNGOs/POs. NDTF ceased to play an important role in the new poverty alleviation strategy.

SRI LANKA



PART I: PROJECT IMPLEMENTATION ASSESSMENT

A. INTRODUCTION

1. The Poverty Alleviation Project (Cr. 2231-CE) evaluated in this report was prepared bythe Government of Sri Lanka (GOSL) and the World Bank between October 1988 and April1990. The project was appraised in October 1990, negotiated in March 1991 and a credit ofUS$57.5 million approved by the Board in April 1991. The credit was signed in May 1991 andbecame effective on September 26, 1991. The project was the first of its kind in Sri Lanka,departing from previous welfare oriented approaches to poverty reduction and relying on aproduction-oriented strategy. The project was consistent with the objectives of the Sri LankaCAS and the GOSL's own policy objectives for poverty reduction through broad-base economicgrowth supported by poverty alleviation programs.

Figure 1. Major Poverty Indicators Used DuringProject Preparation

50% l

2 0 % _;a: J|llglli ¢ :

Percentage of Percentage of Percentage ofPopulation Living in Children Labor Force

Poverty (1985) Malnourished Unemployed (1985)(1987)

Sources: Malnutrition (Department of Census and Statistics),Poverty (Rouse, 1990),Unemployment (Department of Census and Statistics)

Economic and Political Background

2. Sri Lanka experienced considerable political instability and economic hardship during theperiod this project was being prepared (1988-1991). A civil war in the North East increased inintensified in 1987. The rest of the country experienced a violent youth insurrection during 1987-89. This political unrest hampered economic performance during 1987-91. The annual rate of

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economic growth was low, average inflation high and the exchange rate depreciated sharply.Poverty, with 46% of the population estimated to be living below a food-based poverty line' andunemployment at 14% of the labor force, were serious economic problems. Also, malnutritionlevels of children was high, at 38%.

Figure 2. Status of Major Poverty Indicators Used DuringProject Preparation: Most Recent Estimates

40% ,

33%:30%-

20% j22%k

10% L10%

0% -Percentage of Percentage of Percentage of

Population Living in Children Labor ForcePoverty (1990) Malnourished Unemployed (1997)

(1995)Sources: Malnutrition (Department of Census and Statistics),

Poverty (World Bank)Unemployment (Department of Census and Statistics)

3. Major political changes also occurred from 1991-1997, during project implementation.The President was assassinated in April 1993, creating political uncertainty. In August 1994, thesitting government, which had been continuously in office for 17 years, was defeated at thegeneral election. The arrival of a new government brought about substantial changes inadministration, affecting project implementation. Violence intensified from 1996 onwards, withmajor bomb attacks on important institutions, including the Central Bank and an office complexwhich contained the project implementing agency, the National Development Trust Fund(NDTF). The political instability caused by the civil war substantially damaged the economy.During 1992-97 inflation continued to be high, the exchange rate depreciated sharply and thegovernment budget deficit was high. Real wage rates declined among workers and governmentemployees. Such economic and political trends were likely to have had an adverse impact on theincidence, depth and severity of poverty.2 However, child malnutrition fell from 38% in 1987 to33% in 1995, and unemployment declined from 14% in 1985-90 to 10% in 1997. Projectactivities are likely to have contributed to these improvements in malnutrition andunemployment.

Rouse, C.E. (1990) A Study of the Poor in Sri Lanka, Report No.IDP65, World Bank.

2 Poverty estimates for overall Sri Lanka after 1990/91 are not yet available. However, there is evidence of worsening poverty insome areas of the country in recent years; see Aturupane, Rodrigo and Perera, Poverty Among Female Headed Households, (1996)Ministry of Plan Implementation, Poverty Monitoring Unit.

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Table 1: Selected Key Economic Indicators, 1987-91 and 1992-97

1987-91 1992-97Annual GDP growth rate (constant 1982 prices) 3.5 5.4Inflation rate (% change in consumer price index) 13.4 10.8Exchange rate depreciation (% change in SLR:US$ 1) 40.8 29.2Government budget deficit as a % of GDP -12.0 -9.0

Source: Central Bank of Sri Lanka, Annual Reports

B. PROJECT RATIONALE AND OBJECTIVES

Project Rationale

4. At the time of project preparation the Government of Sri Lanka (GOSL) provided severalconsumption oriented welfare services to assist the poor. These included food stamps, kerosenestamps and a time-bound poverty alleviation scheme, the Janasaviya Program [Box 1], whichconsisted of a consumption grant and a savings contribution linked to community work over atwo year period. However, the magnitude of economic and social hardship was such that GOSLwas anxious to speed up poverty reduction through a project containing direct anti-povertymeasures. Moreover, the Janasaviya program was planned to be phased out in 1991, and GOSLneeded a replacement poverty program.3 Also, GOSL desired to move away from its traditionalconsumption-based poverty alleviation approach to a production-based poverty alleviationstrategy. In this context GOSL requested IDA assistance to design and finance a production-oriented poverty alleviation project.

Project Objectives

5. The project had two main general objectives:

* Expansion of employment opportunities and incomes among the poor; and* Reduction of malnutrition among pregnant and nursing mothers, and children under 3

years of age (raised at project mid-term to 5 years of age).

To achieve these general objectives, the project had the following five specific objectives:

a) Reorient and expand existing institutional capacity to serve the poor, and to createadditional capacity. This was to be achieved by:

* Establishing and building capacity in a semi-autonomous apex institution to facilitate andmanage poverty alleviation activities implemented through NGOs/POs; and

* Strengthening the capacity of NGOs/POs to implement poverty programs.

b) Develop credit and other services for promoting self-employment and micro-enterprisedevelopment through group based lending and entrepreneurial development. This was to beachieved through:

3In practice, the Janasaviya Program continued until 1995, when the new govemment replaced it with the Samurdhi Progran.

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* The Credit and Micro-Enterprise Development Fund (CMED), which provided credit topromote micro-enterprises and income generating activities among the poor; and

* The Human Resource Development Fund (HRDF), which provided assistance to trainbeneficiaries in competencies like thrift habits, credit discipline, managerial methods andmarketing skills, needed to operate and develop commercially viable micro-enterprises.

c) Expand productive wage employment for the poor through technically, economicallyand socially viable rural works projects. This was to be achieved through:

* The Rural Works Fund (RWF), which provided assistance to construct, rehabilitate andrenovate rural infrastructure.

d) Develop programs for nutritional interventions for malnourished children andpregnant and nursing mothers. This was to be achieved through:

* The Women and Child Nutrition Fund (WCNF), which provided assistance to reducemalnutrition through nutrition awareness and education programs, child weight monitoring,training in sound food preparation habits and healthy hygiene practices, and delivery ofsupplementary food.

e) Create policy research and program formulation capacity to take greater account ofissues of poverty and unemployment in overall growth policies and public investment projects.This was to be achieved through:

* Establishment of an Employment and Poverty Monitoring Unit (EPPU) in the Ministry ofFinance and Planning. At project mid-term a Poverty Monitoring Unit was also set up in theMinistry of Plan Implementation.

Project Design

6. The project was designed to rely on participatory approaches to mobilize the poor, withnon-governmental organizations (NGOs) and partner organizations (POs)4 playing a leading role.At the time of project preparation it was believed that participatory approaches with NGOintermediation were the most effective strategies in settings where social, economic and politicalconstraints limited the economic activities of the poor.

7. Administration of the Funds (CF, HRDF, RWF, NF) was the responsibility of theJanasaviya Trust Fund (JTF), renamed in 1995 the National Development Trust Fund (NDTF).The JTF (NDTF) was established as an apex agency as a result of collaboration with GOSL andIDA and with the technical assistance from UNDP. The Trust received and disbursed designatedproject funds to Partner Organizations and NGOs (NGOs/POs) according to criteria agreed withIDA. The establishment of the Employment and Poverty Policy Unit was the responsibility of theMPPI. The Trust was chartered in January 1991. Its charter specified its non-profit characterand its authority to enter into relationships with foreign sources of funding that have receivedGOSL approval. Its objectives were employment generation and poverty alleviation. The Trust

4 Partner organizations were defined as government agencies collaborating in project activities.

comprised three elements: (i) a Board of Trustees; (ii) an NGO advisory Board and (iii) anexecutive arm. It linked with the GOSL through the Ministry of Policy Planning andImplementation (in 1995 this Ministry was incorporated into the Ministry of Finances). Atechnical assistance team assisted the Board and a Managing Director of the Trust. TheManaging Director and the Board were all appointed by the Government, although the NGOsector was represented as stipulated in the original agreements with IDA. However, in practicethe Trust operated very much as a government body and did not attain the necessaryflexibility and autonomy to become a true partner of the NGO partner organizations. Thelack of autonomy and flexibility of the Trust proved to be one of the major weaknessesthroughout the project life in developing strategies for poverty alleviation with the supportand through NGOs. This weakness had its origin in the continuous and intense politicization ofpoverty alleviation programs financed by the Government. It was recognized as a major riskduring project preparation, but in the end it was not possible to avoid implementation problemsarising from it. The new government, which took office in mid-1994, made good progress toaddress some of the problems by renaming the Trust and changing the composition of the Boardof Trustees. The new Board also initially strengthened the influence of NGO representatives andcreated an advisory NGO body. However, the influence of and "sense of partnership" by NGOsremained weak throughout the project life due to continuous "lack of trust" between thegovernment and major NGOs.

Box 1: The Janasaviya Program

in~ ~~~~~a imrdice in 19& i.| 1Nl~ f1f Les th o he loz _h pornWS toee .R0 US$1 2

.oh.E aeeiire wet nik I o ntfLR50ZJU pe1ot vro hgdt wsdvddit' _:cmoens Qacnupingato SLR4OU 4 to beusd o

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C. ACHIEVEMENT OF OBJECTIVES AND MAJOR FACTORSAFFECTING PERFORMANCE

8. The achievement of project objectives was partial and unsatisfactory. The overallobjectives, expansion of employment opportunities and incomes among the poor, and thereduction of malnutrition among mothers and young children, were only achieved to a limitedextent. There were several reasons for the unsatisfactory project performance:

9. Political Factors: Political factors worked to the detriment of the project. The project'sname in the early years, Janasaviya Trust Fund, caused it to be associated with the government'sJanasaviya Program. This introduced a degree of political identification of JTF that hamperedproject implementation. Opponents of the government actively sought to hinder projectoperations, while some supporters of the government sought to use project funds to extendpolitical patronage. The new government, which assumed office in August 1994, took time toreview the project, and was ambiguous in its commitment to project activities as these wereperceived as an arm of the previous government's agenda.

10. Troubled GOSL-NGO Relationship: The relationship between GOSL and NGOs wasweak throughout the project's life time. This weakened implementation given the large roleenvisaged for NGOs as partner organizations (POs) of NDTF in the delivery of project services.

* In 1991, at project inception, the government in power had appointed a commission toinvestigate NGO activities. This alienated the NGO sector and made them unwilling toestablish a partnership with NDTF which was perceived as a government institution. Duringproject preparation the largest and most experienced NGO, Sarvodaya, had been expected toplay a prominent role in project implementation. However, when the NGO commission was inprogress, Sarvodaya was banned from participating in NDTF activities. These factors causedproject disbursements to be initially delayed by over one year.

* After 17 years of opposition the new government had come into power in mid-1994 pledging toalleviate poverty through its flagship Samurdhi Program [see Box 2]. Samurdhi was to beimplemented by a cadre of workers recruited directly by the government. It only accorded amore limited role for NGOs/POs than was intended during project preparation. Thus there wasno significant move towards adopting a more participatory approach as envisaged in the project.

* After the new government assumed office, there were again allegations of political bias andcorruption against NGOs/POs, especially those involved in the HRDF. It appeared that someNGOs might have used project funds to promote political election campaigns for the pre- 1994government. These allegations culminated in GOSL appointing another committee of inquiry in1995. NDTF agreed with IDA that external auditors should be contracted (Coopers & Lybrand)and that all NGOs (about 140 NGOs were reported at the time to have used or using CreditFunds from NDTF) having received funds through the Credit Fund would be audited. After alengthy preparation process the external auditors produced at the end of 1995 a detailed auditreport reviewing the 12 largest Credit NGOs (who together represented 87% of outstandingfunds from the Credit Fund). This external auditor report, which was jointly accepted by IDAand the GOSL, concluded that (1) most NGOs needed to strengthen and improve their financialaccounting procedures, (2) for most NGOs accounting procedures were in accordance with Sri

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Lanka's required guidelines, but not necessarily with internationally agreed guidelines, (3)many smaller NGOs needed substantial training and technical assistance to bring theiraccounting procedures in line with accepted standards, and (iv) procedures and eligibilitycriteria for the Credit Fund needed to be revised. IDA and the GOSL followed up on this reportand NDTF began an intensive training and technical assistance program for NGOs to remedythe problems. Meanwhile the Presidential Committee of Inquiry was scheduled to produce itsfindings within three months (August 1995). However, it took over a year to come to a finalreport. While the findings of the committee were inconclusive, and did not lead to convictions,the climate of distrust between GOSL and NGOs/POs worsened again. In this climate NDTF'swork was difficult. It had just begun, under the management of a new Managing Director(government official) and renewed Board of Trustees composition, to improve financialmonitoring mechanisms among NGOs and re-emphasize its role as a facilitating apexorganization.

* After the change of government in August 1994, doubts about NDTF's continued existence,which originated in the GOSL creation and strong support for the Samurdhi Program, createdsome uncertainty in the minds of NDTF staff and among NGOs/POs. This led to increased staffturnover, reduced personal incentives for investment in human capital development, andcaused work flow interruptions and cutbacks in the field.

11. Lack of a Strategy for Institutional Development and Capacity Building: SARrecommendations for developing NGOs/POs capacity and institutional strengthening wereinadequately implemented. Although 25% of HRDF funds (about US$2.9 million) was to beallocated for strengthening the conceptual and management skills of NGOs/POs, only anegligible portion of this was actually spent for such activities. The recommendation of the mid-term supervision mission that NDTF prepare a needs assessment for capacity building was notcompleted. While NGO/PO field implementation improved over time through informalexchanges with each other and by learning from early mistakes, this was a costly and timeconsuming process.

12. Inadequate Assessment of the NGO Sector: The project was unable to correctlyestimate the relative strengths and weaknesses of the NGO sector, resulting in unevenimplementation.

* NDTF failed to make adequate contractual arrangements with NGOs/POs in the early yearsof project implementation. This caused uncertainty among NGOs/POs concerning the scopeand scale of activities that would be supported by NDTF. Yet, NGOs/POs were expected tomake financial commitments and commence program activities. This was further aggravatedby NDTFs failure to reimburse NGOs fully, and on time, for their expenses resulting fromproject activities.

* In the early years, under increasing pressure to improve disbursements, NDTF reluctantlybrought in emerging NGOs as partners. NDTF had to relax the SAR eligibility criteria toadmit many newly formed NGOs, who had insufficient field experience and managerialcapacity. But NDT1 was unable to invest resources to strengthen their capacity adequately tofacilitate efficient program implementation.

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* At peak project operation (1995-96), about 200 NGOs vvere registered with NDTF, and anadditional 100 or so credit organizations (including commercial and rural Banks andcooperative societies). Only a handful met all the eligibility criteria specified in the SAR.

* NGOs/POs were a heterogeneous group with diverse perceptions, strategies and agendas.Throughout the project's life they failed to cooperate consistently together to promote projectobjectives.

13. Complex Disbursement Procedures and Cash Flow Problems: NDTF had developedunduly complex disbursement procedures. Also, disbursement procedures relied largely onreimbursement for expenses incurred by NGOs/POs for project implementation activities. Giventheir low reserve ceilings, small and medium NGOs/POs found it nearly impossible to meet theup front costs of their field activities. Similarly, cash flow problems between the Treasury andNDTF caused delays in repayments to NGOs/POs, often leading to mid-stream field workinterruptions and stoppages.

14. Weak Organizational Structure and Inefficient Routine Functioning of NDTF: Anin-depth review of NDTF's organizational structure at the mid-term review revealed that it didnot facilitate efficient implementation of project activities. The four trusts funds sometimes hadinconsistent strategies, lacked autonomy and imposed such stringent financial controls onNGOs/POs that project disbursements were hampered. Just prior to the Mid-Term ProjectReview, the new government had replaced NDTFs Managing Director (MD). The new MD wasonly available part time and emphasized government control with new vigor. This furtheralienated the NGOs, since a new investigation had begun at the same time. Recommendationswere made at the mid-term review to establish an intermediary layer of authority, by recruitingexperienced specialists from the private sector as managers ifor each Fund. While theserecommendations were followed, they were not applied in spirit, so that sole decision-makingpower still lay exclusively with the Managing Director. The decision-making process was furtherhampered and delayed as the Managing Director assumed only a part time office in NDTF,increasing the backlog in administrative functions.

15. Limited Results from International Technical Assistance: The IBRD was requested bythe GOSL and UNDP to administrate the UNDP grant for technical assistance to the JTF(NDTF). Four long term international consultants were contracted under IBRD conditions byJTF (NDTF). However, because their contracts were with the Bank, the NGOs were given theimpression that the consultants were working for IBRD. In fact they were selected by and workingunder responsibility of the JTF (NDTF). In monitoring and evaluation, the technical assistance waspartly successful. However, NDTF was not satisfied with results in the area of HRD, management,micro-credit and internal staff training. In addition, one of the long term consultants, who wasbrought in the first year of project implementation (1991) to assist NDTF with Human ResourceDevelopment and Management improvements, joined some NGOs in opposing NDTF and failed todeliver good practices on partnerships. International consultants were recruited between 1993-95to: (i) help improve strategies for credit and micro-enterprise development; (ii) design and developNGO training programs; and (iii) design and implement NDTF's monitoring and evaluationactivities. In early 1995 the GOSL decided not to renew the technical assistance contracts andrequested the Bank to act accordingly. In the meantime, the Bank, UNDP and GOSL had reviewedthe technical assistance financed under the UNDP grant in a joint supervision mission executed inlate 1994. It was jointly decided that the administration of the Technical Assistance Program by theBank and its results left much to be desired. This further weakened the already weak management

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within NDTF. The administration of the UJNDP grant would be returned to the UNDP office inColombo with the aim to transfer management of the remaining funds to the GOSL (NDTF) at alater stage. The UNDP grant had disbursed at that point about US$1 million. The transfer ofmanagement to the GOSL did not take place and UNDP canceled the remaining amount. IDAinsisted that NDTF would quickly begin with an internal training program. This was one of theresults from the joint project Mid-Term Review (May 1995) and recruit short term technicalassistance to do this. However, due to delays in appointing four new specialized Directors, as partof a general management and organizational reform of NDTF and mounting unrest among NDTFstaff as a result of uncertainty of work conditions, an integrated staff training plan was notimplemented in time to have a positive effect on NDTF's perfortnance. It was not always possiblefor NGOs to develop all four TF activities, because NGOs were in many cases specialized. Thiswas insufficiently recognized during the early implementation years. NGOs wanted to be selectiveand build capacity more slowly in new areas. By the end of 1995 long term international technicalassistance was discontinued by the GOSL.

16. Absence of Synergy Between Trust Funds: The project was expected to developsynergy between the four trust funds in field implementation activities. This proved to be adifficult task to achieve for several reasons.

* Project interventions in one fund failed to lead smoothly to interventions in other funds.According to the SAR, social mobilization activities under the HRDF were expected toprepare beneficiaries for participation in CMED, RW and nutrition activities. Alternately,nutrition interventions, which proved to be a good entrance into a community, were to lead tocredit and rural works activities. However, such progression of activities from one fund toanother was limited due to weak understanding within NDTF of the importance of promotingsynergy between activities of the four trust funds and poor coordination of efforts betweenNDTF trust funds and NGOs/POs.

* Weakly coordinated sector specialization by NGOs/POs also weakened synergy effectsbetween project components. For example, at peak project implementation in 1996, 55% ofNGOs/POs were only working with one of NDTF's funds, while only 27% worked with allfour funds. In addition, the lack of training to develop NGO/PO expertise prevented themfrom expanding and diversifying their activities. NDTF should have co-ordinated theactivities of NGOs/POs specializing in one or two project components with the activities ofNGOs/POs specializing in other project components. Such action would have improved thegeneration and utilization of synergy between the four components.

17. Weak Monitoring and Evaluation Mechanisms during the first three project years:Monitoring and evaluation was weak throughout the life of the project. According to the SAR, amanagement information system (MIS) was to be developed in NDTF to facilitate decision-making and management. In practice this proved to be very difficult. Only in mid-1995, as aresult of technical assistance (from IDA missions and international consultants) did an adequatemonitoring system at three level slowly emerge: (1) within NDTF organization, (2) betweenNGOs and NDTF, and (3) by NGOs at beneficiary levels. This was a complex task and requiredcostly and dedicated work by NGOs. The result was an innovative monitoring system ofactivities of some 250 NGOs, and within a complex and continuously changing organization ofNDTF. The results from these efforts did not show up but in the last year of projectimplementation and thus have not contributed significantly to the project. An exception was themonitoring mechanisms established early by the Nutrition Fund. This was very effective, and

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broke new ground. However, with the change of the Nutrition Director at the end of 1995 theresults deteriorated again. Research into monitoring and evaluation was not systematicallyorganized by NDTF, but undertaken in an ad-hoc way. ThLe monitoring and staff trainingdepartment operated up to 1995 in a compartmentalized way. Since there were no contractualagreements with NGOs on annual delivery or results, it was difficult to establish benchmarks. Bythe early 1995, however, the Managing Director established the practice of annual agreementswith each NGO and allocation of budgets based upon this. But it was too late in the project life,because many problems within NDTF and among NGOs emerged and needed to be solved.NDTF's institutional and management capacity was too weak for its own staff to fully appreciatethe importance of monitoring project and fund inputs, implementation processes, projectoutcomes at NGO and beneficiary levels and evaluating beneficiary impacts within the context ofNDTF's key mission of poverty alleviation. Nevertheless, toward the end of projectimplementation an effective monitoring mechanism had emerged and it was possible (withtechnical assistance) to analyze the project's impact over the last three implementation years.Due to the initial delays in implementation at the start of the project life, disbursement during thelast three project years represented the major part of disbursed project funds.

Achievement of Specific Project Objectives

18. CMED Fund: The objectives of the CMED Fund were only partially achieved:

* Approximately 117,000 micro-enterprises were promoted in low-income households throughCMED activities. However, evidence from the NGO-Beneficiary Assessment shows that thesurvival rate of these micro-enterprises was moderate. About 34% of micro-enterprises closeddown during the first year of establishment, and an additional 29% failed in the next two years,bringing the survival rate to 37% beyond the third year. This was a moderate survival rate, andsuggests that the majority of micro-enterprises could not be established on a commerciallysustainable basis.

* The SAR had expected that about 175,000 poor households would be able to increase theirearnings from credit and entrepreneurial activities. However, evidence from the NGO-Beneficiary Assessment suggests that only about 40,000 households (23% of the SAR target)succeeded in improving their incomes through CMED activities. This was a substantialshortfall.

* The NGO-Beneficiary Assessment estimated that the average intemal rate of return of survivingmicro-enterprises, taking into account the cost of family labor and household production inputs,was about 33% per year. This was above borrowing costs in the formal sector (interest rates of17-27% per year), but well below informal sector borrowing costs (interest rates of 100% ormore per year).

* The repayment rate of loans from NGOs/POs to NDTF, according to NDTF project data, wasabout 97%. This was a very high repayment rate, exceeding the SAR target of 95%. However,the NGO-Beneficiary Assessment estimated that average repayment rates of borrowers toNGOs/POs was approximately 83%. This suggests that NDTF was being repaid by NGOs/POsusing funds from other sources. This implies that the efficiency of transactions betweenNGOs/POs and beneficiaries was low, and that NGOs/POs bore an extra cost in implementingCMED activities.

* The NGO-Beneficiary Assessment showed that micro-entrepreneurs had not significantlydeveloped capacity to expand production, improve product quality or extend marketingactivities over time. For example, only about 32% of surviving micro-entrepreneurs madecapital investments to expand production. Entrepreneurs typically experienced a one time levelimprovement, moving from one low level of income to a slightly higher level, and thenremaining at that level. The micro-enterprises did not grow and expand over time.

19. HRD Fund: The objective of the HRD fund was only partially satisfied.

* The social mobilization effort was moderately successful in terms of forming community levelsavings groups. NDTF project data shows that approximately 1.1 million low-incomehouseholds were mobilized, with beneficiaries organized into about 177,000 small groups(average 7 members). Average savings rates among group members were approximately 2% ofannual average income, which is a reasonable savings rate for poor individuals.

* However, savings generated by community small-groups were not adequately utilized forinvestment in micro-enterprise promotion and development, as beneficiaries had limitedcapacity to exploit profitable investment opportunities. NDTF and NGOs/POs failed to providesufficient preparatory training in the selection and devefopment of viable micro-enterprisesappropriate to rural markets, consumer demand and village technologies, due to lack of capacityin NDTF.

* There was little progression to the main aim of the component, the development ofentrepreneurial skills and capabilities to enable the poor to run commercially viable micro-enterprises. This can be partly attributed to the failure of the HRDF activities to provideadequate training to beneficiaries in basic business tasks like maintenance of accounts,systematic production of output and active marketing of products. It is also doubtful whethertraining alone can create entrepreneurial skills among poor individuals, including the ability totake calculated risks.

20. Rural Works Fund: The objectives of the RWF were also only partially satisfied:

* NDTF project data shows that about 3100 RW projects had commenced, and approximately2000 had been completed by project closure (a 65% completion rate). NDTF project dataestimated that access to the completed projects was available to about 700,000 families(approximately 18% of families in Sri Lanka) in poor communities in all parts of the countryexcept the war affected North.

* The completed RW projects generated considerable benefits to village communities. TheNGO-Beneficiary Assessment showed that the roads, bridges and culverts constructedimproved access to facilities like schools, health clinics, post offices, banks and shops. Theyalso improved access to raw materials and inputs for production and markets for outputs. Theirrigation facilities improved the productivity of agricultural activities and increased the supplyof irritable land available. Thus, this component is likely to have had a strong impact inimproving social welfare and reducing poverty.

* The NGO-Beneficiary Assessment also showed that beneficiary participation in projectselection and site location was high in RW projects that were constructed through NGOintermediation. Beneficiary approval ratings were, too, were high in RW projects with NGO

- 12-

participation. Beneficiary communities showed their strong support for rural works constructionby supplying about 800,000 unpaid labor days, worth US$2.5 million.

* According to the SAR, the RWF was expected to generate about 10 million work days ofemployment, worth about SLR600 million (equivalent to US$15 million) in 1991 prices.However, estimates from the NGO-Beneficiary Assessnment and NDTF project records suggestthat only about 3.5 million work days of wage employm[ent, worth about SLR2 10 million(equivalent to US$5 million) in constant (1991) prices, were actually generated through therural works program. The project's financial allocation to RW projects was completely utilized.Hence, the shortfall in the quantity and value of wage emnployment created can partly beattributed to cost-ineffective methods of project construction. However, the SAR targets arealso likely to have been over-optimistic and unrealistic.

* Maintenance arrangements for RW projects were weak. Systematic and regular maintenancearrangements at village level, based on a community maintenance fund, were generally notestablished by NGOs/POs engaged in this component. RW projects constructed by localgovernment agencies were maintained through the official government maintenance program.However, many local government agencies have an inaclequate budget for maintenance. Theprospect of medium and long term sustainability of rurael works is moderate.

21. Nutrition Fund: The nutrition fund was relatively the most successful project component.

* According to NDTF data NF activities covered 20-25% of the population within the conflict-free zones of Sri Lanka, and was operational in 18 of the 25 districts. At peak project operationin 1995-96 about 70 NGOs/POs were involved in nutrition interventions. The beneficiaryparticipation rate in poor communities was about 89%, leading to an outreach of approximately700,000 children and 2.7 million mothers. This substantially exceeded the SAR target of300,000 children and 1 million mothers. This high coverage and significant improvement innutrition was praiseworthy.

* The project developed a set of innovative nutrition interventions to address malnutritionamong young children, and pregnant and nursing mothers. These included nutrition trainingand education in baby food preparation, weaning practices, child weight measurement, andgeneral nutrition and food preparation. These nutrition training and education activities werealso specifically targeted to the poorest members of local communities. Their success may belargely attributed to the focus on behavioral causes of malnutrition.

* Data from the NGO-Beneficiary Assessment showed that the nutrition training and educationreceived by mothers in activities like baby food preparation and overall nutrition were utilizedby a majority of beneficiaries. However, women stated that they encountered difficulty inpreparing balanced diets due to high food prices and low income.

During the later years of the project the coverage and scope of the In-Depth Program waslimited due to funding constraints. NDTF was unwilling to release resources to implement theadvanced, community action stages of the In-Depth apptoach. Also, GOSL was unable toproduce and distribute adequate quantities of the nutrition supplement, Triposha, which wasexpected to play an important role in the In-Depth program. In consequence, this program wasdiscontinued in 1996. Instead, the government funds for Triposha production should have been

- 13 -

allocated to assist implement the activities of the In-Depth nutrition program, which has a strongpositive effect on nutrition improvements in local communities.

* GOSL estimates show that the prevalence of malnutrition in the country has been declining overtime [Figure 2]. The project's NF activities were likely to have been an important cause of thisdeclining trend in malnutrition.

Figure 2. Trends in Malnutrition

40% 3%

38%- -

36%4

e 34%-

32%-

1987 1993 1995

Sources: Department of Census and Statistics, Ministry of Plan Implementation

22. The Employment and Poverty Policy Unit (EPPU) and the Poverty Monitoring Unit(PMU): The EPPU and PMU were only partially successful in meeting their objective ofstrengthening government capacity to develop national policies for poverty alleviation andemployment generation.

- The EPPU and PMU implemented a number of studies5 on poverty and employment policyresearch. They provided information useful for GOSL to analyze critical factors related to labormarket functioning and identify interrelationships between poverty and unemployment. Thestudies were used in policy formulation by a number of government ministries and agencies.

* However, efforts to formulate performance indicators and methodologies to track poverty failedto be integrated systematically into government poverty programs. Policy research findingswere also not fed consistently into macroeconomic policy formulation and resource allocationfor poverty reduction, primarily due to the lack of formal mechanisms to ensure such a process.

23. GenderAims: The gender aims of the project were only partially met. While the socialmobilization efforts contributed to enhancing women's self-reliance and bargaining power, theimpact on increasing women's incomes through micro-enterprise development was limited.

* The social mobilization efforts contributed to improving women's self-reliance andbargaining power. In a 1995 beneficiary survey, 82% of female beneficiaries interviewed

The studies by EPPU and PMU are included in Annex 6.

- 14 -

reported that the project had conferred positive benefits in their lives, with 65% identifyingeconomic gains, 78% referring to improved social networks and bargaining power, and 86%indicating that their awareness levels and self-reliance had been increased.

* However, the entrepreneurship training provided to women was inadequate to enable them toincrease incomes through micro-enterprise development. The 1997, NGO-BeneficiaryAssessment revealed that only about one third of women participants who received creditwere able to operate successful micro-enterprises. The majority of female micro-entrepreneurs who survived had family business connections which facilitated their activities.

24. Institutional Development: The institutional development objectives of the project weremet only to a negligible extent. There was limited implementation of activities specified in theSAR to build the capacity of NDTF and NGOs/POs to understand the dynamics of poverty andimplement more effective poverty programs in the field.

* Limited resources were invested by NDTF to strengthen the conceptual and managementskills of NGOs/POs through training in group formation, credit management, managementinformation systems, accounting and auditing. This was partly because NDTF failed tounderstand its role in facilitating NGO/PO activities, and partly because NDTF lackedcapacity to provide such training.

* NGOs/POs were not provided formal opportunities to share lessons-learned with each otherthrough NDTF sponsored workshops or through study visits abroad to learn best practices, asenvisaged in the SAR.

25. Targeting: The project's targeting outcomes were relatively satisfactory. Evidence fromthe RWF shows that about 76% of direct beneficiaries fell below the project income cutoff line ofSLR. 1,500(US$25) per household in 1991 prices, while 350%D were unemployed youth andunskilled laborers. Estimates of household consumption levels in the 1997 NGO-BeneficiaryAssessment show that the per capita average consumption expenditure of project beneficiaries wasSLR506 (US$8 per month) in 1997, under the per capita consumption level of SLR705 (US$12)per month estimated to be the poverty line at 1996 constant prices.

Factors Facilitating Project Implementation

26. Participatory Approach: The use of participatory strategies in mobilizing low-incomecommunities, a novel approach for Sri Lanka prior to the project, contributed to many positiveresults on the ground. Traditional development approaches in Sri Lanka, as elsewhere had beentop-down and bureaucratic, leaving little opportunity for the poor to voice their opinions, identifytheir priorities and participate in their own development. Tapping the productive potential of thepoor through participatory processes of beneficiary consultation and mobilization enhanced someproject outcomes. Although the project fell short of meeting its full potential, the participation ofthe poor in developing their communities has laid an important and lasting foundation forsubsequent efforts in poverty alleviation.

27. Gender Mainstreaming: The project struggled with gender mainstreaming in its initialyears. However, field experience in the later years revealed that ensuring women's participationhad actually improved program effectiveness. With emerging field evidence of the high levels of

- 15 -

enthusiasm and responsiveness from women (e.g. in nutrition and social mobilization activities),NGOsIPOs began to develop more gender-sensitive strategies.

28. NGO Networking and Direct Dialogue with IDA Supervision Teams: Around the mid-term review of the project implementation period, with a change in Bank supervision strategy,there was significant emphasis on establishing a direct dialogue between IDA, NDTF andNGOs/POs. These consultations provided an opportunity for Bank supervision teams to betterunderstand field implementation difficulties and to permit the NGOs to voice their concerns. Theparticipation of NDTF staff in these consultations facilitated a two-way flow of information.These consultative workshops enabled the resolution of long outstanding problems regardingadministrative procedures, financial disbursements and field constraints faced by NGOs/POs.

D. PROJECT SUSTAINABILITY

29. The prospects for project sustainability are limited. The principle of public financing ofpoverty alleviation activities through a flexible, semi-government apex body has been abandoned byGOSL. The apex organization (NDTF) was closed by GOSL with effect from the end of December,1997. Instead, GOSL has adopted a policy of direct government implementation of povertyalleviation activities through its flagship Samurdhi poverty alleviation program. The major focus ofSanurdhi is the delivery of a consumption-based grant, not production oriented economic activitieslike micro-credit or rural infrastructure development. Hence, GOSL has also reverted to theprinciple of poverty alleviation mainly through consumption-based grants, reducing emphasis onproduction oriented anti-poverty measures.

30. However, there are some ways in which the project has produced sustainable results:

* The prospects for continued NGO involvement in poverty alleviation activities are sound. TheNGO-Beneficiary Assessment showed that NGOs,/POs have generally expanded their access tosources of funding from external sources (bilateral and private donors), and utilize theseresources to sustain their involvement in micro-credit, social mobilization and nutritionprograms for the poor.

31. The prospects for sustainability of project outcomes also depends on the time lag betweenthe conclusion of the first project and the commencement of a second project to continue povertyalleviation activities. In order to make best use of the foundation laid by the first project, acontinued poverty program, based on careful analysis of the needs of the poor, and containingrational economic interventions to support and strengthen market processes, would be useful. Thefoundation for nutrition interventions laid by the first poverty project should also be exploited by theproposed second poverty project with a carefully designed nutrition component.

-16 -

Box 2: The Samurdhi Program

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A sbW th tpr - t

4fn of a 1#e na~wit mlf*mi4 - fd §ThX Z~ tot

6 uS$13 mfha r . .S$ 7 i 4,fg

niL3ofD. .- $,,|r-- wb44 s4a-

ltco staings trd auis* co 4WA

*krfnm abxut 66 00 .3t

A)n economn 4o aWphoueholsing a oi _ * g

pw'ccw as ' '

be9U$13 mion, WC)the W_ t hi_ _ _ ___

b)A avng adk crdi s*met *mrhi aetcw*. iitzi&mri, s

=.4

E. BANK PERFORANCE

Project Identification

32. Bank performance in tertms of project identification was partially satisfactory. IDA correctlyidentified the need for a set of poverty alleviation activities that would expand employmentopportunities and improve incomes among the poor, and reduce malnutrition among women andchildren. The focus on an innovative, production-oriented poverty strategy as compared to SriLanka's previous focus on consumption-oriented poverty programs was appropriate. In addition,the project was consistent with the objectives of the Sri Lanka CAS of promoting poverty reductionthrough macroeconomic adjustment generating broad-based economic growth, accompanied byspecific poverty alleviation programs targeted to assist the poor.

33. However, the complexity of the process of implementing poverty programs through NGOsoperating under an apex organization, like NDTF, was badly under-estimated. In particular, therewas inadequate appreciation of the extent of lead time, capacity building, institutional strengtheningand technical inputs required.

- 17-

Project Preparation

34. Project preparation was partially satisfactory. The Government commitment to working inpartnership with NGOs to alleviate poverty was over-estimated. For example, in 1991, the fewNGOs that had the capacity to provide wide coverage (Sarvodaya in particular) were directly underinvestigation from the government commission, and as such, unwilling to participate in projectactivities. Subsequently, the project got off to a start with disbursement levels falling well belowexpected rates. However, despite the adverse consequences for the project, the governmentcontinued the investigations for a three year period.

35. Preparatory work on the organizational structure, administrative functioning and staff/skillsmix of NDTF was inadequate. During the first three years of project implementation, theorganizational structure of NDTF turned out to be inefficient and rigid, causing delays in thedisbursement of funds. By the mid-point of the project, drastic revisions to the organizationalstructure had to be made, agreed upon between GOSL and the Bank at the mid-term review.

Project Appraisal

36. The Bank's project appraisal has been rated unsatisfactory. It did not detect some of theweaknesses in project identification and preparation. The assessment of risk in relation to potentialchanges in government policy was incorrectly assessed. Moreover, the SAR had not identifiedmeasurable performance indicators by which the project could measure its progress.

37. The size of the project loan was large for the absorptive capacity of the country. The totalamount of the project (US$85.0 million) could not be disbursed during the project life, despiteextension by a year. The implementation plan was ambitious and did not provide adequate time forcapacity building in NDTF and NGOs. The troubled relationship between GOSL and NGOs/POs,and limited NDTF and NGO capacity contributed to low disbursement levels during the first threeyears of the project life. Consequently, the project was classified as a problem project by WorldBank from May 1995 to November 1996, and about US$10 million (SDR6.5 million) was canceledfrom the credit as of December 1996.

38. The appraisal process correctly identified the risk of political interference in projectactivities. However, the measures proposed to minimize such risk by: (i) establishing anautonomous Board of Management and NGO advisory committee; (ii) enforcing transparenteligibility criteria for NGOs/POs; and (iii) applying stringent performance criteria, were show to bedeveloped and applied. In the end, these measures were insufficiently implemented during theproject life.

Project Supervision

39. The Bank's project supervision was partially satisfactory. Early Bank supervision missionsdid not always fully identify and assess the gravity of key problems affecting project performance.However, these supervision missions did succeed in identifying and remedying the major constraintto project implementation in the early years, the lack of NGO participation. Problems associatedwith project administration and internal management were addressed particularly during and afterthe joint IDA-GOSL-KfW Mid-Term review mission in May 1995. Subsequently, NDTF was able

-18 -

to disburse funds, from 1994 onwards, at a rate fast enough to clear up part of the backlog createdby delays in the first three years.

40. At the level of specific project components, Bank supervision missions provided advice andtechnical assistance to strengthen and expand the range of activities implemented.

* The NF, for example, was strengthened to enable the nutrition education and awarenessprograms to be extended from a target of I million people to approximately 3.4 million people,about 20-25% of the population living outside the war-affected North-Eastern Province.

* Advice was provided to the RWF to strengthen the pace of rural works projects by improvingmechanisms for project selection, site location and project construction.

41. GOSL was critical of the high turnover in Bank task managers (TMs) before 1995, withfour different TMs managing the project during its life-time. The changeover of TMs affectedconsistency of policy and continuity of approach.

F. BORROWER PERFORMANCE

42. Borrower performance was only partially satisfactory. To its credit, GOSL complied withthe project covenants, procurement rules, provision of technical assistance, and commissioningstudies on poverty policy. However, some actions by GOSL and NDTF hindered project success.

* The climate of mistrust and fear at project inception caused by the government's NGOCommission of Inquiry, and its continuation until 1993, discouraged NGO participation inproject activities. The subsequent shift in policy away from NGO participation after 1994,when the new government assumed office, further distanced the NGO sector. The appointmentof an NGO commission by the new government in 1995 further alienated NGOs.

* The failure of the NDTF's Board of Trustees to contain a balanced representation of NGO,private and governmental sector members, as specified in the SAR, lowered its credibility andweakened its autonomy. NGOs/POs complained that NDTF was managed like a governmentinstitution, playing a controlling rather than a facilitating role.

43. Limited staff skills within NDTF prevented full understanding of the complexity oftheproject and the mix of interventions required to achieve project objectives. For instance, in the earlyyears of project implementation, NDTF failed to develop formal contracts with NGOs/POs clearlyspecifying terms, targets and deliverables. NDTF also failed to develop a well-defined andobjective monitoring system, particularly in the early years of project implementation. After theJoint GOSL-Bank Mid-Term Project Review, project indicators and measures developed by theGOSL and Bank supervision teams were agreed upon with NDTF and served to improve theproject's monitoring activities. However, the monitoring and evaluation activities wereestablished too late in the project life.

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G. ASSESSMENT OF OUTCOME

44. The project outcome was unsatisfactory. The achievement of major objectives was limited,and well below the potential of the project. However, this project was complex and itsimplementation took place during a turbulent and changing political period in Sri Lanka, whichincluded a continued civil war in the eastern and northern provinces.

45. Quantitative Achievements: Achievement of quantitative targets was mixed. As shown inTable 2, some targets were achieved, especially in the NF, while other targets fell short.

Table 2: Achievement of SAR Quantitative Targets

Project Component SAR Target Project AchievementCredit Fund (CF) * 175,000 people to obtain credit * 117,000 people obtained credit

* 50% participants to be women * 57% women participants* 70% on time repayment by borrowers * 83% on time repayment by

borrowersRural Works Fund * 10 million work days of employment * 3.5 million labor days(RWF) * SLR600 million (US$10 million) wage . * SLR250 million (US$4

income million) wage income* 45,000 people to benefit from long-term * data unavailable on long-term

employment employmentHuman Resource No specific targets * 360,000 households mobilizedDevelopment Fund * 58,000 small groups(HRDF) established

* SLRI20 million (US$19million) savings generated

Nutrition Fund * Improved nutrition among I million children * Improved nutrition among 2.7* Improved nutrition among 300,000 pregnant million children

and nursing mothers * Improved nutrition among* 1,800 volunteers to be trained on nutrition 700,000 mothers* 75% reduction in wasting * 10,000 volunteers trained* 25% reduction in low-birth-weight babies * 15,000 mothers and NGO staff

trained* 57% of project sites showing

over 25% decrease in low-birth weight

* 16% reduction in low-birthweight

46. Qualitative Achievements: Qualitative achievements made by the project have beenpartially satisfactory. The project has:

* increased the presence and capabilities of NGOs working in rural villages to assist the poor;* increased social capital and improved social networks among the poor;* mobilized low-income communities to improve nutritional status among young children and

mothers, and enhanced local knowledge base by educating village volunteers and poor mothers;and

* promoted participatory (as compared to previous top-down) approaches responsive tobeneficiary needs.

.

47. The nutrition interventions had a considerable impact on the ability of low-incomecommunities to understand nutrition problems, mobilize community efforts to address these

- 20 -

problems and encourage behavioral changes to improve nutritional status. About 17,000 villagevolunteers trained under the project developed adequate knowledge and skills to work with thepoorest mothers and young children in village communities. Their efforts, together with those ofNGOs/POs, have enhanced community awareness of the gravity of the nutritional problem, andprompted communities to engage in a collaborative strategy to identify nutritional priorities andimplement appropriate remedies.

H. FUTURE OPERATIONS

48. GOSL has expressed interest in a follow-up poverty alleviation project which would besupportive of and build on its Samurdhi poverty program. While the Bank is committed to fundingprograms for poverty alleviation in Sri Lanka, the nature and scope of such programs are yet to bedetermined. GOSL has organized a consultative process, consisting of key government officials,donors and local consultants, to undertake analytical work on poverty related sector issues. TheBank is supporting this process through its economic sector work-on poverty and support for anintegrated survey and analysis. This work is expected to provide the foundation for a follow-uppoverty project.

1. KEY LESSONS LEARNED

49. There are several important lessons to be drawn from this project.

a) Implementing poverty alleviation activities through NGOs operating under an apex semi-government organization is an extremely complex and demanding task The managerial,administrative, research and technical skills and competencies required are formidable.Substantial lead time and resource investment would be required to develop institutionalcapacity to ensure that project implementing agencies and NGOslPOs function efficiently.

b) The apex organization through which assistance is channeled to NGOs/POs needs to have asound governance structure, and a high degree of autonomy from government. Projectactivities suffered because the NDTF was perceived as politically linked to the Janasaviyapoverty alleviation program of the earlier government. Also, the NDTF was located under theMinistry of Finance and Planning and the Board of Management consisted mainly of publicservants, so that administrative and financial procedures tended to be strict. It shouldrecognized, however, that in spending public funds, certain rules have to be followed in order toachieve accountability and prevent misappropriation and waste. This was perceived asbureaucratic by some NGOs/POs. It is important that an apex organization be highlyautonomous, so that it can play an effective facilitating role among NGOs/POs. It is alsoimportant that NGOs/POs be given considerable decision-making power in programimplementation. However, this has to be achieved within the context of adequate financialaccountability and transparency.

c) The staff of an apex organization like NDTF needs to possess experience with and respectforNGOs. This was mainly lacking in the project. NGOs encountered considerable problems withNDTF staff members because the latter lacked experience of, and respect for, NGO activity.For instance, during one period of project implementation NDTF refused to allow NGOs toutilize funds obtained from NDTF to pay NGO staff salaries, although these NGO staffmembers were engaged in implementing poverty alleviation activities under the NDTF trust

- 21 -

funds. There were also periods when project components were facilitated by the presence ofindividual NDTF staff members who respected and sympathized with NGO/PO activities. Forexample, the success of activities under the nutrition fund were partly due to the existence of acommitted, well-informed Nutrition Fund management. Subsequently, after the management ofthe nutrition fund changed in late 1995, the quality of activities deteriorated.

d) The economic rationale and technicalfeasibility ofproject components need to be analyzedand developed with care. The HRDF failed to provide the poor with adequate technical skillsto undertake micro-enterprise activities successfully, as envisaged in the SAR. However, it ishighly questionable whether successful entrepreneurship skills, including taking calculatedrisks, can be developed through training. Also, the demand for employment among the poorwas mainly for wage employment, not micro-enterprise opportunities. Action to removeconstraints to the growth of wage employment opportunities, especially in off-farm activities,may be a more effective strategy to assist the poor than the supply of credit to promote micro-enterprises.

e) Pilot projects, as a basis for testing strategies and approaches, can play a central role infacilitating overall project success. The project could haye benefited greatly from a pilot phaseat project inception which would have helped identify best strategies as well as field constraints.The project SAR recommended that implementation models be developed and that networkingamong NGOs/POs be supported. However, in practice there was little support for suchactivities. Piloting would have provided valuable experience and models, as well as theopportunity to identify possible shortcomings in design and field constraints early.

Jo High quality research studies, including beneficiary studies, are essential to ensure efficientproject implementation and achievement of objectives. The quality of project implementationwould have been substantially strengthened if a high quality management information system(MIS) had been established early in the project life. A MIS should contain sound baselinesurvey data, realistic trends and targets to be achieved, and clearly specified input, process,output and impact indicators.

g) Importance of exploiting synergy effects. Synergy between the four trust fund components,rural works, nutrition, human resource development and micro-credit, needed to be exploited toderive optimal social benefits from the project. This aim was partially achieved by some largeNGOs/POs, with adequate capacity, which implemented all four project components: ruralworks, nutrition, human resource development and micro-credit. However, the aim was notachieved by other smaller NGOs/POs specializing in one or two activities. Such NGOs/POsshould have been related by NDTF to other NGOs/POs operating in complementary areas sothat synergy effects could have been exploited through their combined activities. Unfortunately,the NDTF component trust funds operated relatively independently of each other, so thatsynergy between project components could not be effectively exploited.

h) Importance of establishing a sound institutionalframework. between NGOs/POs, centralgovernment ministries and local government authorities for rural works projects NGOs/POsneed to work closely with government ministries, local government and beneficiarycommunities in selecting, planning and prioritizing rural works projects so that they serve theneeds of communities efficiently and equitably, are cost effective to construct and adequatearrangements are made for future maintenance. The project encountered difficulties inarranging local government maintenance for rural works constructed through NGO/PO and

- 22 -

community participation because such projects were not included in the relevant govemmentministry and local authority work programs. Careful planning and coordination of rural worksprojects, so that facilities constructed by NGOs/POs and beneficiary communities were includedin government work programs, would have improved future maintenance arrangements.

i) Importance ofproviding training to NGOs/POs in poverty alleviation activities Projectimplementation was hampered by the inability of NDTF to provide adequate training toNGOs/POs. Better training would have strengthened the ability of NGOs/POs to implementactivities, especially in the HRD component. However, it should be noted that the NutritionFund, under one of the managers, provided training in child care, nutrition and agriculture. Thisconsiderably helped to build capacity in NGOs/POs and partly accounted for the greater successof this component.

j) Most NGO/POs administrative andfinancial systems did not comply with Bank-requiredaccountability and audit regulations. The complexity of this problem was insufficientlyrecognized during project preparation. NDTF's original ifour operational divisions adoptedcompartmentalized approaches because of weaknesses in project design, political climate andthe complexity of building institutional capacity.

k) Project implementation and supervision experience has shown that the task of capacitybuilding among NGOs/POs, to enable them to foster viable micro-enterprises among thepoor, especially by assisting in the creation of entrepreneurial skills and sound managementpractices, is a difficult and time-consuming process. Also, enterprises need an energetic andbusiness-friendly environment to succeed. This environment cannot be created by thegovernment alone but is an energetic and complex mix of private and public sector interaction.

') NDTF (government institution; insufficiently autonomous; and with a government-dominated Board of Trustees) correctly followed up on its goal ofpromoting moreaccountability and transparency in how projectfunds were spent at NGO/PO and beneficiarylevels. But in this process it emphasized too much its "controlling" as compared to its desired"facilitating" role. This led to delays and confusion in project implementation amongNGOs/POs. As a result NGOs/POs became reluctant to try out innovative activities if these didnot appear to fit into NDTF's bureaucratic framework

m) The Government's broad strategy for poverty alleviation in Sri Lanka underwent a majorshift in emphasis mid-way through the projects lifespan. Originally, under this project, thestrategy of delivering assistance to the poor through NGOs/POs was given a prominent role bythe Govemment. In this context, the NDTF was planned as an apex organization to provideassistance to NGOs/POs to implement poverty alleviation programs. After the new governmentassumed office in August 1994 the emphasis of the overa]ll poverty alleviation strategy changed.The Samurdhi poverty program gave prominence to the strategy of delivering assistance to thepoor directly through government channels, (the Samurdhi Niyamakas), rather than throughNGOs/POs. NDTF ceased to play an important role in the new poverty alleviation strategy.

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PART IIa: GOVERNMENT CONTRIBUTION

A. INTRODUCTION

50. At the time of project preparation, Sri Lanka was facing serious socio-political andeconomic problems amidst rising unemployment and widespread poverty. As the economicgrowth was slow and sluggish, generation of productive employment remained restricted. Thishigh rate of unemployment notably among the youth and increasing poverty among other thingswere seen as the major causes of youth unrest and civil strife witnessed during the latter part ofthe 1980s.

51. In July 1989, the Government of Sri Lanka (GOSL) requested the InternationalDevelopment Association (IDA) to provide technical assistance to prepare a poverty alleviationand employment creation project with possible IDA financial assistance for its implementation.

52. The UNDP financed the project preparation activities of the IDA Mission in two phases.During the first phase, the Mission identified several gaps ini information required, made anattempt to fill these gaps by commissioning a number of local consultants during the January-March period of 1990 and prepared an Interim Report which was submitted to the GOSL andUNDP in Colombo. The second phase of the project preparation Mission commenced in March1990, and lasted till the end of 1990. From March to April of that year, the Preparation Missionworked in Sri Lanka and from May to June the Mission prepared the Draft Report in Washingtonwhich was approved in late 1990 for implementation. The project implementation commenced in1991.

B. PROJECT OBJECTIVES AND COMPONENTS

Objectives

53. The Government of Sri Lanka proposed to implement a project which sought to increaseemployment and income earning opportunities among the poor and the unemployed youth. Thestrategy for such a project emphasized:

* strengthening and expansion of existing institutional capacity to serve the poor andthe unemployed;

* improvement of credit supply and other services to facilitate self-employment andmicro-enterprise development through group-based lending and entrepreneurshipdevelopment;

* asset creation, income generation and wage employment through the expansion ofrural works;

* nutritional interventions to reduce malnutrition among children and pregnant womenand nursing mothers; and

* policy research and program formulation to take greater account of issues of povertyand unemployment in overall growth policies and public investment projects.

- 24 -

54. The project was intended to develop a strong institutional infrastructure which wouldassist the removal of development bottle-necks in rural areas with a view to fostering theproductive needs of:

* landless and near landless households;* small and marginal farmers;* female-headed households;* rural unemployed youth; and* malnourished children, pregnant women and nursing mothers.

55. It was expected that the above would enhance the capacity to meet the challenge ofpoverty and youth unemployment facing Sri Lanka.

Components

56. The project consisted of five components: a) Credit and Micro-Enterprise Development(CMED) Fund; b) Human Resource Development Fund (HRDF); c) Rural Works Fund (RWF);d) Nutrition Fund (NF); and e) Employment Policy Plannipg Unit (EPPU).

57. The Credit and Micro-Enterprise Development Fund (CMED) would extend loans togovernment agencies, banks, co-operatives and non-governmental organizations (NGOs) for on-lending for micro-enterprises and other productive purposes to poor households. Significantlevels of support to these partner organizations were envisaged in the form of term loans for on-lending. The project would provide US$28 million through selected intermediary organizationsfor loans to be granted to some 175,000 borrowers over a 3-5 year period. Additional loanswould be made out of savings mobilized or through other donor funds.

58. The Human Resource Development Fund would provide grants to meet the costs ofhuman resource development and institution building. This would include the costs of socialmobilization by, and technical assistance to the POs receiving Credit Fund support. Theestimated budget of the Social Fund was US$10 million.

59. The Rural Works Fund would finance employment-generating rural infrastructure,following strategies of employment creation through large-scale rural public works and localcommunity involvement in asset creation and utilization, strengthening the capacity of local levelinstitutions, farmer and village organizations and NGOs to undertake and manage ruralconstruction activities. The rural works program was to operate mainly in the South and Centralparts of the country, outside the major metropolitan and plantation areas but would include smalltowns.

60. The Rural Works Fund would operate through grants for corrective maintenance of majorirrigation facilities and rehabilitation of minor irrigation facilities, maintenance of minor roadsand construction of village access trails and footpaths, watershed protection and communityforestry, village water supply and sanitation, and inland fisheries. The Rural Works budget wasestimated at US$38.2 million.

- 25 -

61. The Nutrition Component would build on an ongoing IDA-financed pilot nutritionproject intended to reduce malnutrition in children under 3 years of age and reduce rates ofwasting, stunting and maternal malnutrition. This cost component was estimated to be US$9million.

62. The policy component would require establishment of an Employment Policy Planningunit within the Ministry of Policy Planning and Implementation to analyze the employmentimplications of macro-economic policy, sectoral programs and specific projects. The projectwould also strengthen the capacity of the Department of Census and Statistics to undertakehousehold budget surveys.

Implementation Arrangements

The Janasaviya Trust Fund

63. The project was prepared during a period (1989-90) characterized by youth uprising andweakening of the civil administration of the Government. During the latter part of the 1 980s, thesouthern youth uprising heightened and the normal administrative machinery was seriouslyimpaired from time to time. However, there was no serious threat to genuine NGO activities. Inthis context it was thought both useful and practicable to harness the experience and the linkagesestablish by NGOs.

64. Given this background the Poverty Alleviation Project was to be based on a novelparticipatory concept hitherto not tried out in Sri Lanka. The distinguishing characteristic of thisapproach was to deliver assistance to the poor, through the non-governmental organizations(NGOs) rather than through the existing government agencies. The advantages of such anapproach were:

* It promoted wider participation of the community;* It was more flexible and less subject to bureaucratic control; and* It was cost effective.

65. However, by 1990, after the Government succeeded in restoring law and order in thecountry, there was some re-thinking on its part of the appropriateness of the participatory conceptpromoted by the donors. The decision to link the project to the existing Janasaviya Program byadopting its name among other things, represented an attempt to accommodate the Governmentconcerns in this regard. There was an implicit understanding that the two poverty alleviationprograms, the Janasaviya Program and the Poverty Alleviation Project assisted by the IDA wouldcoexist-exist and perhaps complement each other.

66. It was also considered necessary to set up a separate institution with sufficient autonomyand flexibility to implement the project. Accordingly, a body with the legal status of a TrustFund, the Janasaviya Trust Fund, to be administered by a Board consisting of membersrepresenting the Government, the NGO community and other sections of society was formed.This was later renamed National Development Trust Fund (NDTF).

- 26 -

C. PROBLEMS FACED BY THE PROJECT AND CONTRIBUTORYFACTORS

67. The overall implementation of the project has not been up the anticipated standards asstipulated in the Staff Appraisal Report (SAR). In fact, the project had been declared as a"problem project" by the 1995 Mid-Term Project Implementation Review Mission based on"performance rating". A "Problem Project" situation arose because the project had not gone intobase-line data in detail and developed monitoring indicators and methods. However, a review bya supervision mission 1 8months later had concluded the project as "doing well".

68. Among the perceived problems are the following:

* Targets set in the SAR are far too ambitious. Some of them are almost unattainable.* There appears to be a gross over-estimation of the capacity of the NGO in operation

in Sri Lanka at the time of project preparation.* Supply driven approach and pressure for rapid fund disbursement in an environment

governed by rigorous financial responsibility to Plarliament and to the Government.The administrative culture in the country was such that the civil service wascautious in the use of state's finances.

- Deficiencies in the operational plan, and the absence of a clear hierarchical planwhich could lead to the emergence of an effective project implementation processfrom the very beginning.

* Emergence of ideological differences between the NGO partners and the NDTFmanagers from time to time, particularly during the initial phase of projectimplementation.

* Absence of precisely laid down criteria to select NGOs as partners.* An overemphasis on central, Colombo-based NGOs as opposed to regionally based

NGOs.* The adverse reaction of some NGOs to the appointment of a Presidential Committee

1994 to inquire into various acts of commission and omission on the part of somepartner organizations. This was in turn due to host of representations received bythe Government alleging acts of mismanagement and fraud.

* A degree of compartmentalization that occurred in the management of the project atthe NDTF Headquarters.

* Lack of an adequate monitoring and evaluation systems built into the plan as well asthe subsequent failure on the part of the executing agency and the PartnerOrganizations (POs) to develop those systems. This was primarily due to the lackof a usage of authentic base-line information collected in the country ofimplementation, that is, in Sri Lanka.

* Lack of a proper Management Information System (MIS) and a FinancialInformation System (FIS).

* The inability of the NDTF to build up and improve the top management, asenvisaged in the project document.

* Perceived lack of coherence in the recommendations made by different visitingmission from the World Bank. This was mainly dlue to frequent changes of taskmanagers.

- 27 -

D. STRENGTHS AND ACHIEVEMENTS

69. Despite the inherent weaknesses of the project and implementational defects set outabove, it was not without notable achievements. Field investigations amply demonstrated that atleast in a limited number of localities the project has shown that it was able to minimize some ofthe in-built rigidities in the government machinery and make them work satisfactorily withdivergent institutions, agencies and organizations including some NGOs to reach the poor,organize them and assure empowerment of them in their poverty alleviation efforts. The TrustFund has been able to instill to an extent a pro-poor culture in those localities.

70. Though fragmented, there was clear evidence in many localities that the Project had beenable to mobilize the ultimate beneficiaries through the NGOs/POs, change their attitudes and gearthem towards economic development in a competitive economic environment taking away thewelfare notion out of their minds.

71. There was convincing evidence which surfaced in many field situations that the poor,when socially mobilized and induced to form into small groups of their choice have been capableof saving and investing their savings (however small) for productive activities not only enhancingtheir income but also providing wage employment at least for a few others.

72. The project has contributed significantly towards confidence building and capacityenhancement of poor women. In well functioning POs, the women groups were found to becohesive, disciplined and willing to help each other when they were mobilized and induced toform into compatible groups. The majority of the project participants being women, theydemonstrated a better promise than men in saving and using borrowed fund for productivepurposes elevating their economic and social status with increased capacity in the family decisionmaking process. Some of those who have entered the program are now holding positions in thecommunity based organizations and improved their public speaking capabilities, articulation andleadership qualities. It is of particular interest to note that most of these poor beneficiaries havehad an introduction to the banking habit having savings passbooks and learning to deposit andborrow funds like other commercial bank customers.

73. The rural works program has created assets at the grassroots level which has resulted inappreciation in land values; improved access facilitating the marketing of products; short-termemployment projects enhanced production through improved minor irrigation facilities inagricultural regions, notably in the Dry Zone; increased mobility and quality of life etc.

74. Although the project cannot be considered a total success, the World Bank EvaluationMission that visited in November 1996 highlighted the following:

* Financial Management (of the NDTF) had improved control and accountabilitymechanisms, including POs who were now in place;

* Internal cost-efficiency indicators of the project were very satisfactory;* Impact at beneficiary level was very positive;* 63% of the credit beneficiaries had successful results;* The recovery rate of CPOs for the NDTF was 97% (in 1996);* The HRDF had benefited 347,770 beneficiaries in 57,597 groups in 245 Divisional

Secretariat Divisions;

- 28 -

* The Rural Works Fund has completed over 2,000 small projects reaching over500,000/- of the poorest families. The material labor ratio is 55/45, with 40% femaleparticipation providing over 5.5 million person days of temporary wage employment;

* The "In-Depth Nutrition Method" had proved to be successful;* The Nutrition Project had reached out to over 5,000 GNDs creating awareness of

mothers in maintaining a good feeding schedule for small children, the importance ofcareful early childhood development, use of locally available nutrition foodresources to feed children, providing a balanced diet as far as possible and theimportance of overall family health and sanitation;

* The average incidence of malnutrition at project sites had been reduced from 30% in1995 to 25% in 1996 and the average incidence of low birth weight had declinedfrom 19% to 16% at the project sites;

75. Several studies have shown that accessibility accorded to credit through the NDTF creditscheme had created a "credit culture" among beneficiaries making them realize that loans grantedare to be used for the intended purposes. It had also been pointed out that the beneficiaries didnot regard this program as government welfare program and that the poor had begun to look atthis as a qualitatively different type of program.

76. The joint evaluation mission (GOSL, World Bank and UNDP) report commented that the"NDTF in time may become an international model for Poverty Alleviation and ..........institutional building".

E. MAJOR ISSUES ENCOUNTERED

IDA Project Management

77. The World Bank Task Managers changed several times during the project life. Thus,there were four different Task Managers appointed in the first four years of the Project. Suchrapid changes had adverse consequences on continuity from IDA's perspective. Since differentTask Managers emphasized different approaches during the early years, the NDTF receivedconfusing signals which had an adverse effect on formulation of a clear implementation strategy.

78. From the point of view of IDA, it was a high priority to ensure that proper accountabilitymechanisms for disbursement from NDTF to NGOs/POs and to beneficiaries were installed.Since these were not clearly identified during project preparation, significant delays wereencountered in the first three years of project implementation. As a result, project disbursements(as compared to original SAR estimates) remained below expectations.

International Technical Assistance Program

79. The international technical assistance received by the NDTF often remainedunsatisfactory. Many technical experts placed in the NDTF (four international consultants) wereineffective in terms of improving the quality of NDTF's activities. In addition to a long-termconsultant commissioned in the first year of the project for human resource developmentactivities, (in 1991) there were three others recruited between 1993-95 to ; i) help improvestrategies for credit and micro-enterprise development, ii) design and develop training programs;and iii) design and implement NDTF's monitoring and evaluation activities. Their contribution

- 29 -

failed to develop the technical skills of NDTF staff and NGO/PO s. During this time theadministrative and functional problems existing within NDTF actually aggravated. Beingdissatisfied with the type of technical assistance received, the GOSL decided to discontinue theservices of these consultants in 1995.

80. The International Technical Assistance Program was designed to improve the quality ofthe poverty alleviation program which is essentially multi-disciplinary in nature with a verystrong non-governmental participation in program implementation.

81. The Project Managers in the Bank were of the view that the Government did not have aproper mechanism to administer the TA program from Colombo. Their view was that it wasappropriate to handle the program from Washington even though the UNDP was contributingfunds to the international technical support program. Naturally, the UNDP was unhappy with thissuggestion. However, the Government agreed that the TA program be managed by the WorldBank in Washington. The Bank hired a consortium of NGOs, viz: PACT to handle the TAProgram. This arrangement proved to be unsuccessful because the quality of consultantsprovided was below the expected standard.

F. LESSONS TO BE LEARNED

The Design of the Project

82. There was heavy reliance placed on the capacity of the NGOs/POs to deliver theproject benefits to the target groups. This turned out to be too optimistic. Therefore in future itmay be useful to make a proper assessment of the capacities of such partner organizations beforedeciding to enlist their support.

The Size of the Project

83. By Sri Lankan standards, the total size of the project (US$87.5 million) was large for asocial sector program involving a people based participatory approach. Even under the bestconditions, absorptive capacity problems would have been expected for such a large outlay.Therefore in future, the size of such project may have to be kept at a manageable level.

The Degree of Professionalism

84. Poverty is a complex socio-economic phenomenon which requires for its solutions amulti-pronged approached. Therefore the demands made on the planning an implementationpersonnel may be much higher than in the case of normal sectoral programs and projects. It isnecessary to ensure that in future, the professionalism brought in for such project is of thehighest standard.

G. CONCLUSION

85. In conclusion, it would be validly stated that the project had both strengths andweaknesses in conception as well as in implementation. It was a bold attempt at partnershipbetween the Government and the NGO community to alleviate poverty and deliver certainservices to the poorest sections of the society.

- 30 -

86. Inherent in the project was also capacity building of the NGOs. Taking an overall view,it could be said that there were many positive features as well as good results that were clearlyvisible. Government and the NGOs have worked together for six years and it cannot be said thatthis mutual interaction was substantially negative or unsuccessful. There has been a gradualunderstanding and better working relationships established. It is felt that the country wouldbenefit from building further on the base that has now been established. The refinement ofselection criteria that took place towards the latter part of the project would in the future help toidentify suitable an appropriate NGOs on an objective basis from the very beginning. This initself would avoid many problems that arose at the commencement of the current project due tothe lack of such criteria.

87. Based on the experience of the first Poverty Alleviation Project and also on the currentexperiences of the Samurdhi scheme, it is felt that there is considerable scope for a further projectcomplementary to the existing program using the NGO community as partners along withgovernment institutions in poverty eradication. It would be possible for the Government and theBank to work on identifying the nature, extent and scope of such a project.

88. The overall implementation of the project has not been up the anticipated standards asstipulated in the Staff Appraisal Report (SAR). In fact, the project had been declared as a"problem project" by the 1995 Mid-Term Project Implementation Review Mission based on"performance rating". "Problem Project" situation arose because the project had not gone intobase-line data in detail and developed monitoring indicators and methods. However, a review bya supervision mission 18 months later had concluded the project as "doing well".

Contributory Factors for the Problems faced by the Project

* Targets set in the SAR are far too ambitious. Some of them are almost unattainable.*There appears to be a gross over-estimation of the capacity of the NGO in operationin Sri Lanka at the time of project preparation .

* Supply driven approach pressing for rapid fund disbursement in an environmentgoverned by rigorous financial responsibility to Parliament and the Governmentignoring the administrative culture in the country where the civil service is cautiousin the use of state's finances.

* Deficiencies in the operational plan, and the absence of a clear hierarchical planwhich promoted the emergence of a loose project implementation process at the verybeginning.

* Emergence of ideological differences between the NGO partners and the NDTFmanagers from time to time particularly during the initial phase of projectimplementation.

* Absence of precisely laid down criteria to select NGOs as partners.* An overemphasis on central Colombo-based NGOs as opposed to small institutional

development cost and regionally based NGOs worked as their agents NGO's in theregions.

* The adverse reaction of some NGOs to the appointment of a Presidential Committee1994 to inquire into various acts of commission and omission on the part of somepartner organizations was in turn due to host of representations received by theGovernment alleging acts of mismanagement and fraud.

-31 -

* A degree of compartmentalization that occurred in the management of the project atthe NDTF Headquarters.

* Lack of an adequate monitoring and evaluation systems built into the plan as well asthe subsequent failure on the part of the executing agency and the POs to developthose systems primarily due to the lack of a usage of authentic base-line informationcollected in the country of implementation, that is, in Sri Lanka.

* Lack of a proper MIS and a FIS.* The inability of the NDTF to build up and improve the top management, as

envisaged in the project document.* Perceived lack of coherence in the recommendations made by different visiting

missions from the World Bank. This was mainly due to frequent changes of taskmanagers.

- 32 -

PART IIb: CO-FINANCIER'S (KfW) CONTRIBUTION

A. CREDIT COMPONENT

Summary Review

89. Overall Objective: to contribute to a reduction of unemployment among the poor.

90. Objectives of the Project: to establish a financially sustainable, productivity-orientedcredit program for the target group (households with monthly incomes less than 1500 SLRs) inorder to promote micro-enterprise development.

91. Performance: it can be assumed that unemployment has been reduced. As per review ofCoopers & Lybrand, the beneficiaries indicate that 74% of the projects financed from the creditshave been successful. However, the employment effect remained below its potential, as arevolving utilization of the credit fund has not been achieved due to low recovery rates on thebeneficiaries' level and an in sufficient performance on the organizational level (creditmonitoring) of NDTF and some Credit Partner Organizations (CPOs).

92. KfW rating (ex-post evaluation): some positive effects on the beneficiary level, but onthe whole not successful.

93. Agreements between GOSL and KfW:

Financing Agreement on DM15.0 million: December 20, 1992Agreement on Cancellation of DM7.0 million: September 16, 1996Agreement on Cancellation of DM2.0 million: September 5, 1997

94. Final status of disbursements: on September 5, 1997: DM6.0 million

95. Credit Partner Organizations:

The following CPOs received loans out of the German Financial Contribution:

CPO District SLRs Percent

WDF Hambantota 53,054,245 30.7Sarvodaya Ratmalana 44,712,245 25.9TCCS Hambantota 19,957,710 11.5TCCS Monaragala 16,298,400 9.4TCCS Kandy 13,975,000 8.1TCCS Galle 6.283,750 3.6RRDB Anuradhapura 3,994,500 2.3RRDB Hambantota 3,798,700 2.2RRDB Polonaruwa 2,610,000 1.5RRDB Nuwara Eliya 2,308,000 1.3

-33 -

CPO District SLRs Percent

The Finance Company Colombo 1,998,474 1.1

RRDB Monaragala 1,398,000 0.8

Hatton National Bank Colombo 1,201,900 0.7

RRDB Matara 390,000 0.2

RRDB Ratnapura 343,100 0.2

RRDB Galle 323,500 0.2

RRDB Kalutara 300,000 0.2

TOTAL 172,937,524 100.0

- 34 -

PART III: STATISTICAL AND PROJECT DATA TABLES

Table 1: Summary of Assessments

A. Achievements of Objectives Substantial Partial Negligible Not applicable

Macroeconomic Policies E] 1 ba

Sector Policies :i l ] [

Financial Objectives El [Vl EInstitutional Development El it El EPhysical Objectives 111 it ElPoverty Reduction El El 0I

Gender Issues El El ElOther Social Objectives a El E IaEnvironmental Objectives [E

Public Sector Management El E ElPrivate Sector Development E El El

B. Project Sustainability Likely Unlikely Uncertain

C. Bank Performance Highly Satisfactory Satisfactory Deficient

Identification Et ElPreparation Assistance El ElAppraisal Cl ElSupervision E1 El

D. Borrower Performance Highly Satisfactory Satisfactory Deficient

Preparation El ElImplementation E -- E2Covenant Compliance El El

E. Assessment of Outcome Highly Satisfactory Satisfactory Unsatisfactory Highly Unsatisfactory

a El El al

- 35 -

Table 2: Related IDA Credits

Credit/Title Purpose Year of Approval Status Closing Date

Transportation November 1990 Disbursing 6/30/98Cr. 2183Third Roads

Agriculture June 91 Disbursing 6/30/98Cr. 2260Irrigation Rehabilitation

Water Supply & December 1992 Disbursing 12/31/98Cr. 2442 SanitationCommunity Water Supply &Sanitation

Finance April 1993 Disbursing 6/30/99Cr. 2484Private Finance Development

Population, Health March 1997 Disbursing 12/31/02Cr. 2928 & NutritionHealth Services Development

Table 3: Project Timetable

Steps in Project Cycle Date Planned Date Actual/_______________________________________________________ | j Latest Estimate

Identification (Executive Project Summary) 5/89 6/8/89Preparation 5/90 6/29/90Appraisal 10/90 10/29/90Negotiations 1/91 3/13/91Letter of development policy (if applicable) NA NABoard presentation 3/91 4/25/91Signing 5/91 5/8/91Effectiveness 8/91 9/26/9 1First tranche release (if applicable) NA NAMid-Term review (if applicable) 4/94 4/23/95Project completion 6/30/96 6/30/97Loan closing 12/31/96 12/31/97

- 36 - Page I of 5

Table 4: Credit Disbursements: Cumulative Estimated and Actual (US$ Millions)

FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 Total

Appraisal Estimate - 6.36 9.36 12.1 13.9 15.7 - - 57.42

Revised Estimate 1.49 1.49 4.34 7.01 8.98 14.65 9.98 47.94

Actual 3 0 4.4 7.53 9.55 11.91 1.07 37.46

Appraised Estimate Cumulative 6.36 15.72 27.82 41.72 57.42 57.42 57.42 57.42

Revised Estimate Cumulative 1.49 2.98 7.32 14.33 23.31 37.96 47.94 47.94

Actual Cumulative 3 3 7.4 14.91 24.47 36.38 38.07 38.07

Actual as % of Appraisal Estimate 47% 0% 36% 54% 61% - - 65%

Actual as% of Revised Estimate 201% - 101% 107% 106% 81% 11% 78%

Cum. Actual as % of Cum. SAR Estimate 47% 19% 27% 36% 43% 63% 66% 66%

Cum. Actual as % of Cum. Revised Estimate 201% 101% 101% 104% 105% 96% 79% 79%

Date of Final Disbursement: April 21, 1998

A X 8 -

Appraisal Estimate

0 ~~~~~~~~~~~~~~~~~~eised Estimate

FY94 FY95 FY96 F

1 - ==- bAp~~~~~~~~~~~~~Apraised Estimate Cumulative

O _ ~~~~~~~~~~ - ~~~~~Revised Estimate Cumulative

FY91 92FY96 FY97

Source: Ministrv of Finance and NDTF

Run Date: 10-Jun-1998 WORLD BANK LOAN ADMINISTRATION SYSTEM Report: LDM1071Run Time: 10:18AM Disburements By Fiscal Year Page :

In USD Equivalent

Country: SRI LANKA Paidect: 10368 POVERTY ALLEVIATION Loan: IDA 22310 Ccy Of Comn: XDR

__a D .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.. . ..

1-Jul-1990 30-Jun-1991 0.00 0.001ul-1991 30-Jun-1992 3,000,000.00 3,000,000.00 6.571-Jul-1992 30-Jun-1993 3,000,000.00 6.571-Ju1-1993 30-Jun-1994 4,383,189.03 7,383,189.03 16.171-JuI-1994 30-Jun-1995 7,529,160.41 14,912,349.44 32.6714ul-1995 30-Jun-1996 9,554,117.88 24,466,46732 53.601-Jul-1996 30-Jun-1997 11,911,350.29 36,377,817.61 79.691-Ju1-1997 30-Jun-1998 1,690,718.82 38,068,536A3 83.40

Original Amount 54,344,318.00Total Amount Disbuned * 38,68,536.43Total Amount Cancefled 8,700,445.00

Undisbursed Balance * 7,575,336.57

0 '

I~~~~~~~~~~~~~~~~~~~~~~

Run Date: 10-Jun-1998 WORLD BANK LOAN ADMINISTRATION SYSTEM Report: LDMl07IRun Time: 10:22AM Disbursements By Fiscal Year Pa :

In Currency Of Commitment

Counj. SRILANKA Project: 10368 POVERTY ALLEVIATION Loan: IDA 22310 Cc¶ Of Comm: XDR

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . .. ._._. .... .. . . .. .. ...... .. _... . ... ..... . .. ..... ... .. ._ ___..... ........ .. ...... ....__ . ..... .. .. . . . e_ --r C14ul-1990 30-Jun-1991 0.00 0.00l-Jul-1991 30-Jun41992 2,126,845.05 2,126,845.05 6.231-4ud1992 30-Jun-1993 2,126,845.05 6.231-Jul-1993 30-un-1994 3,103,878.09 5,230,723.14 15.331Ju1-1994 30-Jun-1995 5,037,186.11 10,267,909.25 30.111-Jud1995 30-Jun-1996 6,452,167.60 16,720,076.85 49.03I-Jul-1996 30-Jun-1997 8,424,237.43 25,144,314.28 73.7314td-1997 30-4un-1998 1,245,759.14 26,390,073.42 77.39

o Orginal Amount 40,600,00000Total Amount Disbursd 26,390,073.42Totl Amount Cancelied 6,500,000.00

U Undibu,sed Balanes > 7,709,92658

oAlen -

-39 -

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTLoan Overview Report Table 4

Run Date 10-JUN-1998 Page 4 of 5Run Time 09:57:01 AM

Rn IDA 22310 CE SRI LANKA

Loan Dowc POVERIY ALLEVIATION

Project 10368 POVERTY ALLEVIATION

Approvd Dt 25-APR-1991 Status Disburswng

Signing Dt 8MAY-1991 TF Status Not Applicable

Eff/Deadllne Dt 26-SEP-1991 Eff? YES Restritis Dlsbuments AllowedClosing Dt 31DEC-1997 Housekeeping Not Done

Appi Deadllne Dt 30-APR- 1998 comm CcyXDR

Latest Dlsb/ 21-APR-1998 Type IDARefund/Recov Dt S InIIICiIY

Supplir Rule 1 IBRD/IDA MEMBERS

Loan Amt XDR 40,600,000.000 (a) Pro-disbursement Bd 34,100,000.000

- Cancelled Amt 6500.000.000 (b) Dlsb Up To Amt 34,100Q0000

+ Net TF Inv Inc 0.000 (c) TFAS Dlsb Umil NA

(d) TF Categ Distrlbuted NA* Net Loan & Inv Inc 34.1000.000 Les oF Ca)to Dbd abv

Lowest of (a) to td) above- TF Contrb Due NA LAS Available 34,100,.000

- Fees 0.000 - Disbursed 26390,O73.420

Pro-disbursement Bd 34,100,000.000 - Loan Disbursable Bd 7,709,926.580

* Represents CchltIlzed Chcages,Front End Fe. or TF Admnn Fee Current Undisb Amt 7.709926580

Undislibuted to Catgs 0.000

Total Fre CommLoan Dlsbursable 8d 7,709.926.580 7,709,926.580 0.000

- Pro Sign Off Pipeline 518258.220 518,358220 0.000

- Signe Off PIplp 0.000 oc0 o o.ooo

a Estimnted Bd 7.191,568.360 7.191,.568360 0.000

USD Equivalents Retroactive Amts In XDR

IDA Odg Amt 5750000.00 0 R-tro Amt 0.0

Current Undsb Amt 102319,968.03 - Retro D°0°°°0

Historickd Dkb Ant 38.068.536.430 Retro U re 0.000

- 40 -

Table 4" - 'nrbd E 8wW_ _ Page 5 of 5

Integrated Controllees Systems OProviing Wodd Dank Informaion to the Wordd

Loan Stus I Cateiy Recap I Contracts I Spci_ Amounts I Paid WithdrawalsRejected Withdrawals I Application Pideline I S=ecial Commitments I Cancellations I Statement of Loan

Project: SRI LANKA -- POVERTY Project 1D: 10368ALLEVIATION

Category Recap Data for Credit Number: 22310As of 09-JUN-1998

Number of Categories: 6

Display Amts in USD

Category Category Description Undisb XDR Disb XDR

.1 LSUBLOANS PART A. 1 1,740,592.22 5,639,407.78

2 GOODS 720,212.94 1,279,787.06

_3_ WORKS 3,926,372.55 8,373,627.45

4 CONSULTANTS' SERV. & 3,306,133.93 9,113,866.07

SA__* REVOLVING FUND -1,983,385.06 1,983,385.06

UNALL UNALLOCATED 0.00 0.00

Totals (for all 6 Categories)| 7,709,926.581 26,390,073.42

U? Exgort Data to Excel

Disclaimer: The information provided is for your convenience and does not replace the World Bank official reports andstatements.

Table 5. Key Performance Indicators by Component

Objectives per Fund Indicators Performance measureCredit Fund* make credit available to POs for on-lending to the poor * a sufficient number of NGOs/POs meeting the on-lending * Number of eligible NGOs/POs participating in

for productive purposes eligibility criteria deliver financial services to the poor on-lending activities : 150* ensure beneficiaries have participated in preparatory * beneficiaries have participated in group savings schemes * Number of loans to beneficiaries: 114,000

phase of human resource development to achieve prior to taking out loans * Number of micro-enterprise developmentminimum standards of creditworthiness * beneficiary access to credit is through the small-groups (MED) training programs conducted for

* Promote group-based lending * beneficiaries are provided with skills training and support beneficiaries: 410* Provide support skills and services to promote services * Number of beneficiaries trained in MED

entrepreneurial development * at least 75% of NGOs/POs are maintaining satisfactory * Recovery rate (from POs): 97%* ensure sufficient repayment by POs to the Trust and by repayment schedules Recovery rate from beneficiaries to NGO/PO:

beneficiaries to POs * at least 75% of beneficiaries are maintaining satisfactory 95%repayment

Nutrition Fund* support the innovative intervention tested in Galewala * test and expand the in-depth nutrition approach in GNDs * number of GNDs covered by the In-Depth

AGA Division (modified)2 program: 5,635* provide nutrition coverage in 180 AGA by the end of the * attempt wider coverage by promoting the basic method * number of GNDs covered by the Basic program:

project (approx. 50% of AGAs). After five years of (modified) 4,640operation in an AGAI division: * nutrition interventions are being implemented in at least * number of POs implementing In-Depth program v

* reduce moderate and severe malnutrition in children 50% of GNDs : 35 (average number of NGOs/POs per year)under three years * provide training on nutrition interventions to community * number of PO implementing Basic program : 60

* reduce by 75% the frequency of wasting in children volunteers to ensure sustainability (average number of NGOs/POs per year)under 2 years of age * reduce by 75% the frequency of wasting in children under * number of community volunteers trained: 91

* reduce by 30% the prevalence of stunting in children 2 years of agebetween 2 and 3 years of age * reduce by 30% the prevalence of stunting in children

between 2 and 3 years of age * number of children benefiting from In-DepthNutrition Fund (Coniinued) program : 777,004* reduce by 25% the incidence of low-birth weight * number of children benefiting from Basic* reduce by 25% the prevalence of maternal malnutrition * reduce by 25% the incidence of low-birth weight program: 367,182

and iron deficiency anemia * reduce by 25% the prevalence of maternal malnutrition * reduction of serious malnutrition in project areasand iron deficiency anemia : 32% yearly average

* Participation rate of mothers and children : 83%* incidence of low birth weight: 16%

'The term AGA (Assistant Govemment Agent) division was changed by GOSL during the course of project implementation to DSD (Divisional Secretariat Divisions). Due to design changes made byNDTF's Nutrition Division, nutrition interventions became concentrated at the lower administrative level, the Grama Niladhari Divisions (GND). Subsequently, progress was assessed on the basis 'tof GND coverage. ( O3

2 By project effectiveness, the Galewala experiment, which had relied on on-site feeding, had completely failed. NDTF's Nutrition Division then proceeded to develop an innovative and participatory POnutrition strategy, called the in-depth approach. Given the lengthy duration of the phased procedures entailed in this strategy, a parallel and less comprehensive, "Basic" approach was also ° ldesigned subsequently. tn

Table 5. Key Performance Indicators by Component

Human Resource Development Fund* fund human resource and institutional development of * Extent of coverage of the target population by the HRD * Number of Divisional Secretariat Divisions

beneficiaries and POs Fund (including PO, beneficiaries and geographic) covered: 211 yearly average* strengthen the conceptual and management skills of POs * Provision of relevant PO training programs * Number of beneficiary groups formed : 177,149

via training on group formation, credit management, * Provision of relevant beneficiary training programs * number of beneficiaries (male and female):MIS, accounting and auditing * Extent of support to PO staff resources Males - 375,269, Females - 739,110

* finance programs for awareness creation and organization * Extent of preparatory activities among beneficiary groups * Number of NGOs/POs working on HRD: 77of the poor for credit and entrepreneurial activities (yearly average)

* finance skills and enterpreneurship development * Extent of networking and shared experiences between POs * Number of HRD workers: 949 (yearly average)programs and programs to help the poor identify * Management and operational support provided to POs * Number of other field workers: 833productive activities * Number of relevant NGO/PO training programs:

* provide grants to the POs for: 205- staff training * Rupee amount of savings mobilized by- provision of consultancies to strengthen knowledge beneficiary groups: 472.04 millionand skills in beneficiary support activities- study visits in Asia to learn from the experience ofsimilar organizations- consultancies to help strengthen management- networking workshops to share lessons-learnedwith each other- training of beneficiaries in income-generation- purchase equipment and vehicles to manage theprogrammeet recurrent costs-develop curricula to enhance PO and Trust staffskills by training institutions

Rural Works Fund* provide short-term income for the poor through labor * number of labor days wage work by the poor:

intensive construction of viable rural infrastructure * project participants have obtained short term employment 3,650,300* assist the poor in selecting infrastructure projects which in rural works construction * proportion of males to females employed: 60/40

will help increase their incomes * selected rural works meet the production priorities of the * number of direct beneficiaries (households):* facilitate long-term income opportunities for the poor poor 692,000

through related training and skills upgrading which * the poor have obtained on-the-job skills training and * number of projects funded and completed:would lead to employment opportunities upgrading to enable them to secure subsequent long-term 2,150

employment

O IJ*1u9

-43 - Table 6

Table 6: Studies Included in Project Page 1 of 3

Study Purpose as defined at Status Impact of Study

appraisal/redefined1. Overview of Sri Lankan Analysis of the broad Complete Used in designing policies toLabor Markets macroeconomic structure of promote labour absorption

labour markets

2. A Critical Reassessment of Analysis of the nature of Complete Used to refine thethe Mismatch Unemployment unemployment in Sri Lanka understanding ofHypothesis for Sri Lanka unemployment and improve

policies to improve thedemand for labour

3. Labor and the Numbers Analysis of the availability of Complete Used to develop labour marketRacket: An Assessment of labour market information information systems in theLabor Market Information in Sri Ministry of Labour and theLanka, Ministry of Science and

Technology

4. Review of Literature and Data Set up a ratonal basis for the Complete Used in macroeconomicSources on the Informal Sector study of informal labour policy formulation

markets

5. Does Vocational Education Analysis of the impact of Complete Used in formulation of policiesEnhance Competitivity vocational training on the by the Ministry of Labour and

accumulation of specific the Ministry of Science andhuman capital Technology

6. Monthly Earnings in Sri Analysis of earnings patterns Complete Used in macroeconomic policyLanka formulation

7. Study of the Feasibility of Feasibility and cost analysis Complete Survey not implemented asConducting a Longitudinal of a longitudinal survey of prohibitively expensiveSurvey of Youth youth

8. Pay Trends in the Liberalized Analysis of the time trend of Complete Used in macroeconomic policyEconomy and the Index of wages formulation and the civilEarnings of Paid Employees service salary reform

9. Working Time at the Job: Analysis of hours of work Complete Used in macroeconomic policyReview of the Sri Lankan formulationExperience

10. Female Labour Force Analysis of trends in female Complete Used in macroeconomic policyParticipation in the 1990s labour force participation formulation

I1. Expansion of Productive Analysis of employment in Complete Used in macroeconomic policyEmployment in Sri Lanka: Sri Lanka formulationTrends and Dilemmas

44 - Table 6


Study Purpose as defined at Status Impact of Studyappraisal/redefined

12, Comparison of Reservation Analysis of wage patterns in Complete Used in macroeconomic policyWages and Predicted Wages for Sri Lanka formulation and the civilthe Unemployed service salary reform

13. Analysis of Public Private Analysis of sectoral wage Complete Used in macroeconomic policyPay Differentials differentials in Sri Lanka formulation and the civil

service salary reform

14. Labour Productivity in the Analysis of productive trends Complete Used in macroeconomic policyManufacturing Sector in Sri in Sri Lankan manufacturing formulationLanka

15. Impact of Labour Legislation Analysis of the effect of Complete Used in macroeconomic policyon the Demand for Labour in Sri labour laws on the demand formulationLanka for labour

16. Poverty and Unemployment Overview of research Complete Used in macroeconomic policyin Sri Lanka findings on unemployment formulation

and poverty

17. A Literature Review of An overview of studies on Complete Used in macroeconomic policyFemale Migrant Workers female migrant workers formulation

18. Unemployment Among Analysis of the relationship Complete Used in macroeconomic policyEducated Women in Sri Lanka between education, gender formulation, and in education

and unemployment policy by the Ministry ofEducation and HigherEducation and the PresidentialTask Force on Education

19. Study of Female Migrant Analysis of the employment Complete Used by the Ministry ofWorkers structure of female migrant Labour and the Bureau of

workers Foreign Employment

20. Poverty in Sri Lanka, Survey of the data available Complete Used in macroeconomic policyIndicators, Typology and on poverty formulationStrategies for PovertyAlleviation

21. Baseline Study for the Establish baseline indicators Incomplete Study not completed. Not usedSamurdhi Program for monitoring the Samurdhi to establish baseline indicators

program for Samurdhi.

22. Poverty Among Female Economic analysis of the Complete Used by the Womens Bureau,Headed Households gender dimension of poverty. Department of Social Services

and the Samurdhi Program

45 - Table 6


Study Purpose as defined Status Impact of Studyat appraisal/redefined

23. Evaluation of Human Assessment of the quality of Complete Used for government policyResource Capacity of Social social mobilization formulationMobilization PartnerOrganizations of NDTF, 1996

24. Evaluation Report of the Assessment of nutrition Complete Used for government policyNutrition Component, 1996 outcomes of NDTF

25. Samurdhi-NDTF Nutrition Assessment of Samurdhi Complete Used for government policyIntervention, Improved Nutrition nutrition interventions formulationThrough Communlity finnaced by NDTFMobilization (Divisional Level),1995 .26. Nutrition and Its Effect on Assessment of nutrition and Complete Used for government policyPoverty poverty. formulation

27. Extensive Evaluation of Assessment of Micro-Credit Complete Used by NDTF for monitoringMicro-Enterprise Beneficiaries, and evaluation.1996 andLvalution28. Evaluation of the Assessment of Samurdhi Complete Used for Samurdhi activitiesNDTF/Samurdhi Nutrition nutrition activitiesIntervention Pilot Programme,An Interim Report, 199629. Evaluation of NDTF funded Assessment of Samurdhi Complete Used for Samurdhi activitiesCommunity Projects by community projectsSamurdhi Balakayas, 1996 c p30. Assessment of Community Assessment of Rural Works Complete Used for NDTF and SamurdhiProjects for Poverty Alleviation, Projects Activities199731. Assessment of Training Assessment of training Complete Used for Samurdhi activitiesProgrammes, 1997 activities

32. PO - Comparison of Target Assessment of PO Complete Used by NDTF for monitoringand Achievements, 1997 performance and evaluation

- 46 -

Table 7.1: Project Costs

Appraisal estimate (US$M) Actual (US$M) Actual asComponents Local Foreign Total Total % of SAR

Estimate

Credit Fund 35.00 35.00 17.40 50%Human Resource Development Fund 13.10 1.40 14.50 9.91 68%Rural Works Fund 14.70 1.60 16.30 15.90 98%Women and Child Nutrition 13.00 1.20 14.20 5.90 42%Employment and Poverty Policy Unit 0.20 1.20 1.40 0.95 68%Project Management 3.60 3.60 7.19 200%

Total Project Cost 79.60 5.40 85.00 57.25 67%

~500

3000-

2500

O 20 00-

_ 1500.

10 00oo * Actual

5.00

0.00

Funds|

- 47 -

Table 7.2: Project Financing

Appraisal estimate (US$M) Actual (US$M) Actual asComponents Local Foreign Total Local Foreign Total % of SAR

Estimates

IDA 52.1 5.4 57.5 - - 41.2 72%KfW 10.0 - 10.0 - - 3.5 35%Government of Sri Lanka 17.5 - 17.5 - - 12.5 71%

Total 79.6 5.4 85.0 - - 57.2 67%

60.0-

50.0-

40.0-~

_ 30.0

20 0 0 iE E a &-~~~~~~~0 AR20.0- o Artu?l

10.0.

IDA KfW Governmentof Sri Lanka

Financier

Table 8: Status of Legal Covenants

Agreement Section Covenant Present Description of Covenant CommentsClass Status I

CR & PR 3.04 2 CP Credit Risk Fund NDTF informed IDA that the Risk Fund is being managed in-conformity with the agreements under the project.

CR & PR 4.01 b(i) 1 C Independent Auditors Internal audit team was strengthened. Acceptable externalauditors have been appointed.

Credit 2.01 1 C Special Account to be setup The account was opened at the Sri Lanka Central Bank and isI operational.

Credit 3.01 b 1 C Subsidiary Loan Agreement The Agreement has been accepted by IDA.under which Bank lends $20million to the Trust.

Credit 2.06 2 C Participating Agreements with PO agreements have been developed and agreed with IDA.POs

Credit 3.05 5 Workplan for EPPUCredit 3.06 (a) 3 C Triposha production levels The supply of triposha has been unreliable. It has been

stopped.Credit 3.06 (b) 3 C Triposha allocation NDTF is supporting a pilot program to test the feasibility of

alternative weaning foods outside the public sector. Triposhascheme has been abolished.

Credit 3.06 a 3 Nutritional Health CommitteesCredit 4.01 a 2 C Adequacy of accounting records Accounting records are inadequate and internal controls are

weak. NDTF taking action to correct. IDA's midterm reviewhas emphasized this. Internal accounting has beenstrengthened and account records adequately kept since mid-term review.

Credit 4.01 b(ii) I C Certified Accounts and Auditors Audit reports, received for 1991, 1992, 1993, 1994, 1995, and1996 covering all project components.

Credit 4.01 c 1 C Annual audit of SOEs The SOEs have been audited satisfactorily, for 1991-96.PROJ 3.01 2 C Management and Staff NDTF management has been strengthened by mid-terrn

review. Four qualified directors have been appointed sinceJanuary 1996.

PROJ 3.02 2 C Insurance IDA was informed that Trust vehicles and computers areadequately covered. The Trust's office furniture (fixtures andother equipment) have also been covered.

PROJ 3.03 5 C Mid-Term Review The review was completed in May 1995. so

o co

Table 8: Status of Legal Covenants

Agreement Section Covenant 1 Present Description of Covenant CommentsClass Status

PROJ 3.04 2 CP Investment of Funds NDTF agreed to develop financial policies to guide itsfinancial management and investment policies. Such policiesshould be acceptable to IDA, should be issued by the Trust'sBoard. This is under way but not yet completed.

PROJ Schedule. 3 C Subloans terms and conditions. Complied with.part A l

PROJ Schedule 3 CP Eligibility criteria for POs. New NGOs/POs will not be admitted to the credit fund untilpart A.4 auditing of all NGOs/POs has been completed in November

1996.PROJ Schedule 3 C Criteria for HRD Responsibility for social mobilization transferred to POs.

Part B Training plans for NDTF staff and POs have been developed.PROJ Schedule 3 C Rural works criteria Complied with.

Part C ____I

Status: C- Complied with; CP - Complied with PartiallyCovenant Class I - Accounts/audit; 2 - Financial performance/generate revenue from beneficiaries; 3 - Flow and utilization of Project funds; 5 - Management aspects of the Projectfor its executing agency.

- 50-

Table 9: Bank Resources: Staff Inputs

Stage of Planned ActualProject Cycle Weeks US$000 Weeks US$000

Pre-Appraisal NA NA 37.3 115.6Appraisal - Board NA NA 36.5 103.2Negotiations - Effectiveness 15 NA 10.7 34.2Supervision 61 NA 212.1 605.9Completion 22.8 49.3 4.8 25.5

TOTAL 301.4 884.4

Board Date: 4/25/91Effectiveness: 9/26/91Closing date 12/31/97ICR 6/15/98

Table 10: Bank Resources - Missions

Performance RatingStage of Month Number of Days Specialized staff Implementation Development Types of problems

Project Cycle /year persons in skills Statusb/ Objectivesfield representeda_

Pre-Appraisal 6/89 6 NA _Appraisal 10/90 5 NA _______l

Negotiations 3/91 4 NA _Supervision 5/91 3 NA E, P, F 1 ISupervision 6/92 4 NA P, M, S, F I ISupervision 12/92 2 NA P,F I ISupervision 7/93 5 NA F, M, C, D 2 2Supervision 11/93 5 NA F, M, C, D 2 2Supervision 3/94 3 NA F, M 2 2 Weakening government commitment. Pace of

operations and disbursement is slow.Supervision 12/94 1 NA TM, 2 2 Managing director resigns. Members of Board have

not been appointed.Supervision 5/957 NA N, 0, TM, G, F, 2 2 Classified as problem project.

F,P P _Supervision 11/95 6 NA M, S, TM, M, I, F U U Auditing, performance and project management. lSupervision 3/96 4 NA N, TM, 5, M U U Auditing, performnance and project management.Supervision 12/96 3 42 N&G, M, TM s s Auditing, performance and project management.Completion 12/97 6 17 TM, E&P, G&S, S U Final disbursements to be made NGO-Beneficiary

N, R,O Assessment to be implemented.Field review of nutrition audits to be implemented.

a/ E=Economist, P=Poverly Specialist, F=Financial Analyst, M=Management Specialist, S=NGO/Social Mobilization Specialist, I=MIS, C=Credit,D=Enterprise Development, N=Nutrition Specialist, O=Operations Assistant, R=Rural Development Specialist, G=Gender Specialist, Task Manager.

b/ I = Problem Free, 2 = Moderate Problems, HS = Highly Satisfactory, S = Satisfactory, U=Unsatisfactory

- 52 -Annex 1

Page 1 of 26

AIDE MEMOIRESri Lanka Poverty Alleviation Project (CR. 2231-CE)

IDA Project Supervision and ICR Preparation Mission, September 1-22, 1997Main Summary Aide-Memoire (17 pages and attachments)

Seven technical annexes (not attached) were submitted to the implementing agency (NDTF)

1. An IDA1 mission reviewed the Poverty Alleviation Project (2231-CE) implementationperformance and started preparations for the Implementation Completion Report (ICR), which isdue by early 1998. Mission objectives were to (i) start preparations for producing the draftImplementation Completion Report (ICR) and seek the government's assistance in assessingsustainability of the project's impact; (ii) assess the project's development and implementationperformance; (iii) review procurement, disbursement, project spending and financing since theeffectiveness date (October 1991); (iv) review links between the project, the Country AssistanceStrategy (CAS) and the government's broader poverty alleviation strategy, including theSamurdhi Program; and (v) assess the lessons learned for the benefit of future IDA-financedoperations in poverty alleviation.

2. The mission met with representatives of the Ministry of Finance and Planning (MFP),Ministry of Plan Implementation (MPI), Ministry of Youth, Sports and Rural Development(MYSRD), the Board of trustees and staff of the National Development Trust Fund (NDTF),Non-Governmental and Partner Organizations (NGO/POs) funded by the project, internationalaid agencies and the staff of NDTF. A list of people met will be attached. We thank theGovernment, NDTF's Board of Trustees, NDTF staff and NGO/POs for their assistance andwarm hospitality.

Project Performance and Economic Impact

3. Overall, the project's contribution to poverty alleviation in Sri Lanka appears limited, andwell below its potential. This conclusion is based on data currently available from NDTF, andprevious government and independent studies. During October - December 1997 IDA willundertake an independent analysis (survey based study) to assess the economic impact of theproject more rigorously. This study will particularly analyze the project implementation andimpact from the point of view of NGO/POs and verify beneficiary impact.

4. Total project disbursements, through June 1997, were approximately SLR 2.9 billion(US$57 million), of which IDA contributed US$ 40 million (71% of original SAR estimates),KFW US$ 3.3 million (33% of original SAR estimates) and the Government of Sri Lanka US$13.6 million (74% of original SAR estimates).

5. The relationship between the Government and NGOs throughout the project's life wasambiguous; in 1991-92 the former government appointed a commission to investigate NGO

I Mission team composition: Jacob Bregman (team leader, sr. educ. specialist); Harsha Aturupana (Economist andPoverty specialist, consultant SASCO); Mallika Samaranayake (Participatory Development specialist SASCO), JulittaRasiah (Financial specialist, SASCO); Nandini Gunewardena (Gender and Poverty specialist, PRMGE); David Pyle(Nutrition consultant); Henk OpHetVeld (Rural Works and Social Mobilization consultant); Kamal Siblini(Monitoring and Operations consultant). Mr. Eric Bell and Mrs. Valerie Kozel (PREM) joined the mission for about 2days under separate terms of reference to evaluate issues related to country economic performance, sustainability ofpoverty alleviation strategy and social welfare programs financed by the government.

Annex 1Page 2 of 26

activities. This hampered project implementation considerably. The largest NGO in Sri Lanka,Sarvodaya, was barred from acting as a financial intermediary until the commission wasconcluded. As late as 1993 this investigation still continued. Other NGOs were also discouragedfrom entering into contracts with NDTF. In the later years of the project life, 1995 onwards, theseproblems were repeated, on a smaller scale, for the social mobilization NGOs.

6. The task of building capacity to implement a project of this nature, both in the apexorganization (NDTF) and the NGOs/POs, turned out to be more complex and demanding thanhad been envisaged at the stage of project design. The project has built capacity in NGOs/POs totrain individuals for social mobilization and, to a more limited extent, to deliver credit to the poorto set up micro-enterprises, and to organize community works projects in rural areas. Capacityhas also been built, to a limited extent, in cooperative societies, regional banks and commercialbanks, to deliver credit for micro-enterprise development. However, project experience hasshown that the task of capacity building among NGOs/POs, to enable them to foster viable micro-enterprises among the poor, especially by assisting in the creation of entrepreneurial skills andsound management practices, is a difficult and time-consuming process. Also, enterprises needan energetic and business-friendly environment to succeed. This environment cannot be createdby the government alone but is an energetic and complex mix of private and public sectorinteraction. It is important that GOSL clarify the role of NGOs/POs in the context of its povertyalleviation strategy, utilize the capacity already built and take steps to further strengthen it. Thecapacity already built among NGOs/POs for poverty alleviation through this project constitutes avaluable economic resource for the country.

7. The project drew strong political interest throughout its lifespan. The first managingdirector of the NDTF pointed out that the original name of the fund, the Janasaviya Trust Fund(JTF), caused it to be confused with the Janasaviya program, although the JTF was meant to bean independent organization. The perception that the NDTF was closely linked to the Janasaviyaprogram presented major operational problems in the first three years. In the last three yearsGOSL and NGOs/POs have developed a more rational modus operandi. However, theappointment of a commission to investigate the social mobilization NGOs/POs during June 1995to August 1996 created again mistrust among NGOs/POs. However, NDTF correctly followedup on its goal of promoting more accountability and transparency in how project funds werespent at NGO/PO and beneficiary levels. But in this process it emphasized too much its"controlling" as compared to its desired "facilitating" role. This led to delays and confusion inproject implementation among NGO/POs. As a result NGO/POs became reluctant to try outinnovative activities if these did not appear to fit into NDTF's bureaucratic framework.

8. The broad strategy for poverty alleviation in Sri Lanka underwent a major shift inemphasis mid-way through the projects lifespan. Originally, under this project, the strategy ofdelivering assistance to the poor through NGOs/POs was given a prominent role. In this context,the NDTF was planned as an apex organization to provide assistance to NGOs/POs to implementpoverty alleviation programs. After the new government assumed office in August 1994 theemphasis of the overall poverty alleviation strategy changed. The Samurdhi poverty programgave prominence to the strategy of delivering assistance to the poor directly through governmentchannels, (the Samurdhi Niyamakas), rather than through NGOs/POs. The NDTF ceased to playan important role in the new poverty alleviation strategy.

9. GOSL officials point out that IDA task managers changed several times during theproject life. For instance, there were four different task managers appointed in the first four yearsof the project. Such rapid changes had adverse consequences on continuity from IDA's

- 54-Annex 1

Page 3 of 26

perspective. It was also indicated that in the early years of project implementation various taskmanagers emphasized different approaches. This sent confiusing signals to the NDTF andhampered the implementation of clear strategies. From IDA's point of view it was one of thefirst priorities to ensure that proper accountability mechanisms for disbursements from NDTF toNGO/POs and NGO/POs to beneficiaries were installed. Since these were not clearly identifiedduring project preparation significant delays were encountered in the first three years of projectimplementation. As a result project disbursements (as compared to original SAR estimates)remained below expectations.

10. Project cost-effectiveness was analyzed by examining the percentage shares ofadministration costs incurred by the NDTF and POs and the resources reaching the beneficiaries.For the Human Resource Development fund and the Nutrition fund, the actual expenditures onbeneficiaries was taken as a proxy for the resources reaching beneficiaries. For the Rural Worksfund beneficiaries resources were taken as expenditures nelt of materials costs. For the creditfund the net resources to beneficiaries was estimated as approximately 20% of loans plusrecoveries. This analysis shows that approximately 33% of project disbursements have beenincurred on administration and management expenses by N]DTF and POs, while 67% ofdisbursements have been spent on beneficiaries. This does not include the long-term economicand social benefits, such as employment opportunities created, income increased due to creditand rural works activities, and improved living standards. The typical range, internationally, foradministrative and management costs is 30-35 percent. Thus, the administration cost of theproject was within the typical range for projects of this nature.

11. Credit and Micro-Enterprise Development Fund (CMED). Under the credit fund theproject had disbursed SLR 462 million (US$ 9 million) IDA funds, SLR 173 million (US$ 3.3million) KFW funds and SLR 223 million (US$ 4.3 million) GOSL funds, through June 1997.The economic impact of the credit fund appears moderate.

12. On the positive side, according to project data, this fund assisted to generateapproximately 72 thousand agricultural businesses; 18 thousand micro/cottage industries; 10thousand livestock projects, 13 thousand service enterprises and about 465 other projects.Project data suggests that approximately 281 thousand individuals were employed in theseactivities. However, the number of net new jobs generated is not available in project data. Onthe negative side, the quality of the enterprises generated/developed, measured in terms of keyindicators like profitability, capacity to expand the quantity of output, improve the quality ofgoods and services, diversify into new lines of production, generate adequate incomes to liftindividuals out of poverty, and establish enterprises that are commercially sustainable in themedium to long term, appears to be weak. Research indicates that net profits of about 36% ofenterprises were typically about 500 rupees (US$8) per month. The majority of micro-enterprises encountered difficulties in business tasks like keeping accounts, obtaining inputs andmarketing outputs commercially. Over 50% of projects appeared to have failed within the firsttwo years of commencement. These findings suggest that the impact of the component onraising the incomes of the poor and creating sustainable, long-term employment opportunitieswere not met satisfactorily.

13. Rural Works Fund (community projects). Under this fund the project had disbursedSLR 730 million (US$14 million) IDA funds and SLR 87 million (US$1.7 million) GOSL funds,through June 1997. Project data indicates that, under the rural works fund, approximately 2000community projects had been completed through June 1997, while a further 1,600 projects wereon-going. According to project data, about 3.6 million person days of gross temporary

55 - Annex 1Page 4 of 26

employment were estimated to have been generated through the activities of this fund. Data onnet employment creation is not available. The projects under this fund covered irrigation andagro-wells, road construction, and water and sanitation. The irrigation facilities assisted ruralcommunities to expand agricultural production, benefiting the poor in two ways: (i) enablingthem to increase agricultural activity; (ii) improving employment prospects by enhancing thedemand for labor in the agriculture sector.

14. The roads constructed benefited poor communities by facilitating the delivery ofproduction inputs and improving access to markets. According to project data the total numberof end users estimated to have benefited from these rural works projects is approximately 1.5million. Project data also suggests that NDTF sponsored rural works projects cost approximately85% of the cost of similar government sponsored projects. However, the prospects for futuresustainability of the rural works constructed with NDTF assistance is uncertain. Irrigationfacilities appear to be repaired by villagers when needed, but regular, systematic maintenance hasnot been institutionalized. The maintenance arrangements for drinking water facilities and ruralroads seem to be weak. These are only maintained on an ad hoc basis. Maintenance funds forregular repair and upkeep do not appear to have been institutionalized.

15. Nutrition Fund. Under this fund the project had disbursed SLR 306 million (US$ 5.9million) IDA funds and SLR 8 million (US$ 0.2 million) GOSL funds, through June 1997.Project data indicate that the nutrition fund promoted basic nutrition programs in about 4,600GNDs and In-Depth nutrition programs in about 5,600 GNDs, with potential benefits toapproximately 4.8 million individuals (about 30% of the population outside the war affectedNorth-Eastern province). However, the data over the last 12 months still have to be verified byindependent surveys, because the NDTF/Nutrition department has serious management problemsand appears unable to maintain a reliable monitoring and reporting database. The nutrition fundactivities are likely to have made an important social contribution by: (i) creating awareness ofnutrition issues among the poor; (ii) providing assistance, including training, to monitor nutritionrelated indicators, especially among children; and (iii) delivering nutrition related services likeon-site feeding. Trends in malnutrition have been declining in the country during the 1 990s.While many factors are likely to underlie this trend, including general economic growth, projectdata (as far as available) indicate that the activities of the NDTF nutrition fund have had apositive effect on this trend. The economic benefits of reduced malnutrition are substantial andlong-term. They include lower morbidity, reduced health care costs, better schooling attainmentamong children, and improved future work capacity and labor productivity. Hence, the nutritionfund is likely to have generated positive long-term economic benefits. The main directbeneficiaries of this component have been predominantly women.

16. Human Resource Development Fund (social mobilization). Under this fund theproject had disbursed SLR 502.5 million (US$ 9.7 million) IDA funds and SLR 3.7 million (US$0.1 million) GOSL funds, through June 1997. According to project data, under this fund, morethan 58 thousand community groups were formed for savings and enterprise promotion. Theeconomic benefits of this activity, however, appear to be limited. On the positive side projectdata and research studies indicate that the percentage of individual and group savers haveincreased among project beneficiaries. On the negative side, the resources generated throughgroup savings schemes appear to be used mainly for consumption activities. The utilization ofthese resources for investment in productive income generating activities is low. The provisionof training to the poor to develop micro-enterprises was an important element of this componentin the design of the project. However, studies have questioned the quality of these training

-56 - Annex 1

Page 5 of 26

programs and their ability to assist the poor to initiate and sustain commercially viable micro-enterprises.

17. Employment and Policy Planning Unit (EPPU) and Poverty Monitoring Unit(PMU). Under this component the project had disbursed SLR 28.7 million (US$ 0.6 million)IDA funds and SLR 39.8 million (US$ 0.8 million) GOSL funds, through June 1997. Projectassistance to these two units, located in the Ministry of Finance and Planning (EPPU) and theMinistry of Plan Implementation (PMU), have generated the following economic benefits: (i)enhanced awareness of the importance of basing economic and social policies on rigorousresearch; (ii) improved the capacity of these units to collect, compile and collate statistical data,especially on economic issues related to poverty, labor markets, human capital and gender; and(iii) established links with social science researchers in academia and the private sector to assistin policy research. However, the capacity of these units to disseminate research findings and, inparticular, use research results in policy making, appear to require further strengthening.

18. Proposed IDA Study (NGO/PO survey and analysis). between October andDecember 1997, IDA will conduct a study (survey based) of all NGOs (about 250) and a sampleof beneficiaries to evaluate the social and economic impact of the project. The objective of thestudy will be to: (i) analyze NGO experience regarding design, implementation and impact of theproject; (ii) assess the impact of the project on the participation, targeting and social situation ofwomen and female headed households; (iii) assess the impact of the project on employment,earnings and living standards of beneficiaries. The outcomes of the study will be used for theICR. It was agreed that NDTF will assist with this study. The results will be made available toNGO/POs by NDTF after the final report has been submitted to IDA.

Building Institutional and Management Capacity

19. Organizational Structure of NDTF. The objective of creating a new apex organizationfor poverty alleviation to be implemented through NGO/POs proved to be difficult and theproject design took this insufficiently into account. NDTF did not succeed in creating strongproject ownership among NGO/POs until late in the project life and continued throughout theproject life to function more as a controlling rather than as a facilitating apex agency. Thisinduced resistance among NGO/POs to participate. However, most NGO/PO administrative andfinancial systems did not comply with reasonable accountability and audit regulations. Duringthe midterm project review, which was jointly undertaken by the three financing parties, arestructuring plan for NDTF was agreed. The structural reorganization of NDTF, which includedformation of a management team (4 directors and the managing director) consisting of povertyand financial specialists recruited from the private sector, took almost 18 months to complete (upto November 1996). It improved NDTF's performance, but came too late in the project life tohave a significant impact on the project's impact. Earlier in the project's life technical assistanceprovided to NDTF under the UNDP trust fund had yielded disappointing results without having asustainable impact on NDTF's management and monitoring effectiveness.

20. NDTF staff numbers grew to twice the originally projected size over the last threeimplementation years. In the Government's own review of the Janasaviya Trust Fund(September 1995, University of Peradiniya, Colombo), it is stated that "the increase in thenumber of divisions from seven to nine and the total number of employees to 183 persons -- orhaving 21 1 cadre positions -- certainly does not correspond the SAR projections of 1991,according to which there were to be seven divisions with no more than 72 employees". Mostsenior staff were recruited from the semi-public sector and did not have the necessary

Annex 1Page 6 of 26

professional skills for poverty alleviation and giving NGO/PO support. However, since acomprehensive staff training plan was not implemented, the newly recruited senior managementstaff were not in a position to improve project implementation significantly.

21. The restructuring of NDTF, as agreed during the joint midterm project review, took placefrom June 1995 to November 1996. Its objectives were to increase cost-effectiveness,professionalism, coordination and integration between operational divisions (Credit, SocialMobilization, Rural Works and Nutrition). NDTF's four operational divisions adoptedcompartmentalized approaches because of weaknesses in: project design, political climate and thecomplexity of building institutional capacity. At the same time the budget process and financialcontrols were not sufficiently organized to monitor costs both within NDTF and by NGO/POs.The complexity of developing and monitoring integrated budget and implementation plans forNDTF's operational divisions and for the many individual NGO/POs that requested fundingunder the project, created tensions within NDTF (between divisions) on one side and NDTF andNGO/POs on the other side. This hampered the building of trust and cooperation between NDTFand its NGO/PO clients.

22. By the third year of project implementation national elections were underway and thepolitical climate was changing. After the new government came to power it took another 6-8months before NDTF (its name was changed from JTF to NDTF in February 1995) could againfind its footing with a newly appointed managing director. Meanwhile the new government hadset up an investigation committee into the use of the social mobilization fund that involved 72NGO/POs. In September 1996, 22 of these social mobilization NGO/POs were approved forfurther project funding after a critical review by NDTF according to strict eligibility criteria.NDTF's effectiveness further decreased due to uncertainty about its future sustainability whenthe new government created the Samurdhi (poverty alleviation) program. However, thegovernment insisted that NDTF and NGO/PO activities were still necessary and very much partof its strategy. Not surprisingly NDTF staff became less motivated and this did not improveperformance. In spite of all these constraints NDTF appears to have contributed significantly tothe development and expansion of the NGO/PO sector in Sri Lanka.

NGOs/Partners Organizations working with NDTFProject Components 1992 1993 1994 1995 1996 1997*

Credit 4 36 101 149 149 149HR Development 162 33 72 69 62 22Rural Works 53 127 152 158 19 41Women & Child Nutrition 16 22 44 44 40 34

Source NDTF * till August 31, 1997

The extent to which NGOs/POs were able to integrate project components in their activities canbe illustrated as follows:NGOs/POs working with Nov. 1995 March 1996 August 1997one TF Division 98 77 122two TF Divisions 5 8 23three TF Divisions 17 17 12four TF Divisions 40 38 10Totals 160 140 167

Source NDTF * till August 31, 1997

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Credit Fund Component

The objectives of the credit component were to: (i) deliver financial and related services to thepoor to enhance self-employment opportunities; (ii) promote micro-enterprise development;(iii) increase incomes and earnings of the poor through group-based lending activities andentrepreneurial development.

23. The credit and micro enterprise development fund was the key component in the povertyalleviation strategy of the project. However, project disbursements under this fund up to June1997 were approximately US$ 16.5 million, just 48% of allocated funds. Only 45% of IDAfunds and 33% of KFW funds, the latter provided as a grant to GOSL, were disbursed. The lowdisbursement rates suggest that the financial potential of this activity to develop self-employmentopportunities and promote micro-enterprises among the poor was substantially under-utilized.

24. The impact of the component in assisting the poor to generate economically viablemicro-enterprises was limited. Research shows that only about 35% of micro-enterprises are ableto show profits after making loan installments and interest rate repayments. Micro-enterprisedevelopment activities appear to have greater likelihood of succeeding if credit is offered as partof a package involving: (i) training in entrepreneurship and business development; (ii) assistanceto install assured supply lines for raw materials and inputs; and (iii) provision of services toestablish market linkages for output. This should be taken into account in designing future creditbased poverty alleviation programs.

25. NDTF project data show that the loan recovery rate from NGOs/POs to NDTF wasapproximately 97%. This exceeds the SAR target of 95%. However, research studies suggestthat the loan recovery rate from beneficiaries to NGOs/POs is lower than 97%, implying thatNGOs/POs are repaying the NDTF by obtaining funds from other sources. This raises doubtsconcerning the economic viability of the relationship between the NDTF, NGOs/POs andbeneficiaries.

26. The Credit Monitoring and Evaluation Division (CMED) of the NDTF lacked adequateand reliable data on disbursement by NGOs/POs to borrowers; maturity of credit and repaymentschedules; re-scheduling procedures of NGOs and compliance by beneficiaries; and recoveryrates of NGOs/POs for on-lending to the poor. This made it hard for the NDTF to monitor thefinancial relationship between NGOs/POs and beneficiaries.

27. Sustainability of Credit Fund Operations. The Board of the NDTF has recommendedthat the Credit Fund be continued, within the context of a re-structured NDTF, after the closure ofIDA credit on December 31, 1997. Credit activities will be continued by utilizing theaccumulated finances of the Credit Risk Fund, the Liquidity Security Fund, interest earnings,recoveries of loans and investment of recoveries. Approximately SLR1,000 million has alreadybeen accumulated from these sources for the continuation of credit activities. These resourcesappear sufficient to form the financial base of a revolving credit fund, on a smaller scale than atpresent, to promote micro-enterprises, income generating activities and small businesses for thebenefit of the poor. However, the nature of the re-structured NDTF, including its managementframework for credit operations, staffing, operational procedures, terms of lending andrepayment, and monitoring and evaluation systems, have yet to be worked out. Given that theIDA loan is due to close in 3.5 months time, it is urgent that re-structuring of the NDTF becompleted in time to permit continuation of credit fund activities after closure of the IDA loan.

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Human Resources Development Fund Component

Objectives: The Human Resources Development Fund helps to (i) promote the productive use ofcredit through social mobilization and beneficiary training, and (ii) develop lending capacity ofNGO/POs through staff training and institutional support.

28. Group formation. Social mobilization activities aim to organize the poor in groups aswell as provide beneficiary training for the productive use of credit. The performance of groupformation during the project period is 18 groups per social mobilizer/year which comparessatisfactory with the NDTF performance target set in 1997 of 24 groups. By August 1996, about58 thousand groups (average 6 members per group) have been mobilized by 62 NGO/POs in 245DS Divisions. This included over 350,000 beneficiaries 70% of whom were women.

29. During the last three years of project implementation, the savings mobilization wassatisfactory with an annual growth rate of 25%. The annual savings per group member increasedfrom Rs300 (about US$5) in 1994 to Rs670 (about US$13) in 1997, with total savings of Rs472.0million (about US$9 million). Around 9,000 NGO/PO staff members were trained in socialmobilization at the cost of about Rs2,800 (US$50) per staff member. Developing lendingcapacity of NGO/POs, financial management! systems and other business related problems wereinsufficient addressed. In 1996, NDTF used some newly developed performance indicators andidentified 22 NGO/POs who would be eligible as full service partners on all project components(savings, credit, rural works and nutrition activities).

30. The effectiveness of the skills training (average of three day workshops) to beneficiariesis doubtful in order promote productive use of credit. Some 3,000 skills training programs havebeen conducted, reaching up to 74 thousand beneficiaries. The average training costs perbeneficiary were Rs680 (about US$12) for an average credit of Rs 8,650 (about US$155). Theduration of the workshops as well as the average training costs are minimal. The content of skillstraining focused mainly on production skills and neglected the problems beneficiaries faceregarding inputs, tools and marketing.

Rural Works Fund Component

The main objective of Rural Works Fund component (also called Community Projects) is toprovide wage employment opportunities to the poor and create productive assets, including themaintenance of rural infrastructure. The short term benefit of community projects was to providewage employment to augment the incomes of the poor. The anticipated long term benefits are toachieve improvements in the earning capacity and the standard of living of the poor.

31. The Rural Works Fund (also called Community Works) component successfully reachedthe poor with short term employment. 3.6 million person days have been paid for work done ofRs650 million (about US$12 million) to 95% of the beneficiaries earning less thanRsl,500/month (US$30/month). About 92% were unskilled laborers. However, gender balancecould be improved. Female workers contributed 61% of unpaid work, while benefiting only 39%of the paid work. More community projects could have been completed, if required funds hadbeen available in time. Between June - August 1997, only 32% of the required RWF funds werereceived by the implementation division from NDTF finance department for reimbursing costsmade. There will be a spill over of uncompleted community projects after December 1997. Only

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62% of the contracted projects are completed and monsoon rains (October - December) willaffect completion of the rest. Maintenance of completed projects by beneficiaries is irregular andmarginal. Awareness programs on the maintenance of the community projects were notconducted regularly and should continue to be executed by the relevant implementing parties.

32. The productive assets created under the Rural Works Fund have long term benefits(impact) on agricultural production and on economic and social services to the poor. Economicbenefits from minor irrigation systems (39% of rural works projects undertaken) lead to higheragricultural productivity. Rural roads (45%) give better access to output markets or economicand social services. The extent to which the poor benefit from rural roads depends on the accessto mass/individual transport. Beneficiaries indicated (in studies of community projectsundertaken by Samurdhi Balakayas -- Community Based Organizations) in October 1996 thatabout 40% profited from economic benefits through community projects and 45% from improvedmarketing facilities.

Nutrition Fund Component

|Nutrition component objective: to reduce serious malnutrition among the under-five children and||pregnant and breast-feeding women through community-based interventions.l

33. Data Collection, Reliability and Management within the NDTF Nutrition Division.Over the last 10 months allegations about serious management problems within the NutritionDivision of NDTF have come to light and were reported to this mission. These problems havecreated unrealistic data as well as troubled relationships with nutrition NGO/POs. This seems tobe further illustrated by the decision to start new nutrition (In-Depth) activities in 1997, while it isclear that the Government intends to close NDTF (except for the Credit Fund activities). TheIDA mission has advised the government to execute an independent audit of the performance(financial and nutrition activities) of the Nutrition Division because the problems have castdoubts on the reliability of NDTF's nutrition impact analysis over recent years.

34. The SAR identified Thriposha as "central to the program's success", and the governmentagreed to maintain Thriposha production and "allocate to the Trust as much of that offtake as thenutrition component would require." In fact, over the six years of operation only a very smallquantity of Thriposha was distributed to NDTF nutrition projects (in 1995) because of productionshortfalls and whatever was produced was distributed to MOH facilities. Thus, the nutritioncomponent of the Poverty Alleviation Project was implemented without the processedsupplement and the GOSL expended only 3% of its commitment.

35. The nutrition component has been able to reduce serious malnutrition, especially incommunities implementing the In-Depth strategy. This was achieved by means of aparticipatory methodology that included mobilizing the communities, carefully screening andselecting the most needy (poor and malnourished), relying on locally available commodities,organizing the villages (particularly the women), effective transferring of knowledge and skillsand making credit available for program participants. The In-Depth program demonstrated thebenefit of an integrated approach.

36. Coverage: Between the In-Depth, Basic and Samurdhi programs, the Women andChild Division trained over 24,000 volunteer nutrition workers, community scholars, humanresource developers, community leaders, and Samurdhi Niyajmakas and managers. The

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nutrition programs of the NDTF reached a total population of over 4.9 million (In-Depth - 1.1million; Basic - 2.4 million; Samurdhi - 1.4 million), or almost 31% of the population in 18 ofSri Lanka's 25 districts.

37. Impact: The previous supervision mission (March 1996) found that the moreintensive and integrated In-Depth strategy had the greatest potential for impact with over 56 %of the NGO/PO projects reporting more than 25 % reduction in the rates of seriousmalnutrition. Data on the individual NGO/PO In-Depth projects have not yet been madeavailable which prevents an evaluation of performance over the last year and a half. Data onthe Basic projects is of poor quality, but it appears that this more limited approach is lesseffective and less likely to be sustained. The Samurdhi effort was launched too recently todetermine its potential to affect changes in nutrition behavior. The effectiveness of the nutritioninterventions would have been greatly enhanced through better use of data for managementpurposes, smoother flow of funds and provision of funds for all stages of the In-Depth program(e.g., credit for income-generating purposes). The concerns expressed in 1995 about the cost-effectiveness of the In-Depth approach have not been substantiated. The consensus at present isthat the intensive strategy is what is required and, considering the results that can be achieved,is not expensive.

38. Future Direction: The experience gained in the Poverty Alleviation Projectstrongly points to the value of combining the capabilities and human resources of the Ministryof Health staff, the community-based Samurdhi Niyamakas and experienced NGO/POs toidentify and mobilize the poorest and most malnourished members of the community, totransfer the necessary knowledge and skills to them so that the nutritional status of theirchildren can be improved. The contribution of the NGO/POs to the training, support andmonitoring of community-level nutrition activities and the linkages established between many ofthe NGO/POs involved in the In-Depth program and the MOH's rural health facilities point theway for the future. The more recently introduced Samurdhi workers provide a community-based resource that could be helpful in organizing communities and bringing about lastingchanges in child nutrition practices. In support of this approach, a multi-media nutritioncommunications strategy focusing on a few key messages is required. In addition, pilot effortsto develop a locally produced low-cost weaning food should be pursued.

Employment and Poverty Policy Unit/Poverty Monitoring Unit

Development objectives: a) analyzing the economic growth and poverty implications of labormarket functioning in different sectors, and b) developing methodologies for monitoring nationalpoverty levels.

39. The required output of the EPPU-PMU was partially achieved. In two respects theobjectives for these two units was not met: (a) development of institutional capacity andmethodologies for analyzing the poverty effect of policies, sectoral programs and projects; and (b)development of operational guidelines for implementing poverty strategies. Labor marketanalysis executed by the EPPU identified unknown aspects of labor market functioning, and gapsin existing labor market information, useful for understanding how employment contributes togrowth and poverty. Such analytical work has helped develop better methodologies. ThePoverty Monitoring Unit (PMU) has developed performance indicators and methodologies totrack poverty, plans to enhance national capacity to monitor poverty and baseline analyses whichdescribe the regional and socio-economic characteristics of the poor.

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40. The lack of a concerted effort to evaluate the impact and effectiveness of poverty policyand programs, identified as a weakness at project preparation and listed as one of the SARobjectives, still persists. A better coordinated effort is required to enhance policy formulationand national planning and monitoring capacity at the regional/provincial levels drawing upon andbetter utilizing the data, methodologies and analytical strengths of EPPU/PMU. Further effortsare needed to analyze the poverty effects of policies, programs and projects which would helpassess their impact and effectiveness in alleviating poverty.

41. There is at present no formal institutional mechanism for feeding-in the findings ofmonitoring activities by PMU or analytical work by EPPU for much needed policy formulation,given that there are overlapping mandates among several ministries for poverty alleviation andemployment programs. GOSL efforts to develop more rational national strategies for povertyalleviation, employment generation and in general economic growth could well benefit from thewealth of analytical findings generated by PMU and EPPU.

Gender Issues Addressed and Outcomes

Development objective: (i) develop and strengthen national capacity to provide assistance to low-income women through gender training, (ii) provide assistance to low-income women andalleviate poverty among women

42. The development objective of providing assistance to low-income women has beenaccomplished to a large extent, although further work is needed to enhance the outcomes andhelp low-income women exit poverty. In particular, more rational poverty alleviation strategiesand public policies to counteract market failure in reducing gender disparities (particularly inwages and access to financial services) are essential to build on the gains of project levelinterventions.

43. NDTF and NGO/PO data and beneficiary surveys indicate that: (a) at least 72% of smallgroup members (nearly 740,000 households) are low-income women who have now beenmobilized and are engaged in groups savings and income generating activities; (b) about 10% ofthese women received skills development training, credit and established income generationprojects (57% of the total number of micro-projects established under the project); and (c) nearly840 thousand paid-wage days in rural works were provided to women (39% of total), and almost520 thousand (61%) days of voluntary (unpaid) labor for rural works construction. However,more male (58%) than female (42%) unskilled workers have participated in paid labor, whileconversely, nearly twice as many females (66%) than males (34%) have participated in unpaidlabor.

44. National capacity to provide assistance to low-income women has been enhancedthrough gender training provided to approximately 30% of NGO/POs on analysis andmethodologies to address gender and poverty issues, and in assessing women's participation ratesand the quality and impact of project activities on the lives of low-income women. Analyticalwork on high unemployment among women and gender and poverty by the EPPU-PMU hascontributed to better understanding of the gender, poverty and unemployment relationships.

45. Female participants interviewed in a survey of approximately 4,000 beneficiaries(conducted in early 1996) reported that project interventions had contributed to their

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empowerment in terms of: (a) overall positive impact on their lives (81 % of those surveyed); (b)economic improvements (65%); (c) enhanced self-reliance (54%); (d) improved decision-making,financial management, interaction with local level authorities, awareness levels, and socialnetworks, all of which contributed to their ability to improve their income levels.

Beneficiary Participation

Participation is a process through which stakeholders influence and share control overdevelopment initiatives and the decisions and resources which affect them (World Bank, 1996).

Targeted Beneficiaries. The ultimate beneficiaries of the project, as indicated in the SAR (p.1 8)was the population that fell below the poverty line (approximately 900,000 households or 28% ofall households in Sri Lanka in 1986/87). In particular, the poorest 10 percent among thesehouseholds, about 90,000 based on more rigorous screening criteria, were to be targeted.

46. Targeting Efficiency. There is sufficient evidence to indicate that project benefits werecaptured primarily by the intended beneficiaries, as per the targeting criteria specified under theproject (in the SAR), particularly from the Rural Works Fund and the Nutrition Fund.

47. According to data from NDTF's Rural Works Fund, approximately 28% of directbeneficiaries of rural works have been households with income below Rs.700 (about US$14),while 32% were food stamp holders (with monthly incomes ranging between Rs.700 - 1000), and15% were those with monthly incomes ranging between Rs. 1000 - 1,500. Similarly, the self-selection of unskilled labor (92% of the labor days deployed under the project) in rural worksconstruction suggests that the majority of participants were those within the target group (withlittle access to formal and regular work elsewhere). However, it is clear that, the non-poor toowould have benefited from rural works, since rural infrastructure leads to community-wideimprovements.

48. The Nutrition Fund had developed targeting criteria (based on a combination of income,assets and health/nutritional status) which were used when the project nutrition interventionscommenced at field sites. NGO/POs implementing the In-depth nutrition strategy select the 10poorest GNDs in a given DSA, ensuring that only the poorest and most needy households wereidentified and assisted, based on the criteria mentioned above. In the Basic nutrition strategy, bycontrast, NGO/POs conducted a household poverty survey to identify the poorest and most needyfamilies. These households form the target group for nutrition assistance.

49. Targeting Mechanisms. At project inception, household income levels needed to beverified by a certification by the Grama Niladhari (local government official), in order to beeligible to participate in project activities. NGO/POs and Human Resource DevelopmentWorkers identified the poor in this manner, and only those with GN certificates were included invillage level small-groups, and eligible to participate in the Rural Works Fund, HRD Fund orCredit Fund activities. The Nutrition Fund, however, devised a targeting method that wentbeyond income levels, and village surveys conducted by field workers identified the poorestbased on their health/nutritional status, income and assets.

50. Participation Outcomes. The project objective of using the strategy of small- groupformation to ensure the participation of the poor (SAR, p.1 7) has led to the mobilization of nearly

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180,000 households in 270 Divisional Secretariat Areas2. There is evidence from several sitesthat NGO/PO efforts to increase the participation of beneficiaries in identifying and managingmicro-projects (both for income generation and rural works)3 has enhanced the relevance of mostprojects for the poor. The high voluntary labor contribution alone, particularly for rural works,suggests a significant degree of ownership by project participants. Yet, there is little informationabout the overall quality and sustainability of small-group activities, and further evidence fromthe field is necessary to assess the level of commitment generated among poor communities tosustaining project activities and benefits beyond the life of the project. While femaleparticipation in every project component has been generally high (Approximately 72% of small-group membership; see Technical Annex 6), the adequacy of the assistance provided to ensureexit from poverty needs to be evaluated. Similarly, it is important to assess the extenit to whichthe poorest and most marginalized in target communities have participated.

51. Entry-Exit Mechanisms. Entry4 and exit5 criteria for participation had been defined inthe SAR (p. 19), but were not revised with the change of entitlement programs, on which suchcriteria was based. Therefore, entry and exit criteria were not used rigorously by the project, norwere there attempts to test the most appropriate exit mechanisms for beneficiaries (e.g., theduration of assistance to ensure optimal capacity and self-reliance built among beneficiaries),which would avoid a dilution of the benefits from assistance provided. Objective measures andindicators to determine the length, and extent of assistance required in different socio-economiccontexts was not developed by the project. As a result, it is difficult to determine to what extentbeneficiary capacity has been achieved to influence the direction and execution of their owndevelopment, rather than merely receiving a share of project benefits, relying continuously onexternal assistance.

52. Lessons Learned. The general lesson from social funds elsewhere is that the quality andextent of community participation builds-in a sense of ownership by project beneficiaries,enhancing the sustainability of outcomes. The key lessons for Sri Lanka are: a) although it hasbeen estimated from available data that leakage of project benefits to the non-poor has beenminimal, a more rigorous method of poverty mapping to identify and prioritize the poorestpockets in the country would have rendered the targeting even more efficient; b) the participatoryapproaches adopted by NGO/POs as compared to local government, particularly in rural worksconstruction have been more demand-led and client responsive; c) despite a few weaknesses inpromoting participation through NGO/POs as intermediaries, the project has served as apioneering model for demonstrating the benefits of participatory processes by mobilizingpreviously under-served low-income communities and tapping their productive potential; d)

2 There are a total of 300 DSAs in Sri Lanka, and essentially this means that a coverage of 90% of DSAs was achieved at peakproject operation, up to 1995.

3 As compared to the early years of the project when, in the absence of NGO/POs willing to participate in the project, much of thiswork was coordinated through local government, resulting in top-down, rather than demand-driven projects.

4 The entry criteria for beneficiaries defined at project start-up was income levels -- defined as Rs. 1458 per household, parallel tothose in the Janasaviya Program (JSP). Additional criteria were agreed upon between the Bank, GOSL, NDTF and NGO-POs in theearly stages of project implementation: a) Grama Niladhari certificates attesting to tlhe income levels of beneficiaries to ensure thatthey were below the poverty line; and b) health/nutrition levels and household assets criteria used by the nutrition division of theproject.

5 The exit mechanisms for beneficiaries defined in the SAR were: a) beneficiaries would graduate from the program within the two-year JSP entitlement period as soon as the family's income level reaches Rs. 1,500 per month on a sustained basis; and b) thoserefusing (at any point) to participate in a productive activity would be dropped from the program and become eligible for food stampsonly.

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guidelines for entry-exit of beneficiaries are required in order to make maximum use of limitedresources, NGO/POs assistance, and build capacity and self-reliance among low-income groups;and d) periodic and objective evaluation of the rate and quality of participation, including that bywomen and poorest/marginalized groups are required to ensure equitable access on one hand, andthe desired empowerment outcomes.

Financial Covenants Performance Outcomes

53. Over the life of the project the Government's implementing unit (NDTF) showed, attimes, delayed and partial compliance to the financial covenants, specified in the DevelopmentCredit and the Project Agreement (CreditNo.2231-CE). The project accounts, audited byCoopers and Lybrand throughout the project life, in accordance with the International Standardson Auditing did not have major qualifications. Nevertheless they were delayed in beingsubmitted to IDA within the four months time period specified in the Credit Agreement. Further,internal controls at NDTF proved to be inadequate and ineffective at times. As part of the internalcontrols, NDTF's internal audit division should have had a more aggressive role, at least in termsof screening the NGO/POs for having adequate financial accounting systems.

54. Audit Covenant Pertaining to the Partner Organizations. Under the Credit FundComponent, NGO/POs were required to maintain adequate accounting and financial reportingsystems. They were also required to have these audited annually by an independent auditor inorder to be eligible for further funding under the Credit Fund (2b ofpart A in the schedule to theProjectAgreement). However, only partial compliance has been shown. The main reasons are:(I) NDTF only started to critically monitor credit NGO/POs compliance after the mid termproject implementation review mission (May 1995; jointly executed by the three financingagencies). Even after the mid term review mission, NDTF did not follow up aggressively enoughfor the covenant to be effective in monitoring credit performance.

55. Following a request by the midterm project implementation review mission, NDTFcarried out a review of the credit NGO/POs. IDA also insisted that NDTF should have CreditNGO/POs audited by an external audit firm. Coopers and Lybrand reviewed 77 credit NGO/POs(over the period of January 1994 to March 1995) which accounted for more than 85% of theCredit Fund's disbursements as of December 1995. As per their review, eight out of even the 12large credit POs did not maintain adequate accounting records in line with generally acceptableaccounting practices and five did not have their most recent accounts audited by an independentexternal auditor.

56. Lessons for the Future Related to Financial Covenants. As per new IDA guidelines(OP/BP 10.02), a critically review is required during appraisal of the Financial Managementcapacity and internal controls of the project implementing unit. This should also ensure thatsound financial management systems are in place before the Credit is declared effective.

57. Further, if the systems are found to be inadequate, particularly at NGO/PO level,technical assistance should be provided to enhance their financial capability. After TA has beenprovided, monthly or quarterly follow up financial reports should be required (from NGO/POs) tomonitor progress of compliance.

58. At the NGO/POs Level:a) The scope of the work of the external auditors should be extended so that

NGO/PO accounts are audited by the same auditor; all NGO/POs should be

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required to maintain separate and adequate accounts in accordance with thegenerally accepted accounting practices; auditors of NGO/PO accounts should beacceptable to the IDA.

b) NGO/POs should agree on a time period for the submission of such audit reportswhen they first obtain funds under the Project; this should be included in formalagreements; prompt action mechanisms should be activated by the project unit,such as sending warning letters and eventually suspending disbursements, if theaudit reports are not submitted within the specified time period.

c) Small NGO/POs situated in the rural areas could be given financial assistance tofacilitate annual audit of their accounts by acceptable auditors; if such audits arenot feasible, particularly for NGO/POs with small financial support from theproject fund and for NGO/POs who are situated in very rural parts of the country,alternative independent verification methods should be considered and agreedamong all parties.

Monitoring Performance and Capacity of NDTF and NGODs/POs

59. Weak coordination between NDTF divisions resulted in an ineffective managementinformation system that impaired the capacity to effectively monitor project performance andimpact. Project Management costs exceeded the estimated totals and proportions made at projectdesign. Administrative and management costs were 156% of original IDA project estimates(197% of total project estimates). This represented 2% of IDA disbursements under the project.

60. Though themonitoring system of NDTF 1 DepartmentofNationallNDTF has improved Planning/PMUthroughout the project, 0it is still not adequate to ( 4 OPO assess the projects'effectiveness and itsimpact on the poor. 5The monitoring system c i nericsarieswas not used as a tool

o I. NDTF, an apex organization, interacts with NGOs/POs and beneficiaries to monitor andfor decision-making, assess the efficiency and effectiveness of the project activities to alleviate poverty. NDTFmainly because timely approves NGO/PO sub-project annual workplans and budgets.data analysis were not 2. NDTF monitors NGO/PO activities based upon which it makes operational decisions.

3. NGO/PO delivers services to beneficiary and monitors progressavailable at many 4. NDTF periodically monitors beneficiaries through regional coordinators to assess project

instances of the project performance and impact

life. Better interaction 5. PMU collects information for national indicators and develops strategies

and information exchange between NDTF and NGOs/POs would have improved the capacity toassess implementation performance.

61. Project partners (NGO/POs) also had weak monitoring systems and required intensivetraining in measuring effectiveness and efficiency of implementation. However, coordinationamong NGO/POs was lacking during most of the project life. This contributed to the lack ofmonitoring quality and made it difficult to reach joint (NDTF and NGO/POs) decisions on how toimprove accountability and transparency.

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Samurdi Program and Links with NDTF Activities

62. The Samurdhi Program is the government's main poverty alleviation program in thecountry. Samurdhi has two major strategies: (i) income supplements to the poor; (ii)development of social and economic infrastructure through rural community works, delivery ofcredit for micro-enterprises and nutrition interventions. According to goverment data, theSamurdhi program is in operation in 18 out of the 24 districts in the country, and about 1.8million families received income supplements. Of these families, about 62% receive incomesupplements of SLR500 (US$8) every month; about 1.5% of families receive SLRIOOO (US$16)every month, and the remaining families between SLR100-200 (US$1.6-US$3.2) every month.Overall this covers about 9 million individuals (based on the average family size of 5 persons).This implies that almost 50% of the population benefits from Samurdhi. The activities of theSamurdhi Program are too recent to enable evaluation of their impact and efficiency.

63. Under the Samurdhi Credit program, two schemes have been initiated: (i) SuraturaDiriya, which provides loans at 10% interest to low-income, non-Samurdhi beneficiaries; and (ii)Sasana (Samurdhi development loan scheme), which offers loans to Samurdhi beneficiaries forsmall agriculture, industrial, trading and service activities. Loans have a maximum ofSLR50,000 (about US$850). This scheme is combined with a Samurdhi savings society, inwhich credit seekers are compelled to save a minimum of SLR 2000 (US$34) per family toqualify for credit under Samurdhi. Some of these have been financed under the project byNDTF. There are about 80 such compulsory savings societies throughout the country.According to Samurdhi data, savings mobilized up to now amount to about SLR 1,400 million(US$24 million). Under the Samurdhi Economic Infrastructure Development Program a series ofcommunity projects in irrigation, roads, water and sanitation have commenced. By end 1996,according to Samurdhi data, community projects had been completed in 18 districts at a totalexpenditure of about SLR 211 million (US$3.6 million).

64. Samurdhi is administered through the Samurdhi Authority of the Ministry of Sports,Youth Affairs and Samurdhi. Samurdhi activities are primarily implemented by approximately28,000 Samurdhi Niyamakas (animators in the villages, who organize the (CBO) Balakayas,nominate families eligible to receive Samurdhi benefits, and generally function as the thegovernment's information network at village level). The government has also appointed about1,500 Samurdhi managers, to whom the Niyamakes report regularly. The Samurdhi managersreport to the Divisional Secretariats. The government's target is to eventually arrive at a total of36,000 Samurdhi Niyamakes. The 1997 budgetary allocation to Samurdhi is about SLR 8,000million (US$133 million). This is a large allocation, as it is approximately 62% of GOSLexpenditure on education, and 67% of GOSL expenditure on health care. Out off total Samurdhibudget, approximately SLR 900 million (US$15 million) is spent on salaries of Samurdhiofficials (including Samurdhi Niyamakas). The Niyamakas are currently employed on a monthlyallowance of approximately SLR 3000 (US$50, about 40% of the starting salary of a governmentofficial), and are mainly youth in the age range 18-30 years. There is considerable pressure onGOSL by the Samurdhi Niyamakas to be absorbed into the regular administrative service of thecountry. The GOSL has thus far resisted this pressure. However, there is a strong possibility thatpolitical pressure will compel GOSL to absorb them into the government service in the future.This would more than double the salary cost of the Samurdhi program (their 40% would have tobe increased to 100% of starting salary level), and add to pressure on the government budget.

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Page 17 of 26

65. In late 1995 the Government requested IDA to approve funding of Samurdhi activitiesunder the project. IDA apporoved on condition that (I) project eligibility criteria would bestrictly applied; and (ii) Samurdhi activities should be evaluated by independent consultants. Theevaluation was submitted to IDA late 1996. NDTF approved financing for sub-projects bySamurdhi Balakayas (Community Based Organizations) under the Rural Works and NutritionFunds. The conclusion of the evaluations were mildly positive. Samurdhi type activities were ascost-effective as the other funded activities by NDTF.

66. In 1997 NDTF approved and funded about 640 Samurdhi Rural Works sub-projects, ofwhich about 30 are completed to date. NDTF/RW funds allocated in 1997 are about SLR132million (US$ 2.2 million). An evaluation of about 50 Samurdhi RW projects funded by NDTF(over 1996 and 1997) concluded that these were needs-based, Samurdhi Niyamakes providedgood leadership according to the villagers and Divisional Secretaries have ensured effectiveutilization of resources. In 1996-97 a total of 923 RW projects were approved by NDTF. Todate most are still in progress. NDTF trained about 2,500 Samurdhi Niyamakes and 400Samurdhi managers in nutrition awareness creation, weight measurement of children andpreparation of plans to alleviate key nutritional problems. NDTF supported Samurdhi nutritionactivities in about 40 DSDs, covering a population of about 1.4 million.

Next Steps in the Preparation of the Implementation Completion Report (ICR)

67. The project closure date is December 31, 1997. Agreements and next steps forpreparation of the project ICR (in chronological order):

a) NDTF will immediately inform allfunded NGO/POs individually and set areasonable deadline (preferably before the end of January 1998) forsubmission offinancial claims under IDA projectfinancing (Statements ofExpenditures -- SOEs). NDTF management will closely monitor timelysubmission by NGO/POs of their SOEs.

b) NDTF (MD and Board of Trustees) agreed to request Coopers and Lybrandsin the coming weeks to deliver the 1997 audit reports as soon as possible afterthe closure of the IDA credit. Coopers and Lybrand informed the mission thatthis was possible provided ND TF will make the necessary documents availablein time.

c) NDTF will assist IDA to conduct a NGO/PO survey in the period of Septemberto December 1997. Objectives of the survey are (i) to analyse NGO/POexperience regarding design, implementation and impact of the project, (ii)analyse the profile of beneficiaries and the project's impact on their economicand social situation, and (iii) special emphasis will be placed on analysing theproject impact on women's economic and social benefits. All NGO/POsfunded under the project will be surveyed. The beneficiary survey will be on asample basis. Mr. Harsha Aturupane (consultant to IDA) will execute thesurvey and analyse the results, which will be made available to NDTF and allNGO/POs. The terms of referencefor the survey have been agreed upon withthe government. The results of the survey will be included in the ICR.

-69- Annex 1

Page 18 of 26

d) The GOSL (Board of Trustees and MD/NDTF) will submit to IDA before theend of January 1998 the project's 1997 implementation progress report andupdated information as per technical annexes to this aide-memoire.

e) The Government's part of the ICR (part 2) will be submitted to IDA before theend of Februaryl998. The Secretary Finance and NDTFBoard of Trusteeshas appointed Messrs. H.N. Perera (current Acting MD/NDTF), Tennekoon(MD/NDTF) and Dr. Ratnayake (Secretary MYSRD and SamurdhiCoordinator) to coordinate the preparation of the government's ICR (part 2).

J) IDA will submit its draft ICR (part 1) to GOSL for comments before the end ofFebruary 1998, based on updated technical annexes as attached to this aide-memoire (September 1997) and project performance indicators.

g) The Government (MD/NDTF) will submit to IDA before the end of February1998 (or or as soon as possible thereafter, but not later than April 30, 1998)the required 1997project audit reports (SOEs, Financial Statement of theTrust, Special Account).

Table 1: Proiect Disbursement Progress (IDA+KfW+GoSL) -As of June 30,1997

In millions US$ In million Rs.SARI" Disbursements __SAR_' 4Disbursements__ _ _ _ _

Est 1991 1992 1993 1994 1995 1996 6/30/97 TOTAL Esfimats 1991 1992 1993 1994 1995* 1996 6130197 TOTAL f

CreditFund 20.0 0.02 1.17 1.21 4.26 1.06 1.12 8.84 1,020.0 1.0 55.8 60.2 221.8 58.7 64.9 462.Human Resource Dev. Fund 12.0 0.34 1.34 3.67 2.61 1.51 0.38 9.84 612.0 15.0 64.0 182.4 135.6 83.6 21.9 502.5Rural Works Fund 14.7 1.13 2.10 3.26 3.60 3.17 0.93 14.20 749.7 50.1 100.6 162.2 187.5 175.7 54.0 730.1Nutrition Fund 9.5 0.06 0.32 0.91 1.83 1.85 0.78 5.75 484.5 2.7 15.2 45.3 95.2 102.5 45.4 306.3Employment Policy Planning Un' 0.8 0.21 0.21 0.07 0.07 0.08 0.06 0.70 40.8 9.2 10.1 3.7 3.9 4.3 3.4 34.Project Management 0.5 0.23 0.20 0.16 0.08 0.07 0.06 0.81 25.5 10.4 9.8 8.2 4.0 4.1 3.2 39.

Totar 57.5 1.99 5.34 9.29 12.46 7.75 3.31 | 1 2,932.51 88.4 255.5 462.0 548.0 428. 9 192.8 2.075.

ICreditFund' KtVV 10.01 0.1 0.5 1.9 1.0 3.5 [ 505.01 4.5 26.1 92.3 50.0 172 .9

CreditFund 5.0 2.91 0.04 2.12 5.06 252.5 120.3 1.6 101.2 223 .1Human Resource Dev. Fund 2.5 0.005 0.005 0.02 0.04 0.00 0.07 126.3 0.2 0.2 1.2 2.0 0.1 3.7Rural Works Fund 1.6 0.01 0.12 0.31 0.39 0.40 0.35 0.10 1.70 80.8 0.6 5.5 14.9 19.4 20.8 19.5 6.0 86.7 .Nutrition Fund 4.7 0.12 0.02 0.01 0.15 237.4 6.0 1.0 0.7 7.7Employment Policy PlanningUn 0.6U 0.22 0.03 0.25 30.3 9.6 1.5 11.1Project Management 3.1 0.44 1.05 0.88 1.24 1.15 1.09 0.53 6.38 156.61 18.2 46.5 42.1 61.5 59.9 60.5 31.0 319.7

Total ''17.5 3.37 1.43 3.34 1.77 1.59 1.46 0.65 883391 139.3 63.4 159.7 88.1 82.7 81.1 37.7 552 .0

Cred Fund 1 35.0 2.91 0.16 3.83 3.07 5.23 1.06 1.12 17.36 1,777.5 120.3 7.1 183.1 152.5 271.8 58.7 64.9 858.4HumanResourceDv.Fund 14.5| 0.005 0.34 1.34 3.69 2.65 1.51 0.38 9.91 738.3 0.2 15.2 64.0 183.6 137.6 83.7 2i.9 506.2Rural WorksFund 16.3 0.01 1.25 2.41 3.65 4.00 3.53 1.03 15.90 830.5 0.6 55.6 115.5 181.6 208.3 195.2 60.0 816.8Nutrition Fund | 14.2 0.06 0.32 1.03 1.83 1.87 0.79 5.90 721.9 2.7 15.2 51.3 95.2 103.5 46.1 314.0EmploymentPolicyPlanning Un' 1.41 0.42 0.24 0.07 0.07 0.08 0.06 0.95 71.1 18.8 11.6 3.7 3.9 4.3 3.4 45.7 X,ProjectManagement 3.6 0.44 1.28 1.09 1.40 1.23 1.17 0.59 7.191 182.1 18.2 56.9 51.9 69.7 63.9 64.6 34.2 359.4

Total 85.01 3.37 3.53 9.23 12.91 15.01 9.21 3.96 57.22L 4,321.4 139.3 156.3 441.3 642.4 780.7 510.0 230.5 2,900.5

Includes (as of Jun. 97) 1996 | 1997 | TotalSoE with IDA

1. Original SAR estimates SoE with Central Bank2. Percentages were calculated on the basis of US$57.5 million SAR estimate and US$11.03 million for 1997 which is the SoE of EPPU (under preparation)

amount budgeted for 1997. Actual % of SAR is computed on the basis of the average yearly US$ conversion rate. SoE with NDTF 0.47 0.47 |3. KfW adjusted its credit by cancelling about US$ 2 in mid 1997 SoE to be prepared 1.11 3.40 4.514. IDA credit of SDR 6.5 million (about US$10 million) was cancelled in December1996 (in US$ million) 1.58 3.401 4.98 X

In December 1996 closure date of IDA credit was amended to December 31, 1997 - US$ 4.98m is included in total US$40.14ml IDA disbursement. |GOSL disbursements include Rs. 220 million (US$5 million) for the Credit Risk Fund.Loans given out of PO loan recoveries of Rs.221 .9m (US$ 4.4m) have not been considered as disbursement out of donor fundsAll Fixed assets and the divisional overheads of the NDTF are included in Project Management Funds.Source: NDTF Finance Department

Table 2: Disbursement Progress and Lag as per Estimates - 1992 to June 30, 1997(including US$4.98 million in SoEs under preparation)

Total Disbursement . Original SAR Estimate Total IDA Disb. Original SAR EstimatePer Year Cumulative Per Year Cumulative Total Disbursement Lag Per Year Cumulative Per Year Cumulative IDA Disbursement Lag

Year 1991-97 1991-97 1991-971 1991-972'3 Per Year Cum. (92-97) 1991-97 1991-97 1991.971 1991-97 Per Year Cum (92-97)-199i1 i 3.37 3.37 1991.97 _179 911992 3.53 6.89 11.90 11.90 70.4% 42.1% 1.99 1.99 6.40 6.40 68.8% 68.8%1993 9.23 16.12 15.14 27.04 39.1% 40.4% 5.34 7.34 9.40 15.80 43.2% 53.6%1994 12.91 29.03 17.91 44.95 27.9% 35.4% 9.29 16.62 12.10 27.90 23.2% 40.4%1995 15.01 44.04 18.65 63.60 19.5% 30.7% 12.46 29.08 13.90 41.80 10.4% 30.4%1996 9.21 53.26 21.50 85.10 57.2% 37.4% 7.75 36.83 15.70 57.50 50.7% 36.0%1997 3.96 57.22 19.84 73.10 70.4% 21.7% 3.31 40.14 10.67 47.50 68.9% 16.0%

57.22 - 73.10 - 40.14 - 47.50 -

Fig.2a: Annual Cumulative Disbursement against Fig. 2b: Annual Cumulative Disbursement againstCumulative SAR Estimates (91-97) - IDA+KfW+GoSL Cumulative SAR Estimates (91-97) - IDA

100 ̂ 60m

604-

30-

1991-97 109

:°/ Disb~ ursement Lagl _9_ _KfW adjusted its credit by cancelling about US$ 2 in mid 1997 as per Estimate '% Disbursement Lag oIDA credit of SDR 6.5 million ( about US$10 million) was cancelled in December 1996 s per Es eIn December 1996 closure date of IDA credit was amended to December 31, 1997Low disbursement in 1996 were due to: 1. 1997 budget was set at extension of credit in December 1996

Presidential inquiry into HRD fund spent by PoslNGOs, 2.1997 cumulative estimates include cancellations of US$10 million of IDA funding and US$2 million of KfW funding CDDelays in extemal audit of Credit PoslNGOs (took over 12 months), and 3. Calculation of estimates for 1997: Original Total Estimate-Cancellations-1 996 cumulative disbursementSpending stopped on HRD activities and training. 4. IDA Calculation of estimates for 1997: Onginal Total Estimate-Cancellations-1996 cumukative disbursement

Source: NDTF Finance Deoartment

Table 3: IDA Disbursement - Actual vs. Estimates

(US$ Millions) (SDR Millions)FY Original Formally Revised Actual Original Formally Revised Actual

Disbursement Disbursement Disbursement Disbursement Disbursement DisbursementEstimate Estimate Estimate Estimate

1991 0.0 0.0 0.0 0.0 0.0 0.01992 6.4 3.0 3.0 4.5 2.1 2.11993 9.4 0.0 0.0 6.6 0.0 0.01994 12.1 4.3 4.4 8.5 3.1 3.11995 13.9 7.0 7.5 9.8 5.0 5.01996 15.7 9.0 9.6 11.0 6.4 6.51997 0.0 14.7 11.9 0.0 10.4 8.41998 0.0 10.0 0.0 0.0 7.1 0.0

Total 57.4 47.9 36.4 40.5 34.1- 25.1

-1 2

10 / / -

-Original Disbursement Estimate

1991 199 '' ' t'-f \ D*'i 'Revised Disbursement Estimate~~~~~19914 f9!I

999 u Actual Disbursement

1998

Source: World Bank

Table 4: Cost Effectiveness Analysis of Proiect (Jan94-Jun97)

Table 4a: Not including Project Management Costs1 Table 4b: Including Project Management Co

Cumulative 1994-1997 (Million Rs. and %)' Annual 1994-97 (Million Rs. and %)

HRD RWKs WCN Credit TOTAL 1994 1 1995 1 1996 1 1997 TotalNDTF Expenditures 30.2 8% 16.4 3% 9.5 3% 16.0 5% 72.1 5% 12% 13% 13% 17% 223.3 13%POINGO Expenditure 124.0 31% 53.3 11% 124.6 40% 30.5 9% 332.3 21% 22% 17% 22% 17% 332.32 20%Beneficiary 241.5 61% 417.6 86% 175.1 57% 307.5 87% 1,141.6 74% 65% 71% 65% 66% 1,141.59 67%

Total 395.7 100% 487.2 1oo0% 309.2 10oo 353.9 100% 1,546.1 100% 100% 100%° 100% 100% 1,697.2 100%

I...

Fig. 4: Cost Effectiveness Analysis of Project (including management costs)

Cost effectiveness analysis of the Project was calculated as follows: the amount of NDTF administration and managementexpenditures, PO/NGO administration and management expenditures, and an estimate of the value of resources flowing to theI beneficiaries was calculated separately for each category. The relative percentages of these amounts were then calculated. Thepercentage of administration and management costs was compared to similar percentages of projects in other developingcountries (Average of 30-35%).

1. Project Management Costs cover Intemal Audit, Finance Division and Managing Director's SecreteratProject Management Costs were incurred for all divisions together. In consequence, these costs can't be allocated by fund.Source: NDTF Finance Department

Table 5a: Project Performance Indicators per Component (Credit Fund)

1991 1992 1993 1994 1995 1996 Jan97-Jun97 TOALMain Functional areas Rs(m)jNo Rs (m) No. Rs (m) No. Rs (m) I No. Rs (m) I No. Rs (m) No. Rs (m) No. Rs .,i No.1. Loans to BENEFICIARIES . 5.49 1898 90.73 14878 225.90 5 330.90 38,67 19900 20844 76.60 8863 928.6Z

a. Agri business' 3.24 1,120 70.74 11,600 151.10 18,731 210.00 24,232 112.00 11,593 37.79 4,297 580.23b. Industries 1.28 441 7.55 1,238 33.20 4,235 51.00 6,037 42.00 4,623 13.13 1,893 15V0:8c. Livestock 0.44 153 6.19 1,015 19.40 2,461 29.00 3,434 15.00 1,594 10.18 1,203 862 :d. Services 0.50 172 5.46 896 22.00 2,876 40.00 4,868 28.00 2,950 12.25 1,441 - 142e. Other 0.03 12 0.79 129 0.20 112 0.96 102 2.00 84 0.25 29

2. Recoveries (Capital) 1.00 10.00 63.00 202.00 165.00 101.33. Recovery Rate PO to NDTF 100% 97% 100% 97% 97% 97% 97%4. Recover Rate Beneficiary to PO 100% 93% 93% NA5. MED Training Program =

a. Skill Development 0.67 42 0.22 14 1.20 101 83b. Training of Trainers 0.32 3 0.10 1 OA2c. Other 7 3.42 228 0.84 56 0.21 37 38 * 4v 4 , U

6. Partner Organizations 4 36 101 149 149

I ncludes seasonal cultivation loansSource: Planning & Monitoring Dept.

in

is ;o t

inR

Table 5b: Project Performance Indicators per Component (Human Resource Development)

1991 1992 1993 1994 1995 1996 Jan97-Jun97Main Functional areas Rs(m)No Rs () N1o. RS (m) NO. RS (m) s NO ) RS (m) N O Rs (m) No.' Rs (m) I No.

1. No.of Div.Secretarat Divisions - - 162 270 270 270 245 52

2. Numberof PO Staff Training Programs - - 2.70 18 10.40 81 9.80 94 1.80 1 1 - 0.10 13. Number of PO Training Participants 894 2,570 4,815 577 424. Number of Beneficiary Training Programs 13 30.70 109 131.90 906 83.30 939 55.70 - 5.40 1,1055. Number of Beneficiary Training Participants 351 3,242 24,632 23,055 22,7454.BENEFICIARIESGroups Formed 1,026 6,534 37,727 46,565 59,464 25,833No. of Members - -6,156 39,204 241,101 285,321 365,074 752a. Males 3,694 15,682 91,618 108,422 105,923 49,930b. Females 2,462 23,522 149,483 176,899 259,151 127,593

5. Savings Mobilized 0.36 1.25 71.74 129.12 176.4 946. Human Resources Developers*- 342 1,089 1,507 1,449 1,068 2407. Other Field Workers- 127 850 1,130 425 1,6328. Programme Coordinators** 46 170 278 320 649. Parner Organizations 162 33 72 69 62 22

Source: Plnning & Monitodnn Det

Employees of Partner OrganizationsSource: Planning & Mon;tor;nq Dept.

t.

kX~P

Table 5c: Project Performance Indicators per Component (Rural Works)

1991 1992 1993 1994 1995 1996 Jan97-Jun97 TOTALMain Functional areas Rs (m INo Rs (m) I No. Rs (() |No . Rs (m) I No. Rs (m) I No.1. No. of Projects Commenced/initiated 39.35 # 128.10 326 276.67 854 430.20 1,024 219.20 649 95.13 415 131.95 639 i - 38 52. No. of Projects Completed 30.11 # 99.52 252 188.50 567 250.53 625 107.37 331 57.37 279 5.65 273. No. of Projects On Going 5.65 8 26.28 68 74.98 223 143.46 307 99.22 283 37.10 131 126.30 612 7 $Z9&4. No. of Projects Cancelled 3.59 3 2.30 6 13.39 64 36.21 92 12.61 35 0.66 5.0 - p2es5.BENEFICIARIES

No. of Temp. Employment -Person days 1,524,866 315,414 681,455 1,128,558 .. ., . .No. of Direct Beneficiaries -Families 219,403 150,310 131,498 190,455Paid female participation (Cumulative) 33% 34% 39% 40%,Unpaid female participation (Cumulative) 50% 55% 58% 59%

6. Materal/Labor ratio 48:52 48:52 48:52 53:47 53:477. Partner Organizations 149 204 235 99 41

No. of NGO/CO/CBO 15 22 52 77 80 0 * .No. of DS/PS (govt)1 53 127 152 158 19 41

Source: Plannina & Monitorina Deot

1. Divisional Secreterats and Pradeshiya SabhasSource: Plannina & Monitorna Dept

oD

kq 0

Table 5d: Project Performance Indicators per Component (Women and Child Nut_tion)

1991 1992 1993 1994 1995 1996 Jan97-Jun97 TALMain Functional areas Rs (m|N R(m ) No o. Rs (mi) No. Rs (m) No. . Rs Rsm(mI) No. s (i) No.

GNDs GNDs GNDs GNDs GNDs1. Basic Nutrition Program 7.00 358 14.00 1280 54.50 2747 46.00 23502. lndepth Program 2.00 220 10.00 298 40.00 1506 52.00 1806 82.56 18064 20.50 1690

. raining Programs or votunteers I ora- - 5.9_ _3 1._0 11a. Agriculture & Animal Husbandry 1.00 20 0.30 3 0.13 6b. Eaiy Childhood Development 1.00 13 0.40 4 0.14 6

c. Pre-School Training ~~~~~~~~~~2.00 1 1 0.60 3d. Health & Sanitation 1.90 19 0.30 1 0.07 5

4. Gender Sensitization Training - 1.50 60 1.50 60 0.50 34b ar ner Organizations- -

Basic ~~~~~~~~~~~~~~~~~~~~72 (SM partners) 52 86lndepth ~~ ~ ~~~~~~~16 22 44 44403

Reduction of serious malnutrition (In-depth Avg) 48% 30% 25% 23%Avg. Participation rate of mothers & children 78% 85% 87%Avg. incidence of Low Birth Weight 19% 16% 14%No. of children under 5yrs (Basic) 9,3081 41,434 123,000 193,440

(lndepth), 99,3331 169,800 260,000 146,283 101,588

Notes:

^ GND -Grama Niladhari Division

2. Esfimated expenditure in 3000 GNDs

3. Esftmated expenditure in 1806 GNDs

4. Includes 284 Samurdhi Link Community Projects

Source: Plannina & Monitoring Dept.to

Q 8008

- 78 -

Annex 2Page 1 of 1

PROJECT OBJECTIVES

The major project objectives were to:

* increase income earning opportunities among the poor; and* improve the malnutrition status of pregnant and lactating mothers, and children under 3 years

of age (raised at project mid-term to 5 years of age).

To achieve these goals, the project included five sub-objectives:

* re-orient and expand existing institutional capacity to serve the poor, and create additionalcapacity;

* develop credit and other services for promoting self-employment and micro-enterprisedevelopment through group-based lending and entrepreneurial development;

- expand productive wage employment for the poor through technically, economically andsocially viable rural works projects;

* develop programs for nutrition interventions for malnourished children and pregnant andlactating mothers; and

* create policy research and program formulation capacity within GOSL to take greateraccount of poverty and unemployment issues in overall growth policies and publicinvestment projects. In addition, the project aimed to emphasize gender concerns bypromoting female participation in project activities and benefits.

- 79 -

Annex 3Page 1 of 3

MONITORING AND EVALUATION

Monitoring Outcomes

Project performance was hampered by the lack of a sound monitoring mechanism. NDTFfailed to develop a systematic monitoring system which would could track project progress in aconsistent manner. The lack of integration between the four trust Funds (CMED, HRDF, RWF,and NF) resulted in each using separate methodologies and indicators for monitoring. Guidelineson monitoring based on project objectives and indicators provided by the Bank were agreed uponwith.NDTF at the mid-term review. However, NDTF failed to use these indicators consistently.The preoccupation with NGO/PO misconduct led NDTF to focus more on financial procedures tothe sacrifice of project outcomes and the quality of performance. Due to this intense scrutiny offinancial matters, delays in processing SOEs occurred regularly, resulting in implementationdelays in the field, and a lag in the availability of up-to-date data. During the last three years ofthe project, NDTF was able to strengthen monitoring of financial procedures, making them moreefficient and flexible, and establish standardized planning and budgeting procedures. WhileNGO/POs selection and performance criteria were also developed at that point, they were notused consistently to measure NGO performance. Instead, additional criteria beyond the projectwere developed in 1996 and used to discontinue contracts with the majority of HRD NGO/POs.

Indicators and Methods

The absence of monitoring indicators and a clearly defined monitoring plan in the SARcontributed to confusion over monitoring priorities within NDTF. Initially, NDTF had developedan elaborate field monitoring system and identified a cadre of Regional Coordinators (RCs)whose role entailed visiting field sites and identifying weaknesses of different NGO/POs. Sinceit lacked conceptual clarity on the supportive and corrective role of monitoring, NDTF haddeveloped the function of RCs more as a controlling rather than constructive mechanism.NGO/POs were often in fear of the verdict of the RC, which was more subjective than systematicand objective. In addition to the field supervision by RCs, NDTF staff made surprise visits tofield visits in the hope of detecting mistakes. The preoccupation with NGO/PO performancedetracted attention from monitoring beneficiary impact. This approach to monitoring was notconducive to collaborative efforts between NDTF and NGO/POs, and discouraged the proper useof monitoring to enhance progress, minimize problems, and determine the impact of projectinterventions on beneficiaries.

Failure to Integrate Monitoring and Data Analysis

NDTF did not fully integrate monitoring and data analysis due to four reasons: a) themonitoring system was not used as a tool by management to identify strengths and weaknesses;b) meaningful indicators which would have captured the range of interventions, their qualitativeand quantitative impact were not developed; and c) the separation of component trust fundswithin the NDTF caused each fund to collect its data independently of each other. These factorsweakened the management information system and impaired the overall analysis of projecteffectiveness, efficiency and impact.

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Annex 3Page 2 of 3

Lack of Institutional Capacity for Project Monitoring

Several factors weakened NDTF's efforts to develop NGO/PO capacity in monitoringprogress: a) NDTF was more preoccupied with its controlling function rather than in fostering aconstructive dialogue with NGO/POs in monitoring performance; b) the absence of a consultativeand constructive approach to monitoring activities; c) the failure to develop standardizedindicators for measuring progress; and d) a focus on accounting and financial reporting whichlimited the scope of monitoring and placed more emphasis on routine matters rather than onquality and impact.

Department of National Though theNDTFA Planning/PMU monitoring system of

NDTF has improvedthroughout the project,

C4 @§ -0/ E it is still not adequateto assess the projects'

1 1s (D effectiveness and itsimpact on the poor.The monitoring system

1. NDTF, an apex organization, interacts with NGOs/POs and beneficiaries to monitor and was not used as a toolassess the efficiency and effectiveness of the project activities to alleviate poverty. NDTF for decision-making,approves NGO/PO sub-project annual workplans and budgets.

2. NDTF monitors NGO/PO activities based upon which it makes operational decisions. mainly because timely3. NGO/PO delivers services to beneficiary and monitors progress data analysis were not4. NDTF periodically monitors beneficiaries through regional coordinators to assess project

performance and impact available at many5. PMU collects information for national indicators and develops strategies instances of the project

life. Better interactionand information exchange between NDTF and NGOs/POs would have improved the capacity toassess implementation performance.

National Poverty Monitoring by EPPU/PMU

This was relatively the most successful component of monitoring activity. TheEPPU/PMU had a broader mandate than NDTF in monitoring poverty. EPPU/PMU had the taskof monitoring and evaluating the overall trends, magnitudes and challenges to poverty.Monitoring and evaluation of NDTF, NGO/POs and beneficiaries was only one part of thisbroader aim. EPPU/PMU implemented a number of studies, covering a variety of poverty andemployment related topics. These studies substantially deepened understanding of variousdimensions of poverty in the country. EPPU/PMU also collaborated with Universities, whichwere often the only institutions where adequate research skills were available.

International Technical Assistance

International technical assistance provided to strengthen NDTF's monitoring system hada limited impact due to weak management within NDTF

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Lessons Learned

* A rigorous monitoring system is essential to tracking progress, understand constraints andidentify strengths. Such a monitoring system could have contributed to greater collaborationbetween NDTF and NGO/POs and strengthened project performance.

* A constructive rather than controlling approach to monitoring by NDTF would have yieldedmore honest and accurate assessments and resulted in better data that would have enabled theproject to measure overall outcomes in a more comprehensive manner.

* The use of standardized indicators and measures rather than subjective criteria in supervisionand monitoring would have helped NDTF produce more rational assessments ofperformance.

* A focus on beneficiary impact would have yielded a better understanding of the householdimpact of project interventions, particularly in assessing the extent to which the projectsucceeded in helping the poor exit poverty through each of the four Funds.

* Capacity building of NGO/POs in monitoring and evaluation needs to be an important part ofproject start-up activities.

* The project should have established baseline measures at project start-up which would havebeen useful in making comparisons with subsequent benchmark surveys (e.g. at mid-pointand at project closure).

* Greater use of research skills available in universities and research institutes would havesubstantially strengthened monitoring activity.

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TARGETING, PARTICIPATION AND SOCIAL MOBILIZATION

Targeting, Participation and Social Mobilization Outcomes

Project approaches to targeting the poor and ensuring their participation, especially thatof low-income women, was moderately successful. By the final quarter of projectimplementation, September 1997, evidence from project components and beneficiary surveysindicated that project benefits were captured primarily by the intended beneficiaries. Data fromthe Rural Works component, for example, shows that at least 75% of direct beneficiaries of ruralworks throughout the project life had been households with incomes below SLR1,500 (US$25)(the income criteria used for targeting at project design). Similarly, as shown below in Table 4.1,the NGO-Beneficiary Assessment in 1997 revealed that the per capita average consumptionexpenditure among a sample of 3,000 beneficiaries surveyed was SLR500 (US$8) monthly, wellwithin the consumption level of SLR755 estimated to be the poverty line in 1996.1

Table 4.1 Targeting Efficiency Indicators

Source IndicatorsRural Works Fund records 28% beneficiaries = income below SLR700(US$12)September 1997 32% beneficiaries = income SLR700-1,000 (US$12-17) (food

stamp holders)15% beneficiaries = income SLR1,000 - 1,500(US$17-25)

NGO-Beneficiary Assessment per capita average consumption expenditure in 1997 among aOctober-December 1997 sample of 3,000 beneficiaries = SLR500(US$8)

Mechanisms for Targeting the Poor

The Sri Lanka Poverty project was designed with the targeting criterion of monthlyincome below SLR700 (US$12), following the eligibility criterion for the Janasaviya Program,GOSL's entitlement program for the poor at the time of project design. The local administrativeauthority, the Grama Niladari, was expected to provide income certification as verification.Beneficiary eligibility was determined in this manner for the most part, while some NGO/POsused additional screening criteria such as household assets and living conditions. The NutritionFund developed a more comprehensive targeting method consisting of village surveys whichidentified the poor based on health, nutritional status, assets and income.

Targeting Efficiency

Targeting efficiency was generally sound. The high proportion of unskilled labor (92%of the labor days deployed) engaged in rural works construction suggests self-selection by themajority of participants within the target group (who would otherwise have little access to formaland regular work elsewhere). The relatively significant voluntary labor contribution (28%)

' See Aturupane, Rodrigo and Perera, Poverty Among Female Headed Households, Ministry of Plan Implementation, 1996.

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further suggests the participation of low-income beneficiaries who were concerned aboutimproving the rural infrastructure in their communities. Targeting mechanisms built in at theinception of nutrition field interventions, ensured that only the poorest and most needyhouseholds (based on a combination of income, assets and health/nutritional status) wereidentified as participants. However, the extent to which the project may not have targeted thetruly needy and the poorest is unclear. A poverty mapping process which would have identifiedand prioritized the poverty pockets in the country would have ensured better targeting efficiency.

Strategies for Ensuring Beneficiary Participation

Recognizing the low sustainability of traditional welfare approaches to povertyalleviation, the project strategy rested on a participatory approach based on group formation inlow-income communities2 . The project design drew upon the Bank's previous lessons withdisenfranchised stakeholders in earlier development activities, whose lack of participation hadminimized commitment, ownership and project sustainability. Evidence from these experienceshave shown that the poor generally cannot articulate their needs and have little power tocommand resources beyond their own labor. The Bank has since begun to formalize theparticipation process as a precursor to investment so as to reduce inequities and inefficienciesarising from inadequate involvement of beneficiaries (particularly those with little political oreconomic power). The project's participation strategy entailed small groups consisting of 7-10beneficiaries who met regularly, discussed their needs and priorities and formulated plans forspecific development activities, including rural works, savings and credit, micro-enterprises andnutrition interventions.

Participation Outcomes

The participatory strategy of small- group formation has resulted in the mobilization ofnearly 180,000 households in 270 Divisional Secretariat Areas3. The NGO-Beneficiary survey4

1997 shows that a substantial proportion of beneficiaries (98%) reported acquiring membershipin such a community small-group for the first time, with 93% reporting that they had begunregular savings only after being formally organized into these small-groups. The findings of thisstudy also reveal that the intended outcome of enhancing the ability of the poor to undertakegroup economic and development activities has been achieved. Approximately 87% of groupmembers are engaged in joint economic activities while 95% are involved in community culturalactivities. There is also evidence from several sites that NGO/PO efforts to increase theparticipation of beneficiaries in identifying and managing micro-projects (both for incomegeneration and rural works)5 enhanced the relevance of most projects for the poor. -Similarly, inabout 89% of project villages (in the study sample) community infrastructure projects had beenselected and constructed with full community participation. While female participation in every

2 See the Staff Appraisal Report, p.17.There are a total of 300 DSAs in Sri Lanka, and essentially this means that a coverage of 90% of DSAs was achieved at peak project

operation, up to 1995.NGO-Beneficiary Assessment, 1997.5 As compared to the early years of the project when, in the absence of NGO/POs willing to participate in the project, much of thiswork was coordinated through local govemment, resulting in top-down, rather than demand-driven projects.

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project component was generally high (approximately 72% of small-group membership; seeAnnex V), the adequacy of the assiptance provided to ensure exit from poverty needs to beevaluated. Similarly, it is important to assess the extent to which the poorest and mostmarginalized in target communities have participated.

Entry-Exit Mechanisms

Entry6 and exit7 criteria for participation had been defined in the SAR (p. 19), but werenot revised with the change of entitlement programs, on which such criteria was based.Therefore, entry and exit criteria were not used rigorously by the project, nor were there attemptsto test the most appropriate exit mechanisms for beneficiaries (e.g., the duration of assistance toensure optimal capacity and self-reliance built among beneficiaries), which would avoid adilution of the benefits from assistance provided. Objective measures and indicators to determinethe length, and extent of assistance required in different socio-economic contexts was notdeveloped by the project. As a result, it is difficult to determine to what extent beneficiarycapacity has been achieved to influence the direction and execution of their own development,rather than merely receiving a share of project benefits and relying on external assistance.

Techniques for Social Mobilization of the Poor

Appropriate targeting methods and participation strategies are the first steps in theprocess toward empowering the poor. The process of social mobilization is an intermediary stepwhich enhances the social capital of poor communities by strengthening the organizational andfinancial capacities of the poor and building their capacity to act on their behalf. The projectanticipated diverse outcomes of the social mobilization process: increased awareness, self-reliance and bargaining power particularly of low-income women, ability of beneficiaries toprioritize their needs and develop strategies to meet them, launch income-generating activitiesand sustain their development efforts once outside assistance is withdrawn.

Social Mobilization Outcomes

The relative gains of the social mobilization strategy have been assessed via twobeneficiary surveys, one conducted in January 1996, and another nearly two years later, inOctober-December 1997. The findings of these surveys strongly suggest the reasonable successof social mobilization outcomes. The findings of these surveys need to be treated with a fewreservations, given that they reflect beneficiary statements (which may discount a host of

6 The entry criteria for beneficiaries defined at project start-up was income levels -- defined as SLRI,458 per household, parallel tothose in the Janasaviya Program (JSP). Additional criteria were agreed upon between the Bank, GOSL, NDTF and NGOs/POs in theearly stages of project implementation: a) Grama Niladari certificates attesting to the income levels of beneficiaries to ensure thatthey were below the poverty line; and b) health/nuttition levels and household assets criteria used by the nutrition division of theproject.lThe exit mechanisms for beneficiaries defined in the SAR were: a) beneficiaries would graduate from the program within the two-year JSP entitlement period as soon as the fanily's income level reaches SLRI ,500 per month on a sustained basis; and b) thoserefusing (at any point) to participate in a productive activity would be dropped from the program and become eligible for food stampsonly.

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intervening variables affecting their perceptions, economic and social standing). However, in theabsence of alternate methodologies which may fully capture the intangible benefits of socialmobilization, such beneficiary assessments provide data from which lessons can be drawn aboutproject processes.

Prioritizing Needs and Undertaking Group Action

In the 1997 NGO-Beneficiary Assessment, for example, about 21% of groupsinterviewed claimed they had made representations to local politicians and local administratorson their interests. While NGO intermediaries attribute a much higher (57%) incidence ofcollective representation, these figures need to be interpreted with caution. Nonetheless, giventhat the incidence of such group action by low-income groups is otherwise minimal, it is clearthat at least this percentage of groups had been able to profit from the social mobilization process.Similarly, beneficiaries in 89% of villages had reported full participation in selecting ruralinfrastructure projects. This finding provides significant evidence of enhanced ability ofbeneficiaries to prioritize their needs. Commenting on the process, 94% of beneficiaries reportedthat they would use similar processes for repeat projects, 94% indicated that the selected ruralworks projects improved the infrastructure quality in their communities, and 96% gave a positiveapproval rating for these projects.

Sustainability of Interventions

The sustainability of project interventions vary from project component to component.One of the clearest indicators of sustainability is the survival rate of small-groups formed in low-income communities. Data from the 1997 survey reveals that according to NGO estimates, anaverage of 80% of small-groups are still in existence, despite the withdrawal of NGO mediationaround August 1996, as per project decrees. The 1997 NGO-Beneficiary Assessment furtherrevealed that nearly one third (27%) of the savings generated by beneficiaries in 1996(approximately $2.9 million) was used for investing in income generating activities, and that ahigher proportion of micro-enterprises (37%) survived over three years (bringing in higherreturns to expenditure). Similarly, in the nutrition fund, 92% of female beneficiaries whoparticipated in weaning-food preparation training reported using this knowledge subsequently ona continual basis. Similarly a high proportion of women (84%) who participated in generalnutrition training reported using this knowledge continually.

Lessons-Learned

Community participation builds-in a sense of ownership by project beneficiaries,enhancing the sustainability of outcomes. In Sri Lanka, it is clear that capacity buildingprocesses such as social mobilization, which strengthen the leadership and collective actionpotential of community groups, supported the development effectiveness of social fund activities.In sum, the key lessons for Sri Lanka are:

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* a more rigorous method of poverty mapping to identify and prioritize the poorest pockets inthe country would have made targeting more efficient, and facilitated periodic assessments;

* the participatory approaches adopted by NGOs/POs as compared to local government,particularly in rural works construction have been more demand-led and client responsiveyielding tangible and intangible benefits to beneficiaries;

* despite a few weaknesses in promoting participation through NGOs/POs as intermediaries,the project has served as a pioneering model to demonstrate the benefits of participatoryprocesses by mobilizing previously under-served low-income communities and tapping theirproductive potential;

* clear guidelines for entry-exit of beneficiaries would have served in making maximum use oflimited resources, NGOs/POs assistance, and enabled further capacity building and self-reliance among low-income groups; andperiodic and objective evaluation of the rate and quality of participation, including by womenand poorest/marginalized groups, would have been useful in measuring and ensuringequitable access on one hand, and desired empowerment outcomes on the other.

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GENDER OUTCOMES

Summary of Achievements

The project has partially met the expected outputs on assistance to women as listed in theSAR, due mostly to the initiative of low-income women and NGO efforts. NDTF failed todevelop a mandate and procedures to ensure gender integration in project activities, and providesufficient resources to support such activities. However, the low opportunity cost of projectparticipation for low-income women promoted relatively high involvement in the project's socialmobilization, rural works, CMED and nutrition activities.

Consistency with CAS Priorities

Gender related actions were consistent with priorities set out in the CAS, although withinthe limited scope of project objectives and interventions. Access to financial services helped low-income women to expand and improve their productive potential. Nutrition intervention programsimproved the nutritional status of pregnant and lactating women and children under 5 years inlow-income communities. About 72 percent of small group members mobilized and engaged ingroups savings activities were female, according to data available through the NDTF's HRDfund. Membership in small-groups formed in their villages helped women pool their resources,generate savings, and invest in income-generating activities. Cooperative networks of trust andsupport enhanced women's awareness of ways to use their skills and obtain assistance from localadministrative authorities. In many instances, the small-group savings had helped low-incomewomen escape the cycle of indebtedness to local money-lenders, and better meet theirconsumption expenses, and emergency expenditures.

Improved Gender Data

Several research activities undertaken by the EPPU/PMU improved understanding of theextent of poverty among women, factors accounting for high unemployment among females, andon gender and poverty issues. Statistics on the social and economic situation of women weremore readily available in the country through the Department of Census and Statistics and theCentre for Research on Women (CENWOR), as a result of heightened national concern overgender issues, although not entirely or exclusively through specific project efforts. However,NDTF has been inconsistent in tracking female participation and in maintaining genderdesegregated data.

Improved Capacity to Address Gender Issues

National capacity to address gender and poverty issues has been moderately enhanced viathe project. Approximately 30 percent of NGO partners have received training on genderanalysis and methodologies to address gender and poverty issues. A number of NGO staff andfield workers have been trained in methodologies to evaluate gender differentials in projectparticipation rates and the quality and impact of women's participation in project activities ontheir lives. Such training provided to about one third of the NGOlPOs and their field staff has

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improved local capacity to pay particular attention to the social and economic needs of poorwomen. However, further efforts are needed to further improve awareness of these issues andexpand local capacity to address them. Prior to the gender training provided by the project, onlya few leading Colombo-based NGOs in Sri Lanka (notably, CENWOR, WERC 1 ) had knowledgeand methodologies for gender analysis. Moreover, these NGOs were mostly research orientedand their strengths were more analytical, with limited operational coverage. A genderpractitioner's methodology was pioneered in Sinhala through the project and gender trainingprovided in Sinhala to a large number of NGO/POs through the project (partly by CENWOR),has expanded the knowledge and capacity base in the country.

Access to Credit and Viable Micro-enterprise Development

A higher percentage of females (57%) than males accessed credit via the CMED, whichhelped them by-pass local money-lenders charging exorbitant interest rates. Yet, the extent towhich such access helped low-income women improve their incomes and exit poverty is unclear,due to the lack of project data. Further assessment is required to ascertain whether meaningfuland sustainable increases in income levels have been achieved by the majority of participatingwomen. Only about one third of female borrowers were able to manage and operatecommercially successful micro-enterprises over three years (according to the 1997 beneficiarysurvey data). Insufficient preparation for micro-enterprise development and management werepartly responsible for this low performance record.

Skills Development Training

About 51,000 low-income women (72% of trainees) were provided skills training,according to NDTF project records. However, the project failed to provide relevantcomplimentary skills to support CMED (e.g. technical, managerial and accounting, andmarketing skills).

Human Resource Development

The HRDF's social mobilization activities resulted in a number of intangible benefitswhich helped low-income women improve their productivity and minimize gender disparities.The process of social mobilization contributed to building social capital in otherwise fragmentedand isolated low-income communities. Data from a beneficiary survey of approximately 4000households in 5 project districts revealed that: a) improved knowledge of how best to tap intolocal resources and local administrative channels, gained through the social mobilization process,enhanced women's bargaining power, helping women improve their lives and incomeopportunities; b) increased self-reliance gained through small-group participation gave womencourage to try innovative ways to generate income; c) women reported that they now had a morepositive outlook, more control over their lives and a sense of empowerment; and d) women'sincreased awareness of economic and social issues led to more decision-making influence bylow-income women, particularly on the allocation of household resources. In many settings,these women succeeded in reducing their spouses' expenditure on alcohol and tobacco, and used

'Centre for Research on Women, and Women's Education and Research Council

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it for much needed household expenditure, in particular, children's education. Some women alsoreported that they were able to take action against domestic violence as a result of their enhanceddecision-making power.

Rural Works

The gender objective of ensuring that Rural Works involved women in construction andin wage-employment was partly achieved. According to NDTF project data nearly two fifths (39percent) of those engaged in wage employment for RW were women, while over three-fifths(61%) of the voluntary (unpaid) labor contribution was by women. More males (58%) thanfemales (42%) were employed, while conversely, nearly twice as many females (66%) thanmales (34%) participated in unpaid labor. This gender differentiated pattern of labor utilization inRW activities suggested that the energies and labor of low-income women were harnessed andcontributed disproportionately to RW construction, which was however, unmatched by economicrewards that should have been reaped for their high participation.

Nutrition, Fund

Nutrition interventions in the project reached 3.4 million households, including pregnantand lactating women. The nutrition interventions had important positive benefits for low-incomewomen. Enhanced community awareness of the consequences of low maternal malnutritionhelped improve some customary practices. Nutrition education programs targeted to low incomemothers accumulated a store of knowledge within the community on factors associated with childmalnutrition. At many project sites, low-income women began to reinforce the nutritionmessage, resulting in improved nutritional practices due to peer pressure.

Impact on Gender Disparities

The project has contributed to reducing some gender disparities existing in project areas.However, assistance to low-income women has not happened in a consistent manner throughoutthe life-time of the project or been sufficient to help low-income women exit poverty. Moreover,the lives of low-income women improved not mainly due to systems and strategies developedwithin NDTF, but more as a result of the effective outreach of NGOs and initiatives on the part ofpoor women themselves. Nonetheless, the project set in motion a process of change andintroduced novel concepts and strategies for mobilizing women in low-income communities.These processes were instrumental in building social capital among the poor, an essential pre-requisite to reducing poverty and improving incomes in poor communities. For example, theprovision of financial services to low income women through the Credit Fund helped improvehousehold income levels and savings.

Gender Issues in Sri Lanka

Despite Sri Lanka's commitments to universal education and primary health care (which haveresulted in favorable health and education indicators), poverty has imposed certain limitations in

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access to these services by low income women. In many rural areas, for example, girls are moreoften kept back from school to assist with household chores at peak harvest and cultivationcycles. Similarly, self-neglect and skewed patterns of intra-household food allocation haslowered the health and nutrition levels of low-income women, as compared to women of averageincomes. These factors combined with their lower access to resources, has hindered theproductivity potential and limited the quality of life of low-income women.

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INSTITUTIONAL DEVELOPMENT AND NGO PARTNERS

Institutional Development and Capacity Building Outcomes

The project objective of re-orienting and expanding the then existing institutional capacity to servethe poor, and of creating additional capacity was only partially met. As a result of JTF's efforts to bring inNGOs as intermediary agencies, by the mid-term review of the project,over 200 NGOs had begun workingwith the project and were involved in one or more of the project components. The NDTF's HumanResource Development (HRD) Fund was responsible for meeting the institutional development objectives ofthe project. For the most part, these objectives fell short of their expected outcomes, largely due to theperception of NGOs as adversaries rather than partners. As a result, there was only limited funding andsupport for institutional development, minimizing the success of the HRD Fund. The capacity of smallNGO/POs to expand their coverage, or the opportunity for relatively successful NGOs to replicate theirmobilization strategies remained static throughout the life-time of the project. For the most part, NGO/POswere successful in identifying the poor, forming them into small groups and engaging in social mobilizationactivities. Despite the tenuous relationship with the NDTF, NGO/POs efforts in mobilizing low-incomecommunities yielded successes, largely due to the high commitment levels of most NGOs, their closenessand prior history with low-income communities, and the resulting sense of obligation to meet the needs ofthe latter. Beneficiary reports from assessments conducted in 1995/96 and 1997 attest to the gains of thesocial mobilization strategy, particularly among the majority of project participants (over 70%) who werefemale (discussed further in annex V). Nonetheless, limited efforts in capacity building has minimized theoutcomes of institutional development.

Factors Contributing to Limited Outcomes

There were several reasons for this outcome:

* An environment of distrust was created among NGOs due to the NGO Commission appointed by GOSLin 1991, coinciding with project inception. This prevented NDTF assuming a facilitating, partnershiprole with NGOs.

* Rather than encouraging efforts and supporting activities which would strengthen and develop thecapacity of NGO/POs, NDTF continuously assumed a controlling role, policing and scrutinizing NGOactivities.

* Due to lack of clarity on how best to reach the poor and the importance of building social capital in low-income communities, the NDTF opted for short-cut methods, which detracted from the full potential ofthe institutional development objectives. For example, training programs for micro-enterprisedevelopment were often irrelevant to the needs and opportunities available to the poor, and weresometimes inadequate in providing the appropriate and sufficient skills to ensure the sustainability ofmicro-enterprises.

* The NDTF underestimated the complexity, the human resources inputs and time required to mobilizepoor and develop the capacity of small-groups. Thus, insufficient training was made available to fieldstaff working in poor communities, and there was no mechanism to take advantage of the lessons-learned from the field as the project progressed.

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The Role of Intermediary Agencies in Mobilizing and Delivering Services to the Poor

The project design entailed a clear role for the non-governmental sector in mobilizing andfacilitating access to resources and services to the poor. This strategy was developed with the recognition

that then existing government programs faced resource and coverage limitations to organize the poor andbuild the capacity of low-income communities. This strategy was also in keeping with emerging evidenceon the success of participatory approaches, and the failure of centralized agencies which used top-downplanning to reach the poor. However, the project faced the challenge of building the institutional capacity ofthe NGO sector, much of which had diverse capacity levels, except for the leading NGO at the time, --Sarvodaya, with substantial community development experience.

History of NGO Involvement in Project Activities

The project design had envisaged a major role for Sarvodaya in reaching and organizing the poor.In terms of credit delivery, the SAR identified TCCS, RRDBs, Sarvodya SEEDs, NYSCO and a few otherselect NGOs as the most promising. By project inception, however, an NGO commission of inquiry hadbeen launched by GOSL and many NGOs, particularly Sarvodaya was reluctant to participate in projectimplementation. Thus, in the first two years of project implementation, the Janasaviya NDTF Fund as theproject implementing agency was called then, relied largely on local administration (Divisional Secretariats),and a cadre of approximately 1,500 field workers it recruited directly. With increasing Bankencouragement, JTF made an effort to woo the NGO sector to participate as partner organizations. Theinitial independent start, however, had instilled a perception of NGOs as outsiders among JTF staff, whoadopted a controlling rather than a collaborative role with NGO/POs.

Lessons Learned

There are several lessons to be drawn from the efforts of the project to develop institutional capacitythrough the involvement of the NGO sector.

* A pilot phase would have served useful in defining the most effective techniques and strategies formaking an outreach to the poor, organizing them and developing the capacity of small groups in low-income communities. Such a pilot effort would have also helped determine the general human resourceinputs, and time investments required to achieve project objectives.

* A more comprehensive assessment of the NGO capacity at project design and inception stages wouldhave provided a better idea of the diverse sets of skills and range of competencies existing in the NGOsector. Such an assessment would have been useful in determining the kind of NGO capacity buildingrequired and the approximate costs of such an effort.

* An exit strategy for NGO assistance would have been invaluable for NGO/POs as well as beneficiaries,in providing a mutually agreed upon set of guidelines on the duration of assistance and benchmarks bywhich to gage phasing out of assistance.

* A collaborative and facilitating attitude towards NGO/POs on the part of the NDTF would have beenconducive to achieving mutual goals.

* Encouragement of networking among NGO/POs to share lessons-learned experience and a leadershiprole on the part of the NDTF in assessing field processes and outcomes from early on would havehelped the project to do mid-stream retrofitting as necessary.

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NUTRITION INTERVENTIONS

Summary ofAchievements

The Nutrition Fund of the Sri Lanka Poverty Alleviation project has produced the mostsuccessful outcomes, having met all project objectives and often exceeding SAR targets. At peakproject operation in 1996, the project provided coverage in 270 DSDs, in 18 of the country's 25districts, reaching a population of approximately 4.3 million through the combined efforts twoprograms: In-Depth and Basic. In the last quarter of 1996, participation rates of mothers had reached89%. Levels of malnutrition among young children had been reduced by at least 25% in over 57% ofproject sites, some sites reaching 50% reductions. The incidence of low-birth weight had beenreduced to 16% (from SAR benchmark of 25%), with some sites lowered to 14%.

Design Changes

One of the major factors contributing to the success of the Nutrition Fund is its innovativedesign strategy which departed from the original SAR proposed design. The SAR guidelines fornutrition interventions centered around on-site feeding of Thriposha to low-income mothers andchildren, following the pilot project in Galewala implemented by the Ministry of Health (MoH).However, by project inception, the Galewala experiment had been declared a failure, due primarily tothe reluctance of poor mothers to participate in on-site feeding. Cultural proscriptions and the loss-of-face associated with public feeding programs had led to such non-participation. Moreover, theproduction and distribution of Thriposha was erratic, since it was dependent on imported soya andadditives. Thus a re-orientation of strategy was required, and design changes more appropriate to thenutrition problem in Sri Lanka were introduced by the Nutrition Fund.

In-Depth Program

Recognizing that Sri Lanka's nutrition problems were related more to behavioral factorsrather than food insecurity, the In-Depth nutrition program included a comprehensive set ofinterventions intended to change child-feeding practices. It was a well targeted and multi-dimensionalstrategy designed to improve mothers' understanding and knowledge of a range of factors affectingnutritional status. The program included: nutrition counseling and training, growth promotionactivities, and education on sanitation, home gardens, livestock rearing and early childhooddevelopment. The in-depth approach was a phased process, building on community participation andaccumulated wisdom, placing more emphasis on program quality and positive outcomes. It includedthe following sequential steps:

1. Identification of malnourished children. Begins with the weighing and weight-plotting of allchildren under five in the community by volunteers who have been trained on nutrition.

2. Identification ofpoor and nutritionally deprived households. Volunteer nutrition workers conducta household survey to identify the poor based on poverty and malnutrition: illness patterns,income, education, occupation, sanitary facilities and the condition of residences.

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3. Village mapping. The community develops a map of the village identifying malnourishedpregnant and lactating women, children under 5 and low birth weight babies.

4. Nutrition counseling and training. Participatory counseling/training for groups of mothers andindividual counseling at child weighing sessions.

5. Quarterly weight monitoring. Volunteer workers together with primary health care workers holdquarterly weighing sessions to monitor weight gain of the vulnerable children.

6. Development of a community nutrition strategy. The most nutritionally deprived one third of thehouseholds join in prioritizing their nutrition related problems (causes), strategies to remedy thesecausal factors and to identify a community development project that would best address thespecific nutrition problem.

7. Planning and implementation of a community project. Volunteers together with mothers' groupsin the community plan and execute the community "project" they have identified (in most casesconstruction of pre-schools), and initiate activities to raise funds.

Basic Program

The Basic program was designed in response to the pressure to expand coverage, particularlysince the phased process of the In-Depth approach was time consuming. It was a more generalizedand selective strategy which relied on NGO field staff to enhance community awareness of nutritionissues and monthly weighing of children under five. The main elements of the Basic approach were:

I . Poverty/nutrition survey. The poorest and most nutritionally deprived one third of children underfive years are identified by NGO field staff.

2. Nutritional awareness promotion. Monthly training programs on weaning foods preparation andfeeding practices provided to the mothers of the target group of children.

3. Monthly growth monitoring. NGO field staff together with the (Ministry of Health) primaryhealth care workers conduct regular weight monitoring in each community.

4. Nutrition counseling, training, and supplementaryfeeding, similar to In-Depth program withparticipation by a larger group of women in the community.

Outcomes and Achievements

Through the combined efforts of the In-Depth and Basic approaches, the Nutrition Fundreached approximately 3.4 million mothers and children (about 20%-25% of the population in theconflict-free areas of the country). At peak project operation in 1996, the In-Depth approach wasbeing applied by 45 NGOs working in 180 DSAs (over half the total number of DSAs in the country),covering a population of well over a million, while the Basic approach was being implemented in 80DSDs by 70 NGOs covering a population of over 2.4 million individuals. Because it was lesscomprehensive, the Basic program was able to achieve wider coverage. In sum, the Nutrition Fundhas provided training to about 17,000 village-level workers and volunteers and to 15,000 mothers andNGO staff. The incidence of malnutrition decreased by over 25% some project sites.

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Special Features

The successes of the Nutrition Fund can be attributed to several special features whichenhanced outcomes. These include:

1. A focus on changing mother 'sfeeding behaviors rather than on food insecurity issues. At projectinception, there was little known about the behavioral practices that contributed to low nutritionalstatus, and the role that women themselves could play in remedying this situation. Furthermore,there were misperceptions about the effectiveness of participatory approaches to improvingnutrition in low-income communities. The project helped simplify understanding of the nutritionproblem so that mothers realized the impact of their feeding practices on the nutritional status oftheir children. With training on weaning food preparation, they were able to change their childfeeding practices.

2. Early identification of growth faltering Growth promotion activities, including growthmonitoring and training on weaning foods were designed to help a mother catch faltering growthearly enough so that she could change feeding and hygiene practices and improve the child'sgrowth pattern. Growth monitoring, through the monthly or quarterly weighing and weightplotting helped improve mothers' awareness of a child's growth patterns and catch falteringgrowth early on.

3. Counseling interventions tailored to the specific needs of the mother and child. Nutritioncounseling relied on one-on-one, face-to-face interaction to reinforce the nutrition messages. Thisstrategy had more currency with the target population than messages provided through the massmedia. Nutrition counseling and training was provided to low-income mothers to encourageappropriate feeding practices (the right type of foods, feeding frequency, and timing forintroduction of semi-solids). This counseling was initially provided by trained volunteers andexperts, and gradually handed over to groups of mothers who were trained and ultimately servedas peer counselors to other mothers in the community.

4. Use of the growth chart serves as a diagnostic tool. The project has buiIt on and widened thescope and effectiveness of the practice among MoH Primary health care workers, who use thechild growth chart as an entree for a dialogue on nutrition related behaviors. Initially, weighingsessions simply alerted mothers to growth faltering (or conversely, commended them for weightgain). Community volunteers and PHCs dispensed some quick advise on the need to ensureproper nutrition and feed the child more. As the program evolved, the weighing sessions weretransformed into more comprehensive and participatory evaluation sessions. Mothers were askedwhat their child feeding practices were, and alternate behaviors and their potential was discussed.The weighing session permitted the use of the child's growth chart as a diagnostic tool.

5. Synchronized preventive and treatment approaches by focusing on: sanitation/diarrheal diseases,home gardens/nutritious diets, early childhood development/training provided a well-roundedcomprehension of several nutrition related factors.

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Annex 7Page 4 of 6

6. Integrated problem assessment and resolution at the community level by: a) engaging in aparticipatory strategizing process to identify the community nutritional priorities and remedies;and b) contributing to mothers' sense of enhanced self-esteem as they are perceived as therepository of knowledge, information and in control of changing behaviors.

7. Emphasis on persuasive tactics as compared to fear inducing and prescriptive tactics employedby health personnel. focusing on positive reinforcement of compliance to conducive practices (i.e.women leaders encouraged to set an example by regular attendance at weighing sessionsgenerating the feeling among individual mothers that they do not want to be the only one "leftout" by not attending). For example, training sessions on weaning foods are structured in such away as to elicit information from mothers on their feeding practices, food avoidance and taboosthat they may adhere to. These sessions engage mothers in a discussion on daily household dietsof the household, including those of the target age children, and food preparation practices,prompting them to reconsider misconceptions about food groups and the availability ofinexpensive nutritional foods within their communities.

8. Community mobilization by: a) a participatory poverty survey which raised community awarenessof the gravity of the nutritional problem and helped them to identify specific factors associatedwith low nutrition and poverty; b) training a core cadre of community volunteers and "scholars";c) forming women's groups who are instrumental in peer counseling, informal reinforcement ofkey messages, and practical support in promoting behavioral change; and d) improvingcommunity understanding of what practices contribute to and take away from sound nutritionthrough a participatory process of group discussions, practical-hands on 'training' sessions andother participatory educational/counseling programs.

9. A poverty and nutrition mapping exercise carried out jointly with the community anticipated avisual placement of the vulnerable groups identified through the poverty survey: pregnant andlactating women, children under 5 and low-birth-weight infants. Maps displayed at communitycenters kept the community alerted to the vulnerable group of households.

Lessons Learned

The innovative approaches of the Nutrition Fund provides invaluable lessons for theimplementation of participatory nutrition interventions through social fund projects. Foremost amongthem are:

1. The importance of supportive supervision, and continual monitoring. The Nutrition Fund haddeveloped a system of field supervision designed to identify field strengths and weaknessesagainst a set of key indicators1 . Program monitoring was made relatively easy and standardizedas a result, and permitted objective assessment of progress at field sites.

Percentage of children weighed, percentage of malnourished children (weight for age), percentage of low-birthweight, participation rates at weighing sessions.

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Annex 7Page 5 of 6

2. Hands-on, in-field training of volunteers and nutrition workers. Nutrition workers and volunteerswere provided on-site training which helped impart practical, hands-on understanding of theproblems, rather than theoretical knowledge alone.

3. The importance of building community capacity and creating "Buy-In" to ensure sustainability.Built in mechanisms for community capacity building permitted community buy-in, enhancing theprospects for sustainability. This was achieved by initiating a community dialogue based on: a)respecting and acknowledging the work demands and cash needs of low-income women whichoften influence their feeding practices and care giving practices ; b) attempting to understand therationale behind their behavioral choices rather than criticizing them; and c) engaging in aparticipatory educational process rather than a top-down, one-way flow of information to elicitbehavioral change

4. The importance of creating community ownership by: a) making the community the center of thefocus rather than the medical outpost or the maternal clinic; b) conveying a sense of community"'ownership" of the data on malnutrition, so that beneficiaries felt motivated to improve the dataover which they had control rather than external parties; c) eliciting information and solutionsfrom community members and thus giving them credibility and a sense of community ownership;d) sensitivity to local realities (difficulties in the terrain in the hill country, drastic seasonal foodscarcities in Dry Zone communities, seasonal flooding in Wet Zone villages); e) identifyingvolunteers within the community; and e) conducting weighing sessions at the community level.

Constraints and Weaknesses

Despite its achievements, there are several constraints and weaknesses which minimized theoverall successes of the Nutrition Fund. Much of these are attributable to weakened management andcommitment in NDTF towards the latter part of the project life.

I . Lack offocus on key messages in the nutrition communications strategy which would havedirected attention on the main issues: feeding practices, frequency and timing, growth monitoring,nutrition content of diets. The nutrition counseling provided to mothers would have had moreimpact if it had focused on a few key messages. The effectiveness of this counseling in promptingbehavior change may have been diluted somewhat because of the volume of information providedto low-income mothers.

2. Competition with Thriposha. Depending on availability, the GOSL's supplementary foodprogram, Thriposha has been instrumental in bringing in mothers to maternal clinics and to ensuregood immunization coverage. However, there is sufficient evidence that Thriposha is notpositively correlated with child growth. Despite major problems with production, distribution,targeting and household allocation, GOSL has been reluctant to discontinue it. Thriposhacontradicted the message of behavioral change and distracted attention on changing feedingpractices that the program was conveying. As such Thriposha may have acted as a disincentivefor chanlging mothers' customary behavioral practices.

3. Lack of coordination between line ministry and NGO staff has led to conflicts at some sites.Primary Health Care workers have questioned the credentials and expertise of volunteer workers,and felt that the latter were treading on their territory, resulting in program delays on occasion.

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Annex 7Page 6 of 6

4. Initial lack of commitment by government to the project approach toward nutrition.The NDTF's nutrition interventions received little support by the government at the initial stages.

There was also an absence of promotional information highlighting the program success from the

nutrition Division itself. However, as the good results poured in, and as the Division developed

capacity to present and package its successes, the approach won credibility.

5. Attention only to wasting (weightfor age), to the neglect of stunting issues. The projectinterventionis hiave focused primarily on growth monitoring based on weight-for-age rather than on

stunltinlg (height-for-age) issues.

6. Interruptions in fund-flow to NGOs and complex accounting procedures. Erratic fund flowpatterns due to NDTF's financial management hiccups affected the flow-of funds to NGO-POs,

and to disruptions in field activities. Similarly, in an effort to discourage the misuse-use of funds,

and because of the initial suspicion by Government of the motives of NGO-POs, elaborate and

often complex accounting procedures were developed. Small NGOs with limited staff and only

basic accounting skills found these procedures time consuming and cumbersome. An

unwi I] ,ingness on the part of the finance managers of the project to accommodate the capacity

building needs of such NGO-POs contributed to either their discontinuation as implementors, or

unldue delays at the field level.

7. Use af/mnonitoring data for mid-course corrections. The use of monitoring data for managementpurposes (e.g. to identify strengths and weaknesses and build on the former while trying toaddress the latter) has been uneven. During the tenure of the dynamic Director who had designed

the program, her conscientiousness ensured that monitoring data was used for management

decisions. Her regular field supervision visits enabled her to identify generic as well as specific

problems. Yet, upon her departure monitoring procedures became more personalized.Weakniesses in program implementation provided ammunition for eliminating NGO-POs from the

project, rather than serving as a learinig opportunity. As a result of punitive actions against selectNGO-POs, the collaborative partnership developed initially by the Nutrition Fund wasundermii ined and the level of trust eroded.

8. Limiled attention to and insufficient interventions directed to address the generational cycle of

malnitrition. maternal weight gain and low-birth weight babies. Despite all good intentionis, the

program has not systematically and consistently addressed nor tracked maternal malnutrition as

well as it did child malnutrition. While nutrition counseling was provided to pregnant mothers,

tracking the incidence of low-birth weight babies was also not done consistently and regularly at

all sites.

9. Pressure from the Bank to disburse led to more emphasis placed on rapid expansion of the

Nutrition Fund's activities through the Basic method, whereas the In-Depth method had provided

more sustainable results.

Figure 1: NDTF Organizational StructureAgreed to at Mid-term Review

NGO Advisory CouncilBOARD OF TRUSTEES 200

1 - ---- -- 20 [ NGO COMMITTEE (6)

Committee___ __ to the Board _

I 1 I ~~~~~~~~~~Managementf;~~~~~~~~~_ _ _ [X _ _ _ _ _ _ t 00; 0:000 :t4f 00i ; t: 5 ti-l T eam I

MANAGING DIRECTOR 1* I ' INTERNALfi; f X; X ff : p 0 0 : AUDIT

-- ----- ~__UNIT

DIRECTOR DIRECTOR DIRECTOR DIRECTORCR:EDIT:: u VPANN POVEiRTY :FINANCE &

DEPARTMENT MONITORING ALLEVIATION ADMINISTRATIONDEPARTMENT 2* DEPARTMENT DEPARTMENT ,

PLANNING MONITORING | HRD U UNITFINANCE |ADMINISTRATIO1SECTION SECTION SECTION SECTION SECTION

M- |MICRO-ENTERPRISE| | COMMUNITY | r SOCIAL NUTRITIONPROMOTION PROJECTS MOBILIZATION DIVISION

DIVISION DIVISION ~~~DIVISION

PARTNER ORGANIZATIONS

POVERTY ALLEVIATION ACTIVITIES

GD - Gender and Development 1* = Institutional Development (ID) Consultancy (about 12 person-months)TC - Training Coordination 2* = Planning & Monitoring (P&M) Adviser (12 person-months)

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Figure 2: Project Funds and SoE Flow: IDA, GoS and NDTF+A47

Fd-d-~Bank ID--

l7: Disbursements (US$)

Central Bank (GoSL)

4: SoE 5: Disbursements (Rs)

asury (GoSL) 6: Withdrawl Application (SoE)

1: Advance (Rs)

| Ministry of Fi nance (GoSL) |

4: SoE l1: Advance (Rs)

3: SoE il2: Rs.

NGOslPOs

l2: Rs.

Beneficiaries

Credit fund flow between NDTF, NGO and Credit Beneficiaries.

| ! ~NDTF --

a: Application for allocation b: Approval & e: Claims using Fl for f: Cash reimbursement at 7%.Agreement signed amount disbursed to

_ 2 ~~~~~~~~~~beneficiaries.

NGOsIPOsAFI (e): Maturity Period depends on 97% recovery rate.

d: Repayments c: Lending Next loan will be amalgamated with the previous schedule.

Beneficiaries

Steps:1: Treasury advances Rupees (Rs) funds to NDTF through Ministry of Finance based on allocation in national budget.2: NDTF advances Rs. funds to NGOs/POs who,in turn, disburse partly for their own needs and prtly for the poor beneficiaries.

3: NGO/PO submit their details of expenses to NDTF.

4: NDTF submits SoEs based on NGO SoEs to Central Bank vis Treasury.5: Central Bank debits the Special US$ account for value of SoE and reimburses the Treasury the advance given to NDTF.

6: Once Special Account is debited, NDTF submits an application to World Bank/IDA to replinish the Special Account.

7: World Bank/IDA replenishes special $ Account. Source:NDTF Finance Division and Credit Dept. Sept'97

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world bank document...integrated part of the project (sar, paras 5.45 and 6.4), the ujndp grant...

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